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Industry Bulletin: Resource Investor Article - Avalon Ventures Poised To Capitalize On Shift To Green Economy

August 19, 2008

Dear Avalon Shareholders,

Rare earth elements are in demand for fuel-efficient hybrid and electric vehicles.

VANCOUVER ( -- Avalon Ventures Ltd. [AVL] is a Toronto-based junior mineral exploration and development company that's focused on the rare metals and minerals that are in increasing demand for high-tech and environmentally-friendly applications. Examples include lithium, beryllium, indium, gallium, rare earth elements (REE) such as neodymium and terbium and rare minerals such as calcium feldspar.

One of Avalon's properties shows promise of containing large amounts of REEs that are used in the manufacture of hybrid and electric vehicles that could help in the transition from a fossil-fuel economy to a "greener" one.

Analyst and investor John Kaiser is excited about Avalon's prospects and has been following the company in his newsletter, Kaiser Bottom-Fish Online.

"If I had to hang my hat on one stock, it would be this one," Kaiser told Resource Investor.

According to California-based Kaiser, "In many parts of California there is a waiting list for the Toyota Prius, and, in defiance of the law that a new car depreciates 20% the instant you drive it off the car lot, used 2007 Prius's are now selling at their new cost and sometimes higher. It is no longer the case that the world needs hybrid cars; it is now the case that the world wants hybrid cars."

Unfortunately for car makers in North America, Japan, Korea and Europe, almost all of the entire world supply of rare earth oxides is controlled by China.

"So," writes Kaiser, "if you are a car manufacturer... and you get it that consumers want a lot more hybrids than you are tooled up to produce, and scaling up your production capacity an order of magnitude puts you at the mercy of China and its agenda of being the manufacturing centre of the world because China controls the world's rare earth oxide supply, what do you do?"

Fortunately for car makers outside China, all of Avalon's projects are located in Canada.

Avalon owns five rare metals and minerals projects in Canada. The one that has caught Kaiser's attention is the Thor Lake project. The wholly-owned project is located in the Northwest Territories, about 5 km north of the Hearne Channel of Great Slave Lake and approximately 100 km southeast of the city of Yellowknife.

The Thor Lake property comprises five contiguous mining-leases totalling 10,449 acres (4,249 hectares). The leases have a 21-year term and each lease is renewable in 21-year increments.

Five zones of rare metal mineralization have been identified to date on the Thor Lake property as being of potential economic interest. Of these the North T and South T deposits are of greatest interest for beryllium, yttrium and REE recovery; the Lake Zone is of interest due to its yttrium-REE, tantalum, niobium and zirconium mineralization.

Rare metal mineralization was first discovered in the Thor Lake area in 1976.

Since then, over $12 million has been invested in exploration and development work on the property. This includes geological mapping, sampling, geophysical surveys and nearly 200 drill holes totalling some 13,000 metres.

In April 2005, Avalon purchased the property. Two months later, Avalon initiated a re-evaluation of the economic potential of the Thor Lake property, focusing primarily on the rare earth elements. REEs, such as yttrium, europium and neodymium, are now in much higher demand than they were previously. Neodymium and some heavy rare-earth elements (HREEs) are now used to make high-intensity "super-magnets." Demand for such magnets comes mainly from the automotive industry, where they have become an integral part of the electric motors and generators in fuel-efficient hybrid and electric cars. The magnets are also used in many modern electronics products, such as computer disk drives. Other new applications for these magnets, such as magnetic refrigeration, are in the offing.

In 2006-7, Wardrop Engineering carried out a Preliminary Economic Assessment to model potential development scenarios for the Lake Zone REE deposit and confirm the economic potential of the REE resource.

Highlights of the assessment were the confirmation of rapidly growing demand for REEs and confirmation that the Thor Lake REE project can achieve acceptable returns on invested capital and therefore warrants further investment to advance the project to a pre-feasibility or feasibility stage.

A Phase One drilling program to begin testing the area located immediately south of Thor Lake was carried out in 2007. The assay results from 7 of 13 completed holes received to January 8, 2008 confirmed the presence of several 4-23-metre-wide intervals of relatively high-grade REE mineralization within a broad mineralized envelope averaging over 100 metres in thickness.

A $5.0 million work program is under way in the Lake Zone in 2008. The program involves approximately 8,000 to 10,000 metres of drilling, with an estimated 50-60 holes, to test the northern part of the Lake Zone and carry out detailed in-fill drilling. This in order to define an indicated resource of sufficient size and quality on which to base a pre-feasibility-level analysis of the project.

It is anticipated that this work will completed by fall 2008, allowing for the pre-feasibility study to be completed by yearend 2008 or early 2009. If the results are positive, the next steps are a bulk sampling program in 2009 and completion of a final feasibility study in 2010.

In July 2008, Avalon announced the assay results from the remaining 12 holes from the Phase Two, winter-drilling program on the Lake Zone REE deposit.

Highlights from the results were from Holes L08-97 and L08-98 located in a previously untested area in the southern part of the deposit. These two holes produced some of the broadest intervals of the more valuable HREEs, consisting of europium through lutetium plus yttrium-enriched mineralization yet discovered in the Lake Zone deposit.

Hole L08-98 intersected 48.0 metres averaging 1.57 percent TREO (Total Rare Earth Oxides) with 21.5% HREE (oxide form), including 14.00 metres averaging 2.03% TREO with 28.6% HREE.

The complete mineralized interval from 4.10 to 159.0 m in this hole assayed 0.99% TREO, averaging 16.4% HREE over the entire 154.90-metre mineralized core length.

Hole L08-97 intersected 20.0 metre of 2.02% TREO in the Basal Zone containing 21.2 percent HREE including 10.00 metre of 2.77% TREO with 22.5% HREE. According to Avalon, the intervals are believed to approximate true thicknesses.