technical report on the nechalacho deposit, thor lake project ...

MARKETS
Avalon collected historical price information, supply/demand analysis, and forecasts for the
future. The sources of price information include the websites of Metal-Pages TM and Asian
Metal, <strong>report</strong>s by BCC Research (BCC) and Roskill, verbal communication with Kaz Machida, a
metal trader in the Japanese market and private <strong>report</strong>s to Avalon by Industrial Minerals
Company of Australia Pty Ltd (IMCOA), authored by Dudley Kingsnorth. A detailed presentation
of rare metal markets was included in the previous NI 43-101 <strong>report</strong> (Scott Wilson RPA, 2010)
and an introduction here discusses the changes that have occurred subsequent to that <strong>report</strong>.
PRICE FORECAST
In order to isolate the effect of the updated resource on the project economics, Avalon has
decided not to update the price forecast contained in its NI 43-101 Technical Report dated July
29, 2010. The spot price FOB China for each rare earth element, and the market prices for
niobium, tantalum and zirconium have increased significantly since July 2010 (see tables
below) and therefore Avalon can conservatively state that the price forecast contained in the
July 29, 2010 Technical Report remains valid. Avalon will update its price forecast for its
bankable feasibility <strong>report</strong> due in 2012.
Supply-demand fundamentals continue to support the price level forecasted in July 2010.
SINCE JULY 2010
Rare Earths
• China announced cut backs in export quotas for the first half of 2011 35% lower than the
same period in 2010.
• China is limiting the number of companies involved in the production of rare earths to
exercise more control and reduce illegal mining.
• China nationalized 11 rare earth mines in the South.
• China announced the formation of a rare earth exchange centre at Baotou, to regulate
prices in the marketplace by August 2011.
• China set tough emission limits on miners producing rare earths to be met by 2014
• The European Union declared rare earths, niobium and tantalum “critical raw materials”
• The US Department of Energy declared yttrium, neodymium, dysprosium, terbium and
europium “critical materials”
• Prices for rare earths have increased more than tenfold for elements such as lanthanum
and cerium, and on average six times for the others - see following table.
Technical Report 43-101 – March 13, 2011 Page 18-71
Prepared by Avalon Rare Metals Inc.