RARE EARTHS 101RARE EARTH ElEmEnTS: THE BASicS, EconomicS

Supply cHAin And ApplicATionS

Rare Earth Elements (‘REE’) are non-toxic elements essential to a cleaner environment andreduced reliance on fossil fuels. Also, REE are an enormous potential benefit to human health.

RARE EARTH BASicS

3

Li4

Be

40

Zr41

Nb

31

Ga32

Ge

72

Hf73

Ta

58

Ce59

Pr60

Nd61

Pm62

Sm63

Eu64

Gd65

Tb66

Dy67

Ho68

Er69

Tm70

Yb71

Lu

49

In50

Sn

Other Rare Metals Light Rare Earths Heavy Rare Earths

57

La

37

Rb55

Cs

39

Y

Silvery-white metals that tarnish whenexposed to air, thereby forming their oxides

Relatively soft metals; hardness increaseswith higher atomic numbers

Reacts with water to liberate hydrogengas, slowly in cold/quickly upon heating

Most REE compounds are strongly para-magnetic

Catalytic, chemical, electrical, metallurgical,nuclear, magnetic and optical properties

Many REE compounds fluoresce stronglyunder ultraviolet light

Reacts with dilute acid to release hydro-gen gas rapidly at room temperature

High melting and boiling points

common pRopERTiES oF RARE EARTHS

RThere are 16 REE in total, as defined by the U.S. Geological Survey, 15 lanthanide elementsappearing at the bottom on the Periodic Table, with atomic numbers ranging from lanthanum(57) to lutetium (71), plus the metal yttrium (39); all of which display similar physical andchemical properties. REE deposits tend to occur in two sub-groups:

Light rare earth elements (‘LREE’), which include lanthanum (La), cerium (Ce), praseodymium (Pr), neodymium (Nd), and samarium (Sm)

Heavy rare earth elements (‘HREE’), which are less common and more valuable, includeeuropium (Eu), gadolinium (Gd), terbium (Tb), dysprosium (Dy), holmium (Ho), erbium (Er),thulium (Tm), ytterbium (Yb) and lutetium (Lu)

Yttrium (Y) most commonly occur in association with HREE sub-group

REE are not particularly rare; similar abundance in the earth’s crust to nickel or tin, butgenerally not concentrated in commercial ore deposits.

RARE EARTH EconomicS

250,000

200,000

150,000

100,000

50,000

0

China Supply ROW Supply China Demand Total Demand

Dem

and

tpa

- RE

O

20052006

20072008

20092010f

2011f

2012f

2013f

2014f

2015f

Source: IMCOA, Roskill, CREIC, Discussions with Rare Earths Industry Stakeholders 2011

Global Supply & demand

1794 Rare Earths discovered by Johan Gaddin in Ytterby, Sweden1903 First commercial production of rare earth flints at Treibach in Austria1953 Demand approximately 1,000 tons (US$25 million)1965 First stand-alone rare earths mine opened at Mountain Pass, US1985 Development of the Neo magnet, China initiates low cost production 2003 Demand approximately 85,000 tons (US$500 million)2008 Demand approximately 124,000 tons (US$1.25 billion)2015 Demand approximately 200,000 tons (US$2-3 billion)

Today, China produces over 95% of the world’s rare earth elements (“REE”). New sources arebeing developed in Canada, USA and Australia. In aggregate, demand and supply will bebalanced; however, light rare earth elements (“LREE”) are expected to be in surplus whileheavy rare earth elements (“HREE”) in deficit.

year RE ExportQuota

% change demandoutsidechina

Surplus(Shortfall)

THE cHinA FAcToR-REducEd ExpoRTS

2005 65,609 0.0% 48,000 17,6092006 61,821 -6.0% 53,000 8,821

2007 59,643 -4.0% 55,000 4,6462008 56,939 -4.5% 54,000 2,939

2009 50,145 -12.0% 25,000 25,145

2010 30,258 -40.0% 53,000 -22,742

2010 H1 22,2832011 H1 14,446 -35.2%

It has been reported that China’s government has been considering and implementing a rangeof policies putting the government in control of private and unauthorized mines that producerare earth minerals (especially from the HREE-rich South China ionic clays), implementing stricterregulations towards improving environmental performance of its mining sector, and requiringforeign companies to move factories to China to complete production of items using rare earth.

Source: Metal-Pages, IMCOA

Rare Earths Supply & demand

ndFeB pERmAnEnT mAGnETS(‘nEo mAGnETS’) are much morepowerful than alternatives, providing betterperformance with a smaller size which haslead to many miniaturisation applications.Rare earth magnets have been advancedby neodymium, dysprosium, samarium,praseodymium and terbium.

ElEcTRic moToRSare smaller, lighter weight,quieter and more energyefficient with REE magnets.Typically used in turn-drumtype washer and dryer,motors, vacuum cleaners’ motors,elevator wind-up motors, and compressormotors.

W i n d T u R B i n Epower generation is directlyproportional to the sweeparea of the blades andthe cube of wind-speed(similar principles underlieTidAl poWER), hence windturbine blade spans are getting larger andthe overall assemblies taller.

New designs use Neo magnets for directdrive turbines connected to permanentmagnet generators.

New designs eliminate gearboxes therebyreducing energy losses in the machine’sinternal operations, risk of failures andmaintenance costs.

Approximately 0 .6 - 0 .9 tonnes ofNeo magnets per megawatt, of whichapproximately 30% is REE.

RARE EARTH ApplicATionS

REE are used in everyday products to produce energy, reduce energy, increase energy efficiencyand in everyday lifestyle consumer and medical products.

Energyproduction

EnergyReduction

EnergyEfficiency

lifestyleproducts

Petroleum Refining

High-PoweredElectric Motors

Electric / HybridVehicles

Wind Turbines

UV Filters in Glass

Reducing FuelConsumption

Lighter Vehicles

Smaller, LighterElectric Motors

Electric / HybridVehicles

RechargeableBatteries

Energy-EfficientLighting

Color Screens

HardwareComponents

MedicalServices

La Ce SmNd TbEuY

La

Nd Nd La NdDy Tb

Nd Dy Tb Nd Dy

Dy TbEu GdNdCe

LaYCe

Tb

FerriteAlnico

Samarium-cobalt

Neodymium-iron-boron

0

1940 1950 1960 1970 1980 1990 2000 2010

10

20

30

40

50

60

(BH

)max

., M

GO

e

Year

HyBRid VEHiclEScut fossil fuel use by com-bining a gasoline engine,battery-powered electricmotors and brakes that cap-ture energy from stopping.

Components requiring REE include: themetal hydride component of a nickel–metal hydride (NiMH) battery; theelectric motor, generator and regenerativebraking systems which are dependent onrare earth magnets.

Typical hybrid vehicle contains approxi-mately 30 kgs of REE, with the majoritycontained in a typical NiMH battery(approx. 15 kgs).

REE play a critical role in automotivecatalytic converters, which transform theprimary pollutants in engine exhaustgases into non-toxic compounds.

mRi mAcHinES usedfor medical imaging anddiagnostics, now incorp-orate rare earth perman-ent magnets to generatehigh strength magnetic fields.

Permanent magnets are replacingexpensive traditional systems of supercooling wire coils in liquid helium systemto reduce the electrical resistance in thewire coils.

New units also provide wider, less claus-trophobic space for the patient.

liGHT EmiTTinGdiodES (lEds) are80% more efficient thanincandescent lighting,and 40% more efficientthan compact fluorescentbulbs (CFLs).

LEDs have an expected life of 50,000 hoursand some are sold with 5 year warranties.

LED market value was approx. $4.6 billionin 2007, and expected to be more than$11 billion in 2012.

Global policy shift of banning incandes-cent light bulbs, to be replaced by CFLsand LEDs, is gaining momentum. CFLsincreasingly seen as an interim step, asthey present mercury disposal manage-ment issues.

conSumER ElEcTRonicSsuch as Apple’s iPod musicplayers as well as other highperforming speakers, head-phones or buds, are drivenby tiny Neo magnets, resultingin smaller, lighter speakers withfaster base response and lower overall distortion.

GlASS pRoducTS suchas those used in monitors,requires cerium oxide,with unique physical andchemical properties, as abuilding block for very efficient polishing compounds throughchemical dissolution and mechanical abrasion,such as solar cell protective glass.

mEdicAl: Rare earths areused in a wide range ofapplications including drugtreatments, diagnostictechniques and equipment.

Catalyst in biomedicaland chemical research.

Organize complexes used in intravenouslyadministered contrasting agents toenhance imaging.

Laser cases and radioisotopes used incancer treatments.

moniToRS for computersand plasma televisions arecoated with phosphors,which generate the primarycolours red, blue, and green.Red requires europium, newblue europium phosphor retainsbrightness ten times longer than previousblue phosphors, and green is generated byphosphor doped with terbium.

A combination of these primary colourphosphors are used to create the white“backlight‟ used in LCD screens and theenergy efficient “tri-phosphor‟ light bulbs.

Fluid cRAcKinGcATAlySTS use lanth-anum and cerium in therefining of crude oil, andis the major contributor tothe process that enables thetransformation of heavy moleculesinto lighter compounds that make up gasolineand other fuels (e.g. gas, jet fuel and diesel).

RARE EARTH ElEmEnT pRocESS:

FRom RocK To TomoRRoW’S pRoducTS

REE pRicinG: dySpRoSium And nEodymium

REE Supply cHAin

copoRATE SociAl RESponSiBiliTyRare Earths are essential components in many clean and greentechnologies. Social and environmental responsibility and goodcorporate governance are integral to the exploration, developmentand production stages of any resource project.

MINING BENEFICIATION HYDROMETALLURGY

SEPARATION

Chemical separation ofindividual rare earth oxidesfrom the mixed rare earth

concentration

Cracking the REE bearingminerals to extract

mixed rare earth oxideconcentrate

Grinding and selectiveflotation of REE bearing

minerals from thecrushed ore

From the groundto crushed ore

PRODUCTS PROCESSING

Rare Earth Metals/Chemicalprocessing to meet specificdownstream technology

applications

Wind TurbinesHybrid/Electric Cars

LED ScreensMiniaturization Technology

Source: Metal-Pages

Avalon’s contributions tothe REE supply chain

Downstreamcontributions

RARE METAL APPS is designed to encourage thefurther sharing of scientific and engineering advancesrelated to rare metals among industrial users, investors,

www.raremetalblog.com policy makers, entrepreneurs and academia.

AVALON RARE METALS INC. 130 Adelaide St. W., Ste. 1901, Toronto, ON M5H 3P5www.avalonraremetals.com T: (416) 364-4938 • E: ir@avalonraremetals.com