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Corporate PresentationJune 13, 2013
Don Bubar President & CEO
2
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.
3
Recent Developments
● Major milestone reached with completion of positive
comprehensive Feasibility Study on Nechalacho
● First in the world outside China on a large new heavy rare earth project
● Proves technical and economic viability of project
● Allows serious negotiations on off-take agreements to begin with
consumers around the world
● Off-take agreements essential for securing project financing
● Equity investment remains challenging in current global economic
environment
● New interest in lithium minerals creates opportunity to re-
activate Separation Rapids, Ontario Project
4
Capital StructureJune 13, 2013
Canada - TSX: AVL United States – NYSE MKT: AVL Frankfurt- OU5
Shares Outstanding 103,796,986
Fully Diluted 112,612,236
Market Capitalization US$104 million (S/O @ $1.00)
Recent Price Range US$1.22 - $0.74
52 Week High / Low US$2.40 - $0.74
Cash Reserves C$15 million (No debt)
Insider Share Position 2.9 million shares (2.8%)
Institutional Investors (22%) Hancock, Van Eck, Global X, Manulife and others
Analyst coverage CIBC, Mackie Research, Roth, Citigroup, Cowan
5
AVL One Year Price Chart
Diaoyou Islands
Dispute
Molycorp News
6
2008-2013 Avalon Share Price vs. REE Prices: Opportunity Knocks!
2009-11: Increasing media publicity about China’s
control of REE supply followed by rising prices
creates classic “Speculative Bubble” allowing
Avalon to raise $100 million in equity financing
7
Rare Metals Projects: Avalon is not just about rare earths
All projects 100% owned
Avalon offers
diversified
exposure to a
broad range
of rare metals
8
Rare Metals: Key Enablers of Clean Technology
● Rare earth elements (“REE”) such as Neodymium, Terbium
and Dysprosium; and 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 motors
● Renewable energy: solar power, wind turbines, nuclear power
● LED lighting, rechargeable batteries, light weight aerospace alloys
● Hybrid and electric cars (30 kg REE in aggregate)
9
What are Rare Earth Elements?
Light REE:
La = Lanthanum
Ce = Cerium
Pr = Praseodymium
Nd = Neodymium
Sm = Samarium
Heavy REE:
Eu = Europium
Gd = Gadolinium
Tb = Terbium
Dy = Dysprosium
Ho = Holmium
Er = Erbium
Tm = Thulium
Yb = Ytterbium
Lu = Lutetium
Y = Yttrium
Critical 5: Neodymium, Dysprosium, Terbium, Europium and Yttrium
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REE Balance is Key: The more heavies, the better!
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mt PassMolycorp
Baiyun Obo Baotou
Mt WeldLynas
NolansArafura
NechalachoAvalon
All deposits contain mostly cerium and lanthanum, which will soon be over-
supplied once Molycorp and Lynas reach full production over the next 2 years
11
Key Applications of REE:Magnets for Electric Motors
REE (NdFeB) or “Neo” Magnets reduce electric motor/generator size and weight, and
improve efficiency
Major 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 applications
REE 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 applications
HREE phosphors key to energy efficient lighting, display screens
100 Kw generator
with neo magnets
12
Key Application of REE Magnets in Wind Turbines Emerging
● 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
13
Demand for REE in Permanent Magnets Forecast to Increase Over 40% by 2017
Source: Bloomberg Source: Roskill and Arnold estimates
• 96% NdFeB, growth
driven by consumer
electronics, standard
automotive, air
conditioning, electric
bicycles
• 3% SmCo
for specialist, high
temperature
applications
• 1% SmFeN
for bonded magnets
• ~78% China
• ~22% Japan, other
Asia and Europe
Demand for rare earths in permanent magnets,
2000 to 2017 (kt)
14
Other Emerging REE Applications
● Corrosion Inhibitors
● Rare-earth compounds have demonstrated the potential to be
environmentally benign corrosion inhibitors used in aerospace
applications
● REE-Enabled Hydrophobic Materials
● Rare earth oxides apparently make water-repellent surfaces that
last, based on research and testing done at MIT (April 2013)
● Ceramic forms of hydrophobic materials could be far more
durable than existing coatings or surface treatments
15
The China Factor
● China produces >95% of the world’s
rare earths
● China will soon consume 60-70% of
the world’s rare earths
● In the next 5-10 years, China may
import heavy rare earths (HREE)
● China consolidating REE producers
improve environmental practice
● China is limiting exports of rare earths
and now stockpiling
● Created China Rare Earth Industry
Association to regulate industry
● Illegal mining and exports (mainly
HREE) are being curbed
Experts believe that 2-3 HREE
projects outside China will come into
the market in the next 5-6 years and
will grow with the market
16
Forecast for Global Demand and Supply in 2016 (+/- 20%)(tonnes REO)
Demand Supply Shortage / Excess
Based on total REO
demand of 162,950
tonnes and an
adjusted supply of
180,000 tonnes.
Data source: IMCOA, (Dudley Kingsnorth) , November 2012
Lights
Heavies
17
Rare Earth Element PricesSource: Metal-Pages.com (US$/kg) Prices are indicative and basis FOB China
Metal OxideJan 12, 2012
Prices
June 11, 2013
Current PricesAVL 2016 Forecast
Light Rare Earths
Lanthanum 99% min 50 – 52 6.80 – 7.30 8.75
Cerium 99% min 40 – 45 7.00 – 7.50 6.23
Praseodymium 99% min 160 – 170 72 – 75 75.20
Neodymium 99% min 190 – 200 57 - 60 76.78
Samarium 99% min 77 – 80 10 – 15 6.75
Heavy Rare Earths
Europium 99.9% min 3,780 – 3,800 850 – 950 1,392.57
Terbium 99% min 2,800 – 2,820 700 – 800 1,055.70
Dysprosium 99% min 1,400 – 1,420 460 – 510 688.08
Gadolinium 99%min 100 – 105 44 – 49 54.99
Yttrium 99.999% min 88 – 93 19 - 23 67.25
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Rare Earth Elements Supply Chain:Highly refined specialty products
Mining Milling Hydro-metallurgy
Separation Refining Products
From the
ground to
crushed
ore
Grinding and
beneficiation of
REE minerals
Cracking the REE
minerals to produce
mixed REE oxides
concentrate
Separating and
purifying the
individual REE
oxides
To meet specific
downstream
technology
applications
Permanent
magnets, LED’s,
consumer
electronics
Avalon’s contribution to REE supply chain Value added
19
Thor Lake Area and Regional Infrastructure
(Hydromet plant)
(Nechalacho Mine
and Concentrator)Mackenzie River
barge to Asia route
20
Proposed Geismar HREE Refinery: Local Infrastructure
21
West Long Lake Area
Tardiff Lakes Area
22
Nechalacho General Geology(Vertical Cross Section Looking West)
Looking west at 416200E
Upper Zone
Basal Zone HREE Deposit
High Grade “Basin”
S N
1600 metres
14.6 million tonnes in Reserves
Sufficient for 20 years of production
1.70% TREO, (0.46%HREO), Zr, Nb
23
Measured and Indicated Resources in the Basal Zone at Various NMR Cut-offs (Nov. 2012)
Basal ZoneTonnes
(millions)
%
TREO
%
HREO
% HREO/
TREO
%
ZrO2
%
Nb₂O₅%
Ta₂O₅
$320 NMR Cut-Off (Reflects entire Basal Zone)
Measured 10.88 1.67 0.38 22.91 3.13 0.41 0.04
Indicated 54.95 1.54 0.33 21.63 3.01 0.40 0.04
$800 NMR Cut-Off (Approximately Reflects High Grade “Basin”)
Measured 4.00 2.23 0.59 26.51 4.31 0.54 0.06
Indicated 14.57 2.18 0.56 25.57 4.21 0.53 0.06
$1,000 NMR Cut-Off (Selected parts of High Grade “Basin”)
Measured 1.99 2.52 0.70 27.67 4.90 0.61 0.06
Indicated 5.72 2.52 0.67 26.58 4.79 0.60 0.06
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Nechalacho REE Deposit Conceptual Mine Plan
25
Metallurgical TestworkProgress
● Concentrator (flotation)
1. Main Pilot plant (40 tonne) – completed (SGS). 6 tonnes con produced
2. Follow up mini-pilot plant work at XPS completed
3. Benchscale optimization work continuing
● Hydrometallurgy (Sulphuric Acid Bake Process)
1. Pilot plant trial and process optimization completed (SGS)
2. Produces mixed rare earth concentrate with zircon residue
3. Zircon residues contain REE and require caustic or alkali cracking Presently being marketed as an REE-enriched zirconium product
● Separation and Refining (HCl Solvent Extraction)
1. Prefeasibility completed in April 2012 by SNC-Lavalin
2. Site for Refinery defined in Geismar, Louisiana, USA
3. Testwork underway at MinTek. Identifying potential partners
26
Nechalacho Feasibility StudyDevelopment Concept
● Mining underground drift and
fill/long-hole stoping
● 2,000 tonnes per day (tpd),
(730,000 tonnes per annum (tpa))
● Flotation processing to produce
mineral concentrate at minesite
● Hydrometallurgical treatment of
mineral concentrate in plant south
of Great Slave Lake (Pine Point)
● Rail shipment to separation plant/
cracking facility in southern U.S.
(Geismar, Louisiana)
● Planned initial production of 7,000
tpa separated rare earth oxides
plus by-product zirconium
concentrate
● Operating Costs: CAN$362 per
mined tonne of ore inclusive mine,
concentrator, hydromet plant,
refinery G&A and infrastructure
● Revenues:
C$885 per mined tonne of ore
● Employment:
● NWT Operations: 318
● LA Refinery: 133
27
Feasibility Study Costs
In CAD$ Millions
Resource Definition $23.0
Metallurgical Process Development 17.0
Engineering, Technical Studies 15.0
Environmental Work, Permitting 3.0
Community Engagement 2.0
Total cost of FS $60.0
Cash resources after Feasibility Complete: $15 million
28
Nechalacho Feasibility Study Capital Cost Estimates
● Based on Diluted Proven
and Probable Mineral
Reserves of 14.6 million
tonnes of 1.70% TREO,
(0.46% HREO) 3.34%
(ZrO₂), 0.42% (Nb₂O₅)
and 0.045% (Ta₂O₅).
● The Reserves are
sufficient for an initial 20
years of operations
● The Louisiana Refinery
costs total C$423.28m or
USD$440.92 @ 0.96
Activity
Capital Cost Estimates,
Life of Mine Total
(CAD $ Millions)
Nechalacho Mine & Surface 81.58
Processing Plants 543.75
Infrastructure 229.50
Indirect Constr. & Owners Costs 258.52
Contingency 165.81
EPCM 157.84
Closing Costs/Bond 16.16
Upfront CAPEX 1,453.16
Sustaining Capital 121.84
Total CAPEX 1,575.00
Payback Period 4.3 Years
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2013 Feasibility Study: Summary of Financial Analysis
Financial AnalysisPre-Tax
(CAD$)
After-Tax
(CAD$)
Internal Rate of Return 22.5% 19.6%
Net Present Value @ 8% $1,833 million $1,262 million
Net Present Value @ 10% $1,351 million $900 million
Net Present Value @ 12% $981 million $620 million
● Revenues average $645.8 million per year ($456.5 million from separated rare earth
oxides and $189.3 million from the sale of enriched zirconium concentrate (“EZC”))
● Operating Costs average $264.5 million per year
● Revenues from HREE exceed 50% of total revenues. La and Ce sales account for
<4.5% of revenue. Critical 5 (Nd, Eu,Tb, Dy,Y) represent >82% of REE revenue.
30
Nechalacho Feasibility Study:Key Considerations
● Feasibility Study achieved on schedule and on budget, positioning Nechalacho as the leading large HREE project in the world
● Allows for serious discussions around off-take and project financing to begin with consumers
● Many opportunities to optimize project in NWT to reduce both capital and operating costs
● Potential to partner on Refinery or toll-process through third party owned facility
● Strategic implications around security of supply of critical raw materials attracting interest and support from public policy makers in government
31
Project Financing Plans
● Working with HCF International Advisers to complete the
process of identifying consumers to enter into off-take
agreements and provide strategic investment
● Strategic partner to cover $20-30 million in Project pre-
construction expenditures planned for 2013
● Assuming minimum 50:50 debt:equity ratio
● Recently engaged investment bank to work on equity
component of Project Financing by end of CY 2013
● Preliminary discussions with Export Credit Agencies and
EX-IM Banks on the debt component of Project Financing
32
Project TimelineAs at April 17, 2013
33
Social Licence and Environment
● Leaders in Aboriginal Community Outreach
● Accommodation Agreements
● Signed with Deninu K’ue First Nation
● Negotiations completed with
Lutsel K’e Dene
● Negotiations progressing withYellowknives Dene
● Issued first Sustainability Report
compliant to GRI standard
● Low Uranium and Thorium content reduces concerns about radioactivity
● Completed key permitting milestones, including Public Hearings. Final Report of Environmental Assessment due in June
34
Corporate Sustainability Report
● Report on how you will achieve sustainability goals
and performance
● Sustainability:
● Development that meets the needs of the
present without compromising the ability of
future generations to meet their own needs
(Brundtland Report, 1987)
● Published Corporate Social Responsibility
Roadmap in January 2011
● Published first full Sustainability Report in April
2012 to GRI Version 3.1 and MAC TSM indicators
● Summary of Corporate Sustainability Report 2012
released in June 2013
35
2013 Milestones and Value Drivers for Avalon
● Completing agreements with off-take / strategic partners
● Securing next stage Project Financing
● Completion of Environmental Assessment and Permitting
Process along with project optimization work
● Finalizing remaining Aboriginal Participation Agreements
● Advance the East Kemptville Tin-Indium Project through the
PEA Stage with confirmation drilling program
● Conduct pilot plant work for new market interest in Lithium
minerals products from Separation Rapids Project
36
Management Team
● Donald S. Bubar, P.Geo.President, CEO & Director
● Jim Andersen, CA, CPAV.P. Finance & CFO
● David Marsh, FAusIMM (CP)
Senior V.P. Metallurgy
● Bill Mercer, Ph.D., P.Geo.V.P. Exploration
● Richard Pratt, B.Comm (Hons), LL.B.V.P. General Counsel and Corporate
Secretary
● Pierre Neatby, BA Econ
V.P. Sales and Marketing
● Mark Wiseman, B.Sc., MBAV.P. Sustainability
● Cindy Hu, CA, CPA, CGA Controller
● Gerry Liepert , P.Eng.Senior Project Manager
● Ron Malashewski, P.Eng (AB)Manager, Investor Relations
37
Board of Directors
● Donald S. Bubar, P.Geo.
President, CEO & Director
● Alan Ferry, CFA
Past Chairman
● Phil Fontaine, B.A., LL.D.
Sustainability Advisory Committee Member
● Brian D. MacEachen, C.A.
Chairman and Audit Committee Chair
● Peter McCarter, B.A., LL.B., M.B.A.
Governance/Compensation Committee Chair
● Richard Morland, B. Eng. (Mining)
Technical Advisory Committee Member
38
Senior Staff and Technical Consultants
● Ian M. London, P. Eng., MBA, Energy and Market Development Consultant
● Henrietta Notzl, P.Eng. Metallurgical Consultant
● John Goode, P.Eng. Senior Metallurgical Consultant
● Ben Webb, B.Sc., GIT, Senior Resource Geologist
● Chris Pedersen, P.Geo, Senior Geologist, Camp Manager
● Martin Heiligmann, Ph.D., Project Geologist
● Kelly Cumming, B.A. Northern Relations Manager
● Randy O’Keefe, Camp Logistics Manager
● Ian Taylor, B.A., Human Resources Co-ordinator
● Stanley Chan, P.Eng., Mine Engineer
● David Trueman, Ph.D., P.Geo, Rare Metals Consulting Geologist
● David Connelly, CStJ, CD, MBA, B.Comm, Strategic Advisor
39
Niobium Production and Markets
● Giant Araxa deposit in Brazil (CBMM) produces 80% of world
supply (150,000 tpy Nb2O5)
● Nechalacho is now the third 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
● $9 of Nb = 100kg less weight = 1 litre of fuel savings per 100km
40
Zirconium Production and Markets
Primary zirconium production mainly from zircon sands in
Australia and South Africa (1.5 million tpa zircon)
China imports zircon sands and is the only global producer of
Zirconium Oxychloride (ZoC) the basic chemical feedstock for
producing Zr metal and other chemicals
China increasing ZoC consumption, applying export taxes
Zr Metal critical for nuclear reactors as fuel cladding
Many emerging uses:
Hemodialysis treatment (zirconium phosphate)
Solid Oxide Fuel Cells (yttrium stabilized zirconia)
41
Competitive Advantages with Other Potential REE Producers
● World Class Heavy Rare Earths Deposit
● Very Large with relatively high grades for HREE rich deposits
● Relatively Advanced: completed Feasibility Study, April 2013
● Allows company to enter into off take discussions
● First Mover Advantage is Key
● First to market will capture available market share
● Only room for a handful of new producers “first come, first served”
● Very Low Uranium and Thorium
42
Nechalacho Operating Margin Compared to Peer Companies
● C1 is cash cost per kg REO, net of by
products
● Basket price as quoted by each
company
● M1 is the difference between basket
price and C1
43
REE Company Comparison
CompanyMarket cap US$
Millions
Million tonnes
TREO*Stage
Molycorp $950 2.07Production /
expansion
Lynas Corporation $1,010 1.19 Production Start
Avalon Rare Metals $105 1.80 Feasibility
Alkane Resources $200 0.55 Feasibility
Rare Element Resources $90 1.25 Prefeasibility
Quest Rare Minerals $30 0.29 Prefeasibility
(Market data and FX as of April 15, 2013)
* Based on published information/reports
44