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Industry and Information Bulletins

Industry Bulletin: End Users & Policy Makers Recognizing Strategic Importance of Rare Earths

December 7, 2009

In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue this Industry Bulletin in which we discuss recent trends in the markets of various strategic metals.  In this edition, we report on the accelerating interest among North American and international CleanTech companies and government policy makers in anticipation of the looming shortages in the supply of rare earth elements ("REE") and the need for reliable integrated supply chain solutions.

As our readers are well aware, thousands of electronics, aerospace, military, automotive and renewable energy technologies rely on a range of specialty metals for which there are often no substitutes. Industry experts are forecasting an overall shortage of rare metals, and more specifically REE by 2014, recognizing that several of the heavy REE, such as dysprosium, terbium and europium, are already in short supply.

In response to the growing concern and call to action, the resource and industrial sectors and government procurement and policy agencies convened a number of high profile conferences and summits the past several months to discuss strategic options and to develop plans to meet global economic demand in a socially responsible and sustainable manner. 

Infocast's three-part Critical and Strategic Metals Summit held in Washington DC in October attracted over 100 resource development, applications technology companies and US policy makers from the Departments of Commerce, Defense and Energy. This unique, 360-degree treatment of the challenges and opportunities included discussions on both supply and demand issues, and related policy questions. For example, the US National Defense Authorization Act for Fiscal Year 2010 contains language that now requires that the Federal government look at the role of rare earth materials in the US defense supply chain.

As Dudley Kingsnorth, the Australian-based REE expert noted "Chinese supply constraints are creating opportunities for non-Chinese projects." While in 2008 the world produced 124,000 tonnes total rare earth oxides ("TREO") (est. US$1.25 billion), Kingsnorth projects that some 200,000 tonnes will be demanded in 2014 (est. US$2.5 billion), with some 40,000 additional tonnes being needed from mines outside China. Furthermore, Kingsnorth noted that "Supply and demand for individual REEs are not in balance… with shortages primarily for the heavy rare earths."

Nicholas Curtis, Lynas Corporation's Executive Chairman, noted in his remarks at the 5th International Rare Earths conference in Hong Kong in November 2009, "Governments have now taken very strong policy positions on industries they want to stimulate, and many of those industries they want to stimulate are green industries. And those green industries require rare earths." As such, throughout 2009, the industry witnessed a flurry of announcements of potential new rare earth finds. Curtis aptly noted however that, "Shortages occur when supply as a function of time can no longer keep up with demand and as such the ultimate recoverable resource in the ground is irrelevant in this respect." Both Mr. Curtis and Mr. Kingsnorth reminded the audience that developing new rare earths deposit is a very capital-intensive business and at least a "5 to 10 year journey" to achieve commercial production with many challenges along the way that few of the new explorers fully appreciate.

Avalon's President & CEO Don Bubar also spoke at the Hong Kong conference providing a progress report on the development of Avalon's Nechalacho REE deposit. Considerable interest was expressed in the project by many of the delegates, which included a number of end-users of REE, due to its unusual enrichment in the heavy rare earths (which remain the primary future supply concern), the relatively advanced stage of Avalon's work programs and the company's strong financial condition. In a separate event organized by the Canadian Chamber of Commerce in Hong Kong, Mr. Bubar also presented Avalon's rare earths story to a group of interested local investors.

With the growing concerns around supply of heavy rare earths from end-users, particularly in the magnetics and phosphors applications, the issue of reliable heavy rare earths supply is now being placed front and centre at conference agendas, which have been traditionally focused solely on technology. Avalon, with its growing profile as a knowledgeable, corporately responsible emerging industry leader, has been invited to deliver presentations at Magnetics 2010 in Orlando in January 2010 and Phosphor Global Summit 2010 in San Diego in March.

If you have any comments or questions on 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.

 

About Avalon Rare Metals Inc. 
Avalon Rare Metals Inc. (TSX:AVL, OTCQX:AVARF) is a mineral exploration and development company focused on rare metals deposits in Canada. Its flagship project, the 100%-owned Nechalacho Deposit, Thor Lake, NWT, is emerging as one of the largest undeveloped rare earth elements resources in the world. Its exceptional enrichment in the more valuable 'heavy' rare earth elements, which are key to enabling advances in green energy technology and other growing high-tech applications, is one of the few potential sources of these critical elements outside of China, currently the source of 95% of world supply. The Company is well funded, has no debt and its work programs are progressing steadily. Social responsibility and environmental stewardship are corporate cornerstones.

To find out more about Avalon Rare Metals Inc., please visit our website at www.avalonraremetals.com.