Avalon Rare Metals Inc. - Reports Increase in Indicated Resources in the Nechalacho Rare Earth Elements Deposit, NWT

01:50 AEST Jan 29, 2011 ABN Newswire (C) 2004-2011 Asia Business News PL. All Rights Reserved.

Toronto, Canada (ABN Newswire) - Avalon Rare Metals Inc. (TSE: AVL) (NYSE: AVL) ('Avalon' or the 'Company') is pleased to provide an update on development work on the Nechalacho Rare Earth Elements ('REE') deposit, Thor Lake, NWT. In particular, all the data from the 2010 summer definition drilling program has now been compiled into the deposit block model and the 43-101 compliant resource estimates have been updated accordingly. As expected, this resulted in a significant increase in the proportion of Mineral Resources in the Nechalacho deposit that can be classified as Indicated.

The updated resource estimate for the key Basal Zone part of the deposit has resulted in an increase in Indicated Mineral Resources to 57.49 million tonnes grading 1.56% TREO[1] with 20.72% HREO/TREO using the base case $260 Net Metallurgical Return (NMR) cut-off. This compares with the Indicated Resources of 20.45 million tonnes grading 1.75% TREO with 23% HREO/TREO reported for the Basal Zone in the September 2010 update (for the Tardiff Lakes and West Long Lake areas combined). It should be noted that this increase will not necessarily influence the decision on production rate, which will ultimately be determined by sales volumes estimates rather than resource size.

[1] Total Rare Earth Oxides (TREO) refers to the elements lanthanum to lutetium, plus yttrium, expressed as oxides. See Avalon's website for conversion factors from elements to oxides.Heavy Rare Earth Oxides (HREO) refers to the elements europium to lutetium, plus yttrium, expressed as oxides. Light rare earths (LREO) refers to the elements lanthanum to samarium, expressed as oxides. HREO/TREO refers to the proportion of heavy rare earth oxides as a percentage of the total rare earth oxide content of the rock.

More significantly, the proportion of Indicated Mineral Resources estimated at the much higher $600 NMR cut-off, now total 14.67 million tonnes at 2.19% TREO and 24.68% HREO/TREO. This tonnage is similar to the total Indicated Mineral Resources estimated for the prefeasibility study at the $260 NMR but with a 20% higher TREO grade and a 35% higher HREO content. This confirms, as predicted, that the Basal Zone resource contains high grade sub-zones of sufficient size and continuity to allow for selective mining at higher cut-off grades during the early years of production. At the 2,000 tonnes per day production rate contemplated in the prefeasibility study, this would be sufficient tonnage, once converted to mining reserves, to support a mine life of 20 years.

Don Bubar, President and CEO, stated 'The definition of high grade sub-zones for selective mining will certainly have a beneficial effect on the project economics by increasing revenues during the early years of production. In addition, the increase in total Indicated Mineral Resources in the Basal Zone will extend the mine life used in the prefeasibility study financial model.' Further, 'The results also confirm the high rate of conversion of inferred resources to indicated resources, and the excellent internal continuity of the Basal Zone mineralization.'

Total Inferred Mineral Resources for the Upper and Basal Zones combined now stands at an estimated 226.88 million tonnes grading 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 (Table 1b). 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.

Table 1 includes (for comparative purposes) a column for 'TREO equivalent %' which essentially treats the zirconium, niobium and tantalum as if they were also rare earth elements. TREO equivalent is estimated by calculating a weighted average NMR per kilogram for the rare earths and the rare metals (Zr, Nb, Ta) in a given interval, and re-estimating the interval assuming that all the value was in the rare earths only. The NMR includes the value attributable to ZrO2, Nb2O5, and Ta2O5 in the rock after metallurgical recoveries.

Two drill holes from the summer program are not included in the inferred mineral resources due to the distance from the existing resources. Drill holes L10-310 and L10-311 are about 500 metres north of the present northern limit of the Inferred Mineral Resources. Hole L10-310 intercepted Basal Zone style mineralization averaging1.09% TREO and 25.3% HREO/TREO over 22 metres and L10-311 intercepted Basal Zone style mineralization averaging 1.40% TREO and 25% HREO/TREO over 24.75 metres. Assuming continuity, these holes will have extended the known limits of the Basal Zone some 500 metres further north.

The detailed results and plan for individual drill holes can be viewed on the Company's website at:
http://www.avalonraremetals.com/projects/thor_lake/thor_lake_intro/

The mineral resource estimates were prepared by Finley Bakker, P. Geo., Senior Resource Geologist. Drilling operations are being performed by Foraco Drilling Ltd. of Yellowknife, NWT under the supervision of J.C. Pedersen, P.Geo. The Company's Vice-President, Exploration, William Mercer, Ph.D., P.Geo. (Ont), P. Geol (NWT) is providing overall direction on the project and monitors the QA/QC on the laboratory analyses. The qualified persons for the purposes of this news release are Finley Bakker, William Mercer and D.S. Bubar, P. Geo., President.

The resource estimation procedure employed by Mr. Bakker was similar to that of Scott Wilson Roscoe Postle Associates for the NI 43-101 compliant resource disclosed in the Company's News Release dated June 14, 2010. The base case cut-off grade and metal price assumptions were unchanged while the composite methodology, estimation method (Inverse Distance Squared), block size, domains and estimation parameters were essentially the same. Minor differences in estimation methodology are noted in the footnotes to the tables below. Readers are referred to the Company's current NI 43-101 technical report entitled 'Technical Report on the Thor Lake Project, Northwest Territories, Canada' dated July 29, 2010, as amended September 21, 2010, which is available on Sedar at www.sedar.com.


Winter Drilling Program Begins

The 2011 winter drill program commenced during the week of January 10th with mobilization of crews for both drill rigs, one producing HQ and the second producing very large size PQ core. The PQ drilling is designed to provide additional bulk sample material for the upcoming metallurgical pilot plant program, with the objective of collecting a total of 30 tonnes of Basal Zone ore. An estimated 29,000 metres of definition drilling will be required to achieve this objective. This drilling will also serve to further upgrade the confidence level of the Basal Zone resources, including converting a portion of the Indicated Resources to the 'Measured' level of confidence.


Permitting and Community Engagement Progress

The permitting process is progressing steadily and by the end of October, 2010, scoping sessions related to the environmental assessment had been completed in the communities of Yellowknife, Dettah, Lutsel K'e, Fort Resolution and Hay River. On November 26, 2010, the Mackenzie Valley Environmental Impact Review Board ('MVEIRB') submitted its Draft Terms of Reference ('ToR') with the comment period extended through January 7, 2011. Avalon is now awaiting MVIERB's Final ToR which will serve as the basis for the Developers Assessment Report required for the environmental assessment process.

Since the signing of the Negotiation Agreement with the Yellowknives Dene First Nation, as disclosed in the Company's News Release dated December 8, 2010, discussions continue toward the completion of an accommodation agreement (similar to an 'Impacts and Benefits' agreement) this year. Avalon is also in discussions with the other participating aboriginal communities towards signing similar agreements. Avalon remains committed to maximizing potential partnership and participation opportunities for the local First Nations communities through project development and throughout future operations.


Metallurgical Testing Program Progess

The metallurgical testing program continues with both flotation and hydrometallurgical testwork underway under the supervision of consulting metallurgist, John R. Goode, P. Eng. Two pilot plant trials of the flotation flowsheet have been completed at Xstrata Process Support (XPS) in Sudbury, Ontario, and the data generated are still being analysed to determine next steps. Additional bench scale flotation testwork and mineralogical studies are underway both to further optimize the process and map mineralogical variability across the Basal Zone part of the deposit. Further flotation pilot plant tests are planned once the data from the first two pilot plant runs and bench testwork have been completely evaluated. Bench scale hydrometallurgical testwork is continuing at SGS Minerals in Lakefield, Ontario.

Avalon is also evaluating the results from a series of tests relating to flotation plant tailings disposal. These were done to further assess environmental impacts and study how the tailings can be utilized as paste backfill in the mine.


About Avalon Rare Metals Inc.:

Avalon Rare Metals Inc. (TSX:AVL) (OTCQX:AVARF) is a mineral exploration and development company focused on rare metals deposits in Canada. Its flagship project, the 100%-owned Nechalacho Deposit, Thor Lake, NWT, is emerging as one of the largest undeveloped rare earth elements resources in the world. Its exceptional enrichment in the more valuable 'heavy' rare earth elements, which are key to enabling advances in clean technology and other growing high-tech applications, is one of the few potential sources of these critical elements outside of China, currently the source of 95% of world supply. Avalon is well funded, has no debt and its work programs are progressing steadily. Social responsibility and environmental stewardship are corporate cornerstones. Avalon's performance on community engagement in the north earned it the 2010 PDAC Environmental and Social Responsibility Award.



Contact:

Avalon Rare Metals Inc.
http://www.avalonraremetals.com
Email: ir@avalonraremetals.com

William Mercer, Ph.D., P.Geo.,
VP Exploration
TEL: +1-416-364-4938