Corporate PresentationDon Bubar, President & CEO

February 7, 2011

2

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 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 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 theseforward-looking statements.

3

Capital StructureFebruary 7, 2011

Canada - TSX: AVL

United States – NYSE Amex: AVL Frankfurt- OU5

Shares Outstanding 93,288,523

Fully Diluted 103,508,970

Market Capitalization US $630 million (S.O. @ $6.75)

Recent Price Range US $4.48 - $8.20

52 Week High / Low US $8.20 – C $1.89

Cash Reserves C $37 million (No debt)

Insider Share Position 4.1 million shares (4.5%)

Institutional holdings CPP, TDAM, Front St., Excalibur, MFC Global

(est. 30-40%) Middlefield, AGF , Cantara, Sentry, Chilton

Employees 20 (including contract staff)

4

Management & Board of Directors

ManagementDonald S. Bubar, P.Geo, President, CEO & Director

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

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

David Swisher, B.S. Min.Eng.,

V.P. Operations

Pierre Neatby, B.A. Econ, V.P. Sales & Mktg

Charlotte May, Corporate Secretary

Cindy Hu, CA, CPA, CGA, Controller

DirectorsAlan Ferry, CFANon-Executive Chairman

David Connelly, CStJ, CD, MBA, B.Comm

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

Brian D. MacEachen, C.A. Audit Committee Chair

Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation ctte

Hari Panday, C.A.

Ron Malashewski, P.Eng (AB), Manager, Investor Relations

Virginia Morgan, Investor Relations (on maternity leave)

5

Key Staff & Consultants Chris Pedersen, P.Geo, Senior Geologist, Camp Manager

Martin Heiligmann, Ph.D., Project Geologist

Finley Bakker, P.Geo. Senior Resource Geologist

Brian Delany, P.Eng., Senior Project Manager

Dezhi Qi, P.Eng. Process Engineer

Rob Prasad, Senior Human Resources Coordinator

John Goode, P.Eng. Metallurgical Consultant

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

Ian M. London, P. Eng. Energy and Market Development Consultant

SGS Lakefield Research, Metallurgy & Mineralogy

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

Kaz Machida, KAY Investment, REE Market Development Asia

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

EBA Engineering, Permitting and Environmental Consultants

FL Smidth, Engineering and Design, Flotation Plant

Xstrata Process Support, Metallurgical Testwork Support

6

Project LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumZirconiumHafniumGallium

NORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium

All projects 100% owned

Avalon offers diversified exposure to a broad range of rare metals

7

Nechalacho REE Deposit at Thor Lake: Key Facts

Positive pre-feasibility study completed in 2010. C$27 million invested since 2005, incl. 59,000m of drilling in 266 holesBankable feasibility underway, fully financed, completion in 2012Large resource amenable to low cost underground mining methodsRich in heavy rare earths (20-28%), High grade subzones definedRecovery process defined at bench scale. Pilot plant in progressPFS Production model: 10,000 tpa TREO... Could be increasedBy-product revenues from zirconium, niobium and tantalum (40%)

Environmental assessment and permitting process in progress with First Nations supportPlanning for N. American HREE separation plant Production start-up in 2015+C$1.0 billion estimated total capital cost

8

Comparison of Anticipated Production for Major REE Deposits

Nechalacho Mt Weld Mountain Pass NolansCanada

(10,000 tpa)Australia

(11,000 tpa)USA

(20,000 tpa)Australia

(20,000 tpa)Europium Eu 49 48 24 80Gadolinium Gd 371 107 34 200Terbium Tb 54 8 - 16Dysprosium Dy 271 13 - 66Holmium Ho 48 - - -Erbium Er 126 - - -Thulium Tm 17 - - -Ytterbium Yb 101 - - -Yttrium Y 1,169 41 20 264Lutetium Lu 14 - - -

Total Heavies 22.20% 1.98% 0.39% 3.13%

Lanthanum La 1,583 2,805 6,640 3,948Cerium Ce 3,572 5,141 9,820 9,506Praseodymium Pr 451 585 868 1,164Neodymium Nd 1,783 2,035 2,400 4,240Samarium Sm 391 250 160 474

Total Lights 77.80% 98.33% 99.44% 96.66%

REE OXIDE

9

Demand Growth to 2015 (Source Jacob Securities Jan. 2011)

10

Recent Developments in REE Markets

China reduces export quotas by 35% for first half of 2011 compared to first 6 months of 2010

Chinese REE exports to Japan curtailed in 2010 over territorial dispute creating global security-of-supply concern

Increasing media coverage and commentary on REE supply/demand issues stimulates surge in investor interest

REE prices as a group increased some 300% in 2010

Molycorp signs MOU with Sumitomo for $130 million debt / equity financing, and enters magnet alloy joint venture with Hitachi Metals

Lynas and Sojitz Corporation announce Strategic Alliance to supply Japanese market

Molycorp announces expansion plans to 40,000 tpa TREO and new equity financing plans

11

0

200

400

600

800

1,000

1,200

1,400

1,600

0

10

20

30

40

50

60

70

Va

lue

(US

$ m

illio

ns)

Vo

lum

e (0

00's

tonn

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Gross volume versus value of exports from 1990 to 2011EGross Volume Gross Value

Chinese Rare Earth exports from 1990 to 2011 (Estimate)

*Source: Research in China, China Research and Intelligence, Laurentian Bank Securities

1990 2000 2010

12

Rare Earth Element Prices

Source: Metal-Pages.com, February 3, 2011Prices are indicative and basis FOB China

Metal Oxide Principal Uses Price US$/kg

Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 61.00 – 63.00

Cerium Oxide 99% min Catalyst, glass, polishing 66.00 – 68.00

Praseodymium Oxide 99% min Magnets, glass colorant 102.00 – 105.00

Neodymium Oxide 99% min Magnets, lasers, glass 103.00 – 106.00

Samarium Oxide 99% min Magnets, lighting, lasers 60.00 – 62.00

Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 620.00 – 640.00

Terbium Oxide 99% min Phosphors: green, magnets 620.00 – 640.00

Dysprosium Oxide 99% min Magnets, lasers 360.00 – 370.00

Gadolinium Oxide 99%min Magnets, superconductors 67.00 – 70.00

Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 75.00 – 80.00

13

Dysprosium, Neodymium: 4 year FOB China price trends

Source: Metal-Pages.com

14

Key Applications of REE:Magnets for Electric Motors

REE (NdFeB) or “Neo” Magnets reduce electric motor/generator size and weight, and improve efficiencyMajor applications include:

Electronics (grams)Hybrid-electric cars (1-2 kg)Industrial air conditioners (500 kg)Wind turbines (0.6-1.0 tonne/MW)MRI machines (1-3 tonnes)

Trend toward larger volume applicationsREE magnets can reduce power consumption by 50% Approximately 30% of the magnet is Neodymium metal

HREE dysprosium and terbium additions are key to making “heat resistant” magnets vital to automotive and other applicationsHREE phosphors key to energy efficient lighting, display screens

100 Kw generator with neo magnets

15

Key Application of REE Magnets in Wind Turbines

New GE 4 MW wind turbine uses a 90-ton generator with 2-3 tons of NdFeB permanent magnets to eliminate the need for a gearbox, reducing breakage and energy loss

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

Already planning to build 10 MW size turbines

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

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Niobium Production

Giant Araxa deposit in Brazil (CBMM) produces 80% of world supply (150,000 tpy Nb2O5)

Nechalacho is now the 3rd largest deposit in the world and will produce 1,700 tpa Nb2O5 as by-product

Demand increasing for main use in High strength low alloy (HSLA) steels as use of HSLA steels is expected to double in next few years

Traditional markets in architecture, ships, bridges.

Increasing use in automotive... Reduces the weight of the vehicle and improves fuel efficiency.

$9 of Nb = 100kg less weight = 1 litre of fuel savings per 100km

17

Zirconium Production

Primary zirconium production mainly from zircon sands in Australia and South Africa (1.5 million tpa zircon)

China imports zircon sands and is the only global producer of Zirconium Oxychloride (ZoC) the basic chemical feedstock for producing Zr metal and other chemicals

China increasing ZoC consumption, applying export taxes

Zr Metal critical for nuclear reactors as fuel cladding

Many emerging uses:Hemodialysis treatment (zirconium phosphate)Solid Oxide Fuel Cells (yttrium stabilized zirconia)

18

Thor Lake: Project Location

Flotation plant at Thor lake, shipping of concentrate by barge to hydromet plant at Pine Point.

Concentrates shipped by rail from Hay River to Separation Plant

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North-South Section

Tardiff Lakes Area

West Long Lake Area

Nechalacho REE Deposit: Diamond Drill Hole Location Map

Airstrip

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N-S Composite Section (looking west)

Upper LREE Zone

Basal HREE ZoneAverages 30 m thick, 2% TREO, 20% HREE

Hole 70: 1.90% TREO with 32.6% HREO

over 6.0 metres

Hole 154: 1.88% TREO with 20.5% HREO over 20.0 metres

170m

1590m

Drill Hole with Basal Zone Intercept

Tardiff Lakes Area Indicated resources

Nechalacho REE Deposit

21

Nechalacho Deposit: NI 43-101Resources Updated Jan. 27, 2011

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

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 cut-off value of CAN$260/tonne. (CAN:USD FX $1.11/$1.00)

Tonnes (millions)

%TREO

%HREO

%HREO/TREO

%ZrO2

%Nb₂O₅

ppmTa2O5

TREO equiv

Basal 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

Upper 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

Total Inferred 226.88 1.30 0.19 14.33 2.61 0.36 278 1.71

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Basal Zone Indicated Resources atVarious NMR Cut-offsupdated Jan. 27, 2011

Notes1.CIM definitions were followed for Indicated Resources. An exchange rate of 1.11 was used.2. HREO (Heavy Rare Earth Oxides) is the total of: Y203, Eu203, Gd203, Tb203, Dy203, Ho2O3, Er203, Tm203, Yb203 and Lu203. TREO (Total Rare Earth Oxides) is HREO plus: La203, Ce203, Pr6011, Nd203and Sm2033. 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 Geologist4.Mineral Resources are estimated using price forecasts for 2014 for rare earth oxides prepared early in 2010. Some of these prices are higher and some are lower than current prices. The prices used are the same as in the June 14, 2010 disclosure.5. A cut-off NMR grade of $260 Can was used for the base case. NMR is defined as “Net Metal Return” or the gross in situ value of all the payable rare metals in the ore.6. ZrO2 refers to Zirconium Oxide, Nb₂O₅ refers to Niobium Oxide, Ta₂O₅ refers to Tantalum Oxide, Ga2O3 refers to Gallium Oxide.7. TREO equivalent % is calculated using the weighted average value per kilogram of REE divided into the total NMR of the rock taking into account metallurgical recoveries

Undiluted grades

INDICATEDNMR 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

≥$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

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Prefeasibility DCF Model: Opportunity Analysis

Pre-Tax Analysis (in millions)

Optimization Initiative Action IRR NPV @ 8% NPV @ 10% NCF

Scott Wilson, RPA Cashflow Model Base Case 14% 428 246 2,091

Eliminate 3 year Production Ramp-Up Complete 20% 714 505 2,530

Utilize Increased Resources for selective mining of high grade in first 5 years

In Progress 23% 866 643 2,759

Buy-out 3% NSR* In Progress 24% 927 695 2,893

Alternative Energy Initiatives In Progress 24% 943 709 2,930

Eliminate working capital in base case Complete 26% 987 754 2,930

BFS** Contingency at 10% In Progress 28% 1,048 812 2,999

OVERALL TOTAL All 28% 1,048 812 2,999

*NSR – Net Smelter Return**BFS – Bankable Feasibility Study

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Nechalacho REE Deposit Conceptual Development Plan

Barren Rock Dump

Tailings PondLong Lake

VentMine Portal

Underground Mining

Basal Zone

Upper 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 GSLProduction of 10,000 tpa mixed REE oxides for separation elsewhereMarket capture less than 5% of est. 2014 TREO global demand Operating Costs: $267/tonne inclusive mine, mill and hydrometCAPEX estimate in PFS: $900 million

25

NECHALACHO METALLURGY

Metallurgical testing at SGS Minerals Lakefield Under supervision of John Goode, P.Eng, Consulting Metallurgist

Flotation bench scale testing completeConcentrate with REE, Nb, Ta, Zr at about 5X concentrationREE content approx. 10%, present recoveries: 80-85%Gangue minerals (silicates, etc.) ~40% of concentrate

Mini-pilot flotation plant (4-5 tonnes) trial in progress at XPS

Hydrometallurgical flowsheet defined (90% TREO recovery)“Cracking” of minerals completeSeparation procedure for REE, Zr, Nb, Ta designedMini-Pilot plant work to begin when flotation work complete

Feasibility Study Pilot Plant work on 30 tonne sample (H2 2011)

26

Planning for HREE Separation Plant in North America

No large scale heavy REE separation capability outside China at present. Customers want an outside China separation solution

Scoping Study by SNC Lavalin assuming S. Ontario location

CAPEX estimated at C$345 million (+/- 35%) for 25,000 tpaHREE separation plant

Sized to accommodate additional supply from other producers

Delivered cost of reagents accounts for 90% of OPEXLocate plant near sources of HCL and caustic soda

Review of potential sites in progressConsider partnership opportunities

27

Schedule to Production in 2015

Cost Estimate for Feasibility Study = $43 million

Aboriginal Engagement

Pre-feasibility Draft Document

Draft HydroMet Flowsheet

Final Pre-feasibility Report

Project Description Report

MVLWB Prescreening Process

MVEIRB EA Process

Ministerial Approval

MVLWB LUP/Water Licensing

Flotation Plant Pilot Testing

HydroMet Plant Pilot Testing

Bankable Feasibility

Final Designs & Financing

Project Construction &

Project Start-up

Sales & Market Development

Thor Lake Project Schedule

2010 2011 2012 2013 2014Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q2 Q3 Q4Q3 Q4 Q1Q1 Q2 Q3 Q4 Q1 Q2

2015Q1 Q2 Q3 Q4

Bankable Feasibility Study BudgetSept. 1, 2010 to Aug 31. 2012= $40.5 million

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First Nations Community Engagement & CSR

Community information sessions and site visitsAboriginal Training

First Aid, Driller Helper

Employment at site40% Aboriginal

Business developmentMajor contractors with Aboriginal ownershipIce road haulage, airstrip Wind power evaluationHelped start a new core box business with Deninu Kue

Signed MOU (Negotiation Agreement) with YKDFN

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Competitive Advantages with other emerging REE producers

Relatively Advanced5 years down a 10 year development timeline

Prefeasibility Study CompletedAllows company to enter into discussions with customers about off-take

Metallurgical Flowsheet DeterminedNo issues with contaminants and good recoveries confirmed (75%)

Significant By-product revenue indicated (Zr, Nb, Ta)

Heavy Rare Earth Enrichment Marketing OpportunityNo other advanced projects have all the heavies to offer

First Mover Advantage is KeyFirst to market will capture available market share

Only room for a handful of new producers “first come, first served”

30

REE COMPARABLES: Market Capitalization Normalized to TREO Resources

Company Market cap US$ Millions

Million tonnes TREO*

US$/tonne TREO Stage

Molycorp $3,773 1.3950 $2,705 Production / expansion

Lynas Corporation $3,213 1.1640 $2,760 Construction

Rare Element Resources $441 0.55 $803 Prefeasibility

Quest Rare Minerals $341 0.551 $619 Prefeasibility

Arafura $403 0.8400 $480 Feasibility

Avalon Rare Metals $519 4.298 $121 Feasibility

(Market data and FX as of January 26, 2011)* Based on published information/reports

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Some objectives for 2011

Update of Nechalacho PFS Economic Model by mid-year

Attracting a consumer or consumers as strategic partners and entering into off-take agreements

Advancing feasibility study work especially pilot plant work and planning for HREE separation plant

Concluding First Nations Participation Agreements

Expanding our investor audience internationally and in the Clean Tech community (CSR Road Map 2011)

Increased Research Analyst coverage

Advance East Kemptville and Separation Rapids projects and begin generating other new rare metals projects

32

18 Month Price Chart

CIBC Financings

China export policyMedia Coverage

Resource expansionand PFS newsDines Letter

China reduces export quotasNYSE Amex Listing

33

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Vision Statement

To be the leading integrated supplier of technology metals and minerals for a more sustainable world.

Mission Statement

Maximize 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 responsible mineral production.

35

Rare Metals: Key Enablers of Clean Technology

Rare earth elements (“REE”) such as Neodymium, Terbium and Dysprosium; & other rare metals such as Lithium, Gallium, Indium (+Tin), Niobium, Tantalum, Zirconium

Creating new materials such as thin films (solar) and high strength magnets, the key to energy-efficient electric motorsRenewable energy: solar power, wind turbines, nuclear powerLED lighting, rechargeable batteries, light weight aerospace alloysHybrid and electric cars (30 kg REE in aggregate)

36

What are Rare Earth Elements?

Light REE:La = LanthanumCe = CeriumPr = PraseodymiumNd = NeodymiumSm = Samarium

Heavy REE:Eu = EuropiumGd = GadoliniumTb = TerbiumDy = DysprosiumHo = HolmiumEr = ErbiumTm = ThuliumYb = YtterbiumLu = LutetiumY = Yttrium

Neodymium, Dysprosium, Terbium and Europium in highest demand

37

Key Facts About Rare Earth Elements or “REE” … 1

Widely dispersed, but rarely concentrated; only found as a group, often with uranium & thorium. Deposits are not rare.

Typically concentrated in alkaline intrusive rocks (carbonatites) or peralkaline granites (Thor Lake)

Many different ore minerals: bastnaesite, allanite, monazite. xenotime, eudialyte, fergusonite, zircon

In most deposits, light rare earths “LREE” are far more abundant than heavy rare earths “HREE”; LREE typically comprise 98-99% of resource...HREE far more valuable

REE must be recovered as a group and sequentially separated; HREE cannot be selectively extracted

38

Key Facts About REEs… 2

REEs are not commodities; Like industrial minerals, requirements are customer specificExpensive to recover... Hydrometallurgical concentration and separation in large plants with enormous capital requirements (+$1 billion)There is no custom refining capacity outside ChinaRare Earths enjoy several unique properties making them indispensable to modern technology:

Magnetic, Optical, Catalytic, Chemical, Electrical, Metallurgical and Nuclear

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Each REE deposit has its ownunique, (constant) distribution

Avalon’s Nechalacho deposit is richer in HREE

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mt PassMolycorp

Baiyun Obo Baotou

Mt WeldLynas

NolansArafura

NechalachoAvalon

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Comparison of Anticipated Production for Major REE Deposits (tpy)

Nechalacho Mt Weld Mountain Pass NolansCanada

(10,000 tpa)Australia

(11,000 tpa)USA

(20,000 tpa)Australia

(20,000 tpa)Europium Eu 49 48 24 80Gadolinium Gd 371 107 34 200Terbium Tb 54 8 - 16Dysprosium Dy 271 13 - 66Holmium Ho 48 - - -Erbium Er 126 - - -Thulium Tm 17 - - -Ytterbium Yb 101 - - -Yttrium Y 1,169 41 20 264Lutetium Lu 14 - - -

Total Heavies 22.20% 1.98% 0.39% 3.13%

Lanthanum La 1,583 2,805 6,640 3,948Cerium Ce 3,572 5,141 9,820 9,506Praseodymium Pr 451 585 868 1,164Neodymium Nd 1,783 2,035 2,400 4,240Samarium Sm 391 250 160 474

Total Lights 77.80% 98.33% 99.44% 96.66%

REE OXIDE

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China Dominates Global REE Production

China currently produces over 95% of global REE supplyChina now imposing export quotas and tariffs on REE New non-Chinese supply sources needed to maintain balanceSupplies of key HREE from China (Y, Dy, Tb) will remain tight with potential for a complete export banJapan totally reliant on China for supplies

Yet, Chinese companies are actively trying to acquire additional REE resources around the world.

Mountain Pass era

42

South China Ionic Clays: World’s Primary Source of HREE

Low grade, but relatively easy to recover by in situ or vat leaching

Uncontrolled, primitive methods causing environmental destruction

Government now curtailing production for cleanup

50% of mines unlicensed, Government crackdown initiated Spring 2010

In 2008, one-third of total volume exported was reportedly illegally smuggled out of China

Estimated to be less than 15 years of reserve life

This abandoned mine in Guyun Village in China exhausted the local deposit of heavy rare-earth

elements in three years. Source: NY Times

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Nechalacho REE Deposit:Recent Project History

2005: Acquisition of 100% interest for $300,000 in shares

2006: Compilation work, mineralogy begin community consultation, recognition of heavy rare earth potential

2007: Scoping study, exploration drilling and $16 million equity financing (Research Capital)

2008: Delineation drilling and 43-101 resource estimate, community engagement and begin metallurgical studies and work on PFS

2009: Definition drilling, hydrometallurgical testwork environment, market studies $17.5 million financing (CIBC)

2010: Definition drilling, begin EIA process

June, 2010: Completion of Prefeasibility Study

Expenditures to date: over $27.0 million

44

Global REE Deposits Ranking

Deposit % TREOContained

tonnesTREO

% HREO/TREO

Contained Tonnes HREO

Bayan Obo, China 3.9% 56,900,000 2% 1,138,000

Nechalacho, Canada 1.5% 3,050,000 15% 457,000

Kvanefeld, Greenland 1.0% 2,150,000 14% 301,000

Mountain Pass, USA 9.2% 1,840,000 1% 18,400

HREE-rich Nechalacho deposit now ranks as the second largest REE deposit in the world, after Bayan Obo and the third largest Niobium deposit in the world

Nechalacho has the highest proportion of the more valuable HREE (over +20% in Basal Zone portion)

45

Emerging REE Magnet Applications

Tidal Power Generation TurbinesBeing installed in Nova Scotia and B.C. in 2010

100 MW potential in Nova Scotia

Permanent Magnet Hydro Power GeneratorsA 4MW generator contains 1 tonne of Nd magnets

Electric Bicycles (EB)300-350 g Nd Magnets per EB

20 million EB sold in China in 2009

Sales forecast to grow 30 million EB pa = 9,000 tpa Nd magnets

Magnetic RefrigerationUses alloys of gadolinium magneto-caloric effect

Commercialization within 1-2 years

46

City of YellowknifePopulation: Approx. 20,000

47

Zirconium Use in Dialysis

Zirconium Phosphate can be used for home dialysis treatment.

The benefits of home dialysis:No time-consuming trips to hospitalMore frequent treatments possible, to mimic natural kidney function.More mobility possible for patientsLess costly for government

Individual consumption of ZrO2 equivalent is 1lb per treatment, with 3 treatments per week or potential demand of 7,000 tonnes per year ZrO2 to treat 100,000 patients

Nechalacho will produce 18,000 tpy ZrO2

48

Estimated Total Project Construction Capital Costs

ActivityTotal Capital Cost

Estimates(CAD $ 000’s)

Nechalacho Mine 99,607

Thor Lake Process Facility 173,165

HydroMetallurgical Plant 316,602

Primary Project Component Cost 589,374

Project Engineering, Procurement, Construction and Management 80,657

Contingency @ 22% 144,503

Sustaining Capital 73,000

Reclamation & Miscellaneous 12,200

Total Project Capital Costs 899,734

Operating costs over the 18 year life of the project are estimated to average CAN $267 per tonne of ore mined or $5.93 per kilogram of productBased on Diluted Probable Mineral Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO₂), 0.42% (Nb₂O₅) and 0.042% (Ta₂O₅)Probable Reserves will increase with continued drilling, also extending the mine life.

49

Prefeasibility Study: Summary of Financial Analysis

Financial Analysis Pre-Tax (CAD$) After-Tax (CAD$)

Internal Rate of Return 14% 12%

Net Cash Flow $2.1 billion $1.5 billion

Net Present Value @ 5% $826 Million $540 million

Net Present Value @ 8% $428 million $236 million

Net Present Value @ 10% $246 million $97 million

Financial model developed by independent consultant Scott Wilson RPAAssumes 100% equity financing basisCovers mining, mineral concentration, hydrometallurgical processing and all related infrastructure on an 18 year operating scheduleCAD/USD exchange rate used was CAD$1.00 = USD$0.90Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $21.94, ZrO₂ = $3.77, Nb₂O₅ = $45.00, Ta₂O₅ = $130.00

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Nechalacho Geological Model Evolving

Model Section

Leucoferrodiorite

CaribouLake

Gabbro

Grace Lake Granite

T-Zone

Thor Lake Syenite

Two-Mica

Granite

WhitemanLake Quartz

Syenite

BiotiteGranodiorite

Hearne Channeland Mad Lake

Granites

Interpreted Geometryin Cross Section

Blachford Lake PeralkalineIntrusive Complex, NWT

A unique example of a layered Peralkaline intrusive complex, with the upper, rare metal-richpart of the system readily accessible for mining.

51

Nechalacho Deposit Basal Zone REE Mineralogy

Heavy REE MineralsFergusonite Y, HREE (Nb,Ta) O4

Zircon Zr (HREE) SiO4

Light REE Minerals

Bastnaesite (LREE) F CO3

Allanite (LREE,Ca,Y)2 (Al,Fe)3 (SiO4)4 OH

Synchisite Ca (LREE) (CO3)2 F

Monazite (LREE) PO4

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

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

20μm

Fergusonite

REE distribution in fergusonite:

Zircon

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Nechalacho eudialyte pseudomorphs now consisting of replacement zircon & fergusonite compared with primary Illimaussaq eudyalite

Nechalacho HREE mineralization:Eudialyte pseudomorph

Illimaussaq: Primary euhedral Eudyalite (pink)

Hydrothermal alteration has performed the first stage the first stage of processing