Toronto, ON -- Avalon Rare Metals Inc. (TSX and NYSE Amex: AVL) ("Avalon" or the "Company") is pleased to announce the results of a prefeasibility study for a rare earth elements separation plant to be located in the southern United States. The separation plant prefeasibility study was prepared by independent consultants SNC-Lavalin Inc. ("SNC-Lavalin"). The study was based on a site in Louisiana close to transportation infrastructure. The Company is actively pursuing land acquisition opportunities in the Gulf Coast region with two potential sites in the negotiation stage and others under consideration.

Don Bubar, Avalon's President and CEO commented, "The Gulf Coast region of the United States is an attractive potential location for our separation plant due to low-cost, bulk transportation alternatives, and proximity both to suppliers of the chemical reagents required for the separation process and to potential customers for the Company's rare earth products." Avalon is proceeding with due diligence investigations and negotiations with local landowners to determine the suitability of each property for the Company's needs. In addition, the Company continues to review potential alternative locations for the separation plant both in the U.S. and in Canada.

SEPARATION PLANT COST ESTIMATES

The separation plant prefeasibility study assumes that the plant will be located near sources of electrical power, natural gas, water, and in close proximity to third party chemical producers. Rail spurs connected to existing rail lines will accommodate shipment of concentrate feed stock and shipment of marketable product from the separation plant.

SNC-Lavalin estimated capital and operating costs for a separation plant with a capacity of 10,000 tonnes per annum. The cost estimates are based on fourth quarter 2011 price quotations and have an intended overall accuracy of �25%. The estimated capital cost for the separation plant is US$302 million, which includes a complete separation plant facility; infrastructure, utilities and ancillary services; indirect costs; and contingency. The largest capital expense is the solvent extraction circuit consisting of over 1,000 mixer-settlers, and makes up 33% of the total capital cost at US$101 million. SNC-Lavalin provided the cost estimates in United States Dollars at an exchange rate of US$1.00 = CAN$0.96.

The estimated operating cost is US$5,634 per tonne of rare earth oxide product, which includes labour, operating supplies, supplies and reagents, and maintenance costs. Reagent costs, with hydrochloric acid and sodium hydroxide being the two largest contributors, make up 70% of the total operating costs at US$3,934 per tonne of rare earth oxide product.  

The separation plant is designed to treat chemical concentrates containing a blend of light and heavy rare earth elements originating from the Company's Nechalacho rare earth elements deposit, Thor Lake, NWT, Canada. These chemical concentrates will be produced from two hydrometallurgical facilities: a sulphuric acid bake plant planned for the Northwest Territories and a second cracking plant which is presently contemplated to be co-located with the separation plant, as it also requires hydrochloric acid and caustic soda. The separation plant is designed to produce ten different pure rare earth oxides and one pure mixed heavy rare earth carbonate for sale. The overall plant recovery is estimated at 98%. The following is the expected production rate for each rare earth oxide:

FEASIBILTY STUDY BUDGET UPDATE

The separation plant design will now be incorporated into the development model for the Nechalacho project feasibility study, also being completed by SNC-Lavalin, and scheduled for completion by the end of 2012. The Company has increased its budget to complete the feasibility study, to reflect the expanded scope of work by including the separation plant in the development plan as well as an expansion of the pilot plant work and definition drilling programs. The increase in drilling is necessary to better define the geometry of the deposit as recent results demonstrate some subtle but significant irregularities in the shape of the deposit that require further detailing before the mine plan for the feasibility study can be finalized.

The Company now expects that the total cost of the feasibility study will be approximately $64 million, an increase of $18 million over the Company's previous budget estimate of $46 million. Of this total approximately $30 million has been spent to date and $34 million remains to be spent over the next eight to ten months. With $50 million in cash resources, the Company has sufficient funding available to complete the feasibility study and cover its overhead expenses, but will need to raise additional capital in order to begin funding pre-production development expenditures such as deposits for long lead time equipment items needed in the processing plant.

On July 7, 2011, Avalon announced updated economics on the Nechalacho prefeasibility study including a project capital cost estimate of CAN$902 million prepared by Roscoe Postle Associates ("RPA"). RPA's capital cost estimate included all aspects of project development, including mining, mineral concentration, and hydrometallurgical processing, but did not include costs for a separation plant. Including the separation plant in the development model brings the total estimated capital expenditures for the Nechalacho project to approximately $1.2 billion, as previously forecast. For more information on the Nechalacho prefeasibility study, please refer to the news release:

http://www.thepressreleasewire.com/client/avalon_rare_metals/release.jsp?actionFor=1469164.

The qualified person for the purpose of this news release is Donald Bubar, P.Geo. (Ont), President.

About Avalon Rare Metals Inc. (TSX and NYSE Amex: AVL)

Avalon Rare Metals Inc. is a mineral 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 green energy 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.

Shares Outstanding: 103,186,986. Cash resources: approximately $50 million.

To find out more about Avalon Rare Metals Inc., please visit our website at www.avalonraremetals.com. For questions and feedback, please e-mail the Company at ir@avalonraremetals.com or phone Don Bubar, President at 416-364-4938.