Avalon Rare Metals Continues Upward March Driven by Squeezing Supply of Rare Earth Minerals
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    Rare Earth Metal Stocks on the Rise; Top Stock Avalon Rallies 140%

    Avalon Rare Metals Inc. (OTCPK: AVARF ) stock has climbed nearly 140% since July 1 price of $2 and traded at $4.76 on October 20.  The growing concerns over Chinese control over the supply of rare earth metals (REMs), as well as the strong preliminary results of the company’s summer drilling campaign have contributed to this appreciation.

    Avalon is a Canada-based mineral exploration company, focused on rare metals and minerals, including calcium feldspar, lithium, tantalum, cesium, indium, gallium, yttrium, etc. The company’s active projects (Nechalacho (Thor Lake), Separation Rapids and East Kemptville) are rare minerals properties that are at an advanced stage with identified mineral resources. Avalon has returned very high-grade drill results and their Thor Lake deposit has significant concentrations of heavy rare earth elements, nearly double the typical concentration.

    Avalon’s top priority is the Nechalacho Rare Earth Elements Deposit located at Thor Lake, near Yellowknife, NWT. The Nechalacho deposit is a world class resource of rare metals and minerals now being evaluated primarily for its potential to produce ‘heavy’ rare earth elements (HREE). Demand for HREE is growing rapidly because of their critical application in high strength permanent magnets, which are vital to hybrid car technology and many popular consumer electronic products, yet there is virtually no primary production of HREE outside of China.

    The Nechalacho deposit is unusual in its enrichment in the more valuable HREE such as europium, terbium, and dysprosium along with neodymium. Avalon is currently focusing its efforts on defining high-grade, HREE-rich resources in the very large Basal Zone of the deposit, which now contains Indicated Resources of 14.48 million tonnes grading 1.82% TREO (total rare earth oxides) with 22% HREO/TREO (heavy rare earth oxides as a percentage of TREO) as well as 76.97 million tonnes of Inferred Resources grading 1.60% TREO (20% HREO/TREO). Aggregate Inferred Resources for both the Basal and Upper Zones of the Nechalacho deposit now stand at 175.93 million tonnes grading 1.43% TREO (14.7% HREO/TREO). Nechalacho is also enriched in tantalum, niobium, zirconium, hafnium and gallium, which all represent potential valuable by-products.

    The company has an ongoing drill program that produced excellent results from two drill rigs, one producing HQ and the second producing very large size PQ core. Initial assays from this drilling are expected by late October 2010.

    Since 2005, Avalon has spent more than $20 million on exploration and development work on the property. Positive prefeasibility study results were released in June 2010. Work on a final feasibility study is already underway with collection of a bulk sample for pilot plant work set to begin in July 2010, initiation of an environmental impact assessment along with additional definition drilling, and product market development work. Initial production is targeted for late 2014 or 2015.

    The growing demand for REMs, as well as unstable supply, has made REMs’ prices to increase significantly over the last years. REMs have significant importance to new technologies such as the iPhone and flat screen TVs, as well as to clean energy applications like electric car batteries, wind turbines and low energy bulbs. But even more critical is their use in high-tech strategic military and defense weaponry.

    The prices growth was somehow attenuated by the global financial crises; however, the rebounding worldwide economy and growing concern over China’s control of this resource are once again pushing REMs into the spotlight. More than 97% of REMs are currently mined in China and the country’s government is trying to ensure that all raw REMs are processed within its borders and force major manufacturers of LCDs, mobile phones, computers, electric motors, etc. to relocate production in China.  In addition, China wants to create major wind turbine, solar panel and hybrid car industries domestically, which would require a growing supply of REMs over the long term. Developed countries like the United States and Japan are almost entirely dependent on China’s exports of the resource.

    During the past years Chinese government has reduced by 40% the amount of REMs available for export and there were opinions that China could halt REMs exports by 2012. Even if China continues exporting at current rates, demand is rapidly outpacing supply and many are predicting approximately 40,000 tonnes annual shortfall by 2015. Moreover, the Chinese Ministry of Commerce reported recently that at current production rates, their known reserves would only last 15 to 20 years, and signalled it may even be necessary to begin importing REMs in a few years time.

    While commercial scale production is still a few years away, Avalon remains among top prospects for becoming the next major producer of REMs and providing a new strategic source of REMs outside of China. As Avalon progresses through the permitting and mine development stages, we expect the company’s stock price to further appreciate.

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