Corporate UpdateS b 13 2011September 13, 2011
Don Bubar, President & CEO
Safe Harbour StatementSafe Harbour Statement
Forward looking informationg
Certain statements contained in or incorporated by reference into thispresentation constitute forward-looking statements. Such statementsreflect the current views of Avalon Rare Metals Inc with respect to futurereflect the current views of Avalon Rare Metals Inc. with respect to futureevents and are subject to certain risks, uncertainties and assumptions.Many factors could cause the actual results, performance or achievementsof Avalon Rare Metals Inc. that may be expressed or implied by suchof Avalon Rare Metals Inc. that may be expressed or implied by suchforward-looking statements to vary from those described herein shouldone or more of these risks or uncertainties materialize. Avalon Rare MetalsInc. does not intend, and does not assume any obligation, to update thesey g pforward-looking statements.
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Recent Developments
Completed Updated Pre-feasibility Study with improved economics
Completed US$47.3 million equity financing at US$6.15/shareCompleted US$47.3 million equity financing at US$6.15/share
Completed mini-pilot plant trials of flotation process
Signed fourth MOU with Asian company
Definition drilling continuing at rate of 4,000 metres/month with two rigs
Deposit continues to good continuity, with some irregularities in geometry
Over 30 tonnes collected for bulk sampleOver 30 tonnes collected for bulk sample
Developers assessment report filed with regulators for environmental review process
MOU’s signed with all three First nations groups. Negotiations on accommodation agreements proceeding steadily
Additions to management and technical team
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Capital StructureSeptember 13, 2011
Canada - TSX: AVLCanada TSX: AVL
United States – NYSE Amex: AVL Frankfurt- OU5
Shares Outstanding 102,572,615
Fully Diluted 113 048 970Fully Diluted 113,048,970
Market Capitalization US $462 million (S/O @ $4.50)
Recent Price Range US $4.00 - $5.00
52 Week High / Low US $10.11 – C $2.97
Cash Reserves C $70 million (No debt)
Insider Share Position 4 million shares (3.9%)( )
Institutional holdings Hancock, Global X, Sentry, Van Eck, Diamondback
(est. 30-40%) AGF, Encompass, Chilton, Highbridge, Wellington
Employees 30 (including contract staff)
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Employees 30 (including contract staff)
1 Year Price Chart
China reduces export quotas
CIBC Financing
NYSE Amex Listing DRC / CitiFinancing
CIBC Financing
Rising REE PricesRising REE Prices
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Management & Board of DirectorsDirectors
ManagementD ld S B b P G
Cindy Hu, CA, CPA, CGA, ControllerVirginia Morgan, B.Comm, Director, C i ti d I t R l tiDonald S. Bubar, P.Geo,
President, CEO & Director
Jim Andersen, C.A., C.P.A., V P Finance & CFO Directors
Communications and Investor RelationsRon Malashewski, P.Eng (AB), Manager, Investor Relations
V.P. Finance & CFO
Bill Mercer, Ph.D., P.Geo., V.P. Exploration
David Swisher B S Min Eng
DirectorsAlan Ferry, CFANon-Executive Chairman
David Connelly CStJ CD MBA B CommDavid Swisher, B.S. Min.Eng.,
V.P. Operations
Pierre Neatby, B.A. Econ, V.P. Sales & Marketing
David Connelly, CStJ, CD, MBA, B.Comm
Phil Fontaine, B.A., LL.D.
Brian D. MacEachen, C.A. Audit Committee ChairV.P. Sales & Marketing
Brian Chandler, P.Eng., Senior V.P. & COO
Richard Pratt, V.P., General Counsel
Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation Committee
Hari Panday, C.A.
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Richard Pratt, V.P., General Counsel and Corporate Secretary Richard Morland, B. Eng., Mining
Senior Staff and Technical C lt t Consultants
Ian M. London, P. Eng. Energy and Market Development Consultant
John Goode, P.Eng. Senior Metallurgical Consultant
Chris Pedersen, P.Geo, Senior Geologist, Camp Manager
Martin Heiligmann, Ph.D., Project Geologistg , , j g
Randy O’Keefe, Camp Logistics Manager
Finley Bakker, P.Geo. Senior Resource Geologist
Brian Delany P Eng Senior Project ManagerBrian Delany, P.Eng., Senior Project Manager
Rob Prasad, Senior Human Resources Coordinator
Hoe Teh, P.Eng., Metallurgical Consultant
Dezhi Qi, P.Eng. Process Engineer
Stanley Chan, Eng, EIT. Mine Engineer
David Trueman, Ph.D., P.Geo, Rare Metals Consulting Geologist
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Project LocationsProject LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumNiobiumZirconiumHafniumGallium
NORTH T DEPOSITNORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium
Avalon offers diversifieddiversified exposure to a broad range
f l
All projects 100% owned
of rare metals
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Recent Developments in REE M k tMarkets
China increases second half 2011 quotas by 8 9% (from the first halfChina increases second half 2011 quotas by 8.9% (from the first half 2011 quotas) for a total of 15,738 tonnes
In the past six months Individual REE oxide prices have risen dramatically outside China and inside China as welldramatically outside China and inside China as well
Siemens and Lynas sign a letter of intent for future magnet production
Avalon signs MOU’s about off-take and investment with four AsianAvalon signs MOU s about off-take and investment with four Asian industrials
Frontier Resources and Korean Resources Corporation sign strategic t hipartnership
Production of dysprosium temporarily halted in three South China mining districts
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Rare Earth Element PricesRare Earth Element Prices
Source: Metal-Pages.com, September 6, 2011 (US$/kg)Prices are indicative and basis FOB China
Metal Oxide Principal Uses Current Prices Oct .09 Prices
Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 109.00 – 111.00 4.40 – 4.90
Cerium Oxide 99% min Catalyst, glass, polishing 109.00 – 111.00 3.50 – 4.00
Praseodymium Oxide 99% min Magnets, glass colorant 247.00 – 250.00 14.20 – 14.70
Neodymium Oxide 99% min Magnets, lasers, glass 310.00 – 315.00 14.70 – 15.20
Samarium Oxide 99% min Magnets, lighting, lasers 127.00 – 130.00 4.25 – 4.75
Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 5,060.00 – 5,080.00 470.00 – 490.00
Terbium Oxide 99% min Phosphors: green, magnets 3,700.00 – 3,720.00 340.00 – 360.00
Dysprosium Oxide 99% min Magnets, lasers 2,280.00 – 2,300.00 105.00 – 110.00
Gadolinium Oxide 99%min Magnets, superconductors 190.00 – 195.00 5.00 – 5.50
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Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 160.00 – 165.00 10.00 – 10.50
Forecast for Global Demand and Supply in 2015 (+/- 20%)and Supply in 2015 (+/ 20%)
Demand (tonnes REO)
Excess / Shortage Supply (tonnes REO)
Data source: IMCOA, (Dudley Kingsnorth) February ,2011.
Based on total REO d d f 185 000demand of 185,000 tonnes and an adjusted supply of 198,500 tonnes.
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Comparison of Anticipated Production for Major REE DepositsProduction for Major REE Deposits
Nechalacho Mt Weld Mountain PassAvalon
(10 000 tpa)Lynas
(11 000 tpa)Molycorp
(20 000 tpa)
REE OXIDE(10,000 tpa) (11,000 tpa) (20,000 tpa)
Europium Eu 49 48 24Gadolinium Gd 370 107 34Terbium Tb 64 8 -Dysprosium Dy 364 13 -Dysprosium Dy 364 13 -Holmium Ho 69 - -
Erbium Er 189 - -
Thulium Tm 26 - -Ytterbium Yb 147Ytterbium Yb 147 - -Yttrium Y 1,580 41 20
Lutetium Lu 20 - -
Total Heavies 28.75% 1.98% 0.39%
L h L 1 463 2 805 6 640Lanthanum La 1,463 2,805 6,640Cerium Ce 3,264 5,141 9,820Praseodymium Pr 407 585 868Neodymium Nd 1,623 2,035 2,400
S i S 374 250 160
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Samarium Sm 374 250 160
Total Lights 71.25% 98.33% 99.44%
Thor Lake: Project LocationThor Lake: Project Location
Flotation plant t Th l kat Thor lake,
shipping of concentrate by b tbarge to hydromet plant at Pine Point.
Concentrates shipped by rail from Hay Riverfrom Hay River to Separation Plant
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West Long Lake Area
Tardiff Lakes Area
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Nechalacho REE Deposit
N-S Composite Section (looking west)
Nechalacho REE Deposit
U LREE Z
Tardiff Lakes Area Indicated resources
Upper LREE Zone170m
1590m
Basal HREE ZoneAverages 30 m thick, 2% TREO 20% HREE
Hole 70: 1.90% TREO with 32.6% HREO
Hole 154: 1.88% TREO
1590m
TREO, 20% HREE over 6.0 metres with 20.5% HREO over 20.0 metres Drill Hole with
Basal Zone
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Intercept
Nechalacho Deposit: NI 43-101Resources Updated Jan 27 2011Resources Updated Jan. 27, 2011
Tonnes (millions)
%TREO
%HREO
%HREO/TREO
%ZrO2
%Nb₂O₅
ppmTa2O5
TREO equiv
Basal ZoneBasal Zone
Indicated 57.49 1.56 0.33 20.72 2.99 0.40 396 2.01
Inferred 107.59 1.35 0.26 18.97 2.83 0.37 354 1.77
U ZUpper Zone
Indicated 30.64 1.48 0.15 10.26 2.10 0.31 192 1.86
Inferred 119.29 1.26 0.13 10.15 2.41 0.35 209 1.66
Prepared initially from 2009 data by Scott Wilson RPA for Technical Report filed July 29, 2010. Updated for 2010 drilling by Finley Bakker, P.Geo., Sr. Resource Geologist
Total Inferred 226.88 1.30 0.19 14.33 2.61 0.36 278 1.71
Mineral Resources based on following price assumptions: US$21.94/kg TREO, US$3.76/kg ZrO2, US$130/kg Ta2O5, and US$45/kg/Nb2O5 and are estimated using a Net Metal Return (NMR) cut-off value of CAN$260/tonne. (CAN:USD FX $1 11/$1 00) NMR i d fi d th i it l f ll th bl t l i th
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$1.11/$1.00) NMR is defined as the in situ value of all the payable rare metals in the ore net of estimated metallurgical recoveries and processing costs
Metallurgical TestworkP Progress
FlotationB h l b i ll l t ti i ti1. Benchscale – basically complete, optimization
2. Integrated flotation plants – three completed3. Pilot plant (~30t) – planned November, 2011
Hydrometallurgy1. Benchscale – cracking complete, solution chemistry in progress2 Pilot in progress2. Pilot – in progress
Separation1. Scoping complete (SNC Lavalin)2. Prefeasibility in progress (SNC Lavalin)3. Feasibility
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Metallurgy Schedule Present timeMetallurgy Schedule2008 2009
FLOTATION Q3, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4BENCHSCALE
2010 2011 2012
Open cycleLocked cycle
Optimising processMINIPILOT
FULLSCALE PILOT
HYDROMETALLURGYBENCHSCALE
Mineral breakdown (AB, CCr)Solution chemistry
PILOTMineral breakdown (AB, CCr)
Solution chemistry
SEPARATIONScoping
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PrefeasibilityFeasibility
2011 Updated RPA Prefeasibility Study: Summary of Financial AnalysisSummary of Financial Analysis
Financial Analysis
Original PFS Updated PFS
P T (CAD$)After-Tax
P T (CAD$)After-Tax
Pre-Tax (CAD$)(CAD$)
Pre-Tax (CAD$)(CAD$)
Internal Rate of Return
14% 12% 39% 34%
Net Cash Flow $2.1 billion $1.5 billion $6.08 billion $4.48 billion
Net Present Value @ 8%
$428 million $236 million $2.22 billion $1.61 billion
Net Present Value @ 10%
$246 million $97 million $1.77 billion $1.27 billion
Based on Probable Mineral Reserves resources of 14,539,167 tonnes defined from January 2011 updated resources ,including high-grade subzones
Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $46.33, ZrO₂ = $3.77, Nb₂O₅ = $55.86, Ta₂O₅ = $255.63
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20 Mine Life. 1 year ramp-up to full 2,000 tpd production rate.
Schedule to Production in 2016
Bankable Feasibility StudySept 1 2010 to Aug 31 2012Sept. 1, 2010 to Aug 31, 2012
Budget = $46 million
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Environmental Concerns: U i & Th iUranium & Thorium
All rare earth deposits contain some Uranium (U) and Thorium (Th) but p ( ) ( )there are no other hazardous materials in the ore.
Nechalacho U & Th content is exceptionally low averaging 23ppm U (background levels) and 114ppm Th (mildly elevated) in high grade ore(background levels) and 114ppm Th (mildly elevated) in high grade ore
Levels are safe for mining and processing activities and no water issues due to insolubility
Th is concentrated with the rare earths and does not go to mine tailings
Levels do not invoke additional permitting requirements from Canadian Nuclear Safety Commission or special transport regulationsNuclear Safety Commission or special transport regulations
Proposed Hydromet facility is on a brownfields mining site and will use historic open pits for waste disposal. Th will be diluted to safe levels
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ThO2 Content Comparison in V i REE D itVarious REE Deposits
Nechalacho
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Competitive Advantages With Oth E i REE P dOther Emerging REE Producers
Relatively Advanced: At Feasibility Study StageAll i di i i h b ff kAllows company to enter into discussions with customers about off-take
First Mover Advantage is KeyFirst to market will capture available market shareFirst to market will capture available market share
Only room for a handful of new producers “first come, first served”
Metallurgical Flowsheet DeterminedVery low Uranium and Thorium
Good recoveries confirmed (75%)
Pilot plant test work underwayot p a t test o u de ay
Heavy Rare Earth Enrichment Marketing OpportunityNo other advanced projects have all the heavies to offer by 2015-2016
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REE COMPARABLES: Market Capitalization Normalized to TREO Resources
CompanyMarket cap
US$ MillionsMillion tonnes
TREO*US$/tonne
TREOStage
US$ Millions TREO TREO
Molycorp $4,598 1.3950 $3,296Production / expansion
Lynas Corporation $3,200 1.1640 $2,749 Construction
Avalon Rare Metals $436 4.298 $101 Feasibility
Rare Element Resources $380 0.55 $690 Prefeasibility
Arafura $295 0.84 $351 Feasibility
Quest Rare Minerals $280 0.976 $287 Prefeasibility
(Market data and FX as of September 2, 2011)* Based on published information/reports
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Also, the market has yet to fully recognize the value of Avalon’s heavy rare earths
Future Milestones and Value D i f A l i 2011Drivers for Avalon in 2011
Completion of flotation pilot plant work and bench scale hydromet workUpdated resource estimates for 2011 drillingCompleting definitive agreements with off-take/ strategic partnersstrategic partnersDefining the HREE separation plant locationFi li i Ab i i l P i i i AFinalizing Aboriginal Participation Agreements
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Vision StatementVision StatementTo be the leading integrated supplier of technology metals and minerals for a more sustainable world.
Mission StatementMaximize shareholder value by being the first to market with a new supply of heavy rare earths, by providing superior customer service and by being a leader in socially p y g yresponsible mineral production.
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Rare Earth Element Supply Chain
REE MiningFrom the ground to
REE MillingGrinding and Beneficiation
REE Hydrometallurgy
C ki th REE i l From the ground to crushed ore
Grinding and Beneficiation of REE minerals
Cracking the REE minerals to produce mixed REE
oxides concentrate
REE SeparationREE RefiningTo meet specific
REE ProductsPermanent magnets
Separating and purifying the individual REE oxides
To meet specific downstream technology
applications
Permanent magnets, LED’s , consumer
electronics
Avalon’s contributions to the REE supply chain...Three large plants with a
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g ptotal CAPEX of > $1billion
REE Mineral Concentration
Grind to 37 µm
REE Mineral Concentration
Deslime (~8 µm)
Magnetics removal
Mill D li iRougher flotation
Mill DeslimingCyclones
Cleaner flotation
Magnetic
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Gravity concentrationg
Separator
HydrometallurgyHydrometallurgy
Acid (H2SO4) bake (~200C)
REE SolutionResidue (zircon, columbite, gangue)
Precipitate bulk LREE+50% HREECaustic (NaOH) crack (~600C)
Acid (HCl) solution 50% HREE, Nb, Ta, Zr
Combined REE productSeparate HREE Nb -Ta Zr
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Rare Earth Separation Plant Recoveries: 74% TREO, 80% Zr
Rare Earth Element SeparationRare Earth Element Separation
REO REECl3 Aqueous solution
Leaching La-Nd/Sm-Lu Organic solvent
La, Ce, Pr/Nd
Sm-Gd/Tb-Dy Ho-Lu, Y
Sm-Dy/Ho-Lu, Y
La, Ce/Pr NdHo-Lu YSm,Eu/Gd Tb/Dy
Sm/Eu GdLa/Ce Pr
TmYb Lu
Sm/Eu Gd
Tb DySm EuLa CeHo/Er
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Ho Er
Basal Zone Indicated Resources atVarious NMR Cut-offs (43-101 compliant)updated Jan. 27, 2011Undiluted grades
INDICATED Tonnes TREO HREO/TREO % % ppm TREOINDICATEDNMR CUTOFF
Tonnes(Millions)
TREO%
HREO/TREO%
%ZrO2
%Nb₂O₅
ppmTa2O5
TREO equiv
≥$260 57.49 1.56 20.72 2.99 0.40 396 2.01
≥$400 39.79 1.77 22.15 3.41 0.45 448 2.28
P d f 2009 d t b S tt Wil RPA d t il d i T h i l R t fil d J l 29
$
≥$600 14.67 2.19 24.68 4.22 0.53 552 2.80
≥$700 7.26 2.43 25.97 4.64 0.58 621 3.10
Prepared from 2009 data by Scott Wilson RPA detailed in Technical Report filed July 29, 2010 and updated for 2010 drilling by Finley Bakker, P. Geo., Sr. Resource Geologist
Mineral Resources are estimated using price forecasts for 2014 for rare earth oxides prepared early in 2010. Some prices are higher and some are lower than current prices.
Mineral Resources NMR price assumptions (2010): US$21.94/kg TREO, US$3.76/kg ZrO2, US$130/kg Ta2O5, and US$45/kg/Nb2O5 .
NMR is defined as the in situ value of all the payable rare metals in the ore net of ti t d t ll i l i d i t $US FX t $1 11 Th
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estimated metallurgical recoveries and processing costs $US FX rate: $1.11. The 2010 base case NMR is C$260/tonne.
First Nations Community Engagement & CSREngagement & CSR
Community information sessions and site visits
Aboriginal TrainingFirst Aid, Driller Helper
Employment at siteEmployment at site40% Aboriginal
Business developmentMajor contractors withMajor contractors with Aboriginal ownershipIce road haulage, airstrip Wind power evaluationHelped start a new core box business with Deninu Kue
Signed MOUs (Negotiation Agreement) with three FN’s
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Agreement) with three FN s
Nechalacho REE Deposit C t l D l t PlConceptual Development Plan
Barren Rock Dump
VentMine Portal
Tailings PondLong Lake
Underground MiningUpper Zone
Basal Zone
Tailings Storage
Mining underground room & pillar/long-hole stoping2,000 tonnes per day (tpd), (lower rate during start-up)
Flotation processing to produce mineral concentrate Hydrometallurgical treatment of mineral con in plant south of GSLy g pProduction of 10,000 tpa mixed REE oxides for separation elsewhereMarket capture less than 5% of est. 2014 TREO global demand Operating Costs: $267/mined tonne of ore inclusive mine, mill and
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Operating Costs: $267/mined tonne of ore inclusive mine, mill and hydromet or $6.50 - $7.00/kg REO after separation
Estimated Total Project C t ti C it l C tConstruction Capital Costs
A ti itTotal Capital Cost
E ti tOperating costs over the 18 lif f h jActivity Estimates
(CAD $ 000’s)
Nechalacho Mine 99,607
Thor Lake Process Facility 173 165
18 year life of the project are estimated to average CAN $267 per tonne of ore mined or $5.93 per
Thor Lake Process Facility 173,165
HydroMetallurgical Plant 316,602
Primary Project Component Cost 589,374
kilogram of productBased on Diluted Probable Mineral Reserves of 12.0 million
Project Engineering, Procurement, Construction and Management
80,657
Contingency @ 22% 144 503
Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO₂), 0.42% (Nb₂O₅) and 0.042% (Ta₂O₅)Contingency @ 22% 144,503
Sustaining Capital 73,000
Reclamation & Miscellaneous 12,200
(Ta₂O₅)Probable Reserves will increase with continued drilling, also extending the mine life
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Total Project Capital Costs 899,734 mine life.
Project Development phase(+ Expected Production Level and Capex)(+ Expected Production Level and Capex)Source: Ernst & Young April 2011
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