Corporate Presentation for Avalon Rare Metals Inc.

1. Corporate Presentation
Don Bubar, President & CEO
August, 2010

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.
2

3. Project Locations
NECHALACHO
Heavy Rare Earths
Tantalum
Niobium
Zirconium
Hafnium
Gallium
NORTH T DEPOSIT
Beryllium
Light Rare Earths
Lithium
Avalon offers Gallium
Niobium
diversified
exposure to a
broad range
of rare metals
All projects 100% owned
3

4. 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)
4

5. 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
Neodymium, Dysprosium, Terbium and Europium in highest demand
5

6. 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
6

7. Comparison of HREE Distributions
for Major REE Deposits
REE OXIDE Nechalacho Bayan Obo Mt Weld Mountain Pass Nolans
Canada 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%
7

8. Global Rare Earths Market
IMCOA 2009 updated market forecast Global demand in 2008
124,000 tonnes TREO valued
250,000 at US$1.25 billion
200,000
Forecast demand in 2014
De m and tpa ‐ REO
150,000 200,000 tonnes TREO valued
100,000
at US$2-3 billion, assuming
10% per annum growth rate in
50,000
demand from existing
0
technology only
4 5 6 7 8 9f 01 0f 01 1f 01 2f 01 3f 01 4f
2 00 2 00 2 00 2 00 2 00 2 00 2 2 2 2 2
China Supply ROW Supply Adjusted Global Demand China Demand Does not factor in demand
from new technology
ROW = rest of world supply (yet to come on Estimated that 25% of all new
stream) TREO = Total Rare Earth Oxides
technologies rely on REE
8

9. 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 This abandoned mine in Guyun Village in China
smuggled out of China exhausted the local deposit of heavy rare-earth
elements in three years. Source: NY Times
Estimated to be less than 15 years
of reserve life
9

10. Key Applications of REE:
Magnets for Electric Motors
REE (Neo) Magnets reduce electric motor/generator size and
weight, improve efficiency 100 Kw generator
with neo magnets
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
10

11. 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
Red stickman (approx. 6’ tall) shown to demonstrate scale. The wind
higher tower turbine blades on this 4MW model are 176 foot long.
Photo: Popular Science / GE
11

12. 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
12

13. 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.
13

14. Rare Earth Element Prices
Source: Metal-Pages.com, August 17, 2010
Prices are indicative and basis FOB China
Metal Oxide Principal Uses Price US$/kg
Light Rare Earths
Lanthanum 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 Earths
Europium 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
14

15. Price Trends:
Dysprosium & Terbium Oxide
Source: Metal-Pages.com August 17, 2010
Dy Current Price: Tb Current Price:
US$278/kg US$585/kg
15

16. Price Trends: Lanthanum &
Neodymium Oxide
Source: Metal-Pages.com August 17, 2010
La Current Price: Nd Current Price:
US$36.00/kg US$48.50/kg
16

17. 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.
17

18. 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
18

19. Nechalacho Geological Model
Evolving
Blachford Lake Peralkaline
Intrusive Complex, NWT
Biotite
Grace Lake Granite
Granodiorite
Whiteman
Interpreted Geometry
Lake Quartz
Syenite
T-Zone
in Cross Section
Two- Model Section
Mica
Granite Leucoferrodiorite Thor Lake Syenite
Caribou A unique example of a layered
Lake
Gabbro
Hearne Channel
and Mad Lake
Peralkaline intrusive complex,
Granites with the upper, rare metal-rich
part of the system readily
accessible for mining.
19

20. Nechalacho REE Deposit:
Diamond Drill Hole
Location Map North-South
Section
North Tardiff Zone
20

21. Nechalacho REE Deposit
N-S Composite Section (looking west)
Area of Indicated resources
Upper LREE Zone
170m
1590m
Basal HREE Zone
Hole 154: Hole 70: 1.90% TREO
1.88% TREO
Averages 30 m thick, 2% with 32.6% HREO
with 20.5% TREO, 20% HREE over 6.0 metres
HREO over
20.0 metres Drill Hole with
Basal Zone
Intercept
21

22. 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 defined
April: Project Description Rpt and permit applications filed with MVLWB
May: Diamond drilling resulting in new high-grade zone discovery
Begin Environmental baseline field program
June: Airstrip construction (Deton Cho)
Results of prefeasibility study disclosed
Environmental Assessment begins
Geomechanical & hydrology work begins
July: Diamond drilling resumes
August: Flotation pilot plant work to begin
MOU Negotiations advance with Aboriginal partners
22

23. New Thor Lake Airport
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
23

24. Nechalacho Deposit: NI 43-101
Resource Estimate June 14, 2010
Tonnes % % % % ppm ppm
(millions) TREO HREO ZrO2 Nb O Ga2O3 Ta 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)
24

25. REE Distribution in the Basal
Zone Ore Compared with Other
REE Deposits & Avg. Value/kg
100%
90% Heavy rare earths
80%
Light rare earths
70%
Samarium
60%
50% Neodymium
40% Praseodymium
30% Cerium
20% Lanthanum
10%
0%
Mt Pass Baiyun Obo Mt Weld Nolans Nechalacho
Molycorp Baotou Lynas Arafura Avalon
$9.90 $11.40 $13.60 $14.20 $22.10 Value US$/kg
25

26. Nechalacho REE Deposit
Conceptual Development Plan
Mine Portal Vent
Barren Rock Dump
Tailings Pond
Long Lake
Upper Zone
Underground Mining
Tailings Storage
Basal Zone
Mining underground room & pillar/long-hole stoping
1,000 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 GSL
Mixed REE carbonates shipped to third party for separation
Market capture less than 5% of est. 2014 TREO global demand
Operating Costs: $267/tonne inclusive mine, mill and hydromet
26

27. Proposed Nechalacho Site Plan
Tailings Area
T-Zone
Ore reserves
Plant site
Airstrip
Nechalacho Ore
Ramp Reserves
Plant Site
27

28. Estimated Total Project
Construction Capital Costs
Total Capital Cost Operating costs over the
Activity Estimates 18 year life of the project
(CAD $ 000’s) are estimated to average
Nechalacho Mine 99,607 CAN $267 per tonne of
ore mined or $5.93 per
Thor Lake Process Facility 173,165 kilogram of product
HydroMetallurgical Plant 316,602 Based on Diluted
Primary Project Component Cost 589,374 Probable Mineral
Reserves of 12.0 million
Project Engineering, Procurement, tonnes of 1.71% TREO,
80,657
Construction and Management 3.18% (ZrO ), 0.42%
Contingency @ 22% 144,503 (Nb O ) and 0.042%
(Ta O )
Sustaining Capital 73,000
Probable Reserves will
Reclamation & Miscellaneous 12,200 increase with continued
Total Project Capital Costs 899,734 drilling, also extending
the mine life.
28

29. 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 do
not involve significant extra costs: occur in same minerals as REE.
Pilot Plant work to prove process set to begin Fall, 2010.
Flotation Plant HydroMet Plant Production Annual
Product
Recoveries Recoveries 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%
29

30. 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
30

31. 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
31

32. Prefeasibility Opportunity
Analysis
Pre-Tax Analysis (in millions)
Risk to
Optimization Initiative IRR NPV @ 8% NPV @ 10% NCF
Implement
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
Low 16% 518 327 2,236
increase grade
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
Medium 15% 455 268 2,156
Recoveries
OVERALL TOTAL All 33% 1,400 1,102 3,882
32

33. Schedule to Production in 2015
Cost Estimate for Feasibility Study = $43 million
33

34. A Leader in Environmental &
Social Responsibility: Winner of
PDAC’s 2010 e3 Plus Award
Naming ceremony
March 2010 PDAC
Community meetings Awards Ceremony
Accepting award
and site visits from
Jon Baird, PDAC
President
First Nations training
Employment at site
40% aboriginal
Business
development Sept 2009 naming
ceremony
Chiefs Ed Sangris and
Wind power evaluation with Ted Tsetta with Don
Bubar
YKDFN
34

35. Capital Structure
as 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)
35

36. REE COMPARABLES:
Market Capitalization
Normalized to TREO Resources
Market cap Million tonnes CAD$/tonne
Company Stage
CAD$ Millions TREO TREO
Lynas Corporation $1,379 1.1640 $1,184 Construction
Production /
Molycorp $1,182 1.3950 $847
expansion
Avalon Rare Metals $200 2.8712 $70 Feasibility
Arafura $190 0.8400 $226 Feasibility
Rare Element
$96 0.3690 $159 Exploration
Resources
Alkane** $96 0.6570 $157 Feasibility
Great Western
$58 0.1344 $299 Prefeasibility
Minerals*
(Market data and FX as of August 13, 2010)
* Great Western Market cap includes Technologies assets
** Alkane market cap includes gold assets
36

37. 18 Month Price Chart
CNBC / NY Times Resource expansion
and PBS report
CIBC Financing
Prospectus cleared
PFS
Dines Letter
37

38. Management, Directors
& Strategic Advisors
Management Directors
Donald S. Bubar, P.Geo, Alan Ferry, CFA
President, CEO & Director Non-Executive Chairman
Jim Andersen, C.A., C.P.A., David Connelly, CStJ, CD, MBA,
V.P. Finance & CFO B.Comm
Bill Mercer, Ph.D., P.Geo., Phil Fontaine, B.A., LL.D.
V.P. Exploration Brian D. MacEachen, C.A.
David Swisher, B.S. Min.Eng., Audit Committee Chair
Peter McCarter, B.A., LL.B., M.B.A.
V.P. Operations
Chair Governance/Compensation ctte
Pierre Neatby, B.A. Econ,
Hari Panday, C.A.
V.P. Sales & Mktg
Charlotte May, Corporate Secretary Strategic Advisors
Cindy Hu, CA, CPA, CGA, Controller F. Dale Corman, P.Eng.
Ron Malashewski, P.Eng (AB), Gerald Prosalendis, Communications
Manager, Investor Relations Joe Monteith, Business development
38

39. 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
39

40. Global REE Deposits Ranking
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
Contained Contained
Deposit % TREO tonnes % HREO Tonnes
TREO 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
40