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Industry and Information Bulletins

Industry Bulletin: Rare Earths Prices Rising Rapidly

August 23, 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 rapidly rising prices for the full range of rare earth element oxides. These significant price increases are in most part attributable to China 's recent decision to impose a further reduction of rare earth export quotas, compounded by rising demand for these elements outside China as consumers scramble to secure supplies.

Based on data reported by Metal-PagesTM and Asian MetalTM prices for individual rare earth oxide have risen between 22% and 750% since January, 2010, although the most significant rises have occurred since the June announcement on export quota reductions. The largest percentage price increases have been for cerium and lanthanum, which most analysts believe is largely due to China's exporters limiting exports of the low valued light rare earths in favour of the high valued heavy rare earths, creating an artificial (and likely temporary) shortage of these light rare earths outside China. However, there is also increased demand anticipated in the catalyst and battery markets for cerium and lanthanum, the latter linked to growing demand for hybrid and electric cars.

With the exception of terbium, today's prices for all the rare earths are the highest they have been since 2001, when price data became more widely available for individual rare earth elements. Based on a simple, un-weighted, arithmetic average, rare earth prices as a group have risen a remarkable 300% since the beginning of 2010! This has no doubt contributed to the increased trading activity witnessed recently in the shares of rare earth companies such as Avalon.

China's Ministry of Commerce had also indicated that it would implement a range of policies putting the government in control of private and unauthorized mines that produce rare earth elements (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 earths.

The following table illustrates the change in prices for each of the most commonly traded rare element oxides based on data reported by Metal-PagesTM, and Asian MetalTM on an ‘USD FOB ex-China per kilogram' basis. For simplicity, the prices documented are the mid-points between the bid and the ask prices on the reference dates.

 

Rare Earth Oxide

As of Jan 5 2010

As of Aug 5 2010

% Increase

Heavy Rare Earths

Europium

485

590

22

Terbium

365

605

65

Dysprosium

117.25

286.50

144

Yttrium

10.25

34.50

236

Gadolinium

6.75

40.00

490

       

Light Rare Earths

Neodymium

22.50

55.25

145

Praseodymium

21.50

54.50

155

Lanthanum

5.60

33.50

500

Samarium

3.95

31.80

720

Cerium

4.15

33.00

695

There is general consensus that there will be growing demand for rare earths to enable Clean Technology and tight supplies (especially for the heavy rare earths) until new projects such as Nechalacho come on stream over the next five years. Consequently, significant prices increases are anticipated, although the magnitude of the recent increases has surprised many industry observers. In some cases, individual rare earth prices are already ahead of price forecasts for 2015!

With the recent completion of a positive prefeasibility study, Avalon is moving forward rapidly with the development of its Nechalacho rare earth elements deposit at Thor Lake, NWT, the most advanced potential new source of heavy rare earth elements in the world.

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

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 clean 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.   

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