Rare Earth El R E th Elements, t Corporate and Project Information I f ti

…advancing green technology
May 2010

Safe Harbour Statement
Forward looking information
Certain statements contained in or incorporated by reference into this presentation constitute forward-looking statements. Such statements reflect the current views of Avalon Rare Metals Inc with respect to future Inc. events and are subject to certain risks, uncertainties and assumptions. Many factors could cause the actual results, performance or achievements of Avalon Rare Metals Inc. that may be expressed or implied by such y p p y forward-looking statements to vary from those described herein should one or more of these risks or uncertainties materialize. Avalon Rare Metals Inc. does not intend, and does not assume any obligation, to update these forward-looking statements.

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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 = Y bi Ytterbium Lu = Lutetium Y = Yttrium

Neodymium, Dysprosium, Neodymium Dysprosium Terbium and Europium in highest demand
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REE Economics: A Question of Balance Between Q “Heavies” and “Lights”
Only occur altogether as a group and recovered as a group & must be sequentially separated at additional cost In most deposits, the balance is tipped toward the light rare earths (“LREE”) which comprise 9 99% of resource (“ ) 97-99% f Deposits having an unusual balance with a high proportion of heavy rare earths (“HREE”) are very rare ( ) y Consequently, HREE are much more valuable
US$470.00/kg for europium vs. US$4.00/kg for cerium

Basal Zone of Nechalacho deposit is exceptional among hard rock REE deposits for it’s high proportion of HREE (>20%)
Implies a high value ore and higher operating margins p g g p g g

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Rare Metals: Key to the Green Energy Economy Rare earth elements (“REE”) such as Neodymium. & other rare metals such as Lithium. Tantalum. Zirconium Creating new materials such as thin films (solar) and high strength magnets. light weight alloys Hybrid and electric cars (30 kg REE) …advancing green technology 6 . the key to energy-efficient electric motors Renewable energy: solar power and wind turbines LED lighting. Indium. rechargeable batteries. Gallium. Terbium and Dysprosium.

Tb. Eu. Y Eu Tb enable light to match brightness and color with substantially less energy usage …advancing green technology 7 . Tb Nd. green and red REE Required Nd. Tb Y. Dy. Gd. Electric and Plug-in Cars Wind and tidal power generation Flat screen displays and monitors LED lights Rare Earth Technology T h l REE permanent magnets REE permanent magnets REE phosphors create the colors blue. Eu. Pr. Pr.Main Green Energy Economy Applications of Rare Earth pp Elements Application Hybrid. Ce REE phosphors Y. Pr. Dy.

6-1.0 tonne/MW) MRI machines (1-3 tonnes) with neo magnets Use of REE magnets in air conditioners can reduce power p y p consumption by 50% with same performance HREE dysprosium is key to making “heat resistant” magnets vital to automotive and other applications …advancing green technology 8 .Key Application of REE: Magnets for Electric Motors REE (Neo) Magnets reduce electric motor/generator size and weight. improve efficiency 100 Kw generator Major new applications include: Industrial air conditioners (500 kg) Hybrid-electric cars (1-3 kg) Wind turbines (0.

Emerging REE Magnet Applications Tidal Power Generation Turbines Being installed in Nova Scotia and B.000 Magnetic Refrigeration Uses alloys of g y gadolinium magneto-caloric effect g Commercialization within 1-2 years …advancing green technology 9 . 20 million EB sold in China in 2009 Sales forecast to grow 30 million EB pa = 9 000 tpa Nd magnets 9.C. in 2010 100 MW potential in Nova Scotia Run-of-River Run of River PMG hydro power generation A 4MW generator contains 1 tonne of Nd magnets Electric Bicycles ( ) y (EB) 300-350 g Nd Magnets per EB.

Dy. Why? 10 . USA era Yet.China Dominates Global REE Production China currently produces over 95% of global REE supply China now imposing export g quotas and tariffs on REE New non-Chinese supply sources needed to maintain balance Supplies of key HREE from China (Y. Tb) will remain ( . ) tight with potential for a complete export ban Japan totally reliant on China p y for supplies …advancing green technology Mountain Pass. Chinese companies are actively trying to acquire additional REE resources around the world. y.

000 De m and tpa ‐ REO O 150. assuming 10% per annum g growth rate in p demand from existing technology only China Supply ROW Supply Adjusted Global Demand China Demand Does not factor in demand from new technology Estimated that 25% of all new t h l i rely on REE technologies l 11 ROW = rest of world supply (yet to come on st ea ) stream) TREO = Total Rare Earth Oxides O ota a e a t O des …advancing green technology .000 50.000 100.000 tonnes TREO valued at US$1.Global Rare Earths Market IMCOA 2009 updated market forecast 250.000 0 2 00 4 2 00 5 2 00 6 2 00 7 2 00 8 9f 01 0f 01 1f 01 2f 01 3f 01 4f 2 2 2 2 2 2 00 Global demand in 2008 124.000 200.000 tonnes TREO valued at US$2-3 billion.25 billion Forecast demand in 2014 200.

00 190.00 – 535.Rare Earth Element Prices Source: Metal-Pages. glass Magnets.60 4. lighting.50 – 31. ceramics.40 – 7. polishing Magnets.00 – 200. lasers. 2010 Prices are indicative and basis FOB China Metal Oxide Light Rare Earths Lanthanum Oxide 99% min Cerium Oxide 99% min Praseodymium Oxide 99% min Neodymium Oxide 99% min Samarium Oxide 99% min Heavy Rare Earths Europium Oxide 99% min Terbium Oxide 99% min Dysprosium Oxide 99% min Gadolinium Oxide 99%min Yttrium Oxide 99.com.20 30.00 12 . lasers Price US$/kg 6.75 515. lasers Magnets.90 11.50 30.00 – 600.00 7.999% min …advancing green technology Principal Uses Re-chargeable Batteries Catalyst. glass colourant Magnets.70 – 5. superconductors Phosphors.25 – 4.00 – 30.00 4.30 – 6. magnets Magnets. May 7.00 – 12. lasers TV colour phosphors: red Phosphors: green.00 560. glass.

Price Trends: Dysprosium & Terbium Oxide Source: Metal Pages com May 7 2010 Metal-Pages.com 7. Dy Current Price: US$195/kg Tb Current Price: US$580/kg …advancing green technology 13 .

com May 7. 2010 g y La Current Price: US$6.Price Trends: Lanthanum & Neodymium Oxide Source: Metal-Pages.50/kg US$6 50/kg Nd Current Price: US$30.50/kg …advancing green technology 14 .

V) physical strategic commodities” notably heavy rare earths Some 200 new REE junior exploration plays worldwide …advancing green technology 15 .5million Goldman Sachs sells its stake in Molycorp (Mountain Pass Mine). Molycorp announces $350 million IPO in 2010 RESTART Act tabled in Washington designed to re-establish a domestic REE supply chain Dacha Capital (DAC V) raises C$23 million to invest in “physical (DAC. A$19.Recent Developments in REE Markets Lynas Corporation (Mount Weld) secures A$450 million equity financing after China NFM deal blocked by FIRB Arafura Resources (Nolans) sells 25% stake in 2009 to East China Expl for A$23million and raises A$19 5million in 2010 Expl.

Be) How advanced is the project? Long time line to production: at least 10 years from exploration to production “First mover advantage” for more advanced projects REE market is not yet big enough to support dozens of new producers …advancing green technology 16 . not all amenable to REE recovery Some are high in REE (bastnaesite). Th. U.REE Investment Criteria Heavy rare earth enrichment is key Light Li ht rare earth d th deposits are not rare at all and need to be exceptional grade to it t t ll d dt b ti l d t compete with existing and emerging light rare earth sources Only heavy rare earths are truly supply-challenged Resource size is not a critical factor in valuation (many are large) REE Mineralogy/Metallurgy is very important Many REE-bearing minerals. some low (apatite) Presence of contaminants an important consideration (eg.

AVALON RARE METALS INC. …advancing green technology 17 .

Project Locations j NECHALACHO Heavy Rare Earths Tantalum Niobium Zirconium Hafnium Gallium NORTH T DEPOSIT Beryllium Light Rare Earths Lithium Gallium Niobium Avalon offers diversified exposure to a broad range of rare metals f l All projects 100% owned j …advancing green technology 18 .

Avalon’s Competitive Advantages: Nechalacho Basal Zone has exceptionally high p p p y g proportion of heavy y rare earths ( >20%) Implies a high value ore and higher operating margins Viable metallurgical process defined Valuable by-products (zirconium. gallium) Low thorium. no significant contaminants Relatively advanced compared to new entrants Already 5 years along the “10 year journey” Well-financed ($14 million). technical experts …advancing green technology 19 . no debt Experienced management. niobium.

170 87 708 170 C $201 million (S/O @ $2.TSX: AVL United States .90 C $4.4 million shares (4.708. TDAM.55) C $2..0 million 3. Fuchs Glbl C $42 2 million (Feb 28.3%) ( ) CPP. Excalibur.OTCQX: AVARF Shares Outstanding Fully Diluted Market Capitalization Recent Price Range 52 Week High / Low Cash Reserves Insider Share Position Institutional holdings (25%) Balance Sheet Assets …advancing green technology SEC 12g3-2(b) # 82-4427 78.670 87. MFC Global. Cantara.24 . NatCan. Front St. Seamans.55 C $14.$0.2 28 20 . 2010 7 Canada .$2.990.Capital Structure as at May 7. Faircourt. 2010) $42.20 .

One Year Price Chart (TSX) ( ) CNBC / NY Times CIBC Financing Prospectus cleared The Dines Letter …advancing green technology 21 .

V.A.A..B. MacEachen. Bubar.Eng..P. CPA. Investor Relations Directors Alan Ferry. LL. Operations Charlotte May. B..D. Audit Committee Ch i A dit C itt Chair Hari Panday. Corporate Secretary Cindy Hu. Min. CFA Non-Executive Chairman Brian D. M. Gerald Prosalendis...A.A. V. C. B.B. B.S. V.A. CGA. Ph. C. Chair Governance/Compensation ctte Phil Fontaine. Community Relations Joe Monteith. P.Geo.P. CA.D. Business development …advancing green technology 22 . Peter McCarter. Exploration David Swisher.Management. P.A..Eng. Controller Virginia Morgan. Finance & CFO Bill Mercer. CEO & Director Jim Andersen. Communications David Connelly.Com.P. B. President. Strategic Advisors F. P.A. C. Dale Corman. Manager.P. LL. C.. Directors & Strategic Advisors Management Donald S.Geo.


in …advancing green technology 24 . Current access is flyin.Thor Lake: Project Location j Proximity to y Great Slave Lake provides access to railhead at Hay River by barge in summer and ice road in winter.

rare metal-rich part of the system readily accessible f mining. ibl for i i 25 …advancing green technology . NWT Biotite Granodiorite Grace Lake Granite Whiteman Lake Quartz Syenite T-Zone Interpreted Geometry I dG in Cross Section Thor Lake Syenite Model TwoMica Granite Leucoferrodiorite Caribou Lake Hearne Channel Gabbro and Mad Lake Granites Section A unique example of a l i l f layered d Peralkaline intrusive complex. with the upper.Nechalacho Geological Model Evolving Blachford Lake Peralkaline Intrusive Complex.

640 metres. and 43-101 resource estimate. environmental and market studies & $17 5 million financing $17.398 t i holes 2010-11: Pilot plant work Expenditures to date total over $20.000 in shares Recognized heavy rare earth potential 2007: Scoping study. 70 holes. MOU with First Nations. begin env. drilling & $16 million financing 2008: Delineation drilling programs 16 640 metres 85 holes 16. project engineering Winter Wi t 2010 d illi drilling: 11 398 metres in 43 h l 11. expln.0 million …advancing green technology 26 .5 2010: Pre-feasibility study.Nechalacho REE Deposit: Development Progress 2005: Acquisition of property for $300. metallurgical.575 metres. community engagement 2009: Definition drilling 14. impact assessment.

Nechalacho REE Deposit: Drill Hole Location Map N-S Section line North Tardiff Zone E-W Section Line c Key Area 156 …advancing green technology 27 .

90% TREO with 32.88% TREO with 20.Nechalacho REE Depsoit p N-S Composite Section (looking west) Area of Indicated resources Upper LREE Z U Zone 170m 1590m Hole 154: 1.5% HREO over 20. TREO 20% HREE Hole 70: 1.0 metres Drill Hole with Basal Zone Intercept 28 …advancing green technology .6% HREO over 6.0 metres Basal HREE Zone Averages 30 m thick. 2% TREO.

205 .Nechalacho REE Deposit p E-W Composite Section p (looking north. 20% HREE 1500m Hole 206: 1. 63 62 114 113 53 97 56A 80-12 118 Upper LREE Zone 250m Basal HREE Zone Averages 30 m thick. 2% TREO.2 t …advancing green technology Drill Hole with Basal Zone Intercept 29 .90% TREO with 30% HREO over 14 2 metres 14. 206 131. no vertical exaggeration) 132.

0m @ 1.2% …advancing green technology -160 -155 -158 -142 142 -154 -153 30 . area of existing Indicated Mineral Resources -161 -143 -207 -159 -157 -176 -175 Hole L09-207 intersected 43.Basal Zone Drilling Program Main Target Areas N -206 Basal Zone Break N-S Section New target area -208 -162 Approx.89% 1 89% TREO with 27 2% HREO 27.

HREO = heavy rare earth oxides (europium to lutetium + yttrium) …advancing green technology 31 .60% TREO Cut-off Grade Jan. Good continuity confirmed in Basal Zone.96 % HREO 0. 2010 Zo ne Basal Zone Upper Zone Basal Zone T o ta l Millio ns to nne s 9.00 22. Indicated Mineral R I di t d Mi l Resources updated b H d t C d t d by Hudgtec Consultants f lt t from original estimate b W d i i l ti t by Wardrop Engineering Ltd (A Tetratech Company) and subject to final audit for PFS Defining Indicated Resources is a function of drill hole spacing being reduced to average of 50 metres.43 0.00 % T REO 1.86 2.94 1.40 0.31 H R E O/ T R E O 23% 8% 21% 16% IN D ICA T E D MIN E R A L R E S OU R CE S IN FE R R E D MIN E R A L R E S OU R CE S Sufficient Indicated to support PFS.44 37.00 1. 14.Nechalacho REE Deposit Mineral Resources @ 1.16 0.56 60. TREO = total rare earth oxides.

Nechalacho Aeromagnetics Associated anomaly indicates potential extensions to REE deposit in subsurface 1km 1k Nechalacho deposit: Known exposed extent …advancing green technology 32 .

South Basal Zone Geometry y The Basal Zone is deeper to the south under Long Lake where higher HREE grades are found …advancing green technology 33 .

Basal Zone Geometry and Ore Blocks with >0 5% HREO >0.5% Clear correlation of high HREE grades with deeper parts of Basal Zone and this area is open to the south under cover rocks …advancing green technology 34 .S.

500 tpy TREO in chemical concentrate over first 10 years Mixed REE carbonates shipped to third party for separation Market capture 6. 16% of HREO Operating C O i Costs: up to $250/ $250/tonne i l i mine.Nechalacho REE Deposit Conceptual Development Plan Mine Portal Barren Rock D mp Dump Long Lake Upper Zone Tailings Pond Vent Underground Mining g g Tailings Storage Basal Zone Mining underground room & pillar/long-hole stoping pillar/long hole 1. 2014 TREO demand ).000 tonnes per day (tpd). mill & h d inclusive i ill hydromet …advancing green technology 35 .5% (est.000 tpd by year 4 Flotation processing to produce mineral concentrate (80% recovery) Hydrometallurgical treatment of mineral con in plant south of GSL y g p Average of 12. ramping to 2.

second mainly HREE) Zircon Zi Fergusonite REE distribution in fergusonite: REE Oxide % Y 29.30 Ce 4.4 Separation of REE oxides (Asia?) Eu 1.10 Tm 0.Basal Zone HREE Mineralization in Zircon and Fergusonite: g Metallurgical Recovery Process 20μm 82-85% REE Recovery in on-site plant Fine-grinding (40 micron) Froth Flotation Hydrometallurgical plant l H d t ll i l l t located off-site t d ff it Caustic cracking of REE con followed by acid leaching (HCl or H2SO4) will put 90% of REE plus Zr and Nb into solution Solvent extraction then precipitation of two mixed REE carbonates (one mainly LREE.60 Gd 14.70 Yb 4.70 …advancing green technology 36 .80 Dy 9.3 Tb 1.80 Ho 1.40 Pr 1.6 Sm 10.20 Er 4.70 Nd 15.40 Lu 0.0 La 0.

Confirmation testing in progress with Xstrata Process Control Hydrometallurgical Testwork Ongoing Caustic cracking with N OH f ll C ti ki ith NaOH followed by leaching mainly with H2SO4 db l hi i l ith Excellent progress to deliver four to six products: HREE mixed carbonate LREE mixed carbonate Niobium Pentoxide & Zirconium Oxychloride by-products Gallium and tantalum (possibly) 2010 Plans Utilize existing 5 MT of core stored in Yellowknife Mini-pilot plant at Xstrata facility to produce 600 kg concentrate HydroMet pilot run using 20 kg per day for 30 days …advancing green technology 37 .Metallurgical Progress g g Mine Site Flotation Process Testwork Complete Flowsheet Developed optimization continuing Developed.

000 tonnes of total rare earth oxides per th id annum 2014 Demand forecast after Kingsnorth.6% Heavies +Y …advancing green technology 38 . 2009 49. 2014 Demand Forecast Nechalacho 2014 production forecast at 5.TREO Production Forecast vs.000 or 10.4% 49 4% La + Ce 25% Nd+Pr+Sm 25.

2014 Demand Forecast …advancing green technology 39 .TREO Production Forecast vs.

60 Nolans Arafura $14.REE Distribution in the Basal Zone Ore Compared with Other p REE Deposits & Avg.10 Value US$/kg Heavy rare earths Light rare earths Samarium Neodymium Praseodymium Cerium Lanthanum …advancing green technology 40 .90 Baiyun Obo Baotou $11.40 Mt Weld Lynas $13.20 Nechalacho Avalon $22. Value/kg 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Mt Pass Molycorp $9.

3690 0.38 $103.8400 1.3950 1.34 $ $149.29 Stage Production / expansion Construction Exploration Prefeasibility y Feasibility Prefeasibility y Feasibility * Molycorp Market Cap assumed at $1B as per by KBFO Express 10 03 30 ** G t W t Great Western M k t cap i l d T h l i assets Market includes Technologies t *** Alkane market cap includes gold assets …advancing green technology 41 .76 $298.1640 0.34 $351.000?? $757 $130 $40 $154 $ $201 $68 Million tonnes TREO 1.3455 0.6570 CAD$/tonne TREO $716.1344 0.85 $650.51 $183.REE COMPARABLES: Market Capitalization p Normalized to TREO Resources Company Molycorp* y Lynas Corporation Rare Element Resources Great Western Minerals** Arafura Avalon Rare Metals Alkane*** Market cap CAD$ Millions $1.

Schedule to Production in 2014 Capital Costs at +$400 million Thor Lake Project S h d l P j t Schedule Aboriginal Engagement Pre-feasibility Draft Document Draft HydroMet Flowsheet Final Pre-feasibility Report Project Description Report MVLWB Prescreening Process MVEIRB EA Process Ministerial Approval MVLWB LUP/Water Licensing Bankable Feasibility Final Designs & Financing Project Construction Project Start-up Sales & Market Development S 2010 Q1 Q2 Q3 Q4 Q1 2011 Q2 Q3 Q4 Q1 2012 Q2 Q3 Q4 Q1 2013 Q2 Q3 Q4 Q1 2014 Q2 Q3 Q4 Q1 2015 Q2 Q3 Q4 …advancing green technology 42 .

$400 million +/. Avalon will generate a project description report t submit t th M k d i ti t to b it to the Mackenzie V ll L d and i Valley Land d Water Board (MVLWB) for a Type A Land Use Permit (LUP) & Type A Water License 45 day pre-screening process 2.0 year MVLWB process to finalize LUP & Water License and determine conditions for each Posting Environmental Bond Begin Construction.10-15% g p …advancing green technology 43 .0 year Environmental Assessment (EA) Process conducted by the Mackenzie Valley Environmental Impact Review Board 3 to 6 month Federal Ministerial review & approval 1. Capital cost est.Permitting Process g Upon completion of PFS.

A Leader in Environmental & Social Responsibility: Winner of p y PDAC’s 2010 e3 Plus Award Naming ceremony Community meetings and site visits First Nations training March 2010 PDAC Awards Ceremony Accepting award from Jon Baird. PDAC President Employment at site p y 40% aboriginal Business development Wind power evaluation with YKDFN …advancing green technology Sept 2009 naming ceremony Chiefs Ed Sangris and Ted Tsetta with Don Bubar 44 .

. P.Geo.. P. …advancing green technology 45 . Rare Metals Geologist Chris Pedersen. Martineau Dumoulin. Williams-Jones) Geological Research Fasken. Rare Metals Geologist Bruce Hudgins.Thor Lake Project Consultants j David Trueman. Pre-Feasibility Study Independent Consultants Ian M. P. P. P. Energy and Market Development Consultant g gy p Jacques Whitford Stantec.Eng.D. Metallurgical Consultant SGS Lakefield Research. Investment. Permitting.Geo. Asia Machida. Ph. (Dr. Market Development Kaz Machida KAY Investment REE Market Dev. Aboriginal Law CIBC World Markets Investment Bankers Markets.Geo. Metallurgy & Mineralogy Scott Wilson RPA Inc. London.E. Environmental Studies Pierre Neatby. Dev McGill University. A. Resource database management John Goode. Eng.

Metallurgist Paul Schmidt. Operations …advancing green technology 46 . P. Metallurgist and H&S expert Chair: Bill Mercer.Eng. Eng.Eng. P. Health and Safety Chief Glenn Nolan. P.Eng. Mine development Les Heymann P Eng Heymann. VP. P.P. Biologist Denis Kemp P Eng Kemp. Metallurgist and REE specialist Chair: David Swisher. Missanabie Cree First Nation Jean Cinq-Mars.Advisory Committees y Community. Environment. Exploration Mining and Metallurgy Denis Kemp.. V.

OTHER PROJECTS …advancing green technology 47 .

Lithium p p Separation Rapids is a large NI 43-101 compliant p p g p lithium resource defined. that is permitted to start production once a market is established and development partnerships are finalized 2010 Plans Continue lithium product marketing Consider strategic options to take advantage of investor interest i li hi i in lithium related to rechargeable b l d h bl battery demand growth …advancing green technology 48 .Separation Rapids .

000 regional exploration program in progress Drilling of three high priority targets commenced in January …advancing green technology 49 .000 New resource block model developed from historical data Metallurgical testing completed 90% recoveries of tin achievable using new technology Attractive economics at current tin prices Potential for tin recoveries from old tailings 2010 Plans Negotiate site access for confirmation drilling & tailings sampling Complete PEA and attempt to secure surface rights $500.East Kemptville Tin-Indium p Preliminary Economic Assessment in progress Expenditures in 2009: $318.

Tin and indium are used as an alloy in flat-screen display panels.00/lb. Indium is alloyed with gallium in CIGS (Copper Indium Gallium Selenide) solar panels Prices for tin quoted on the London Metal Exchange at over US$8.00/lb Kemptville ceased operations in 1992 Indium (99. Europe. China and California have all recently passed laws requiring the use of lead free solders in lead-free electronics.Tin-Indium Market Demand Growing demand for tin and indium from consumer electronics industries Tin is increasingly being used to replace lead in solders due to lead toxicity issues. US$8 00/lb compared to less than US$2 00/lb when East US$2.99% purity) is currently trading at prices in excess of US$500/kg in China …advancing green technology 50 .

11% Sn + Zn&Cu Main and Baby Zone …advancing green technology 51 .East Kemptville Regional Targets .Magnetics Duck Pond Deposit ~9mt @ 0.

W.com i@ l t l …advancing green technology 52 . ON Canada M5H 3P5 T: (416) 364 4938 ۰ F: (416) 364 5162 364-4938 364-5162 www. Suite 1901 Toronto.com www.com www raremetalblog com Investor Relations: ir@avalonraremetals. 130 Adelaide St.Corporate Information p Avalon Rare Metals Inc.avalonraremetals.raremetalblog.

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