Corporate Presentation - Avalon Rare Metals

Corporate Presentation
Don Bubar, President & CEO
February 7, 2011

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

Capital Structure
February 7, 2011
Canada - TSX: AVL
United States – NYSE Amex: AVL
Frankfurt- OU5
Shares Outstanding 93,288,523
Fully Diluted 103,508,970
Market Capitalization US $630 million (S.O. @ $6.75)
Recent Price Range US $4.48 - $8.20
52 Week High / Low US $8.20 – C $1.89
Cash Reserves
C $37 million (No debt)
Insider Share Position 4.1 million shares (4.5%)
Institutional holdings CPP, TDAM, Front St., Excalibur, MFC Global
(est. 30-40%)
Middlefield, AGF , Cantara, Sentry, Chilton
Employees
20 (including contract staff)
3

Management & Board of
Directors
Management
Donald S. Bubar, P.Geo,
President, CEO & Director
Jim Andersen, C.A., C.P.A.,
V.P. Finance & CFO
Bill Mercer, Ph.D., P.Geo.,
V.P. Exploration
David Swisher, B.S. Min.Eng.,
V.P. Operations
Pierre Neatby, B.A. Econ,
V.P. Sales & Mktg
Charlotte May, Corporate Secretary
Cindy Hu, CA, CPA, CGA, Controller
Ron Malashewski, P.Eng (AB),
Manager, Investor Relations
Virginia Morgan, Investor Relations (on
maternity leave)
Directors
Alan Ferry, CFA
Non-Executive Chairman
David Connelly, CStJ, CD, MBA,
B.Comm
Phil Fontaine, B.A., LL.D.
Brian D. MacEachen, C.A.
Audit Committee Chair
Peter McCarter, B.A., LL.B., M.B.A.
Chair Governance/Compensation ctte
Hari Panday, C.A.
4

Key Staff & Consultants
Chris Pedersen, P.Geo, Senior Geologist, Camp Manager
Martin Heiligmann, Ph.D., Project Geologist
Finley Bakker, P.Geo. Senior Resource Geologist
Brian Delany, P.Eng., Senior Project Manager
Dezhi Qi, P.Eng. Process Engineer
Rob Prasad, Senior Human Resources Coordinator
John Goode, P.Eng. Metallurgical Consultant
David Trueman, Ph.D., P.Geo, Rare Metals Consulting Geologist
Ian M. London, P. Eng. Energy and Market Development Consultant
SGS Lakefield Research, Metallurgy & Mineralogy
Scott Wilson RPA Inc., Pre-Feasibility Study Independent Consultants
Kaz Machida, KAY Investment, REE Market Development Asia
McGill University, (Dr. A.E. Williams-Jones) Geological Research
EBA Engineering, Permitting and Environmental Consultants
FL Smidth, Engineering and Design, Flotation Plant
Xstrata Process Support, Metallurgical Testwork Support
5

Project Locations
NECHALACHO
Heavy Rare Earths
Tantalum
Niobium
Zirconium
Hafnium
Gallium
Avalon offers
diversified
exposure to a
broad range
of rare metals
NORTH T DEPOSIT
Beryllium
Light Rare Earths
Lithium
Gallium
Niobium
All projects 100% owned
6

Nechalacho REE Deposit at
Thor Lake: Key Facts
Positive pre-feasibility study completed in 2010. C$27 million
invested since 2005, incl. 59,000m of drilling in 266 holes
Bankable feasibility underway, fully financed, completion in 2012
Large resource amenable to low cost underground mining methods
Rich in heavy rare earths (20-28%), High grade subzones defined
Recovery process defined at bench scale. Pilot plant in progress
PFS Production model: 10,000 tpa TREO... Could be increased
By-product revenues from zirconium, niobium and tantalum (40%)
Environmental assessment and permitting
process in progress with First Nations support
Planning for N. American HREE separation plant
Production start-up in 2015
+C$1.0 billion estimated total capital cost
7

Comparison of Anticipated
Production for Major REE Deposits
REE OXIDE
Nechalacho Mt Weld Mountain Pass Nolans
Canada Australia USA Australia
(10,000 tpa) (11,000 tpa) (20,000 tpa) (20,000 tpa)
Europium Eu 49 48 24 80
Gadolinium Gd 371 107 34 200
Terbium Tb 54 8 - 16
Dysprosium Dy 271 13 - 66
Holmium Ho 48 - - -
Erbium Er 126 - - -
Thulium Tm 17 - - -
Ytterbium Yb 101 - - -
Yttrium Y 1,169 41 20 264
Lutetium Lu 14 - - -
Total Heavies 22.20% 1.98% 0.39% 3.13%
Lanthanum La 1,583 2,805 6,640 3,948
Cerium Ce 3,572 5,141 9,820 9,506
Praseodymium Pr 451 585 868 1,164
Neodymium Nd 1,783 2,035 2,400 4,240
Samarium Sm 391 250 160 474
Total Lights 77.80% 98.33% 99.44% 96.66%
8

Demand Growth to 2015
(Source Jacob Securities Jan. 2011)
9

Recent Developments in REE
Markets
China reduces export quotas by 35% for first half of 2011 compared to
first 6 months of 2010
Chinese REE exports to Japan curtailed in 2010 over territorial dispute
creating global security-of-supply concern
Increasing media coverage and commentary on REE supply/demand
issues stimulates surge in investor interest
REE prices as a group increased some 300% in 2010
Molycorp signs MOU with Sumitomo for $130 million debt / equity
financing, and enters magnet alloy joint venture with Hitachi Metals
Lynas and Sojitz Corporation announce Strategic Alliance to supply
Japanese market
Molycorp announces expansion plans to 40,000 tpa TREO and new
equity financing plans
10

Chinese Rare Earth exports from
1990 to 2011 (Estimate)
Gross volume versus value of exports from 1990 to 2011E
Gross Volume
Gross Value
Volume (000's tonnes)
70
60
50
40
30
20
10
1,600
1,400
1,200
1,000
800
600
400
200
Value (US$ millions)
0
1990 2000 2010
*Source: Research in China, China Research and Intelligence, Laurentian Bank Securities
0
11

Rare Earth Element Prices
Source: Metal-Pages.com, February 3, 2011
Prices are indicative and basis FOB China
Metal Oxide Principal Uses Price US$/kg
Light Rare Earths
Lanthanum Oxide 99% min Re-chargeable Batteries 61.00 – 63.00
Cerium Oxide 99% min Catalyst, glass, polishing 66.00 – 68.00
Praseodymium Oxide 99% min Magnets, glass colorant 102.00 – 105.00
Neodymium Oxide 99% min Magnets, lasers, glass 103.00 – 106.00
Samarium Oxide 99% min Magnets, lighting, lasers 60.00 – 62.00
Heavy Rare Earths
Europium Oxide 99% min TV colour phosphors: red 620.00 – 640.00
Terbium Oxide 99% min Phosphors: green, magnets 620.00 – 640.00
Dysprosium Oxide 99% min Magnets, lasers 360.00 – 370.00
Gadolinium Oxide 99%min Magnets, superconductors 67.00 – 70.00
Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 75.00 – 80.00
12

Dysprosium, Neodymium:
4 year FOB China price trends
Source: Metal-Pages.com
13

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
100 Kw generator
with neo magnets
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
14

Key Application of REE Magnets
in Wind Turbines
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
15

Niobium Production
Giant Araxa deposit in Brazil (CBMM) produces 80% of
world supply (150,000 tpy Nb2O5)
Nechalacho is now the 3 rd largest deposit in the world and
will produce 1,700 tpa Nb 2 O 5 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
16

Zirconium Production
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)
17

Thor Lake: Project Location
Flotation plant
at Thor lake,
shipping of
concentrate by
barge to
hydromet plant
at Pine Point.
Concentrates
shipped by rail
from Hay River
to Separation
Plant
18

Nechalacho REE Deposit:
Diamond Drill Hole
Location Map
North-South
Section
Tardiff Lakes Area
Airstrip
West Long Lake Area
19

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

Nechalacho Deposit: NI 43-101
Resources Updated Jan. 27, 2011
Tonnes
(millions)
%
TREO
%
HREO
%
HREO/TREO
% %
ZrO 2 Nb₂O₅
ppm
Ta 2 O 5
TREO
equiv
Basal 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
Upper 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
Total Inferred 226.88 1.30 0.19 14.33 2.61 0.36 278 1.71
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
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)
21

Basal Zone Indicated Resources at
Various NMR Cut-offs
updated Jan. 27, 2011
Undiluted grades
INDICATED
NMR CUTOFF
Tonnes
(Millions)
TREO
%
HREO/TREO
%
% %
ZrO 2 Nb₂O₅
ppm
Ta 2 O 5
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
≥$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
Notes
1.CIM definitions were followed for Indicated Resources. An exchange rate of 1.11 was used.
2. HREO (Heavy Rare Earth Oxides) is the total of: Y 2 0 3 , Eu 2 0 3 , Gd 2 0 3 , Tb 2 0 3 , Dy 2 0 3 , Ho 2 O 3 , Er 2 0 3 , Tm 2 0 3 , Yb 2 0 3 and
Lu 2 0 3. TREO (Total Rare Earth Oxides) is HREO plus: La 2 0 3 , Ce 2 0 3 , Pr 6 0 11 , Nd 2 0 3 and Sm 2 0 3
3. 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
4.Mineral Resources are estimated using price forecasts for 2014 for rare earth oxides prepared early in 2010. Some of
these prices are higher and some are lower than current prices. The prices used are the same as in the June 14, 2010
disclosure.
5. A cut-off NMR grade of $260 Can was used for the base case. NMR is defined as “Net Metal Return” or the gross in
situ value of all the payable rare metals in the ore.
6. ZrO 2 refers to Zirconium Oxide, Nb₂O₅ refers to Niobium Oxide, Ta₂O₅ refers to Tantalum Oxide, Ga2O3 refers to
Gallium Oxide.
7. TREO equivalent % is calculated using the weighted average value per kilogram of REE divided into the total NMR of
the rock taking into account metallurgical recoveries
22

Prefeasibility DCF Model:
Opportunity Analysis
Pre-Tax Analysis (in millions)
Optimization Initiative Action IRR NPV @ 8% NPV @ 10% NCF
Scott Wilson, RPA Cashflow Model Base Case 14% 428 246 2,091
Eliminate 3 year Production Ramp-Up Complete 20% 714 505 2,530
Utilize Increased Resources for
selective mining of high grade in first 5
years
In Progress 23% 866 643 2,759
Buy-out 3% NSR* In Progress 24% 927 695 2,893
Alternative Energy Initiatives In Progress 24% 943 709 2,930
Eliminate working capital in base case Complete 26% 987 754 2,930
BFS** Contingency at 10% In Progress 28% 1,048 812 2,999
OVERALL TOTAL All 28% 1,048 812 2,999
*NSR – Net Smelter Return
**BFS – Bankable Feasibility Study
23

Nechalacho REE Deposit
Conceptual Development Plan
Mine Portal
Vent
Barren Rock Dump
Long Lake
Tailings Pond
Underground Mining
Upper Zone
Basal Zone
Tailings Storage
Mining underground room & pillar/long-hole stoping
2,000 tonnes per day (tpd), (lower rate during start-up)
Flotation processing to produce mineral concentrate
Hydrometallurgical treatment of mineral con in plant south of GSL
Production of 10,000 tpa mixed REE oxides for separation elsewhere
Market capture less than 5% of est. 2014 TREO global demand
Operating Costs: $267/tonne inclusive mine, mill and hydromet
CAPEX estimate in PFS: $900 million
24

NECHALACHO METALLURGY
Metallurgical testing at SGS Minerals Lakefield
Under supervision of John Goode, P.Eng, Consulting Metallurgist
Flotation bench scale testing complete
Concentrate with REE, Nb, Ta, Zr at about 5X concentration
REE content approx. 10%, present recoveries: 80-85%
Gangue minerals (silicates, etc.) ~40% of concentrate
Mini-pilot flotation plant (4-5 tonnes) trial in progress at XPS
Hydrometallurgical flowsheet defined (90% TREO recovery)
“Cracking” of minerals complete
Separation procedure for REE, Zr, Nb, Ta designed
Mini-Pilot plant work to begin when flotation work complete
Feasibility Study Pilot Plant work on 30 tonne sample (H2 2011)
25

Planning for HREE Separation
Plant in North America
No large scale heavy REE separation capability outside China at
present. Customers want an outside China separation solution
Scoping Study by SNC Lavalin assuming S. Ontario location
CAPEX estimated at C$345 million (+/- 35%) for 25,000 tpa
HREE separation plant
Sized to accommodate additional supply from other producers
Delivered cost of reagents accounts for 90% of OPEX
Locate plant near sources of HCL and caustic soda
Review of potential sites in progress
Consider partnership opportunities
26

Schedule to Production in 2015
Thor Lake
Project Schedule
Aboriginal Engagement
Pre-feasibility Draft Document
Draft HydroMet Flowsheet
Final Pre-feasibility Report
Project Description Report
MVLWB Prescreening Process
MVEIRB EA Process
Ministerial Approval
MVLWB LUP/Water Licensing
Flotation Plant Pilot Testing
HydroMet Plant Pilot Testing
Bankable Feasibility
Final Designs & Financing
Project Construction &
2010 2011 2012 2013 2014 2015
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
Bankable Feasibility Study Budget
Sept. 1, 2010 to Aug 31. 2012= $40.5 million
Cost Estimate for Feasibility Study = $43 million
Project Start-up
Sales & Market Development
27

First Nations Community
Engagement & CSR
Community information
sessions and site visits
Aboriginal Training
First Aid, Driller Helper
Employment at site
40% Aboriginal
Business development
Major contractors with
Aboriginal ownership
Ice road haulage, airstrip
Wind power evaluation
Helped start a new core box
business with Deninu Kue
Signed MOU (Negotiation
Agreement) with YKDFN
28

Competitive Advantages with
other emerging REE producers
Relatively Advanced
5 years down a 10 year development timeline
Prefeasibility Study Completed
Allows company to enter into discussions with customers about off-take
Metallurgical Flowsheet Determined
No issues with contaminants and good recoveries confirmed (75%)
Significant By-product revenue indicated (Zr, Nb, Ta)
Heavy Rare Earth Enrichment Marketing Opportunity
No other advanced projects have all the heavies to offer
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”
29

REE COMPARABLES:
Market Capitalization
Normalized to TREO Resources
Company
Market cap
US$ Millions
Million tonnes
TREO*
US$/tonne
TREO
Molycorp $3,773 1.3950 $2,705
Stage
Production /
expansion
Lynas Corporation $3,213 1.1640 $2,760 Construction
Rare Element Resources $441 0.55 $803 Prefeasibility
Quest Rare Minerals $341 0.551 $619 Prefeasibility
Arafura $403 0.8400 $480 Feasibility
Avalon Rare Metals $519 4.298 $121 Feasibility
(Market data and FX as of January 26, 2011)
* Based on published information/reports
30

Some objectives for 2011
Update of Nechalacho PFS Economic Model by mid-year
Attracting a consumer or consumers as strategic partners and
entering into off-take agreements
Advancing feasibility study work especially pilot plant work and
planning for HREE separation plant
Concluding First Nations Participation Agreements
Expanding our investor audience internationally and in the Clean
Tech community (CSR Road Map 2011)
Increased Research Analyst coverage
Advance East Kemptville and Separation Rapids projects and
begin generating other new rare metals projects
31

18 Month Price Chart
China export policy
Media Coverage
China reduces export quotas
NYSE Amex Listing
CIBC Financings
Dines Letter
Resource expansion
and PFS news
32

Vision Statement
To be the leading integrated supplier of technology metals
and minerals for a more sustainable world.
Mission Statement
Maximize 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
responsible mineral production.
34

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 (+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)
35

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
36

Key Facts About Rare Earth
Elements or “REE” … 1
Widely dispersed, but rarely concentrated; only found as a
group, often with uranium & thorium. Deposits are not rare.
Typically concentrated in alkaline intrusive rocks
(carbonatites) or peralkaline granites (Thor Lake)
Many different ore minerals: bastnaesite, allanite, monazite.
xenotime, eudialyte, fergusonite, zircon
In most deposits, light rare earths “LREE” are far more
abundant than heavy rare earths “HREE”; LREE typically
comprise 98-99% of resource...HREE far more valuable
REE must be recovered as a group and sequentially
separated; HREE cannot be selectively extracted
37

Key Facts About REEs… 2
REEs are not commodities; Like industrial
minerals, requirements are customer specific
Expensive to recover... Hydrometallurgical
concentration and separation in large plants with
enormous capital requirements (+$1 billion)
There is no custom refining capacity outside China
Rare Earths enjoy several unique properties
making them indispensable to modern technology:
Magnetic, Optical, Catalytic, Chemical, Electrical,
Metallurgical and Nuclear
38

Each REE deposit has its own
unique, (constant) distribution
Avalon’s Nechalacho deposit is richer in HREE
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
Mt Pass
Molycorp
Baiyun Obo
Baotou
Mt Weld
Lynas
Nolans
Arafura
Nechalacho
Avalon
39

Comparison of Anticipated
Production for Major REE Deposits
(tpy)
REE OXIDE
Nechalacho Mt Weld Mountain Pass Nolans
Canada Australia USA Australia
(10,000 tpa) (11,000 tpa) (20,000 tpa) (20,000 tpa)
Europium Eu 49 48 24 80
Gadolinium Gd 371 107 34 200
Terbium Tb 54 8 - 16
Dysprosium Dy 271 13 - 66
Holmium Ho 48 - - -
Erbium Er 126 - - -
Thulium Tm 17 - - -
Ytterbium Yb 101 - - -
Yttrium Y 1,169 41 20 264
Lutetium Lu 14 - - -
Total Heavies 22.20% 1.98% 0.39% 3.13%
Lanthanum La 1,583 2,805 6,640 3,948
Cerium Ce 3,572 5,141 9,820 9,506
Praseodymium Pr 451 585 868 1,164
Neodymium Nd 1,783 2,035 2,400 4,240
Samarium Sm 391 250 160 474
Total Lights 77.80% 98.33% 99.44% 96.66%
40

China Dominates Global REE
Production
China currently produces
over 95% of global REE
supply
China now imposing export
quotas and tariffs on REE
New non-Chinese supply
sources needed to maintain
balance
Supplies of key HREE from
China (Y, Dy, Tb) will remain
tight with potential for a
complete export ban
Japan totally reliant on China
for supplies
Mountain Pass era
Yet, Chinese companies are actively
trying to acquire additional REE
resources around the world.
41

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
smuggled out of China
Estimated to be less than 15 years
of reserve life
This abandoned mine in Guyun Village in China
exhausted the local deposit of heavy rare-earth
elements in three years. Source: NY Times
42

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 and 43-101 resource estimate, community
engagement and begin metallurgical studies and work on PFS
2009: Definition drilling, hydrometallurgical testwork environment,
market studies $17.5 million financing (CIBC)
2010: Definition drilling, begin EIA process
June, 2010: Completion of Prefeasibility Study
Expenditures to date: over $27.0 million
43

Global REE Deposits Ranking
HREE-rich Nechalacho deposit now ranks as the second
largest REE deposit in the world, after Bayan Obo and the
third largest Niobium deposit in the world
Nechalacho has the highest proportion of the more
valuable HREE (over +20% in Basal Zone portion)
Deposit
% TREO
Contained
tonnes
TREO
%
HREO/
TREO
Contained
Tonnes
HREO
Bayan Obo, China 3.9% 56,900,000 2% 1,138,000
Nechalacho, Canada 1.5% 3,050,000 15% 457,000
Kvanefeld, Greenland 1.0% 2,150,000 14% 301,000
Mountain Pass, USA 9.2% 1,840,000 1% 18,400
44

Emerging REE Magnet
Applications
Tidal Power Generation Turbines
Being installed in Nova Scotia and B.C. in 2010
100 MW potential in Nova Scotia
Permanent Magnet Hydro Power Generators
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
45

City of Yellowknife
Population: Approx. 20,000
46

Zirconium Use in Dialysis
Zirconium Phosphate can be used
for home dialysis treatment.
The benefits of home dialysis:
No time-consuming trips to hospital
More frequent treatments possible,
to mimic natural kidney function.
More mobility possible for patients
Less costly for government
Individual consumption of ZrO2 equivalent
is 1lb per treatment, with 3 treatments per
week or potential demand of 7,000 tonnes
per year ZrO2 to treat 100,000 patients
Nechalacho will produce 18,000 tpy ZrO2
47

Estimated Total Project
Construction Capital Costs
Activity
Total Capital Cost
Estimates
(CAD $ 000’s)
Nechalacho Mine 99,607
Thor Lake Process Facility 173,165
HydroMetallurgical Plant 316,602
Primary Project Component Cost 589,374
Project Engineering, Procurement,
Construction and Management
80,657
Contingency @ 22% 144,503
Sustaining Capital 73,000
Reclamation & Miscellaneous 12,200
Total Project Capital Costs 899,734
Operating costs over the
18 year life of the project
are estimated to average
CAN $267 per tonne of
ore mined or $5.93 per
kilogram of product
Based on Diluted
Probable Mineral
Reserves of 12.0 million
tonnes of 1.71% TREO,
3.18% (ZrO₂), 0.42%
(Nb₂O₅) and 0.042%
(Ta₂O₅)
Probable Reserves will
increase with continued
drilling, also extending
the mine life.
48

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 consultant 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, ZrO₂ = $3.77, Nb₂O₅ = $45.00, Ta₂O₅ = $130.00
49

Nechalacho Geological Model
Evolving
Blachford Lake Peralkaline
Intrusive Complex, NWT
Biotite
Granodiorite
Grace Lake Granite
Two-
Mica
Granite
Caribou
Lake
Gabbro
Whiteman
Lake Quartz
Syenite
Leucoferrodiorite
Hearne Channel
and Mad Lake
Granites
Model Section
T-Zone
Thor Lake Syenite
Interpreted Geometry
in Cross Section
A unique example of a layered
Peralkaline intrusive complex,
with the upper, rare metal-rich
part of the system readily
accessible for mining.
50

Nechalacho Deposit
Basal Zone REE Mineralogy
Heavy REE Minerals
20μm
Fergusonite Y, HREE (Nb,Ta) O 4
Zircon Zr (HREE) SiO 4
Fergusonite
Zircon
REE distribution in fergusonite:
Light REE Minerals
Bastnaesite (LREE) F CO 3
Allanite (LREE,Ca,Y) 2 (Al,Fe) 3 (SiO 4 ) 4 OH
Synchisite Ca (LREE) (CO 3 ) 2 F
Monazite (LREE) PO 4
REE Y La Ce Pr Nd Sm Eu Gd Tb Dy Ho Er Tm Yb Lu
Oxide % 29.0 0.30 4.40 1.70 15.6 10.4 1.60 14.3 1.80 9.80 1.20 4.10 0.70 4.40 0.70
51

Nechalacho eudialyte pseudomorphs
now consisting of replacement
zircon & fergusonite compared with
primary Illimaussaq eudyalite
Hydrothermal alteration has performed the first stage the first stage of processing
Nechalacho HREE mineralization:
Eudialyte pseudomorph
Illimaussaq: Primary euhedral
Eudyalite (pink)
52