Corporate Presentation

Don Bubar, President & CEO August, 2010

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Safe Harbour Statement

Forward looking information

Certain statements contained in or incorporated by reference into this presentation constitute forward-looking statements. Such statements reflect the current views of Avalon Rare Metals Inc. with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Avalon Rare Metals Inc. that may be expressed or implied by such forward-looking statements to vary from those described herein should one or more of these risks or uncertainties materialize. Avalon Rare Metals Inc. does not intend, and does not assume any obligation, to update these forward-looking statements.

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Project LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumZirconiumHafniumGallium

NORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium

All projects 100% owned

Avalon offers diversified exposure to a broad range of rare metals

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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, Tantalum, Zirconium

Creating new materials such as thin films (solar) and high strength magnets, the key to energy-efficient electric motors

Renewable energy: solar power and wind turbines

LED lighting, rechargeable batteries, light weight alloys

Hybrid and electric cars (30 kg REE in aggregate)

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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

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REE Economics: A Question of Balance between “Heavies”and “Lights”

Only occur altogether as a group and recovered as a group and must be sequentially separated at additional cost

In most deposits, the balance is tipped toward the light rare earths (“LREE”) which comprise 97-99% of resource

Deposits having an unusual balance with a high proportion of heavy rare earths (“HREE”) are very rare

Consequently, HREE are much more valuable

Basal Zone of Nechalacho deposit is exceptional among hard rock REE deposits for its high proportion of HREE ( >20%)

Implies a high value ore and higher operating margins

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Comparison of HREE Distributions for Major REE Deposits

Nechalacho Bayan Obo Mt Weld Mountain Pass NolansCanada China Australia USA Australia

Europium Eu 0.49% 0.19% 0.44% 0.12% 0.40%Gadolinium Gd 3.71% 0.40% 0.97% 0.17% 1.00%Terbium Tb 0.54% 0.07% 0.08%Dysprosium Dy 2.71% 0.30% 0.12% 0.33%Holmium Ho 0.48%

Erbium Er 1.26%

Thulium Tm 0.17%Ytterbium Yb 1.01%Yttrium Y 11.69% 0.20% 0.37% 0.10% 1.32%

Lutetium Lu 0.14%

Total Heavies 22.20% 1.09% 1.98% 0.39% 3.13%

Lanthanum La 15.83% 27.10% 25.50% 33.20% 19.74%Cerium Ce 35.72% 49.86% 46.74% 49.10% 47.53%Praseodymium Pr 4.51% 5.15% 5.32% 4.34% 5.82%Neodymium Nd 17.83% 15.40% 18.50% 12.00% 21.20%

Samarium Sm 3.91% 1.15% 2.27% 0.80% 2.37%

Total Lights 77.80% 98.66% 98.33% 99.44% 96.66%

REE OXIDE

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Global Rare Earths Market

IMCOA 2009 updated market forecast

ROW = rest of world supply (yet to come on stream) TREO = Total Rare Earth Oxides

Global demand in 2008 124,000 tonnes TREO valued at US$1.25 billion

Forecast demand in 2014 200,000 tonnes TREO valued at US$2-3 billion, assuming 10% per annum growth rate in demand from existing technology only

Does not factor in demand from new technology

Estimated that 25% of all new technologies rely on REE

0

50,000

100,000

150,000

200,000

250,000

2004

2005

2006

2007

2008

2009f

2010f

2011f

2012f

2013f

2014f

Dem

and tp

a ‐ R

EO

China Supply ROW Supply Adjusted Global  Demand China Demand

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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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Key Applications of REE:Magnets for Electric Motors

REE (Neo) Magnets reduce electric motor/generator size and weight, improve efficiency

Major new applications include:Industrial air conditioners (500 kg)Hybrid-electric cars (1-2 kg)Wind turbines (0.6-1.0 tonne/MW)MRI machines (1-3 tonnes)

REE magnets can reduce power consumption by 50% (e.g. air conditioners)

HREE dysprosium and terbium are key to making “heat resistant” magnets vital to automotive and other applications

HREE phosphors key to energy efficient lighting, display screens

100 Kw generator with neo magnets

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Key Application of REE Magnets PMG’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 of permanent neodymium 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

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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Emerging REE Magnet Applications

Tidal Power Generation Turbines

Being installed in Nova Scotia and B.C. in 2010

100 MW potential in Nova Scotia

Run-of-River PMG hydro power generation

A 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 Refrigeration

Uses alloys of gadolinium magneto-caloric effect

Commercialization within 1-2 years

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Recent Developments in REE Markets

China reduces export quotas by 64% for second half of 2010

REE prices have increased 35% Jan-June 2010, Higher HREE prices forecast for 2014 (Byron Capital)

Molycorp completes $390 million IPO in 2010 to restart production at Mountain Pass and co-operation agreement with Neo Materials

RESTART Act tabled in Washington designed to re-establish a domestic REE supply chain

Dacha Capital (DAC.V) raises C$23 million to invest in “physical strategic commodities” notably heavy rare earths

Avalon issues positive prefeasibility study and increased resource size. Nechalacho now largest REE resource outside China.

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Rare Earth Element Prices

Source: Metal-Pages.com, August 17, 2010Prices are indicative and basis FOB China

Metal Oxide Principal Uses Price US$/kg

Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 36.00 – 38.00

Cerium Oxide 99% min Catalyst, glass, polishing 35.00 -37.00

Praseodymium Oxide 99% min Magnets, glass colourant 48.50 – 49.00

Neodymium Oxide 99% min Magnets, lasers, glass 48.50 – 49.00

Samarium Oxide 99% min Magnets, lighting, lasers 33.00 -35.00

Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 575.00 – 595.00

Terbium Oxide 99% min Phosphors: green, magnets 585.00 – 605.00

Dysprosium Oxide 99% min Magnets, lasers 278.00 – 298.00

Gadolinium Oxide 99%min Magnets, superconductors 39.00 – 41.00

Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 33.00 – 36.00

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Price Trends:Dysprosium & Terbium Oxide

Dy Current Price:US$278/kg

Tb Current Price:US$585/kg

Source: Metal-Pages.com August 17, 2010

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Price Trends: Lanthanum & Neodymium Oxide

La Current Price:US$36.00/kg

Nd Current Price:US$48.50/kg

Source: Metal-Pages.com August 17, 2010

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Thor Lake: Project Location

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

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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 programs and 43-101 resource estimate, community engagement and begin work on pre-feasibility study, including metallurgical studies

2009: Definition drilling, hydrometallurgical process development, environment, market studies

2009: $17.5 million equity financing (CIBC)

Total drilling: 44,000 metres, 198 holes

Expenditures to date: over $20.0 million

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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

Biotite Granodiorite

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.

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Nechalacho REE Deposit: Diamond Drill Hole Location Map North-South

Section

North Tardiff Zone

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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

Area of Indicated resources

Nechalacho REE Deposit

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Nechalacho REE Deposit:2010 Development Progress

Winter: Completed 11,398 metres of drilling in 43 holes and initiated proactive product sales and marketing program

March: Metallurgical process flowsheets definedApril: Project Description Rpt and permit applications filed with MVLWBMay: Diamond drilling resulting in new high-grade zone discovery

Begin Environmental baseline field programJune: Airstrip construction (Deton Cho)

Results of prefeasibility study disclosedEnvironmental Assessment beginsGeomechanical & hydrology work begins

July: Diamond drilling resumesAugust: Flotation pilot plant work to beginMOU Negotiations advance with Aboriginal partners

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New Airstrip completed July 15, 2010 by Deton Cho Logistics and RTL Enterprises

Top dressing prepared from T-Zone waste rock

3 T-Zone trailers repositioned at airstrip and re-furbished to become over flow camp site

New Thor Lake Airport

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Nechalacho Deposit: NI 43-101Resource Estimate June 14, 2010

Tonnes (millions)

%TREO

%HREO

%ZrO2

%Nb�O�

ppmGa2O3

ppmTa�O�

Basal Zone

Indicated 14.48 1.82 0.40 3.38 0.437 144 430

Inferred 76.87 1.60 0.33 3.14 0.443 134 413

Upper Zone

Indicated 6.89 1.45 0.17 1.86 0.286 175 194

Inferred 99.06 1.29 0.12 2.44 0.364 172 210

Total Inferred 175.93 1.43 0.21 2.74 0.399 155 298

Prepared by independent consultant Scott Wilson RPA

Total Inferred Resources represent 2.5 million tonnes contained TREO

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)

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

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mt PassMolycorp

$9.90

Baiyun Obo Baotou$11.40

Mt WeldLynas$13.60

NolansArafura$14.20

NechalachoAvalon$22.10 Value US$/kg

Light rare earths

Heavy rare earths

Samarium

Neodymium

Praseodymium

Cerium

Lanthanum

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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 stoping1,000 tonnes per day (tpd), ramping to 2,000 tpd by year four

Flotation processing to produce mineral concentrate Hydrometallurgical treatment of mineral con in plant south of GSLMixed REE carbonates shipped to third party for separationMarket capture less than 5% of est. 2014 TREO global demand Operating Costs: $267/tonne inclusive mine, mill and hydromet

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Proposed Nechalacho Site Plan

Nechalacho Ore Reserves

Airstrip

Tailings Area

Ramp

Plant Site

T-Zone

Plant site

Ore reserves

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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 product

Based on Diluted Probable Mineral Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO�), 0.42% (Nb�O�) and 0.042% (Ta�O�)

Probable Reserves will increase with continued drilling, also extending the mine life.

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Production and Metallurgical Rates of Recovery

Hydrometallurgical Plant will produce 4 saleable products: total rare earth oxide, zirconium oxide, niobium oxide and tantalum oxide

Ta, Nb and Zr production accounts for 44% of the revenues but donot involve significant extra costs: occur in same minerals as REE.

Pilot Plant work to prove process set to begin Fall, 2010.

ProductFlotation Plant

RecoveriesHydroMet Plant

RecoveriesProduction Annual

Output (tonnes)

TREO 79.5% 93.0% Close to 10,000

ZrO� 89.7% 90.0% 18,000

Nb�O� 68.9% 80.0% 1,700

Ta�O� 63.0% 50.0% 100

Total Recovery 84.6% 90.0%

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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 Scott Wilson RPA

Assumes 100% equity financing basis

Covers mining, mineral concentration, hydrometallurgical processing and all related infrastructure on an 18 year operating schedule

CAD/USD exchange rate used was CAD$1.00 = USD$0.90

Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $21.94, ZrO� = $3.77, Nb�O� = $45.00, Ta�O� = $130.00

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Project Optimization Opportunities

Reduce or eliminate the 3 year production ramp-up

Increase the proven & probable reserves and mine life

Selectively mine higher grades at start-up

Reduce diesel power reliance (hydro, renewables)

Higher product demand and pricing

Improve metallurgical recoveries

Reduce royalty burden through buy-outs

Potential by-product revenues from gallium recovery

Alternative, lower cost hydromet plant locations

Debt financing for part of CAPEX

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Prefeasibility Opportunity Analysis

Pre-Tax Analysis (in millions)

Optimization InitiativeRisk to

ImplementIRR NPV @ 8% NPV @ 10% NCF

Scott Wilson, RPA Cashflow Model N/A 14% 428 246 2,091

Reduce 3 year Production Ramp-up None 22% 778 569 2,584

Selective Mining in first 5 years to increase grade

Low 16% 518 327 2,236

Buy-out 3% NSR Low 15% 472 282 2,196

10% Reduction of Power Costs Low 14% 441 257 2,119

TOTAL Low Risk Results None/Low 25% 961 730 2,917

10% Increase in Metal Prices Medium 17% 651 430 2,638

Relocation of HydroMet outside NWT Medium 16% 552 355 2,330

1% Improvement in HydroMet Recoveries

Medium 15% 455 268 2,156

OVERALL TOTAL All 33% 1,400 1,102 3,882

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Schedule to Production in 2015

Cost Estimate for Feasibility Study = $43 million

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

Naming ceremony

Community meetings and site visits

First Nations training

Employment at site

40% aboriginal

Business developmentWind power evaluation with YKDFN

Sept 2009 naming ceremony

Chiefs Ed Sangris and Ted Tsetta with Don

Bubar

March 2010 PDAC Awards CeremonyAccepting award

from Jon Baird, PDAC

President

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Capital Structureas at August 17, 2010

Canada - TSX: AVL

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

Shares Outstanding 79,104,270

Fully Diluted 88,633,170

Market Capitalization C $200 million (S/O @ $2.55)

Recent Price Range C $2.40 - $2.80

52 Week High / Low C $4.24 - $1.17

Cash Reserves C $8.0 million (No debt)

Insider Share Position 3.4 million shares (4.3%)

Institutional holdings (30%) CPP, TDAM, Front St., Excalibur, MFC Global

Middlefield, AGF , Cantara, Seamans, Fuchs Glbl

Balance Sheet Assets C $40.5 million (May 31, 2010)

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REE COMPARABLES: Market Capitalization Normalized to TREO Resources

CompanyMarket cap

CAD$ MillionsMillion tonnes

TREOCAD$/tonne

TREO Stage

Lynas Corporation $1,379 1.1640 $1,184 Construction

Molycorp $1,182 1.3950 $847Production / expansion

Avalon Rare Metals $200 2.8712 $70 Feasibility

Arafura $190 0.8400 $226 Feasibility

Rare Element Resources

$96 0.3690 $159 Exploration

Alkane** $96 0.6570 $157 Feasibility

Great Western Minerals*

$58 0.1344 $299 Prefeasibility

(Market data and FX as of August 13, 2010)* Great Western Market cap includes Technologies assets** Alkane market cap includes gold assets

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18 Month Price Chart

CIBC Financing

CNBC / NY Times

Prospectus cleared

Resource expansionand PBS report

Dines Letter PFS

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Management, Directors& Strategic Advisors

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

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

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.

Strategic Advisors F. Dale Corman, P.Eng.

Gerald Prosalendis, Communications

Joe Monteith, Business development

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Key Staff & Consultants

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

Chris Pedersen, P.Geo, Senior Geologist, Camp Manager

Martin Heiligmann, Ph.D., Project Geologist

Finley Bakker, P.Geo. Senior Resource Geologist

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 Consultant

Jacques Whitford Stantec, Permitting, Environmental Studies

Kaz 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

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Global REE Deposits Ranking

Deposit % TREOContained

tonnesTREO

% HREOContained

Tonnes HREO

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

Nechalacho Inferred, Canada 1.4% 2,500,000 22% 550,000

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 the giant LREE Bayan Obo in China

Nechalacho has the highest proportion of the more valuable HREE