Annual & Special Meeting
February 25, 2014
Safe Harbour Statement
Forward Looking Information This corporate presentation contains “forward-looking statements” (“FLS”) within the meaning of the United States Private Securities Litigation Reform Act of 1995 and applicable Canadian securities legislation. Generally, these FLS can be identified by the use of forward-looking terminology such as “plans” or “estimates” or derivations thereof. FLS contained herein include, without limitation, Avalon Rare Metals Inc (“Avalon”)’s forecasts of a correlation between REE prices and Avalon’s stock price, predictions of the future supplies and prices of and demand for REE, potential future applications for REE, Avalon’s beliefs and expectations concerning its strategic advantage, the Nechalacho REE Project’s technical and economic feasibility, the Nechalacho REE Project’s status as the most advanced heavy rare earth elements project in the world outside China, the key measures, timelines and economics reported in the Feasibility Study, life of mine, social, community and environmental impacts, mineral resource and mineral reserve estimates, off-take agreements and purchasers for the Company’s products, environmental assessment and permitting, securing sufficient financing on acceptable terms, opportunities for short and long term optimization of the Nechalacho REE Project, and continued positive discussions and relationships with local communities and stakeholders. FLS are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of Avalon to be materially different from those expressed or implied by such FLS. FLS are based on assumptions management believes to be reasonable at the time such statements are made. Although Avalon has attempted to identify important factors that could cause actual results to differ materially from those contained in FLS, there may be other factors that cause results not to be as anticipated, estimated or intended. Factors that may cause actual results to differ materially from expected results described in FLS include, but are not limited to those risk factors set out in the Company’s current Annual Information Form, Management’s Discussion and Analysis and other disclosure documents available under the Company’s profile at www.SEDAR.com. There can be no assurance that FLS will prove to be accurate, as actual results and future events could differ materially from those anticipated in FLS. FLS have been provided for the purpose of assisting investors in understanding the Company’s plans and objectives and may not be appropriate for other purposes. Accordingly, readers should not place undue reliance on FLS. Avalon does not undertake to update any FLS that are contained herein, except in accordance with applicable securities laws.
_______________________________________
The technical information contained in this presentation has been reviewed and approved by William Mercer, Ph.D., P.Geo. (Ont), P.Geo. (NWT), Vice President, Exploration and Donald Bubar, P.Geo. (Ont), President and CEO of Avalon, qualified persons for the purposes of National Instrument 43-101. For additional information on the Nechalacho Rare Earth Elements Project, see the technical report entitled “Technical Report Disclosing the Results of the Feasibility Study of the Nechalacho Rare Earth Elements Project” dated May 31, 2013 and effective April 17, 2013.
2013 Corporate Highlights
● Reached several major milestones on Nechalacho: ● Completed Comprehensive Feasibility Study ● Environment Assessment completed and approved ● Developed improved process flowsheets and mine plan ● Signed Participation Agreement with NWTMN ● Lost-time injury free year at Nechalacho
● Published second Sustainability Report ● Raised over $4 million in “top-up” equity financing ● Re-activated Separation Rapids Project
Capital Structure January 31, 2014
Canada - TSX: AVL
United States – NYSE MKT: AVL Frankfurt- OU5
Shares Outstanding 110,479,567
Fully Diluted 119,304,817
Market Capitalization US$62 million (S/O @ $0.56)
Recent Price Range US$0.61 - $0.51
52 Week High / Low US$1.27 - $0.46
Cash Reserves C$6 million (No debt)
Insider Share Position 3 million shares
Institutional Investors Hancock, Global X, Encompass, Chilton & others
Analyst Coverage CIBC, Roth, Citigroup, Cowen, Edison
4
One Year Stock Chart
Feasibility Study
Tax-loss Selling
REE Price Recovery
Avalon Share Price vs. REE Prices 2009-2014
Rare Earth Oxide Commodity Price Index (FOB $US/tonne) vs Share Price ($CAD)
2013 Expenditure Summary
In CAD$ Millions
Nechalacho $18.6
Separation Rapids 0.3
Other Projects 0.2
General and Administration 6.5
$25.6
Working Capital – November 30, 2013 $7.6
(1) From September 1, 2012 to August 31, 2013
Rare Metals Projects Avalon is not just about rare earths
All projects 100% owned
Avalon offers diversified exposure to a broad range of rare metals
Thor Lake Area and Regional Infrastructure
100 km
NORTHWEST TERRITORIES
Fort Smith
Fort Resolution Hay River/ K’atl’odeeche
Canadian National Railway
Yellowknife
Pine Point
Bluefish Hydro Dam
Taltson Hydro Dam
Great
Slave
Lake
Behchoko
Snare Hydro Dam
Lutsel K’e
Proposed National Park
Thor Lake (Nechalacho Mine and Concentrator)
ALBERTA
N
0
Whati
SASKATCHEWAN
100 km
CN Route From Hay River to Geismar, LA
Separation Plant Geismar, LA
Nechalacho Mine , NWT
Proposed HREE Refinery Geismar, LA Local Infrastructure
• On Mississippi River • Served by CN Rail and Interstate Highway
• Well-established Chemical Industry Cluster
• Ready availability of chemical reagents
• Availability of skilled labour
Proposed Plant Site
Product Marketing Update Pierre Neatby Vice President, Sales and Marketing
REE Market Developments in 2013
● 2013 world demand increased 4% to 120,000 mt (destocking continues)
● Demand for REO from magnet industry growing at 9%/year ● Chinese “illegal activity” still in the 10,000-20,000 mt range ● 2013 Chinese export quotas were approx 30,000 mt ● “Baotou Rare Earths Trading Platform” initiated ● Leaks suggest WTO ruling to go against China ● Molycorp producing below capacity, losing money ● Lynas producing, but at 1/3 of capacity ● Continued concern in governments about security of supply
● Canadian Rare Earth Elements (Research) Network (“CREEN”) created
Europium Price FOB China 2010-2013
Panic buying and Stockpiling Diayou Islands Incident Reduced buying due
to De-stocking
Source: Asian Metal
0
5
10
15
20
25
30
35
US$
/pou
nd
Annual Average Cobalt Prices
Partnership Discussions
● Three potential profiles of Strategic Partners ● Consumers of REE concerned about security of supply
motivated to secure off-take ● Technical partners with expertise in Rare Earth
processing and refining ● Financial partners seeking return on investment
● MOUs or NDAs have been signed with numerous parties in various parts of the world over the past five years, falling into one or more of these profiles
● Best progress to date has been made in discussions with potential technical partners
● New market interest in Petalite from the glass industry in 2014 implies fundamental change in supply picture
● 2 tonne bulk sample of ore currently being processed in Europe to define new flow sheet and produce Petalite concentrate samples for glass industry customers.
● Updating PFS cost estimates and investigating alternatives for constructing demonstration scale process plant
● Updating environmental studies in preparation for permitting ● Keeping First Nation as well as City of Kenora and Ontario
Government updated on recent work programs and future development prospects
Separation Rapids Project Update
Operations Update Dave Marsh Senior Vice President, Metallurgy
Feasibility Study: Opportunities
● Many opportunities to optimize project development model to reduce technical risk and increase revenues ● Improve recoveries in flotation plant and simplify flowsheet
● Develop alternative mixed alkali hydromet’ process ● Revise mine plan to prioritize high grade sub-zones
● Potential to partner on refinery or toll-process through third party owned facility to reduce CAPEX and RISK
● Public policy initiatives to support development of REE industry outside of China to address issue of security of supply of critical raw materials
Concentrator Plant Optimization Progress in 2013
● Increased flotation recoveries ● REE recoveries up to 89% from 78% in Feasibility Study
● Simplified process flowsheet ● Removal of “de-sliming” and “gravity enrichment” circuits ● Easier to operate ● Reduced power consumption ● Environmental Benefits
● Optimised crushing and grinding circuits ● Single stage crushing (previously three stages) ● Improved grinding control ● Reduced power consumption
Hydrometallurgical Process Optimization Progress
● Process change to HCl leaching ● HREE recoveries to Separation up to 90% from 52%
● Valuable Zircon product for established markets ● Not reliant on marketing of Enriched Zircon Concentrate
● Removal of low value Ce and La ahead of Separation ● High purity mixed REE product (suitable for toll refining by
others) ● Potential to recover Niobium and Tantalum (testwork in
progress) ● Alternative site locations investigated
Conceptual Nechalacho Mine and Concentrator Plan
Concentrator Site Layout
Process Plant Layout Plan
Grinding - Section
Hydromet Plant Layout
Mining Optimization Progress
Improved Mining Operation by: ● Revised mine plan
● Higher grades in first five years ● Optimised mining method
● Improved efficiency ● Simplified ore handling
● Crusher relocated to surface ● Reduced u/ground installations ● Ore trucked to surface (previously by conveyors) ● Ability to blend ore ahead of milling
Measured and Indicated Resources in the Basal Zone at Various NMR Cut-offs
Basal Zone Tonnes
(millions) %
TREO %
HREO % HREO/
TREO %
ZrO2 %
Nb₂O₅ %
Ta₂O₅ US$345 NMR Cut-Off (Reflects entire Basal Zone)
Measured 12.56 1.71 0.38 22.50 3.20 0.405 0.0404
Indicated 49.33 1.62 0.35 21.27 3.07 0.405 0.0398
US$800 NMR Cut-Off (Approximately Reflects High Grade “Basin”)
Measured 5.11 2.20 0.58 26.17 4.23 0.52 0.0544
Indicated 16.15 2.20 0.55 24.87 4.13 0.52 0.0542
US$1,000 NMR Cut-Off (Selected parts of High Grade “Basin”)
Measured 2.49 2.49 0.68 27.38 4.77 0.59 0.0620
Indicated 6.99 2.52 0.66 26.03 4.66 0.58 0.0614
August 2013
Nechalacho General Geology (Vertical Cross Section Looking West)
29
Looking west at 416200E
S N
1600 metres
Upper Zone
Basal Zone HREE Deposit
High Grade “Basin”
Lakes and Overburden
Lower Zone
1,600 metres
14.6 million tonnes in Reserves Sufficient for 20 years of production 1.70% TREO, (0.46%HREO), Zr, Nb
N S
Mine Optimization- Current Layout
30
Engineering and Plant Design Progress
Hatch Engineers work program: ● Finalizing mine design (essentially complete) ● Optimizing design of Concentrator (essentially complete) ● Up-dating Nechalacho Site layout (essentially complete) ● Re-design of Hydrometallurgical Plant (process and
engineering) ● Re-working of Capex estimates from first principles ● Re-working of Opex estimates ● Developing Implementation Plan
Nechalacho Feasibility Optimization Next Steps
● Collect bulk sample material for additional pilot plant trials of new hydromet process
● Complete hydromet plant design ● Continue Niobium and Tantalum recovery process work ● Completion of Hatch OPEX and CAPEX up-dated cost
estimates ● Update 43-101 report
Nechalacho Project Timeline
As at February 19, 2014
Permitting and Sustainability Update Mark Wiseman Vice President, Sustainability
2013 Highlights
● Lost time accident free in fiscal year 2013 ● Report of Environmental Assessment and Ministerial
Approvals received ● Final two stage permitting strategy includes:
● Early Works permits to allow construction start April/May 2014
● Operations Permits for operations - target end 2014 ● Multiple meetings, open house, community communication
and calls with aboriginal groups ● Two Aboriginal Agreements in place
2013 Corporate Sustainability Report
● ALIGN OPTIMIZE INNOVATE
● Published in December 2013
● MAC TSM Self Assessment and GRI Level G3.1
● Aligns the Company’s operating philosophy with its Cleantech customers
● Aligned Sustainability and Fiscal reporting
Importance of Sustainability
● Avalon is identified as a ‘preferred supplier’ for potential customers
● Sustainability performance is a key criterion for socially responsible investors, strategic partners and financiers
● Sustainability is a key driver for process design improvement (cost, safety, environment)
● Organizational commitment and brand strengthening ● Strong risk management ● Drives performance
Economic Benefits of Sustainability
● Improved safety performance reduces downtime and
manpower costs ● Reduced energy use and cost, reduced reclamation cost ● Improved permitting and relationships with communities and
aboriginal governments/organizations ● Outreach initiatives led to projects with eight universities,
Council of Metallurgists Rare Earths Symposium, formation of CREEN
Overall, Sustainability increases shareholder value
Employee Recognition
Cindy Hu Special Achievement
Ron Malashewski Environmental Excellence
2014 Objectives and Value Drivers for Avalon
● Nechalacho Rare Earth Elements Project ● Complete agreements with off-take / strategic partners
● Secure next stage Project Financing
● Secure Permits and commence site preparation
● Complete optimization work and produce updated FS
● Finalize remaining Aboriginal Participation Agreements
● Separation Rapids ● Secure off-take commitments and funding for demonstration plant
● East Kemptville ● Secure access for drilling program and complete PEA