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Industry and Information Bulletins

Industry Bulletin: China Significantly Reduces its Export Quotas of Rare Earth Products for the Second Half of 2010

July 9, 2010

In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue this Industry Bulletin which reports on a recent announcement on China's decision to impose a further reduction of rare earth exports for the second half of 2010.

As reported by Metal-PagesTM on July 8, 2010 and updated on July 9, 2010, China has allocated export quotas for rare earths for the second half of 2010. The quotas for the remainder of 2010 total 7,976 tonnes, representing a sharp decrease of about 64.2% compared to the quotas of 22,282 tonnes for the first half of 2010, and also down about 72% from 28,417 tonnes for the second half of 2009.

China's Ministry of Commerce has also announced the export quotas for foreign enterprises, which usually lags about two months behind the quotas for Chinese companies. The total amount of 7,976 tonnes includes 1,768 tonnes for foreign enterprises, compared to 5,978 tonnes allocated for the first half of 2010.

(in tonnes)

2010
First half

2010
Second half

2010
Total

Local

16,304

6,208

22,512

Foreign

5,978

1,768

7,746

Total

22,282

7,976

30,258

China has been reducing the amount of rare earths that can be exported in each of the last three years, in order to conserve rare earth resources for domestic consumers. The Chinese government has implemented rare earth export quota management since 1998.

It has been reported that China's government has been considering and implementing a range of policies putting the government in control of private and unauthorized mines that produce rare earth minerals (especially from the heavy rare earth rich South China ionic clays), implementing stricter regulations towards improving environmental performance of its mining sector, and requiring foreign companies to move factories to China to complete production of items using rare earth.

It was reported in Summer 2009, that the Chinese government was also considering the outright ban of exports of specific heavy rare earths, for example dysprosium, terbium and yttrium (Avalon Industry Bulletin August 19, 2010: http://www.avalonraremetals.com/news_media/industry_info/index.php?&content_id=228), however today's policy announcement does not speak to this matter.

Avalon's heavy rare earth rich Nechalacho rare earth elements deposit at Thor Lake in the NWT, supported by the recently announced positive prefeasibility report (News Release of June 21, 2010: http://cnrp.marketwire.com/client/avalon_rare_metals/release.jsp?actionFor=1278796), is in a solid position to contribute to the growing need for the supply of rare earth products from outside China.

If you have any comments or questions on this article or the rare earths generally, please do not hesitate to
contact the company directly at ir@avalonraremetals.com.  Follow us on Twitter at
http://twitter.com/avalonraremetal, join our FaceBook page at http://www.facebook.com/pages/Avalon-Rare-Metals-Inc/224623996080?ref=ts or subscribe to our YouTube video feeds at
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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. Avalon is well funded, has no debt and its work programs are progressing steadily. Social responsibility and environmental stewardship are corporate cornerstones. Avalon's performance on community engagement in the north earned it the 2010 PDAC Environmental and Social Responsibility Award.