A North American View of REE and a Canadian Supply ...avalonadvancedmaterials.com/_resources/PN_Beijing_2010.pdf · A North American View of REE and a Canadian Supply Solution for

A North American View of REEand a Canadian Supply Solution

for the Heavy REEyPierre Neatby, Marketing & Sales Advisor

Asian Metal Conference, Beijing, A il 23 2010April 23, 2010

…advancing green technology

www.avalonraremetals.com March 2010

Safe Harbour Statement

Forward looking information

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 suchy p p yforward-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 theseforward-looking statements.

2…advancing green technology

Overview

Demand drivers for REE in North America

Recent activities in the North American REEmarkets

North American REE supply chain concerns and political reactionpolitical reaction

Avalon’s Nechalacho heavy REE deposit

A l ’ d l t lAvalon’s development plans


Growing Recognition of Importance of Rare Earth

Application Rare Earth T h l

REE Required

pElements in Green Technology

Technology

Hybrid, Electric and Plug-in Cars

REE permanent magnets

Nd, Pr, Dy, Tb

Wind and tidal power generation

REE permanent magnets

Nd, Pr, Dy, Tb

Flat screen displays and monitors

REE phosphors create the colors blue, green and red

Y, Eu, Tb, Gd, Pr, Ce

LED lights REE phosphors Y Eu TbLED lights REE phosphors enable light to match brightness and color with substantially less energy usage

Y, Eu, Tb


less energy usage

Key Application of REE Magnets PMG’s for Wind TurbinesPMG s for Wind Turbines

The illustration to the right of a new GE 4 MW wind turbine uses a 90-ton generator with a 20-foot ring

f d iof permanent neodymium magnets to eliminate the need for a gearbox, reducing breakage andreducing breakage and energy loss.

PMGs make the whole assembly (nacelle) lighter weight allowing higher tower

PMG = permanent magnet generator Red stickman (approx. 6’ tall) shown to demonstrate scale. The wind


turbine blades on this 4MW model are 176 foot long. Photo: Popular Science / GE

Growing Demand for REEMagnets in Power Generation Magnets in Power Generation

PMGs for Run of the River:

Currently four - 4MW units being installed on Canada’s Trent Rapids River system; The first to be installed in North America and largest that have been manufactured to dateAmerica and largest that have been manufactured to date

PMG’s Capturing Tidal Power:

Canada’s Nova Scotia Power Corporation (NSPC) andCanada s Nova Scotia Power Corporation (NSPC), and Ireland’s OpenHydro testing PMG units in Canada’s Bay of Fundy, home of the world's highest tides

PMG tidal units comprised of 10-metre,12 runner blade turbine with magnets on the rotor blades


PMG - Run of the River Projectsj

Generator being loweredGenerator being lowered into the turbine pit

Cylindrical rotor, to which the NdFeB permanent magnets are glued and b lt d t it t fbolted to its outer surface4MW generator contains 1tonne of magnets


PMG Capturing Tidal Power

Bay of Fundy in Nova Scotia Canada has the highest tides in the world with an estimated 100MW power generation potential


p g p

Recent Developments in REE MarketsMarkets

A number of nations announce plans to stockpile REE

C dCanada: Dacha Capital Inc. buying physical rare metals focusing on heavy rare earths as investment opportunityon heavy rare earths as investment opportunity

Avalon advances Nechalacho HREE project, defines process flowsheet and set to release prefeasibility study.p p y y

Many new early-stage exploration projects started

China: Announcement of reductions in REE export quotas and potential ban on future exports of unprocessed HREE(notably dysprosium and terbium); stimulates international concern over security of supply of critical metals


concern over security of supply of critical metals

Recent Developments in REE MarketsMarkets

United States:

Molycorp Mountain Pass Mine planning to re-start primary production of LREE and build p y pmagnet alloy business. Announces intent to do $350million IPO in 2010.US Government gets involved in REE

US Government Accountability Office (GAO)

US Department of Defence (DOD)

US Department of Energy (DOE)

C t bl RESTART l i l ti


Congress tables RESTART legislation

U.S. GAO, DOD, DOE & Congressional Initiatives Congressional Initiatives … 1

US Government Accountability Office (GAO)y ( )

Independent body provided report at the request of Department of Defence

US could rebuild its domestic supply chain for REEin 10-15 years, with several mining, production and

i i iti ti ithi th t 2 3processing initiatives within the next 2 – 3 years

US Department of Defence (DOD)

DOD plans to complete a study on national security risks related to REE shortage by September 2010


September, 2010

U.S. GAO, DOD, DOE & Congressional InitiativesCongressional Initiatives… 2

US Department of Energy (DOE)p gy ( )

DOE developing its first-ever strategic plan toaddress the role of rare earth and other strategicmaterials in clean energy technologies.

DOE to solicit broad public input from stakeholdersDOE to solicit broad public input from stakeholdersand experts


U.S. GAO, DOD, DOE & Congressional InitiativesCongressional Initiatives… 3

RESTART (Rare Earths Supply-Chain Technology( pp y gyand Resources Transformation Act of 2010)

Proposed United States legislation intended toProposed United States legislation intended to

"take any and all actions necessary to ensure thereintroduction of a competitive domestic rare earthpsupply chain, to include the reintroduction of thecapacity to conduct mining, refining / processing,alloying and manufacturing operations using domesticy g g p gsuppliers to provide a secure source of rare earthmaterials as a vital component of national security andeconomic policy."


RESTART’s Seven-Point I iti ti I l dInitiative Includes:

Establishing a Federal government rare earths workinggroup

Assessing the domestic REE supply-chain to determine which REEs are critical to US’s national economic securitywhich REEs are critical to US s national economic security

Creating a national stockpile for important rare earth materials

Evaluating international trade practices in the REE markets

Providing government-backed loan guarantees for domestic rare earths supply-chain development

Supporting innovation and training of the entire domestic rare earth supply chain


rare earth supply-chain.

NECHALACHO HEAVY RARE EARTHS DEPOSITEARTHS DEPOSIT

THOR LAKE NWT CANADA


THOR LAKE, NWT, CANADA

Thor Lake, NWT, Canada, ,


Thor Lake: Project Locationj

Proximity to yGreat Slave Lake provides access toaccess to railhead at Hay River by barge in summer and ice road in winter. Current access is fly-in.


Nechalacho HREE Deposit:Development ProgressDevelopment Progress

2005: Acquisition of property for $300,000 in sharesRecognized heavy rare earth potential

2007: Scoping study, expln. drilling & $16 million financing

2008: Delineation drilling programs 16 640 metres 85 holes2008: Delineation drilling programs 16,640 metres, 85 holes and 43-101 resource estimate, community engagement

2009: Definition drilling 14,575 metres, 70 holes, metallurgical, environmental and market studies & $17 5 million financingenvironmental and market studies & $17.5 million financing

2010: Pre-feasibility Study, Begin Env. Impact Assessment, MOU with First Nations, project engineering

2010 11 Pil t Pl t k2010-11: Pilot Plant work

Expenditures to date total over $16.0 million

$10 million in planned expenditures CY2010


$10 million in planned expenditures CY2010

Nechalacho HREE Deposit: Drill Hole Location MapHole Location Map

N-S Section line

cc KeyccE-WSection Line

Key Area


156156

Nechalacho HREE Deposit:Key CharacteristicsKey Characteristics

Very large size: Basal Zone contains 9.0mt indicated and 37.5mt inferred resources at 1 9%TREO (open for expansion)inferred resources at 1.9%TREO (open for expansion)

Exceptional enrichment in valuable heavy rare earths (20-30%)

Near-surface, flat-lying deposit geometry, good continuity

A bl l d d i i h dAmenable to low cost underground mining methods

REE amenable to economic recovery, valuable by-products identified

Pre-feasibility Study nearing completion: May, 2010

In situ ore value nearly double projected operating costs of $200-250/tonne

Environmental assessment and permitting process underwayprocess underway

Initial production forecast for 2014-2015

$400-500 million estimated capital cost


Nechalacho HREE Deposit Mineral Resources @ 1.60% TREO Cut-off Grade Jan. 14, 2010

Zo ne Mill io ns to nne s % T REO % HREO HREO/T REO

INDICAT ED MINERAL RESOURCES

Basal Zone 9.00 1.86 0.43 23%

INFERRED MINERAL RESOURCES

Upper Zone 22.44 2.00 0.16 8%

Basal Zone 37.56 1.94 0.40 21%

Sufficient Indicated to support PFS. Good continuity confirmed in Basal Zone.I di t d Mi l R d t d b H d t C lt t f i i l ti t b W d

Basal Zone 37.56 1.94 0.40 21%

T o ta l 60.00 1.96 0.31 16%

Indicated Mineral Resources updated by Hudgtec Consultants from original estimate by Wardrop Engineering Ltd (A Tetratech Company) and subject to final audit for PFSDefining Indicated Resources is a function of drill hole spacing being reduced to average of 50 metres.


TREO = total rare earth oxides, HREO = heavy rare earth oxides (europium to lutetium + yttrium)

TREO Production Forecast vs. 2014 Demand Forecast2014 Demand Forecast

Nechalacho 2014Nechalacho 2014 production forecast at 5,000 or 10,000 tonnes of total rare

th idearth oxides per annum

2014 Demand forecast after Kingsnorth, 2009

49 4% La + Ce49.4% La + Ce25% Nd+Pr+Sm

25.6% Heavies +Y


REE Distribution in the Basal Zone Ore Compared with Other pREE Deposits & Avg. Value/kg

100%

70%

80%

90%

40%

50%

60% HREE

Samarium

Neodymium

Praesodymium

10%

20%

30%

y

Cerium

Lanthanum

0%Mt Pass

Molycorp$9.90

Baiyun Obo Baotou$11.40

Mt WeldLynas$13.60

NolansArafura$14.20

NechalachoAvalon$22.10 Value US$/kg


Nechalacho HREE Deposit Conceptual Development PlanConceptual Development Plan

Barren Rock D mp

VentMine Portal

Barren Rock Dump

Tailings PondLong Lake

Underground MiningUpper Zone

g g

Basal Zone

Tailings Storage

Mining underground room & pillar/long-hole stopingMining underground room & pillar/long hole stoping1,000 tonnes per day (tpd), ramping to 2,000 tpd by year 4

Flotation processing to produce mineral concentrate (80% recovery)Hydrometallurgical treatment of mineral con in plant south of GSLy g p

Average of 12,500 tpy TREO in chemical concentrate over first 10 yearsMixed REE carbonates shipped to third party for separation

Market capture 6.5% (est. 2014 TREO demand ), 16% of HREOO i C $250/ i l i i ill & h d


Operating Costs: up to $250/tonne inclusive mine, mill & hydromet

Basal Zone HREE Mineralization in Zircon and Fergusonite: gMetallurgical Recovery Process

82-85% REE Recovery in on-site plant82-85% REE Recovery in on-site plantFine-grinding (40 micron)

Froth Flotation

H d t ll i l l t l t d ff it

20μm

Hydrometallurgical plant located off-site Caustic cracking of REE con followed by acid leaching (HCl or H2SO4) will put 90% of REE plus Zr and Nb into solution90% of REE plus Zr and Nb into solution

Solvent extraction then precipitation of two mixed REE carbonates (one mainly LREE, second mainly HREE)Fergusonite

ZiLREE, second mainly HREE)

Separation of REE oxides (Asia?)

REE Y La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu

REE distribution in fergusonite:

Zircon


Oxide % 29.0 0.30 4.40 1.70 15.6 10.4 1.60 14.3 1.80 9.80 1.20 4.10 0.70 4.40 0.70

Metallurgical Progressg g

Mine Site Flotation Process Testwork CompleteFlo sheet De eloped optimi ation contin ingFlowsheet Developed, optimization continuing

Confirmation testing in progress with Xstrata Process Control

Hydrometallurgical Testwork OngoingCaustic cracking with NaOH followed by leaching mainly with H2SO4

Excellent progress to deliver 4-6 products:HREE mixed carbonate

LREE mixed carbonateLREE mixed carbonate

Niobium Pentoxide & Zirconium Oxychloride by-products

Gallium and tantalum (possibly)

2010 PlansUtilize existing 5 MT of core stored in Yellowknife

Mini-pilot plant at Xstrata facility to produce 600 kg concentrate

HydroMet pilot run using 20kg per day for 30 days


Schedule to Production in 2014Capital Costs at +$400 millionCapital Costs at +$400 million

Thor Lake P j t S h d l

2010 2011 2012 2013 2014 2015

Aboriginal Engagement

Pre-feasibility Draft Document

Draft HydroMet Flowsheet

Project Schedule Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q3 Q4 Q1 Q2 Q3 Q4Q1 Q2 Q3 Q4 Q1 Q2 Q1 Q2 Q3 Q4

Final Pre-feasibility Report

Project Description Report

MVLWB Prescreening Process

MVEIRB EA ProcessMVEIRB EA Process

Ministerial Approval

MVLWB LUP/Water Licensing

Bankable Feasibility

Final Designs & Financing

Project Construction

Project Start-up

S &


Sales & Market Development

Avalon’s Competitive Advantages: NechalachoAdvantages: Nechalacho

Basal Zone has exceptionally high proportion of heavy p y g p p yrare earths ( >20%)

Implies a high value ore and higher operating margins

Viable metallurgical process defined

Valuable by-products (zirconium, niobium, gallium)

Low thorium, no significant contaminants

Relatively advanced compared to new entrantsAlready 5 years along the “10 year journey”

Well-financed ($15 million), no debt


Experienced management, technical experts

A Leader in Environmental & Social Responsibility: Winner of p yPDAC’s 2010 e3 Plus Award

Naming ceremony

Community meetings and site visits

March 2010 PDAC Awards CeremonyAccepting award

from Jon Baird, PDAC

President

First Nations training

Employment at site

President

p y40% aboriginal

Business development

Wind power evaluation with YKDFN

Sept 2009 naming ceremony

Chiefs Ed Sangris and Ted Tsetta with Don

Bubar


with YKDFN

Thor Lake Project Consultants j

David Trueman, Ph.D., P.Geo, Rare Metals Geologist

Chris Pedersen, P.Geo, Rare Metals Geologist

Bruce Hudgins, P.Geo. Resource database management

John Goode, P.Eng. Metallurgical Consultant

SGS Lakefield Research, Metallurgy & Mineralogy

Scott Wilson RPA Inc., Pre-Feasibility Study Independent Consultants

Ian M. London, P. Eng. Energy and Market Development Consultantg gy p

Jacques Whitford Stantec, Permitting, Environmental Studies

Pierre Neatby, Market Development/ Marketing & Sales

Kaz Machida KAY Investment REE Market Dev AsiaKaz Machida, KAY Investment, REE Market Dev. Asia

McGill University, (Dr. A.E. Williams-Jones) Geological Research

Fasken, Martineau Dumoulin, Aboriginal Law

CIBC World Markets Investment Bankers


CIBC World Markets, Investment Bankers

Capital Structureas at April 1 2010as at April 1, 2010

Canada - TSX: AVLCanada TSX: AVL

United States - OTCQX: AVARF SEC 12g3-2(b) # 82-4427

Shares Outstanding 78,801,698

Fully Diluted 87 483 198Fully Diluted 87,483,198

Market Capitalization C $201 million (S/O @ $2.55)

Recent Price Range C $2.40 - $2.80

52 Week High / Low C $4.24 - $0.51

Cash Reserves C $15.0 million

Insider Share Position 3.4 million shares (4.3%)( )

Institutional holdings (25%) CPP, TDAM, Front St., Excalibur, NatCan, MFC

Global, Faircourt, Cantara, Seamans, Fuchs Glbl

Balance Sheet Assets C $42 5 million (Nov 30/09)


Balance Sheet Assets C $42.5 million (Nov. 30/09)

Management, Directors& Strategic Advisors& Strategic Advisors

ManagementD ld S B b P G

DirectorsAl F CFADonald S. Bubar, P.Geo,

President, CEO & Director

Jim Andersen, C.A., C.P.A., V P Finance & CFO

Alan Ferry, CFANon-Executive Chairman

Brian D. MacEachen, C.A. Audit Committee ChairV.P. Finance & CFO

Bill Mercer, Ph.D., P.Geo., V.P. Exploration

David Swisher B S Min Eng

Hari Panday, C.A.

Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation ctte David Swisher, B.S. Min.Eng.

V.P. Operations

Charlotte May, Corporate Secretary

Cindy Hu CA CPA CGA Controller

Phil Fontaine, B.A., LL.D.

Strategic Advisors F Dale Corman P EngCindy Hu, CA, CPA, CGA, Controller

Virginia Morgan, B.Com, Manager, Investor Relations

F. Dale Corman, P.Eng.

Gerald Prosalendis, Communications

David Connelly, Community Relations

Joe Monteith Business development


Joe Monteith, Business development

Corporate Informationp

Avalon Rare Metals Inc. 130 Adelaide St. W, Suite 1901Toronto, ON Canada M5H 3P5

T: (416) 364 4938 ۰ F: (416) 364 5162T: (416) 364-4938 ۰ F: (416) 364-5162

www.avalonraremetals.comwww raremetalblog comwww.raremetalblog.com

Investor Relations: i @ l t [email protected]


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A North American View of REE and a Canadian Supply ...avalonadvancedmaterials.com/_resources/PN_Beijing_2010.pdf · A North American View of REE and a Canadian Supply Solution for