Corporate Presentation

May 17, 2013

Donald S. 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

Capital Structure May 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$110 million (S/O @ $1.06)

Recent Price Range US$1.20 - $0.93

52 Week High / Low US$2.47 - $0.90

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

4

Rare Metals Applications Rare earths and rare metals can be found in many everyday applications

5

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

6

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

Assoc. 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

7

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

8

Rare Earth Element Prices Source: Metal-Pages.com (US$/kg) Prices are indicative and basis FOB China

Metal Oxide Jan 12, 2012

Prices

May 13, 2013

Current Prices AVL 2016 Forecast

Light Rare Earths

Lanthanum 99% min 50 – 52 7.00 – 8.00 8.75

Cerium 99% min 40 – 45 7.00 – 8.00 6.23

Praseodymium 99% min 160 – 170 70 – 75 75.20

Neodymium 99% min 190 – 200 62 - 65 76.78

Samarium 99% min 77 – 80 15 – 20 6.75

Heavy Rare Earths

Europium 99.9% min 3,780 – 3,800 1,000 – 1,100 1,392.57

Terbium 99% min 2,800 – 2,820 850 – 950 1,055.70

Dysprosium 99% min 1,400 – 1,420 520 – 570 688.08

Gadolinium 99%min 100 – 105 44 – 49 54.99

Yttrium 99.999% min 88 – 93 21 - 25 67.25

9

Five Year Price Chart

10

AVL One Year Price Chart

Diaoyou Islands

Dispute

Molycorp News

11

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

12

Comparison of Anticipated Production for Major REE Deposits

Nechalacho Mt Weld Mountain Pass

REE Oxide

Avalon FS

(9,287 tpa)

Lynas

(11,000 tpa)

Molycorp

(20,000 tpa)

Europium Eu 48 48 24

Gadolinium Gd 353 107 34

Terbium Tb 59 8 -

Dysprosium Dy 324 13 -

Holmium Ho 60 - -

Erbium Er 161 - -

Thulium Tm 22 - -

Ytterbium Yb 130 - -

Yttrium Y 1,454 41 20

Lutetium Lu 18 - -

Total Heavies 28.3% 1.98% 0.39%

Lanthanum La 1,381 2,805 6,640

Cerium Ce 3,024 5,141 9,820

Praseodymium Pr 381 585 868

Neodymium Nd 1,529 2,035 2,400

Samarium Sm 343 250 160

Total Lights 71.7% 98.33% 99.44%

13

Rare Earth Elements Supply Chain

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

14

Thor Lake Area and Regional Infrastructure

(Hydromet plant)

(Nechalacho Mine

and Concentrator)

15

Proposed HREE Refinery Location in Geismar, Louisiana

16

Proposed MineSite Layout

Flotation Plant Airstrip

Exploration

Camp Thor Lake

Tailings Pond

T-Zone

Deposit

Long Lake

Road / Proposed

Tailings Pipeline

Basal Zone priority

development area

17

West Long Lake Area

Tardiff Lakes Area

18

Nechalacho General Geology (Section 416200E Looking West)

Looking west at 416200E

Upper Zone

Basal Zone

High Grade “Basin”

S N

Long Lake

19

Plan view of High Grade “Basin” in Basal Zone Deposit

West Long Lake High Grade “Basin”

East Long Lake

20

Definition Drill Hole Pattern (416200E Looking West)

25m window

21

Basal Zone Mineral Resources at Base Case $320/tonne NMR Cut-Off (Including High Grade Basin)

Category Tonnes

(millions)

TREO

(%)

HREO

(%)

HREO/TREO

(%)

ZrO2

(%)

Nb2O5

(%)

Ta2O5

(%)

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

Measured

and Indicated 65.83 1.57 0.34 21.86 3.03 0.40 0.04

Inferred 59.89 1.28 0.25 19.59 2.70 0.36 0.03 Notes:

1. CIM definitions were followed for Mineral Resources.

2. The Qualified Person for this Mineral Resource estimate is Tudorel Ciuculescu, M.Sc., P.Geo., RPA Senior Geologist.

3. HREO (Heavy Rare Earth Oxides) is the total concentration of: Y2O3, Eu2O3, Gd2O3, Tb2O3, Dy2O3, Ho2O3, Er2O3, Tm2O3, Yb2O3 and Lu2O3.

4. TREO (Total Rare Earth Oxides) is HREO plus: La2O3, Ce2O3, Pr2O3, Nd2O3 and Sm2O3.

5. Rare earths were valued at an average net price of US$41/kg, ZrO2 at US$3.77/kg, Nb2O5 at US$56/kg, and Ta2O5 at US$256/kg. Average REO

price is net of metallurgical recovery and payable assumptions for a mixed rare earth concentrate, and will vary according to the proportions of

individual rare earth elements present. This average price is based on the price set used in the Updated Pre-Feasibility Study, applied to the

Measured & Indicated Basal Zone resources.

6. An exchange rate of US$1.00 = C$1.05 was used.

7. A cut-off NMR value of C$260 per tonne was used. NMR is defined as "Net Metal Return" or the in situ value of all payable metals, net of estimated

metallurgical recoveries and off-site processing costs.

8. ZrO2 refers to Zirconium Oxide, Nb2O5 refers to Niobium Oxide, Ta2O5 refers to Tantalum Oxide.

22

Measured and Indicated Resources in the Basal Zone at various NMR cut-offs (Nov. 2012)

Basal Zone Tonnes

(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

$1000 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

23

Nechalacho REE Deposit Development Concept

● Mining underground drift and

fill/long-hole stoping

● 2,000 tonnes per day (tpd),

(730,000 tonnes per year)

● 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

● Operating Costs:

CAN$362/mined tonne of ore

inclusive mine, concentrator,

hydromet plant, refinery G&A and

infrastructure

● Revenues: C$884.65/ mined

tonne of ore

● Employment:

● NWT Operations: 318

● LA Refinery: 133

24

Nechalacho REE Deposit Conceptual Mine Plan

25

Proposed Mine Plan Layout

Access decline

U/G Crusher

DECLINE

• 1.6 km long

• 5m wide x 5m high

• Grade: 15%

• 243 m deep

26

Metallurgical Testwork Progress

● 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 & require caustic or alkali cracking. Presently being marketed as an REE-enriched zirconium product

● Separation & 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.

27

Proposed Geismar HREE Refinery: Local Infrastructure

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

29

2013 Feasibility Study: Summary of Financial Analysis

Financial Analysis Pre-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 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

● Major Milestone achieved on schedule and on budget

● 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 and securing a strategic partner

● Intend the strategic partner to cover the $30-60 million in

Project pre-construction expenditures planned for 2013

● Assuming minimum 50:50 debt:equity ratio

● Recently engaged investment bank to working 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 Timeline as at April 17, 2013

33

Social Licence

● Leaders in Aboriginal Community Outreach

● Accommodation Agreements

● Signed with Deninu K’ue First Nation

● Negotiations completed with

Lutsel K’e Dene

● Negotiations progressing with

Yellowknives Dene

● Issued first Sustainability Report

compliant with GRI standards

● Implemented industry standard risk management program

● Environmental Assessment process in final stages, no major concerns

34

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

● Mixed Concentrate shipped to U.S. will contain <500ppm U+Th

35

Thorium and Uranium Content Comparison in Various REE Deposits

Nechalacho Avg.

114 ppm ThO2

Uranium data

not available if

not shown on

graph

36

Corporate Sustainability Report

● Report on how you will achieve sustainability goals & 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

37

2013 Milestones and Value Drivers for Avalon

● Completing agreements with off-take / strategic partners

● Securing next stage Project Financing

● Completion of Environmental Assessment & 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

38

REE Company Comparison

Company Market cap US$

Millions

Million tonnes

TREO* Stage

Molycorp $950 2.07 Production /

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

39

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: at Feasibility Study Stage

● 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

40

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

41

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

42

Management Team

● Donald S. Bubar, P.Geo. President, CEO & Director

● Jim Andersen, CA, CPA V.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., MBA V.P. Sustainability

● Cindy Hu, CA, CPA, CGA Controller

● Gerry Liepert , B.Sc., P.Eng. Senior Project Manager

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

43

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., 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, Eng, EIT. Mine Engineer

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

● David Connelly, CStJ, CD, MBA, B.Comm, Strategic Advisor

44