Avalon Rare Metals Project Update Sept. 2011

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Pierre Neatby, VP Sales & Marketing, provides project update at Metal Pages Rare Earth Conference, Beijing Sept. 2011

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Avalon Rare Metals Project Update Sept. 2011

  1. 1. Avalon Project Update Beijing September 16, 2011 Pierre NeatbyVice President Sales and Marketing
  2. 2. Safe Harbour StatementForward looking informationCertain statements contained in or incorporated by reference into thispresentation constitute forward-looking statements. Such statementsreflect the current views of Avalon Rare Metals Inc. with respect to futureevents and are subject to certain risks, uncertainties and assumptions.Many factors could cause the actual results, performance or achievementsof Avalon Rare Metals Inc. that may be expressed or implied by suchforward-looking statements to vary from those described herein shouldone or more of these risks or uncertainties materialize. Avalon Rare MetalsInc. does not intend, and does not assume any obligation, to update theseforward-looking statements. 2
  3. 3. Vision StatementTo be the leading integrated supplier of technology metalsand minerals for a more sustainable world.Mission StatementMaximize shareholder value by being the first to marketwith a new supply of heavy rare earths, by providingsuperior customer service and by being a leader in sociallyresponsible mineral production. 3
  4. 4. Capital StructureSeptember 5, 2011Canada - TSX: AVLUnited States – NYSE Amex: AVL Frankfurt- OU5Shares Outstanding 102,572,615Fully Diluted 113,048,970Market Capitalization US $462 million (S/O @ $4.50)Recent Price Range US $4.00 - $5.0052 Week High / Low US $10.11 – C $2.97Cash Reserves C $72 million (No debt)Insider Share Position 4 million shares (3.9%)Institutional holdings Hancock, Global X, Sentry, Van Eck, Diamondback(est. 30-40%) AGF, Encompass, Chilton, Highbridge, WellingtonEmployees 30 (including contract staff) 4
  5. 5. Project Locations NECHALACHO Heavy Rare Earths Tantalum Niobium Zirconium Hafnium Gallium NORTH T DEPOSIT Beryllium Light Rare EarthsAvalon offers Lithium Galliumdiversified Niobiumexposure to abroad rangeof rare metals All projects 100% owned 5
  6. 6. Canadian Properties BeingDeveloped for Rare Earths 2005 Thor Lake 6
  7. 7. 211 Canadian Properties BeingDeveloped for Rare Earths 2011 Thor Lake 7
  8. 8. Forecast for Global Demandand Supply in 2015 (+/- 20%) Demand Data source: IMCOA, (Dudley Excess / Shortage Supply (tonnes REO) Kingsnorth) February ,2011. (tonnes REO) Based on total REO demand of 185,000 tonnes and an adjusted supply of 198,500 tonnes. 8
  9. 9. Comparison of AnticipatedProduction for Major REE Deposits REE OXIDE Nechalacho Mt Weld Mountain Pass Avalon Lynas Molycorp (10,000 tpa) (11,000 tpa) (20,000 tpa)Europium Eu 49 48 24Gadolinium Gd 370 107 34Terbium Tb 64 8 -Dysprosium Dy 364 13 -Holmium Ho 69 - -Erbium Er 189 - -Thulium Tm 26 - -Ytterbium Yb 147 - -Yttrium Y 1,580 41 20Lutetium Lu 20 - - Total Heavies 28.75% 1.98% 0.39%Lanthanum La 1,463 2,805 6,640Cerium Ce 3,264 5,141 9,820Praseodymium Pr 407 585 868Neodymium Nd 1,623 2,035 2,400Samarium Sm 374 250 160 Total Lights 71.25% 98.33% 99.44% 9
  10. 10. Rare Earth Element Prices Metal Pages Avalon 2015Metal Oxide Principal Uses Prices Aug 16, Forecast 2011Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 129.00 – 131.00 11.00Cerium Oxide 99% min Catalyst, glass, polishing 119.00 – 121.00 16.00Praseodymium Oxide 99% min Magnets, glass colorant 247.00 – 250.00 81.00Neodymium Oxide 99% min Magnets, lasers, glass 335.00 – 340.00 90.00Samarium Oxide 99% min Magnets, lighting, lasers 127.00 – 130.00 8.00Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 5460.00 – 5480.00 1,086.10Terbium Oxide 99% min Phosphors: green, magnets 4200.00 – 4220.00 1,166.09Dysprosium Oxide 99% min Magnets, lasers 2380.00 – 2400.00 451.00Gadolinium Oxide 99%min Magnets, superconductors 200.00 – 205.00 46.00Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 180.00 – 185.00 28.00 10
  11. 11. Project Development phase(+ expected production level and capex)Source: Ernst & Young April 2011 11
  12. 12. Avalon Recent DevelopmentsCompleted Updated Pre-feasibility Study with improved economicsCompleted US$47.3 million equity financing at US$6.15/ shareCompleted mini-pilot plant trials of flotation processMOUs signed with 3 Asian companiesDefinition drilling continuing at rate of 4000 metres/ mo. with two rigs Over 30 tonnes collected for bulk sampleDevelopers assessment report filed with regulators for environmentalreview processMOU’s signed with all three First nations groups. Negotiations onAccomodation agreements proceeding steadily 12
  13. 13. Thor Lake: Project LocationFlotation plantat Thor lake,shipping ofconcentrate bybarge tohydromet plantat Pine Point.Concentratesshipped by railfrom Hay Riverto SeparationPlant 13
  14. 14. Nechalacho REE Deposit atThor Lake: Key Facts C$30 million invested since 2005, incl. 59,000m of drilling in 266 holes $46 million Bankable feasibility underway, funded, complete in 2012 Large resource amenable to low cost underground mining methods Rich in heavy rare earths (20-28%), High grade subzones defined Extractive process defined at bench scale. Pilot plants in progress Product marketing: 3 MOU’s signed with potential strategic partners By-product revenues from zirconium, niobium and tantalum Environmental assessment and permitting process in progress with First Nations support Planning for N. American HREE separation plant Start-up in 2015, sales in 2016 C$1.0-1.2 billion estimated total capital cost 14
  15. 15. Rare Earth Element Supply Chain REE REE Mining REE Milling HydrometallurgyFrom the ground to Grinding and Beneficiation Cracking the REE mineralscrushed ore of REE minerals to produce mixed REE oxides concentrate REE Products REE Refining REE SeparationPermanent magnets, To meet specificLED’s , consumer Separating and purifying downstream technology the individual REE oxideselectronics applications Avalon’s contributions to the REE supply chain... Three large plants with a total CAPEX of > $1billion 15
  16. 16. Tardiff Lakes AreaWest Long Lake Area 16
  17. 17. Nechalacho REE DepositConceptual Development PlanMine Portal Vent Barren Rock Dump Tailings Pond Long Lake Upper Zone Underground Mining Tailings Storage Basal Zone Mining underground room & pillar/long-hole stoping 2,000 tonnes per day (tpd), (lower rate during start-up) Flotation processing to produce mineral concentrate Hydrometallurgical treatment of mineral con in plant south of GSL Production of 10,000 tpa separated REE oxides Market capture less than 5% of est. 2015 TREO global demand 17
  18. 18. Metallurgical testwork progress Flotation 1. Benchscale – basically complete, optimization 2. Integrated flotation plants – three completed 3. Pilot plant (~30t) – planned November, 2011 Hydrometallurgy 1. Benchscale – cracking complete, solution chemistry in progress 2. Pilot – in progress Separation 1. Scoping complete (SNC Lavalin) 2. Prefeasibility in progress (SNC Lavalin) 3. Feasibility 18
  19. 19. Metallurgy Schedule 2008 2009 2010 2011 2012 FLOTATION Q3, Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 BENCHSCALE Open cycle Locked cycle Optimising process MINIPILOT FULLSCALE PILOT HYDROMETALLURGY BENCHSCALE Mineral breakdown (AB, CCr) Solution chemistry PILOT Mineral breakdown (AB, CCr) Solution chemistry SEPARATION Scoping Prefeasibility Feasibility Present time 19
  20. 20. 2011 Updated RPA Prefeasibility Study:Summary of Financial Analysis Original PFS Updated PFSFinancial Analysis After-Tax After-Tax Pre-Tax (CAD$) Pre-Tax (CAD$) (CAD$) (CAD$)Internal Rate of 14% 12% 39% 34%ReturnNet Cash Flow $2.1 billion $1.5 billion $6.08 billion $4.48 billionNet Present Value $428 million $236 million $2.22 billion $1.61 billion@ 8%Net Present Value $246 million $97 million $1.77 billion $1.27 billion@ 10% Based on Probable Mineral Reserves resources of 14,539,167 tonnes defined from January, 2011 updated resources ,including high-grade subzones. Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $46.33, ZrO₂ = $3.77, Nb₂O₅ = $55.86, Ta₂O₅ = $255.63 20 Mine Life. 1 year ramp-up to full 2,000 tpd production rate. 20
  21. 21. Environmental Concerns:Uranium & ThoriumAll Rare earth deposits contain some Uranium (U) and Thorium (Th) butthere are no other hazardous materials in the ore.Nechalacho U & Th content is exceptionally low averaging 23ppm U(background levels) and 114ppm Th (mildly elevated) in high grade oreLevels are safe for mining and processing activities and no water issuesdue to insolubilityTh is concentrated with the rare earths and does not go to mine tailingsLevels do not invoke additional permitting requirements from CanadianNuclear Safety Commission or special transport regulationsProposed Hydromet facility is on a brownfields mining site and will usehistoric open pits for waste disposal. Th will be diluted to safe levels 21
  22. 22. ThO2 content comparison invarious REE deposits Nechalacho 22
  23. 23. Competitive Advantages withother emerging REE producers Relatively Advanced: At Feasibility Study stage Allows company to enter into discussions with customers about off-take First Mover Advantage is Key First to market will capture available market share Only room for a handful of new producers “first come, first served” Metallurgical Flowsheet Determined Very low Uranium and Thorium Good recoveries confirmed (75%) Pilot plant test work underway Heavy Rare Earth Enrichment Marketing Opportunity No other advanced projects have all the heavies to offer by 2015-16 23
  24. 24. Schedule to Production in 2016Thor Lake 2010 2011 2012 2013 2014 2015 2016Project Schedule Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4Aboriginal EngagementFinal Pre-feasibility Report Bankable Feasibility Study BudgetFile Permit Applications Sept. 1, 2010 to Aug 31. 2012=Environmental Assessment $46 millionMinisterial ApprovalLand Use/Water permitsFlotation Pilot Plant TestingHydroMet Pilot Plant TestingBankable Feasibility StudyFinal Designs & FinancingProject ConstructionProject Start-upProduction & SalesMarket Development 24
  25. 25. Future Milestones and ValueDrivers for Avalon in 2011 Completion of flotation pilot plant work Completing definitive agreements with off- take/ strategic partners Defining the HREE separation plant location Finalizing Aboriginal Participation Agreements Updated resource estimates for 2011 drilling 25
  26. 26. What are Rare Earth Elements? Light REE: La = Lanthanum Ce = Cerium Pr = Praseodymium Nd = Neodymium Sm = Samarium Heavy REE: Eu = Europium Gd = Gadolinium Tb = Terbium Dy = Dysprosium Ho = Holmium Er = Erbium Tm = Thulium Yb = Ytterbium Lu = Lutetium Y = Yttrium Neodymium, Dysprosium, Terbium and Europium in highest demand 26
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