Corporate PresentationJune 13, 2013

Don Bubar President & CEO

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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.

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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

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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

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AVL One Year Price Chart

Diaoyou Islands

Dispute

Molycorp News

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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

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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

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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)

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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

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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

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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

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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)

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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

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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

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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

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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

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Thor Lake Area and Regional Infrastructure

(Hydromet plant)

(Nechalacho Mine

and Concentrator)Mackenzie River

barge to Asia route

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Proposed Geismar HREE Refinery: Local Infrastructure

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West Long Lake Area

Tardiff Lakes Area

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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

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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

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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

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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

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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

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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.

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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

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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

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Project TimelineAs at April 17, 2013

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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

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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

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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

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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

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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

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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

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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

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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)

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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

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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

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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

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