Corporate UpdateS b 13 2011September 13, 2011

Don Bubar, President & CEO

Safe Harbour StatementSafe Harbour Statement

Forward looking informationg

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 futurereflect 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 suchof 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 thesey g pforward-looking statements.

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Recent Developments

Completed Updated Pre-feasibility Study with improved economics

Completed US$47.3 million equity financing at US$6.15/shareCompleted US$47.3 million equity financing at US$6.15/share

Completed mini-pilot plant trials of flotation process

Signed fourth MOU with Asian company

Definition drilling continuing at rate of 4,000 metres/month with two rigs

Deposit continues to good continuity, with some irregularities in geometry

Over 30 tonnes collected for bulk sampleOver 30 tonnes collected for bulk sample

Developers assessment report filed with regulators for environmental review process

MOU’s signed with all three First nations groups. Negotiations on accommodation agreements proceeding steadily

Additions to management and technical team

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Capital StructureSeptember 13, 2011

Canada - TSX: AVLCanada TSX: AVL

United States – NYSE Amex: AVL Frankfurt- OU5

Shares Outstanding 102,572,615

Fully Diluted 113 048 970Fully Diluted 113,048,970

Market Capitalization US $462 million (S/O @ $4.50)

Recent Price Range US $4.00 - $5.00

52 Week High / Low US $10.11 – C $2.97

Cash Reserves C $70 million (No debt)

Insider Share Position 4 million shares (3.9%)( )

Institutional holdings Hancock, Global X, Sentry, Van Eck, Diamondback

(est. 30-40%) AGF, Encompass, Chilton, Highbridge, Wellington

Employees 30 (including contract staff)

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Employees 30 (including contract staff)

1 Year Price Chart

China reduces export quotas

CIBC Financing

NYSE Amex Listing DRC / CitiFinancing

CIBC Financing

Rising REE PricesRising REE Prices

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Management & Board of DirectorsDirectors

ManagementD ld S B b P G

Cindy Hu, CA, CPA, CGA, ControllerVirginia Morgan, B.Comm, Director, C i ti d I t R l tiDonald S. Bubar, P.Geo,

President, CEO & Director

Jim Andersen, C.A., C.P.A., V P Finance & CFO Directors

Communications and Investor RelationsRon Malashewski, P.Eng (AB), Manager, Investor Relations

V.P. Finance & CFO

Bill Mercer, Ph.D., P.Geo., V.P. Exploration

David Swisher B S Min Eng

DirectorsAlan Ferry, CFANon-Executive Chairman

David Connelly CStJ CD MBA B CommDavid Swisher, B.S. Min.Eng.,

V.P. Operations

Pierre Neatby, B.A. Econ, V.P. Sales & Marketing

David Connelly, CStJ, CD, MBA, B.Comm

Phil Fontaine, B.A., LL.D.

Brian D. MacEachen, C.A. Audit Committee ChairV.P. Sales & Marketing

Brian Chandler, P.Eng., Senior V.P. & COO

Richard Pratt, V.P., General Counsel

Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation Committee

Hari Panday, C.A.

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Richard Pratt, V.P., General Counsel and Corporate Secretary Richard Morland, B. Eng., Mining

Senior Staff and Technical C lt t Consultants

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

John Goode, P.Eng. Senior Metallurgical Consultant

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

Martin Heiligmann, Ph.D., Project Geologistg , , j g

Randy O’Keefe, Camp Logistics Manager

Finley Bakker, P.Geo. Senior Resource Geologist

Brian Delany P Eng Senior Project ManagerBrian Delany, P.Eng., Senior Project Manager

Rob Prasad, Senior Human Resources Coordinator

Hoe Teh, P.Eng., Metallurgical Consultant

Dezhi Qi, P.Eng. Process Engineer

Stanley Chan, Eng, EIT. Mine Engineer

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

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Project LocationsProject LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumNiobiumZirconiumHafniumGallium

NORTH T DEPOSITNORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium

Avalon offers diversifieddiversified exposure to a broad range

f l

All projects 100% owned

of rare metals

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j

Recent Developments in REE M k tMarkets

China increases second half 2011 quotas by 8 9% (from the first halfChina increases second half 2011 quotas by 8.9% (from the first half 2011 quotas) for a total of 15,738 tonnes

In the past six months Individual REE oxide prices have risen dramatically outside China and inside China as welldramatically outside China and inside China as well

Siemens and Lynas sign a letter of intent for future magnet production

Avalon signs MOU’s about off-take and investment with four AsianAvalon signs MOU s about off-take and investment with four Asian industrials

Frontier Resources and Korean Resources Corporation sign strategic t hipartnership

Production of dysprosium temporarily halted in three South China mining districts

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Rare Earth Element PricesRare Earth Element Prices

Source: Metal-Pages.com, September 6, 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 109.00 – 111.00 4.40 – 4.90

Cerium Oxide 99% min Catalyst, glass, polishing 109.00 – 111.00 3.50 – 4.00

Praseodymium Oxide 99% min Magnets, glass colorant 247.00 – 250.00 14.20 – 14.70

Neodymium Oxide 99% min Magnets, lasers, glass 310.00 – 315.00 14.70 – 15.20

Samarium Oxide 99% min Magnets, lighting, lasers 127.00 – 130.00 4.25 – 4.75

Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 5,060.00 – 5,080.00 470.00 – 490.00

Terbium Oxide 99% min Phosphors: green, magnets 3,700.00 – 3,720.00 340.00 – 360.00

Dysprosium Oxide 99% min Magnets, lasers 2,280.00 – 2,300.00 105.00 – 110.00

Gadolinium Oxide 99%min Magnets, superconductors 190.00 – 195.00 5.00 – 5.50

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Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 160.00 – 165.00 10.00 – 10.50

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

Demand (tonnes REO)

Excess / Shortage Supply (tonnes REO)

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

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

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Comparison of Anticipated Production for Major REE DepositsProduction for Major REE Deposits

Nechalacho Mt Weld Mountain PassAvalon

(10 000 tpa)Lynas

(11 000 tpa)Molycorp

(20 000 tpa)

REE OXIDE(10,000 tpa) (11,000 tpa) (20,000 tpa)

Europium Eu 49 48 24Gadolinium Gd 370 107 34Terbium Tb 64 8 -Dysprosium Dy 364 13 -Dysprosium Dy 364 13 -Holmium Ho 69 - -

Erbium Er 189 - -

Thulium Tm 26 - -Ytterbium Yb 147Ytterbium Yb 147 - -Yttrium Y 1,580 41 20

Lutetium Lu 20 - -

Total Heavies 28.75% 1.98% 0.39%

L h L 1 463 2 805 6 640Lanthanum La 1,463 2,805 6,640Cerium Ce 3,264 5,141 9,820Praseodymium Pr 407 585 868Neodymium Nd 1,623 2,035 2,400

S i S 374 250 160

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Samarium Sm 374 250 160

Total Lights 71.25% 98.33% 99.44%

Thor Lake: Project LocationThor Lake: Project Location

Flotation plant t Th l kat Thor lake,

shipping of concentrate by b tbarge to hydromet plant at Pine Point.

Concentrates shipped by rail from Hay Riverfrom Hay River to Separation Plant

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West Long Lake Area

Tardiff Lakes Area

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Nechalacho REE Deposit

N-S Composite Section (looking west)

Nechalacho REE Deposit

U LREE Z

Tardiff Lakes Area Indicated resources

Upper LREE Zone170m

1590m

Basal HREE ZoneAverages 30 m thick, 2% TREO 20% HREE

Hole 70: 1.90% TREO with 32.6% HREO

Hole 154: 1.88% TREO

1590m

TREO, 20% HREE over 6.0 metres with 20.5% HREO over 20.0 metres Drill Hole with

Basal Zone

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Intercept

Nechalacho Deposit: NI 43-101Resources Updated Jan 27 2011Resources Updated Jan. 27, 2011

Tonnes (millions)

%TREO

%HREO

%HREO/TREO

%ZrO2

%Nb₂O₅

ppmTa2O5

TREO equiv

Basal ZoneBasal 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

U ZUpper 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

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

Total Inferred 226.88 1.30 0.19 14.33 2.61 0.36 278 1.71

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 (NMR) cut-off value of CAN$260/tonne. (CAN:USD FX $1 11/$1 00) NMR i d fi d th i it l f ll th bl t l i th

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$1.11/$1.00) NMR is defined as the in situ value of all the payable rare metals in the ore net of estimated metallurgical recoveries and processing costs

Metallurgical TestworkP Progress

FlotationB h l b i ll l t ti i ti1. Benchscale – basically complete, optimization

2. Integrated flotation plants – three completed3. Pilot plant (~30t) – planned November, 2011

Hydrometallurgy1. Benchscale – cracking complete, solution chemistry in progress2 Pilot in progress2. Pilot – in progress

Separation1. Scoping complete (SNC Lavalin)2. Prefeasibility in progress (SNC Lavalin)3. Feasibility

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Metallurgy Schedule Present timeMetallurgy Schedule2008 2009

FLOTATION Q3, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4BENCHSCALE

2010 2011 2012

Open cycleLocked cycle

Optimising processMINIPILOT

FULLSCALE PILOT

HYDROMETALLURGYBENCHSCALE

Mineral breakdown (AB, CCr)Solution chemistry

PILOTMineral breakdown (AB, CCr)

Solution chemistry

SEPARATIONScoping

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PrefeasibilityFeasibility

2011 Updated RPA Prefeasibility Study: Summary of Financial AnalysisSummary of Financial Analysis

Financial Analysis

Original PFS Updated PFS

P T (CAD$)After-Tax

P T (CAD$)After-Tax

Pre-Tax (CAD$)(CAD$)

Pre-Tax (CAD$)(CAD$)

Internal Rate of Return

14% 12% 39% 34%

Net Cash Flow $2.1 billion $1.5 billion $6.08 billion $4.48 billion

Net Present Value @ 8%

$428 million $236 million $2.22 billion $1.61 billion

Net Present Value @ 10%

$246 million $97 million $1.77 billion $1.27 billion

Based on Probable Mineral Reserves resources of 14,539,167 tonnes defined from January 2011 updated resources ,including high-grade subzones

Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $46.33, ZrO₂ = $3.77, Nb₂O₅ = $55.86, Ta₂O₅ = $255.63

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20 Mine Life. 1 year ramp-up to full 2,000 tpd production rate.

Schedule to Production in 2016

Bankable Feasibility StudySept 1 2010 to Aug 31 2012Sept. 1, 2010 to Aug 31, 2012

Budget = $46 million

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Environmental Concerns: U i & Th iUranium & Thorium

All rare earth deposits contain some Uranium (U) and Thorium (Th) but p ( ) ( )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(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 regulationsNuclear 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 V i REE D itVarious REE Deposits

Nechalacho

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Competitive Advantages With Oth E i REE P dOther Emerging REE Producers

Relatively Advanced: At Feasibility Study StageAll i di i i h b ff kAllows company to enter into discussions with customers about off-take

First Mover Advantage is KeyFirst to market will capture available market shareFirst 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 underwayot p a t test o u de ay

Heavy Rare Earth Enrichment Marketing OpportunityNo other advanced projects have all the heavies to offer by 2015-2016

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REE COMPARABLES: Market Capitalization Normalized to TREO Resources

CompanyMarket cap

US$ MillionsMillion tonnes

TREO*US$/tonne

TREOStage

US$ Millions TREO TREO

Molycorp $4,598 1.3950 $3,296Production / expansion

Lynas Corporation $3,200 1.1640 $2,749 Construction

Avalon Rare Metals $436 4.298 $101 Feasibility

Rare Element Resources $380 0.55 $690 Prefeasibility

Arafura $295 0.84 $351 Feasibility

Quest Rare Minerals $280 0.976 $287 Prefeasibility

(Market data and FX as of September 2, 2011)* Based on published information/reports

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

Future Milestones and Value D i f A l i 2011Drivers for Avalon in 2011

Completion of flotation pilot plant work and bench scale hydromet workUpdated resource estimates for 2011 drillingCompleting definitive agreements with off-take/ strategic partnersstrategic partnersDefining the HREE separation plant locationFi li i Ab i i l P i i i AFinalizing Aboriginal Participation Agreements

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Vision StatementVision StatementTo be the leading integrated supplier of technology metals and minerals for a more sustainable world.

Mission StatementMaximize 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 p y g yresponsible mineral production.

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Rare Earth Element Supply Chain

REE MiningFrom the ground to

REE MillingGrinding and Beneficiation

REE Hydrometallurgy

C ki th REE i l From the ground to crushed ore

Grinding and Beneficiation of REE minerals

Cracking the REE minerals to produce mixed REE

oxides concentrate

REE SeparationREE RefiningTo meet specific

REE ProductsPermanent magnets

Separating and purifying the individual REE oxides

To meet specific downstream technology

applications

Permanent magnets, LED’s , consumer

electronics

Avalon’s contributions to the REE supply chain...Three large plants with a

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g ptotal CAPEX of > $1billion

REE Mineral Concentration

Grind to 37 µm

REE Mineral Concentration

Deslime (~8 µm)

Magnetics removal

Mill D li iRougher flotation

Mill DeslimingCyclones

Cleaner flotation

Magnetic

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Gravity concentrationg

Separator

HydrometallurgyHydrometallurgy

Acid (H2SO4) bake (~200C)

REE SolutionResidue (zircon, columbite, gangue)

Precipitate bulk LREE+50% HREECaustic (NaOH) crack (~600C)

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

Combined REE productSeparate HREE Nb -Ta Zr

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

Rare Earth Element SeparationRare Earth Element Separation

REO REECl3 Aqueous solution

Leaching La-Nd/Sm-Lu Organic solvent

La, Ce, Pr/Nd

Sm-Gd/Tb-Dy Ho-Lu, Y

Sm-Dy/Ho-Lu, Y

La, Ce/Pr NdHo-Lu YSm,Eu/Gd Tb/Dy

Sm/Eu GdLa/Ce Pr

TmYb Lu

Sm/Eu Gd

Tb DySm EuLa CeHo/Er

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Ho Er

Basal Zone Indicated Resources atVarious NMR Cut-offs (43-101 compliant)updated Jan. 27, 2011Undiluted grades

INDICATED Tonnes TREO HREO/TREO % % ppm TREOINDICATEDNMR 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

P d f 2009 d t b S tt Wil RPA d t il d i T h i l R t fil d J l 29

$

≥$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

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 the in situ value of all the payable rare metals in the ore net of ti t d t ll i l i d i t $US FX t $1 11 Th

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estimated metallurgical recoveries and processing costs $US FX rate: $1.11. The 2010 base case NMR is C$260/tonne.

First Nations Community Engagement & CSREngagement & CSR

Community information sessions and site visits

Aboriginal TrainingFirst Aid, Driller Helper

Employment at siteEmployment at site40% Aboriginal

Business developmentMajor contractors withMajor 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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Agreement) with three FN s

Nechalacho REE Deposit C t l D l t PlConceptual Development Plan

Barren Rock Dump

VentMine Portal

Tailings PondLong Lake

Underground MiningUpper Zone

Basal 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 GSLy g pProduction 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

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Operating Costs: $267/mined tonne of ore inclusive mine, mill and hydromet or $6.50 - $7.00/kg REO after separation

Estimated Total Project C t ti C it l C tConstruction Capital Costs

A ti itTotal Capital Cost

E ti tOperating costs over the 18 lif f h jActivity Estimates

(CAD $ 000’s)

Nechalacho Mine 99,607

Thor Lake Process Facility 173 165

18 year life of the project are estimated to average CAN $267 per tonne of ore mined or $5.93 per

Thor Lake Process Facility 173,165

HydroMetallurgical Plant 316,602

Primary Project Component Cost 589,374

kilogram of productBased on Diluted Probable Mineral Reserves of 12.0 million

Project Engineering, Procurement, Construction and Management

80,657

Contingency @ 22% 144 503

Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO₂), 0.42% (Nb₂O₅) and 0.042% (Ta₂O₅)Contingency @ 22% 144,503

Sustaining Capital 73,000

Reclamation & Miscellaneous 12,200

(Ta₂O₅)Probable Reserves will increase with continued drilling, also extending the mine life

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Total Project Capital Costs 899,734 mine life.

Project Development phase(+ Expected Production Level and Capex)(+ Expected Production Level and Capex)Source: Ernst & Young April 2011

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