corporate presentation: avalon rare metals inc. (tsx: avl) (august 2010)
TRANSCRIPT
Corporate Presentation
Don Bubar, President & CEO August, 2010
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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 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 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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Project LocationsNECHALACHOHeavy Rare EarthsTantalumNiobiumZirconiumHafniumGallium
NORTH T DEPOSITBerylliumLight Rare EarthsLithiumGalliumNiobium
All projects 100% owned
Avalon offers diversified exposure to a broad range of rare metals
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Rare Metals: Key Enablers of Clean Technology
Rare earth elements (“REE”) such as Neodymium, Terbium and Dysprosium; & other rare metals such as Lithium, Gallium, Indium, Tantalum, Zirconium
Creating new materials such as thin films (solar) and high strength magnets, the key to energy-efficient electric motors
Renewable energy: solar power and wind turbines
LED lighting, rechargeable batteries, light weight alloys
Hybrid and electric cars (30 kg REE in aggregate)
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What are Rare Earth Elements?
Light REE:La = LanthanumCe = CeriumPr = PraseodymiumNd = NeodymiumSm = Samarium
Heavy REE:Eu = EuropiumGd = GadoliniumTb = TerbiumDy = DysprosiumHo = HolmiumEr = ErbiumTm = ThuliumYb = YtterbiumLu = LutetiumY = Yttrium
Neodymium, Dysprosium, Terbium and Europium in highest demand
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REE Economics: A Question of Balance between “Heavies”and “Lights”
Only occur altogether as a group and recovered as a group and must be sequentially separated at additional cost
In most deposits, the balance is tipped toward the light rare earths (“LREE”) which comprise 97-99% of resource
Deposits having an unusual balance with a high proportion of heavy rare earths (“HREE”) are very rare
Consequently, HREE are much more valuable
Basal Zone of Nechalacho deposit is exceptional among hard rock REE deposits for its high proportion of HREE ( >20%)
Implies a high value ore and higher operating margins
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Comparison of HREE Distributions for Major REE Deposits
Nechalacho Bayan Obo Mt Weld Mountain Pass NolansCanada China Australia USA Australia
Europium Eu 0.49% 0.19% 0.44% 0.12% 0.40%Gadolinium Gd 3.71% 0.40% 0.97% 0.17% 1.00%Terbium Tb 0.54% 0.07% 0.08%Dysprosium Dy 2.71% 0.30% 0.12% 0.33%Holmium Ho 0.48%
Erbium Er 1.26%
Thulium Tm 0.17%Ytterbium Yb 1.01%Yttrium Y 11.69% 0.20% 0.37% 0.10% 1.32%
Lutetium Lu 0.14%
Total Heavies 22.20% 1.09% 1.98% 0.39% 3.13%
Lanthanum La 15.83% 27.10% 25.50% 33.20% 19.74%Cerium Ce 35.72% 49.86% 46.74% 49.10% 47.53%Praseodymium Pr 4.51% 5.15% 5.32% 4.34% 5.82%Neodymium Nd 17.83% 15.40% 18.50% 12.00% 21.20%
Samarium Sm 3.91% 1.15% 2.27% 0.80% 2.37%
Total Lights 77.80% 98.66% 98.33% 99.44% 96.66%
REE OXIDE
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Global Rare Earths Market
IMCOA 2009 updated market forecast
ROW = rest of world supply (yet to come on stream) TREO = Total Rare Earth Oxides
Global demand in 2008 124,000 tonnes TREO valued at US$1.25 billion
Forecast demand in 2014 200,000 tonnes TREO valued at US$2-3 billion, assuming 10% per annum growth rate in demand from existing technology only
Does not factor in demand from new technology
Estimated that 25% of all new technologies rely on REE
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50,000
100,000
150,000
200,000
250,000
2004
2005
2006
2007
2008
2009f
2010f
2011f
2012f
2013f
2014f
Dem
and tp
a ‐ R
EO
China Supply ROW Supply Adjusted Global Demand China Demand
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South China Ionic Clays: World’s Primary Source of HREE
Low grade, but relatively easy to recover by in situ or vat leaching
Uncontrolled, primitive methods causing environmental destruction
Government now curtailing production for cleanup
50% of mines unlicensed, Government crackdown initiated Spring 2010
In 2008, one-third of total volume exported was reportedly illegally smuggled out of China
Estimated to be less than 15 years of reserve life
This abandoned mine in Guyun Village in China exhausted the local deposit of heavy rare-earth
elements in three years. Source: NY Times
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Key Applications of REE:Magnets for Electric Motors
REE (Neo) Magnets reduce electric motor/generator size and weight, improve efficiency
Major new applications include:Industrial air conditioners (500 kg)Hybrid-electric cars (1-2 kg)Wind turbines (0.6-1.0 tonne/MW)MRI machines (1-3 tonnes)
REE magnets can reduce power consumption by 50% (e.g. air conditioners)
HREE dysprosium and terbium are key to making “heat resistant” magnets vital to automotive and other applications
HREE phosphors key to energy efficient lighting, display screens
100 Kw generator with neo magnets
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Key Application of REE Magnets PMG’s for Wind Turbines
The illustration to the right of a new GE 4 MW wind turbine uses a 90-ton generator with a 20-foot ring of permanent neodymium magnets to eliminate the need for a gearbox, reducing breakage and energy loss
Permanent magnet generator (PMGs) make the whole assembly (nacelle) lighter weight allowing higher tower
Red stickman (approx. 6’ tall) shown to demonstrate scale. The wind turbine blades on this 4MW model are 176 foot long. Photo: Popular Science / GE
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Emerging REE Magnet Applications
Tidal Power Generation Turbines
Being installed in Nova Scotia and B.C. in 2010
100 MW potential in Nova Scotia
Run-of-River PMG hydro power generation
A 4MW generator contains 1 tonne of Nd magnets
Electric Bicycles (EB)
300-350 g Nd Magnets per EB
20 million EB sold in China in 2009
Sales forecast to grow 30 million EB pa = 9,000 tpa Nd magnets
Magnetic Refrigeration
Uses alloys of gadolinium magneto-caloric effect
Commercialization within 1-2 years
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Recent Developments in REE Markets
China reduces export quotas by 64% for second half of 2010
REE prices have increased 35% Jan-June 2010, Higher HREE prices forecast for 2014 (Byron Capital)
Molycorp completes $390 million IPO in 2010 to restart production at Mountain Pass and co-operation agreement with Neo Materials
RESTART Act tabled in Washington designed to re-establish a domestic REE supply chain
Dacha Capital (DAC.V) raises C$23 million to invest in “physical strategic commodities” notably heavy rare earths
Avalon issues positive prefeasibility study and increased resource size. Nechalacho now largest REE resource outside China.
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Rare Earth Element Prices
Source: Metal-Pages.com, August 17, 2010Prices are indicative and basis FOB China
Metal Oxide Principal Uses Price US$/kg
Light Rare EarthsLanthanum Oxide 99% min Re-chargeable Batteries 36.00 – 38.00
Cerium Oxide 99% min Catalyst, glass, polishing 35.00 -37.00
Praseodymium Oxide 99% min Magnets, glass colourant 48.50 – 49.00
Neodymium Oxide 99% min Magnets, lasers, glass 48.50 – 49.00
Samarium Oxide 99% min Magnets, lighting, lasers 33.00 -35.00
Heavy Rare EarthsEuropium Oxide 99% min TV colour phosphors: red 575.00 – 595.00
Terbium Oxide 99% min Phosphors: green, magnets 585.00 – 605.00
Dysprosium Oxide 99% min Magnets, lasers 278.00 – 298.00
Gadolinium Oxide 99%min Magnets, superconductors 39.00 – 41.00
Yttrium Oxide 99.999% min Phosphors, ceramics, lasers 33.00 – 36.00
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Price Trends:Dysprosium & Terbium Oxide
Dy Current Price:US$278/kg
Tb Current Price:US$585/kg
Source: Metal-Pages.com August 17, 2010
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Price Trends: Lanthanum & Neodymium Oxide
La Current Price:US$36.00/kg
Nd Current Price:US$48.50/kg
Source: Metal-Pages.com August 17, 2010
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Thor Lake: Project Location
Proximity to Great Slave Lake provides access to railhead at Hay River by barge in summer and ice road in winter. Current access is fly-in.
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Nechalacho REE Deposit:Recent Project History
2005: Acquisition of 100% interest for $300,000 in shares
2006: Compilation work, mineralogy begin community consultation, recognition of heavy rare earth potential
2007: Scoping study, exploration drilling and $16 million equity financing (Research Capital)
2008: Delineation drilling programs and 43-101 resource estimate, community engagement and begin work on pre-feasibility study, including metallurgical studies
2009: Definition drilling, hydrometallurgical process development, environment, market studies
2009: $17.5 million equity financing (CIBC)
Total drilling: 44,000 metres, 198 holes
Expenditures to date: over $20.0 million
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Nechalacho Geological Model Evolving
Model Section
Leucoferrodiorite
CaribouLake
Gabbro
Grace Lake Granite
T-Zone
Thor Lake Syenite
Two-Mica
Granite
WhitemanLake Quartz
Syenite
Biotite Granodiorite
Hearne Channeland Mad Lake
Granites
Interpreted Geometryin Cross Section
Blachford Lake PeralkalineIntrusive Complex, NWT
A unique example of a layered Peralkaline intrusive complex, with the upper, rare metal-richpart of the system readily accessible for mining.
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Nechalacho REE Deposit: Diamond Drill Hole Location Map North-South
Section
North Tardiff Zone
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N-S Composite Section (looking west)
Upper LREE Zone
Basal HREE ZoneAverages 30 m thick, 2% TREO, 20% HREE
Hole 70: 1.90% TREO with 32.6% HREO
over 6.0 metres
Hole 154: 1.88% TREO with 20.5% HREO over 20.0 metres
170m
1590m
Drill Hole with Basal Zone Intercept
Area of Indicated resources
Nechalacho REE Deposit
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Nechalacho REE Deposit:2010 Development Progress
Winter: Completed 11,398 metres of drilling in 43 holes and initiated proactive product sales and marketing program
March: Metallurgical process flowsheets definedApril: Project Description Rpt and permit applications filed with MVLWBMay: Diamond drilling resulting in new high-grade zone discovery
Begin Environmental baseline field programJune: Airstrip construction (Deton Cho)
Results of prefeasibility study disclosedEnvironmental Assessment beginsGeomechanical & hydrology work begins
July: Diamond drilling resumesAugust: Flotation pilot plant work to beginMOU Negotiations advance with Aboriginal partners
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New Airstrip completed July 15, 2010 by Deton Cho Logistics and RTL Enterprises
Top dressing prepared from T-Zone waste rock
3 T-Zone trailers repositioned at airstrip and re-furbished to become over flow camp site
New Thor Lake Airport
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Nechalacho Deposit: NI 43-101Resource Estimate June 14, 2010
Tonnes (millions)
%TREO
%HREO
%ZrO2
%Nb�O�
ppmGa2O3
ppmTa�O�
Basal Zone
Indicated 14.48 1.82 0.40 3.38 0.437 144 430
Inferred 76.87 1.60 0.33 3.14 0.443 134 413
Upper Zone
Indicated 6.89 1.45 0.17 1.86 0.286 175 194
Inferred 99.06 1.29 0.12 2.44 0.364 172 210
Total Inferred 175.93 1.43 0.21 2.74 0.399 155 298
Prepared by independent consultant Scott Wilson RPA
Total Inferred Resources represent 2.5 million tonnes contained TREO
Mineral Resources based on following price assumptions: US$21.94/kg TREO, US$3.76/kg ZrO2, US$130/kg Ta2O5, and US$45/kg/Nb2O5 and are estimated using a Net Metal Return cut-off value of CAN$260/tonne. (CAN:USD FX $1.11/$1.00)
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REE Distribution in the Basal Zone Ore Compared with Other REE Deposits & Avg. Value/kg
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mt PassMolycorp
$9.90
Baiyun Obo Baotou$11.40
Mt WeldLynas$13.60
NolansArafura$14.20
NechalachoAvalon$22.10 Value US$/kg
Light rare earths
Heavy rare earths
Samarium
Neodymium
Praseodymium
Cerium
Lanthanum
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Nechalacho REE Deposit Conceptual Development Plan
Barren Rock Dump
Tailings PondLong Lake
VentMine Portal
Underground Mining
Basal Zone
Upper Zone
Tailings Storage
Mining underground room & pillar/long-hole stoping1,000 tonnes per day (tpd), ramping to 2,000 tpd by year four
Flotation processing to produce mineral concentrate Hydrometallurgical treatment of mineral con in plant south of GSLMixed REE carbonates shipped to third party for separationMarket capture less than 5% of est. 2014 TREO global demand Operating Costs: $267/tonne inclusive mine, mill and hydromet
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Proposed Nechalacho Site Plan
Nechalacho Ore Reserves
Airstrip
Tailings Area
Ramp
Plant Site
T-Zone
Plant site
Ore reserves
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Estimated Total Project Construction Capital Costs
ActivityTotal Capital Cost
Estimates (CAD $ 000’s)
Nechalacho Mine 99,607
Thor Lake Process Facility 173,165
HydroMetallurgical Plant 316,602
Primary Project Component Cost 589,374
Project Engineering, Procurement, Construction and Management
80,657
Contingency @ 22% 144,503
Sustaining Capital 73,000
Reclamation & Miscellaneous 12,200
Total Project Capital Costs 899,734
Operating costs over the 18 year life of the project are estimated to average CAN $267 per tonne of ore mined or $5.93 per kilogram of product
Based on Diluted Probable Mineral Reserves of 12.0 million tonnes of 1.71% TREO, 3.18% (ZrO�), 0.42% (Nb�O�) and 0.042% (Ta�O�)
Probable Reserves will increase with continued drilling, also extending the mine life.
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Production and Metallurgical Rates of Recovery
Hydrometallurgical Plant will produce 4 saleable products: total rare earth oxide, zirconium oxide, niobium oxide and tantalum oxide
Ta, Nb and Zr production accounts for 44% of the revenues but donot involve significant extra costs: occur in same minerals as REE.
Pilot Plant work to prove process set to begin Fall, 2010.
ProductFlotation Plant
RecoveriesHydroMet Plant
RecoveriesProduction Annual
Output (tonnes)
TREO 79.5% 93.0% Close to 10,000
ZrO� 89.7% 90.0% 18,000
Nb�O� 68.9% 80.0% 1,700
Ta�O� 63.0% 50.0% 100
Total Recovery 84.6% 90.0%
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Prefeasibility Study: Summary of Financial Analysis
Financial Analysis Pre-Tax (CAD$) After-Tax (CAD$)
Internal Rate of Return 14% 12%
Net Cash Flow $2.1 billion $1.5 billion
Net Present Value @ 5% $826 Million $540 million
Net Present Value @ 8% $428 million $236 million
Net Present Value @ 10% $246 million $97 million
Financial model developed by independent Scott Wilson RPA
Assumes 100% equity financing basis
Covers mining, mineral concentration, hydrometallurgical processing and all related infrastructure on an 18 year operating schedule
CAD/USD exchange rate used was CAD$1.00 = USD$0.90
Expected revenues are based on the following price assumptions in USD per kilogram: TREO = $21.94, ZrO� = $3.77, Nb�O� = $45.00, Ta�O� = $130.00
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Project Optimization Opportunities
Reduce or eliminate the 3 year production ramp-up
Increase the proven & probable reserves and mine life
Selectively mine higher grades at start-up
Reduce diesel power reliance (hydro, renewables)
Higher product demand and pricing
Improve metallurgical recoveries
Reduce royalty burden through buy-outs
Potential by-product revenues from gallium recovery
Alternative, lower cost hydromet plant locations
Debt financing for part of CAPEX
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Prefeasibility Opportunity Analysis
Pre-Tax Analysis (in millions)
Optimization InitiativeRisk to
ImplementIRR NPV @ 8% NPV @ 10% NCF
Scott Wilson, RPA Cashflow Model N/A 14% 428 246 2,091
Reduce 3 year Production Ramp-up None 22% 778 569 2,584
Selective Mining in first 5 years to increase grade
Low 16% 518 327 2,236
Buy-out 3% NSR Low 15% 472 282 2,196
10% Reduction of Power Costs Low 14% 441 257 2,119
TOTAL Low Risk Results None/Low 25% 961 730 2,917
10% Increase in Metal Prices Medium 17% 651 430 2,638
Relocation of HydroMet outside NWT Medium 16% 552 355 2,330
1% Improvement in HydroMet Recoveries
Medium 15% 455 268 2,156
OVERALL TOTAL All 33% 1,400 1,102 3,882
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Schedule to Production in 2015
Cost Estimate for Feasibility Study = $43 million
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A Leader in Environmental & Social Responsibility: Winner of PDAC’s 2010 e3 Plus Award
Naming ceremony
Community meetings and site visits
First Nations training
Employment at site
40% aboriginal
Business developmentWind power evaluation with YKDFN
Sept 2009 naming ceremony
Chiefs Ed Sangris and Ted Tsetta with Don
Bubar
March 2010 PDAC Awards CeremonyAccepting award
from Jon Baird, PDAC
President
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Capital Structureas at August 17, 2010
Canada - TSX: AVL
United States - OTCQX: AVARF SEC 12g3-2(b) # 82-4427
Shares Outstanding 79,104,270
Fully Diluted 88,633,170
Market Capitalization C $200 million (S/O @ $2.55)
Recent Price Range C $2.40 - $2.80
52 Week High / Low C $4.24 - $1.17
Cash Reserves C $8.0 million (No debt)
Insider Share Position 3.4 million shares (4.3%)
Institutional holdings (30%) CPP, TDAM, Front St., Excalibur, MFC Global
Middlefield, AGF , Cantara, Seamans, Fuchs Glbl
Balance Sheet Assets C $40.5 million (May 31, 2010)
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REE COMPARABLES: Market Capitalization Normalized to TREO Resources
CompanyMarket cap
CAD$ MillionsMillion tonnes
TREOCAD$/tonne
TREO Stage
Lynas Corporation $1,379 1.1640 $1,184 Construction
Molycorp $1,182 1.3950 $847Production / expansion
Avalon Rare Metals $200 2.8712 $70 Feasibility
Arafura $190 0.8400 $226 Feasibility
Rare Element Resources
$96 0.3690 $159 Exploration
Alkane** $96 0.6570 $157 Feasibility
Great Western Minerals*
$58 0.1344 $299 Prefeasibility
(Market data and FX as of August 13, 2010)* Great Western Market cap includes Technologies assets** Alkane market cap includes gold assets
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18 Month Price Chart
CIBC Financing
CNBC / NY Times
Prospectus cleared
Resource expansionand PBS report
Dines Letter PFS
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Management, Directors& Strategic Advisors
ManagementDonald S. Bubar, P.Geo, President, CEO & Director
Jim Andersen, C.A., C.P.A., V.P. Finance & CFO
Bill Mercer, Ph.D., P.Geo., V.P. Exploration
David Swisher, B.S. Min.Eng.,
V.P. Operations
Pierre Neatby, B.A. Econ, V.P. Sales & Mktg
Charlotte May, Corporate Secretary
Cindy Hu, CA, CPA, CGA, Controller
Ron Malashewski, P.Eng (AB), Manager, Investor Relations
DirectorsAlan Ferry, CFANon-Executive Chairman
David Connelly, CStJ, CD, MBA, B.Comm
Phil Fontaine, B.A., LL.D.
Brian D. MacEachen, C.A. Audit Committee Chair
Peter McCarter, B.A., LL.B., M.B.A. Chair Governance/Compensation ctte
Hari Panday, C.A.
Strategic Advisors F. Dale Corman, P.Eng.
Gerald Prosalendis, Communications
Joe Monteith, Business development
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Key Staff & Consultants
David Trueman, Ph.D., P.Geo, Rare Metals Geologist
Chris Pedersen, P.Geo, Senior Geologist, Camp Manager
Martin Heiligmann, Ph.D., Project Geologist
Finley Bakker, P.Geo. Senior Resource Geologist
John Goode, P.Eng. Metallurgical Consultant
SGS Lakefield Research, Metallurgy & Mineralogy
Scott Wilson RPA Inc., Pre-Feasibility Study Independent Consultants
Ian M. London, P. Eng. Energy and Market Development Consultant
Jacques Whitford Stantec, Permitting, Environmental Studies
Kaz Machida, KAY Investment, REE Market Dev. Asia
McGill University, (Dr. A.E. Williams-Jones) Geological Research
Fasken, Martineau Dumoulin, Aboriginal Law
CIBC World Markets, Investment Bankers
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Global REE Deposits Ranking
Deposit % TREOContained
tonnesTREO
% HREOContained
Tonnes HREO
Bayan Obo, China 3.9% 56,900,000 2% 1,138,000
Nechalacho Inferred, Canada 1.4% 2,500,000 22% 550,000
Kvanefeld, Greenland 1.0% 2,150,000 14% 301,000
Mountain Pass, USA 9.2% 1,840,000 1% 18,400
HREE-rich Nechalacho deposit now ranks as the second largest REE deposit in the world, after the giant LREE Bayan Obo in China
Nechalacho has the highest proportion of the more valuable HREE