Avalon Rare Metals Updates on Rare Earth Separation Plant Construction

Avalon Rare Metals Inc. (TSX:AVL)(OTCQX:AVARF) announces that further to the Company's news release dated August 18, 2010, SNC-Lavalin Inc. has delivered the scoping study commissioned by the Company to provide an initial estimate of costs for the construction of a new rare earth separation plant in North America.

The separation plant flow sheet was designed to produce separated oxides of both the light rare earths and heavy rare earths present in the ore from Avalon's Nechalacho deposit. A facility capable of separating individual heavy rare earths on a scale suitable for Avalon's needs is not presently available outside of China. As noted by the Company's Vice President, Sales and Marketing, Pierre Neatby, "Our prospective customers have indicated that they want Avalon to supply them with separated rare earth oxides, including the heavy rare earths, from a location outside China".

SNC-Lavalin has prepared a scoping study for a conceptual design of such a separation plant with an intended production capacity of 25,000 tonnes per annum ("t/a"). This plant capacity is intended to handle the presently contemplated production of 10,000 t/a from Nechalacho, any future Avalon production increases, and process material from other potential future producers, especially those producing chemical precipitates rich in the heavy rare earths. The estimated capital cost developed by SNC-Lavalin in the scoping study for such a separation plant is $346 million, with an intended level of accuracy of +/- 35%. It will be a very large facility, covering an area of some 5.2 acres (2.1 hectares). For the purpose of this study, a plant location in southern Ontario is assumed.

Key site selection criteria include proximity to transportation infrastructure, and proximity to suppliers of the principal reagents required which include hydrochloric acid and caustic soda. The delivered cost of these reagents accounts for most of the plant's total estimated operating cost. A number of possible sites meeting these criteria have been identified by Avalon and additional sites will be considered in other parts of the world. With the scoping study in hand, the Company is now in a position to discuss alternatives with potential development partners and will immediately begin the process of investigating possible locations for this plant.

Don Bubar, President and CEO of Avalon, stated: "The inclusion of a dedicated separation plant into our development model for the Nechalacho project will enable Avalon to supply its customers with quality separated rare earth oxides and ultimately position Avalon as a leader in the rare earth marketplace in both the light, and also the truly rare, heavy rare earths."

Rare earth elements are used in the production of many clean technology products such as hybrid and electric vehicles, wind turbines, and energy-efficient lighting and are also used extensively in the electronics industry. Primary supplies originate mainly from China and are increasingly constrained as Chinese internal demand starts to outstrip domestic supply. Recently, this has motivated the Chinese government to reduce the amount of separated rare earth oxides available for export to consumers outside China.


Avalon Rare Metals Inc.


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