Exploration and CSR: A practitioner’s perspective October 30, 2012

1. Exploration and CSR:A practitioner’s perspectiveOctober 30, 2012 Donald S. Bubar President & CEO

2. 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.

3. 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

4. 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

5. 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

6. e3 Plus Principles Adopt Responsible Governance and Management Apply Ethical Business Practices Respect Human Rights Commit to Project Due Diligence and Risk Assessment Engage Host Communities & Other Affected and Interested Parties Contribute to Community Development and Social Well-being Protect the Environment Safeguard the Health and Safety of Workers and Local Population

7. Avalon’s Approach to Corporate Social Responsibility in the NWT Adoption of PDAC E3 Plus Principles as company policy in 2009 And focus on building relationships with Aboriginal groups by: • 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

8. First Nations & Metis Communities in the Thor Lake area, NWT Bathurst Inlet NUNAVUT G r e a t B e a r L a k e Thor Lake Location TL TL N’dilo, Dettah Yellowknives Dene First Nation NWT Lutselk’e: Lutselk’eDene Nation Behchoko TliChoDene Nation Yellowknife: North Slave Metis Alliance Fort Resolution: DeninuKue First Nation NWT METIS Nation G r e a t • S l a v e L a k e Hay River : Katlodechee First Nation Hay River

9. 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

10. 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 Avalon’s Community Engagement Practices • Site visits • Chance for company to demonstrate responsible development

11. Avalon’s Community Engagement Practices: Education • Engage the Youth • Open up children’s & teenager’s minds to endless possibilities • Present alternatives and opportunities

12. Avalon’s Community Engagement Practices: Cultural Events • Particpate in local cultural events • Dene National Assembly • Naming ceremony

13. Facilitate Employment & Business Opportunities • Accommodation Agreement with DeninuK’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 DeninuK’ue

15. 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

16. 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

17. The business case for embracing CSR • Reduced risk of permitting delays • Local community support • More sources of investment capital • CleanTech funds and SRI’s are increasingly important sources of investment capital • Better access to markets for products • Socially 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