Industry and Information Bulletins

In our ongoing efforts to provide you with broader communications and industry information, we are pleased to issue another Industry Bulletin discussing recent trends in the markets of various rare and strategic metals.  In this edition, we report on some interesting new developments in the global Rare Earth Elements (REE) sector that illustrate the growing supply concerns and the strategic positioning now occurring amongst Asian producers, potential new producers in Australia and Japanese consumers of REE.  

Arafura Accepts Strategic investment from Chinese Company. On February. 18th, Ian Laurance, the Chairman of Australian REE developer Arafura Resources,  announced that his Company has agreed to execute a Letter of Intent with Jiangsu Eastern China Non-Ferrous Metals Investment Holding Co. Ltd, a subsidiary of the East China Exploration & Development Bureau (ECE), for the Chinese company to subscribe for up to an initial placement of Arafura fully paid ordinary shares to a maximum amount of A$8.5 million at a price of A$0.30 per share. In addition, and on completion of the Rights Issue Shortfall Offer and ECE´s initial placement, ECE will be offered additional New Shares through a placement of Fully Paid Ordinary Shares at an issue price of A$0.40. This second placement may take EEC´s total stake in Arafura to 

This announcement, coupled with an earlier announcement in 2008 about Arafura´s signing of a MOU with Inner Mongolia Bao Tou Steel Rare Earth Hi-Tech Co., Ltd., indicates the growing influence of Chinese interests over the development of this emerging Australian light rare earths producer.

http://www.ntnews.com.au/article/2009/02/25/35595_nt-business.html

Lynas Corp Suspends A$214 million Rare Earths Project. Lynas Corporation, another Australian-based emerging producer of REE, also announced last week that it has suspended its Mount Weld Rare Earth project in Australia, because of a dispute with bondholders. The disagreement involves $95 million in convertible bonds, initially sold in 2007 to a Goldman Sachs unit and an unnamed hedge fund raised in conjunction with a bank facility to fund the project. "Bond holders have not agreed to the release of the funds. This is requiring us to suspend the project and reduce our overheads," said Nicholas Curtis, executive chairman at Lynas. "We are going to put the project into a mode where we can start again as quickly and efficiently as possible as soon as we secure the financing," Curtis added.

Certainly, if Mount Weld does not go ahead as scheduled, the looming global supply shortages of REE, forecast to begin by 2012, would be further exacerbated. It is rumoured that Chinese investors have expressed interest in providing bridge financing to Lynas, as has been done for Arafura Resources.

http://www.reuters.com/article/rbssIndustryMaterialsUtilitiesNews/idUSSYD40255020090210

Toyota Tsusho Corporation To Acquire Own Sources Of Rare-Earth Metals
In late January of this year, it was reported that Toyota Tsusho Corporation, a trading house affiliate of Toyota Motor Corporation, will start importing rare-earth elements from Vietnam and India, giving the Japanese car maker independent sources of these key materials for the production of hybrid cars, The Nikkei reported. Toyota Tsusho will form a joint venture with the Vietnamese state-run mining agency to develop the Dong Pao deposits, northwest of Hanoi. Toyota Tsusho will take more than half, or possibly all, of the 49% stake allotted to Japanese investors. Facilities to be built on the site will yield 5,000 tons of rare-earth elements per annum, starting in 2011. Toyota Tsusho has also spent JPY500 million to buy Wako Bussan Co., a Tokyo-based trading house that owns the right to purchase rare-earth elements from India's state-run Indian Rare Earths Ltd. The Toyota group member will start importing 4,000 tons of the elements a year in 2010.

http://www.asianewsnet.net/news.php?id=3627&sec=2

Clearly, Toyota is taking steps to ensure the development of non-Chinese sources of supply, while Chinese investors are taking steps to maintain their dominance of global REE supplies.

How Avalon´s  Lake Zone deposit at Thor Lake in the Northwest Territories will factor into this global REE chess game remains to be seen but, as its exceptional size and strong enrichment in the heavy rare earths becomes more apparent to the market, it will surely attract increasing attention from the major players in Asia.

For an analysis on the significance of these and related events, the reader is encouraged to read the Jack Lifton´s Feb. 18 commentary, which appeared on Resource Investor at:

http://www.resourceinvestor.com/pebble.asp?relid=49114.

Mr. Lifton has made it known that his next commentary, entitled "The Return of the Predator: China Moves to Re-assert its Control of the Rare Earths' Market" is due for release in the next few days.

Avalon, in collaboration with Pro-edge Consultants Inc., has established a blog to provide a forum for information and discussion on the rare metals including emerging uses and supply/demand trends. Readers are invited to visit this new blog at:

www.raremetalblog.com

If you have any comments or questions on lithium or any of the other rare metals, please do not hesitate to post them on the blog or feel free to contact the company directly at office@avalonraremetals.com