Corporate PresentationJune 7, 2011

Don Bubar, President & CEO

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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.

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Capital StructureJune 7, 2011

Canada - TSX: AVL

United States – NYSE Amex: AVL Frankfurt- OU5

Shares Outstanding 94,154,915

Fully Diluted 104,908,970

Market Capitalization US $750 million (S/O @ $8.00)

Recent Price Range US $6.50 - $9.50

52 Week High / Low US $10.11 – C $1.92

Cash Reserves C $31 million (No debt)

Insider Share Position 4.1 million shares (4.5%)

Institutional holdings John Hancock, TDAM, Global X, Manulife, AGF

(est. 30-40%) Encompass, Van Eck, Cantara, Sentry, Chilton

Employees 25 (including contract staff)

4

1 Year Price Chart

CIBC Financing

PFS News

China reduces export quotasNYSE Amex Listing

Rising REE Prices

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Dysprosium, Neodymium, and Lanthanum: Inside China price trends

Updated June 7, 2011

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Rare Earth Element Prices

Source: Metal-Pages.com, June 7, 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 147.00 – 149.00 4.40 – 4.90

Cerium Oxide 99% min Catalyst, glass, polishing 148.00 – 150.00 3.50 – 4.00

Praseodymium Oxide 99% min Magnets, glass colorant 215.00 – 218.00 14.20 – 14.70

Neodymium Oxide 99% min Magnets, lasers, glass 255.00 – 258.00 14.70 – 15.20

Samarium Oxide 99% min Magnets, lighting, lasers 117.00 – 120.00 4.25 – 4.75

Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 2980.00 – 3000.00 470.00 – 490.00

Terbium Oxide 99% min Phosphors: green, magnets 1580.00 – 1600.00 340.00 – 360.00

Dysprosium Oxide 99% min Magnets, lasers 1480.00 – 1490.00 105.00 – 110.00

Gadolinium Oxide 99%min Magnets, superconductors 180.00 – 185.00 5.00 – 5.50

Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 155.00 – 160.00 10.00 – 10.50

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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

Brian Chandler, P.Eng. Senior VP & COO (starting August 15)

Richard Pratt, V.P., General Counsel and Corporate Secretary (August)

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.

Charlotte May, Assistant SecretaryCindy Hu, CA, CPA, CGA, ControllerRon Malashewski, P.Eng (AB), Manager, Investor Relations

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Each REE deposit has its ownunique, (constant) distribution

Avalon’s Nechalacho deposit is rich in HREE and a more sustainable alternative to the South China ionic clays

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Mt PassMolycorp

Baiyun Obo Baotou

Mt WeldLynas

NolansArafura

NechalachoAvalon

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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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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

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Forecast for Global Demand and Supply in 2015 (+/- 20%)

Demand (tonnes REO)

Excess / Shortage Supply (tonnes REO)

Based on total REO demand of 185,000 tonnes and an adjusted supply of 198,500 tonnes.

Data source: IMCOA, (Dudley Kingsnorth) February ,2011.

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REE MiningFrom the ground to crushed ore

REE MillingGrinding and Beneficiation of REE minerals

REE Hydrometallurgy

Cracking the REE minerals to produce mixed REE oxides concentrate

REE SeparationSeparating and purifying the individual REE oxides

REE RefiningTo meet specific downstream technology applications

REE ProductsPermanent magnets, LED’s , consumer electronics

Rare Earth Element Supply Chain

Avalon’s contributions to the REE supply chain...Three large plants with a total CAPEX of > $1billion

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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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Nechalacho REE Deposit at Thor Lake: Key Facts

Positive pre-feasibility study completed in 2010. >C$30 million invested since 2005, incl. 59,000m of drilling in 266 holes$46 million Bankable feasibility underway, funded, complete in 2012Large resource amenable to low cost underground mining methodsRich in heavy rare earths (20-28%), High grade subzones definedExtractive process defined at bench scale. Pilot plant in progressProduct sales and marketing program initiated... Strategic partnersBy-product revenues from zirconium, niobium and tantalum

Environmental assessment and permitting process in progress with First Nations supportPlanning for N. American HREE separation plant Start-up in 2015, sales in 2016C$1.0-1.2 billion estimated total capital cost

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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/mined tonne of ore inclusive mine, mill and hydromet or $6.50 -$7.00/kg REO after separation

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2010 RPA 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

Based only on resources defined from drilling done up to October, 2009High grade sub-zone discovered in 2010 will increase revenues and enhance profitabilityExpected revenues are based on the following price assumptions in USD per kilogram: TREO = $21.94, ZrO₂ = $3.77, Nb₂O₅ = $45.00, Ta₂O₅ = $130.00 REE prices have appreciated substantially over the past 12 months, allowing for a higher REE price assumptionRevised Financial Analysis in preparation

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Aboriginal Engagement

Final Pre-feasibility Report

File Permit Applications

Environmental Assessment

Ministerial Approval

Land Use/Water permits

Flotation Pilot Plant Testing

HydroMet Pilot Plant Testing

Bankable Feasibility Study

Final Designs & Financing

Project Construction

Project Start-up

Production & Sales

Market Development

Q1 Q2 Q3Q3 Q4 Q1Q1 Q2 Q3 Q4 Q1 Q2 Q42015

Q1 Q2 Q3 Q42016Thor Lake

Project Schedule2010 2011 2012 2013 2014

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Q2 Q3 Q4

Schedule to Production in 2016

Bankable Feasibility Study BudgetSept. 1, 2010 to Aug 31. 2012= $46 million

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Environmental Concerns: Uranium & Thorium

All Rare earth deposits contain some Uranium (U) and Thorium (Th) but 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

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 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 various REE deposits

Nechalacho

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Competitive Advantages with other emerging REE producers

Relatively Advanced: At Feasibility Study stageAllows company to enter into discussions with customers about off-take

First Mover Advantage is KeyFirst 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 underway

Heavy Rare Earth Enrichment Marketing OpportunityNo other advanced projects have all the heavies to offer by 2015-16

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REE COMPARABLES: Market Capitalization Normalized to TREO Resources

Company Market cap US$ Millions

Million tonnes TREO*

US$/tonne TREO Stage

Molycorp $5,329 1.3950 $3,820 Production / expansion

Lynas Corporation $4,061 1.1640 $3,489 Construction

Rare Element Resources $501 0.55 $911 Prefeasibility

Arafura $379 0.84 $476 Feasibility

Quest Rare Minerals $450 0.976 $461 Prefeasibility

Avalon Rare Metals $668 4.298 $155 Feasibility

(Market data and FX as of May 24, 2011)* Based on published information/reports

Also, the market has yet to fully recognize the value of Avalon’s heavy rare earths

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Future Milestones and Value Drivers for Avalon in 2011

Update of PFS Economic Model (June 30)

China REE export policy announcement (July 1)

Attracting an end-user or processor as a strategic partner and entering into off-take agreements

Defining the HREE separation plant location

Defining Aboriginal Participation Agreements

Increased Research Analyst coverage

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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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25

Senior Staff and Technical Consultants

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

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

John Goode, P.Eng. Senior Metallurgical Consultant

Hoe Teh, P.Eng., Metallurgical Consultant

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

Rob Prasad, Senior Human Resources Coordinator

Dezhi Qi, P.Eng. Process Engineer

Stanley Chan, P.Eng. Mine Engineer

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External Consultants

SGS Lakefield Research, Metallurgy & MineralogyRoscoe Postle Associates Inc., Independent Engineering and Resource ConsultantsSNC Lavalin Inc., Separation Plant EngineeringKaz Machida, REE Market Development AsiaMcGill University, (Dr. A.E. Williams-Jones) Geological ResearchEBA Engineering, Permitting and Environmental ConsultantsFL Smidth, Engineering and Design, Flotation PlantXstrata Process Support, Metallurgical Testwork Support

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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.

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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 MOUs (Negotiation Agreement) with three FN’s

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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 (+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)

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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

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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

REE supplies in China are tightening and Chinese companies are actively trying to acquire additional REE resources around the world.

Mountain Pass era

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

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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

es)

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

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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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Comparison of Anticipated Production for Major REE Deposits

Nechalacho Mt Weld Mountain PassAvalon

(10,000 tpa)Lynas

(11,000 tpa)Molycorp

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

Total Heavies 22.20% 1.98% 0.39%

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

Total Lights 77.80% 98.33% 99.44%

REE OXIDE

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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

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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

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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)

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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

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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

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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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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-offs (43-101 compliant)updated Jan. 27, 2011

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 “Net Metal Return” or the gross in situ value of all the payable rare metals in the ore. $US FX rate: $1.11. The 2010 base case NMR is C$260/tonne.

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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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.

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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)

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Deslime (~8 µm)

Magnetics removal

Rougher flotation

Cleaner flotation

Gravity concentration

Grind to 37 µm Mill

Magnetic Separator

DeslimingCyclones

REE Mineral concentration

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Hydrometallurgy

REE SolutionResidue (zircon, columbite, gangue)

Precipitate bulk LREE+50% HREE

Combined REE product

Acid (H2SO4) bake (~200°C)

Acid (HCl) solution 50% HREE, Nb, Ta, Zr

Caustic (NaOH) crack (~600°C)

Separate HREE Nb -Ta Zr

Rare Earth Separation Plant Recoveries: 74% TREO, 80% Zr

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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

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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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Project Development phase(+ expected production level and capex)Source: Ernst & Young April 2011

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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.

52

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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Avalon’s CSR culture

Rare metals products contribute to a more sustainable world

We should produce these materials in a sustainable manner:By being an ethical companyWhich operates with environmental responsibilityWith a concern for and commitment to health and safetyWhile contributing to community development and well-being

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Underground Mine (2,000 tpd)

Much smaller environmental footprint than open pit with less waste rock removal and less disturbance of water courses

Tailings will be used for paste back-fill, waste rock for construction

Tailings Disposal Facility

Environmental Impacts

Tailings benign consisting largely of common rock forming minerals quartz feldspar, mica and magnetite (no sulphides)Natural basin identified containing

two small ponds with no fish habitatIdeal drainage and discharge

design, inert water chemistry

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Proposed Mine and Flotation Plant Site

Area of Tailings = 115 ha

Area of Airstrip = 3 ha

Area of Mine = 20 ha

Area

Location of resource, flat-lying, 200 metres below surface accessed By ramp from the west.

56

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 briefly curtailed in 2010 over territorial dispute creating global security-of-supply concern

Many REE prices have risen 5 to 10 fold over the past 12 months

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 and $275 million financing facility to expand production to 22,000 tpa TREO by 2013

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

Molycorp announces the acquisition of AS Silmet REE plant in Estonia and Santoku America REE metal alloy plant in Arizona

57

RESTART Act introduced into U.S. House of Representatives

Expedite the permitting process in order to increase the exploration and development of domestic REE sources,

Setting up a Defense Logistics Agency (DLA) REE inventory --where DLA enters into long-term supply contracts and then makes the supplies available for purchase to federal government contractors -- to generate a domestic market and facilitate the domestic sourcing of rare earth alloys and magnets;

Making government-backed loans available to start REE production should lending from capital markets not be available;

Requiring cabinet Secretaries to appoint REE Executive Agents

Establishing a REE program at the U.S. Geological Survey