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Industry and Information Bulletins

Industry Bulletin: New developments in the global Rare Earth industry underline industry consolidation trend and supply chain concerns

April 23, 2009

In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue another Industry Bulletin discussing recent trends in the markets of various rare and strategic metals.  In this edition, we report on recent developments in the global Rare Earth Elements (REE) sector that underline a new trend toward industry consolidation and concerns about the adequacy of the supply chain to serve Green Technology boom in North America.   

Molycorp Signs Letter of Intent to Acquire Controlling Interest in Great Western Minerals Group: On April 20th, Molycorp Minerals (´Molycorp´) and Great Western Minerals Group (´GWMG´) announced that they have entered into a non-binding letter of intent wherein Molycorp would acquire a controlling interest in GMWG pursuant to a share issuance, merger, amalgamation, or other form of business combination to be negotiated by the end of July, 2009. The deal is currently outlined as a share exchange and loan arrangement.

Molycorp is a privately held, US-based mining company that produces and markets rare earth products. Molycorp owns, processes and markets rare earth materials from its rare earth operation at Mountain Pass, California, and maintains a joint venture with Sumitomo Metals, which markets rare earth products in Asia and produces permanent magnet materials in Japan.

GWMG (GWG:TSXV) is a Canadian-based junior exploration and development company with exploration-stage REE properties in North America and South Africa. GWGM also owns UK-based Less Common Metals Ltd. and US-based Great Western Technologies Inc., both of which produce specialty metal alloys for use in the battery, magnet and aerospace industries.

Molycorp, which was acquired by an investment group lead by Resource Capital Funds and Goldman Sachs from Chevron Mining last September (Industry Bulletin September 22, 2008), recently launched an initiative to become North America´s leading "rare earth and technology" company, and is a spearheading an effort to re-establish a reliable and secure supply chain of rare earth end-products for North American consumers. Clearly, the GWGM acquisition is a first step in that direction, which could allow Molycorp to become an integrated producer of rare earth materials and help re-build domestic supply chain capacity between rare earth mining and magnet production and recapture America´s position as a leading technology provider of rare earth materials.

If you would like to read the full announcement and anticipated arrangements, please click:
http://www.marketwire.com/press-release/Great-Western-Minerals-Group-Ltd-TSX-VENTURE-GWG-976986.html

Arafura Accepts Strategic investment from Chinese Company: Further to our Industry Bulletin of February 27, 2009, the financing agreement announced between Australian REE developer Arafura Resources and Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co. Ltd, a subsidiary of the East China Exploration & Development Bureau (ECE), has now closed following receipt of approval from the Australian Foreign Investment Review Board (´FIRA´). ECE have acquired a 25% interest in Arafura whose assets include the Nolans rare earths, phosphate, uranium and thorium deposit, as well as a range of gold, nickel and vanadium properties, for a $24 million equity investment.

The Australian Government is clearly indicating an openness to Chinese ownership of its natural resources. Several weeks early, the Australian government endorsed the sale of OZ Minerals, the world's second-largest zinc producer and Australia's third-largest diversified mining company to China's Minmetals, a  $1.2 billion deal designed to allow OZ to pay off all its debts and still have significant funds left over. The Australian government threatened to block the full takeover of OZ Minerals because of security issues surrounding the inclusion of the Prominent Hill mine in South Australia, but it was subsequently excluded from the deal, allowing it to proceed.

If you would like to read the full announcement and anticipated arrangements, please click:
http://www.miningaustralia.com.au/Article/NT-explorer-signs-over-25/477602.aspx

How Avalon´s Lake Zone deposit at Thor Lake in the Northwest Territories will factor into this global trend toward consolidation of REE production industry remains to be seen but, as its exceptional size and strong enrichment in the heavy rare earths becomes more apparent to the market, it will surely attract increasing attention from the major players both in North America and in Asia.

If you have any comments or questions on lithium or any of the other rare metals, please do not hesitate to post them on the www.raremetalblog.com  or feel free to contact the company directly at office@avalonraremetals.com