NI 43-101 Resource Estimate

NI 43-101 Compliant Resource Estimate Update, January 2011

Click here to download the full NI 43-101 report as filed on SEDAR March 15, 2011

In January 2011 , Avalon updated its June 2010 NI 43-101 compliant resource estimate for the Nechalacho deposit incorporating additional information as a result of the summer definition drilling program. As expected, this resulted in a significant increase in the proportion of Mineral Resources in the Nechalacho deposit that can be classified as Indicated.

Indicated Mineral Resources for the Basal Zone are now estimated at 57.49 million tonnes of 1.56 % TREO, with an additional 30.64 million tonnes of 1.48 % TREO in the Upper Zone.

The estimated Inferred Mineral Resources for both Basal and Upper Zones total 226.88 million tonnes averaging 1.30 % TREO with 14.33% HREO/TREO compared with 182.56 million tonnes grading 1.40% TREO with 15% HREO/TREO in the September 2010 resource estimate. This increase in inferred resources is mainly due to the inclusion of extensions of the deposit identified from exploration holes located to the southwest of Long Lake and to the reinterpretation of the upper limit of the Basal Zone. Avalon's mine plan is concentrated on the Basal Zone, as this portion of the deposit is generally of higher overall grade, but also has higher levels of the more valuable heavy rare earths.

The cutoff grade for the mineral resources is based on a value of CND$260 per tonne after incorporating metallurgical recoveries and expected metal prices as detailed in the previously released Prefeasibility Study. This cutoff is based on an estimate of the operating cost from mining through to hydrometallurgical recovery.

The Indicated and Inferred Mineral Resources are summarized in the table below.

	Tonnes (milllions)	TREO %	HREO %	HREO/TREO %	ZrO2 %	Nb2O5 %	Ta2O5 ppm	TREO equiv %
Basal Zone
Indicated	57.49	1.56	0.33	20.72	2.99	0.40	396	2.01
Inferred	107.59	1.35	0.26	18.97	2.83	0.37	354	1.77
Upper Zone
Indicated	30.64	1.48	0.15	10.26	2.10	0.31	192	1.86
Inferred	119.29	1.26	0.13	10.15	2.41	0.35	209	1.66
Total Inferred	226.88	1.30	0.19	14.33	2.61	0.36	278	1.71

Notes:

CIM definitions were followed for Mineral Resources.
HREO (Heavy Rare Earth Oxides) is the total concentration of: Y₂0₃, Eu₂0₃, Gd₂0₃, Tb₂0₃, Dy₂0₃, Ho₂O₃, Er₂0₃, Tm₂0₃, Yb₂0₃ and Lu₂0₃.
TREO (Total Rare Earth Oxides) is HREO plus: La₂0₃, Ce₂0₃, Pr₆0₁₁, Nd₂0₃ and Sm₂0₃
Mineral Resources are estimated using price forecasts for 2014 for rare earth oxides prepared early in 2010. Some of these prices are higher and some are lower than current prices. The prices used are the same as in the June 14, 2010 disclosure.
Mineral Resources are undiluted.
A cut-off NMR grade of $260 Can was used for the base case. NMR is defined as "Net Metal Return" or the in situ value of all the payable rare metals in the ore net of estimated metallurgical recoveries and processing costs.
An exchange rate of 1.11 was used.
ZrO2 refers to Zirconium Oxide, Nb₂O₅ refers to Niobium Oxide, Ta₂O₅ refers to Tantalum Oxide, Ga₂O₃ refers to Gallium Oxide.
TREO equivalent is estimated by calculating a weighted average NMR per kg for the rare earths and rare metals (Zr, Nb, Ta) in an given interval, and re-estimating the interval assuming that all the value was in rare earths only.
The two main differences to previous estimates were that 8 composites were used per block, versus 15 in the estimate released in July 19th, 2010 and the Basal Zone was not flattened onto the lower contact prior to block estimation. All other parameters were similar.

The details of the individual elements for these resources are attached as a table here.

Qualified Persons

Finley Bakker, P. Geo. (BC) and William Mercer, P Geol. (NWT) are the Qualified Persons as defined by National Instrument 43-101 for the purposes of this resource estimation and has verified that the technical information regarding the resources in this section accurately reflects the technical information in the Prefeasibility Study.

The field exploration program, including all drilling, was carried out under the supervision of J.C. Pedersen, P.Geo., the Company's Senior Geologist. The Company's Vice-President, Exploration, Dr. William Mercer, P.Geo. provided overall direction on the project.

Quality Assurance and Quality Control

Any assay results obtained prior to 2007 (holes 1 to 51) did not have internal Quality Assurance/Quality Control (QA/QC) and were analyzed for a limited series of elements; however, six of the old holes were re-assayed in 2008 for the larger suite of elements.

All drill core from the 2007 to 2009 programs was split on site, sampled on two metre intervals and shipped to the commercial laboratory sample preparation facilities in Yellowknife, NWT for sample preparation.

Three analytical standards were prepared from crushed rejects of historical Lake Zone samples in 2007, then analysed in a Round Robin campaign at five separate laboratories to determine reproducible values. These standards were then routinely inserted into the sample batches to monitor core analyses. The standards were prepared in order to represent what was believed to be the low, average and high grades of the Nechalacho deposit.

A fourth, higher REE grade, standard was prepared in 2009, and a second Round Robin, this time including the initial three standards and the new one, was completed. The second Round Robin included commercial certified standards. The fourth standard was not ready in time for the 2009 drilling program but will be utilized for future drilling campaigns starting in January 2010.

The Round Robin data in both cases was examined by QA/QC consultant Dr. Barry Smee and Dr Smee certified specific values for many of the rare earths.

Barren diabase drill core is routinely inserted as preparation and assay blanks.

Avalon has changed the laboratories used for analysis over time.

Period	Primary Laboratory	Secondary Laboratory	Comment
August - October 2007	Acme Analytical Vancouver, BC	Actlabs Ancaster, ON	All pulp analysed in both labs
January - May 2008	Acme Analytical Vancouver, BC	ALS Chemex Vancouver, BC	Every tenth pulp checked in secondary lab
June 2008 - April 2010	ALS Chemex Vancouver, BC	Acme Analytical Vancouver, BC	Every tenth pulp checked in secondary lab

Under the present practice, ALS Chemex ships crushed splits of all the samples to its laboratory in Vancouver, BC. Selected reject duplicates are also analyzed at an alternative independent laboratory, as noted above, presently Acme Analytical. Acme completes the pulverization of these duplicates. These duplicates are selected by taking every tenth sample in sample number order. Standards are also inserted into the duplicate sample stream.

The results reported to date for the standards were produced by ALS Chemex and either achieved acceptable standard values for the main REE of economic interest (particularly Nd, Tb and Dy) or reanalysis was requested until acceptable levels were achieved.

All samples are routinely analysed by lithium metaborate/tetraborate fusion and dilute nitric acid digestion, followed by whole rock and 45 element multi-element ICP analysis, being ALS sample method ME-MS81. Commencing with hole L09-137, all samples contained within intercepts above the 1.6% cut-off criteria and any additional samples exceeding analytical limits or of geological significance are rerun using similar ALS method ME-MS81H for higher concentration levels. ME-MS81H is a similar method but with greater dilution in the analytical procedure.

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