Exploration and CSR:A practitioner’s perspective

October 30, 2012

Donald S. BubarPresident & CEO

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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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Why Embrace CSR at the Exploration Stage?

●Preserve Social Licence to operate

● Increased transparency

● Involvement in local community

●Preserve access to land

●Reduced risk of permits being delayed or denied

●Protect the value of your investment●Failure to develop positive community relations can become

an encumbrance on the future re-sale value of your property

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Prospectors and Developers Association of Canada

• Sequel to E3 program (Environmental Excellence in Exploration) introduced in 2002

• E3 Plus Developed in 2008 to include CSR through: Guidance by members 3 Exploration industry workshops 3 Focus Group meetings

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e3 Plus: A Framework for Responsible Exploration

● Web-based free resource providing the information & guidance

companies need to improve social, environmental, and health

and safety performance leading to enhancing shareholder value

● Single source of material exclusively for the exploration industry

● Comprehensive, Scalable, Adaptable

● Excellence in

● Social Responsibility

● Environmental Stewardship

● Health and Safety

● English, French, and Spanish

www.pdac.ca/e3plus

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e3 Plus Principles

1. Adopt Responsible Governance and Management

2. Apply Ethical Business Practices

3. Respect Human Rights

4. Commit to Project Due Diligence and Risk Assessment

5. Engage Host Communities & Other Affected and Interested Parties

6. Contribute to Community Development and Social Well-being

7. Protect the Environment

8. Safeguard the Health and Safety of Workers and Local Population

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Avalon’s Approach to Corporate Social Responsibility in the NWT

●Open, honest and regular dialogue with local communities

●Minimizing impacts on the land

●Emphasizing workplace health and safety

●Participate in cultural events

●Hiring local people & promoting training

●Promoting partnerships to provide lasting benefits

Adoption of PDAC E3 Plus Principles as company policy in 2009And focus on building relationships with Aboriginal groups by:

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Fort Resolution: Deninu Kue First NationNWT METIS

Nation

Bathurst Inlet

NUNAVUT

NWT

S l a v eL a k e

G r e a t B e a rL a k e

G r e a t

Hay River

Lutsel k’e: Lutsel k’e

Dene Nation

N’dilo, Dettah Yellowknives Dene First

NationBehchoko

TliCho Dene Nation

Yellowknife: North Slave

Metis AllianceHay River :Katlodechee First Nation

First Nations & Metis Communities in the Thor Lake area, NWT

TL

TL Thor Lake Location

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Community Engagement Principles

Engage early and often

Persevere through periods of inactivity

Continue engaging as the project progresses

Work towards signing MOU’s and Participation Agreements as project progresses

Identify opportunities for employment or services

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Avalon’s Community Engagement Practices

Meetings

Ensure forum with Chief & Council, Environment Committee and Elders

Presentation (lots of visuals) followed by question and answer period

Chance for company to listen to community concerns

Opportunity to build relationships & trust

Site visits

Chance for company to demonstrate responsible development

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Avalon’s Community Engagement Practices: Education

Engage the Youth

Open up children’s & teenager’s minds to endless possibilities

Present alternatives and opportunities

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Avalon’s Community Engagement Practices: Cultural Events

Particpate in local cultural events

Dene National Assembly

Naming ceremony

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Facilitate Employment & Business Opportunities

● Accommodation Agreement with Deninu K’ue First Nation in place

● Accom. Agts. with Yellowknives Dene and Lutsel K’e Dene in prep.

● Aboriginal Training● First Aid, Driller Helper

● Employment at site● 2010 40% Aboriginal

● 2011 60% Aboriginal

● Business Contracts●Major contractors with Aboriginal

ownership

● Ice road haulage, airstrip Wind power evaluation

●Helped start a new core box business with Deninu K’ue

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Accommodation Agreement:Basic Principles

●Provides for equity participation at no cost to First Nation

●Provides for debt financing to fund FN’s share of capital costs repayable out of future revenues

●Limited partnership model to minimize tax liability

●Facilitate Training programs

●Preferential hiring and service contract opportunities

●Funding for implementation costs and advisors

●Environmental monitoring

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Corporate Sustainability Report

●Report on how you will achieve sustainability goals & performance

●Sustainability:

●Development that meets the needs of the present without compromising the ability of future generations to meet their own needs (Brundtland Report, 1987)

● Published Corporate Social Responsibility Roadmap in January 2011

● Published first full Sustainability Report in April 2012 to GRI Version 3.1 and MAC TSM indicators

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The business case for embracing CSR

Reduced risk of permitting delaysLocal community support

More sources of investment capitalCleanTech funds and SRI’s are increasingly

important sources of investment capital

Better access to markets for productsSocially responsible manufacturers are managing their supply chains to the source of raw materials to encourage sustainability and avoid sourcing from conflict areas (eg; tantalum from Congo)Dodds Frank Act will force US consumers to audit supply chains to the raw material sources to ensure no conflict materials are used