The Anchor House, Inc.

Don Bubar, President and CEO of Avalon Ventures, answered the following questions via written response on 18 February 2008:

Clint Cox: How did you get interested in the Rare Earth Elements (REE)?

Don Bubar: It followed from an initial interest in the rare metals lithium and tantalum. After we acquired Thor Lake as an additional rare metals asset, it soon became apparent that (because of the enrichment in the HREE) that the REE represented the best near term development opportunity for this polymetallic rare metals resource.

Cox: What role do the REE play in today’s society?

Bubar: An evermore important role in many emerging “green” and “clean” technologies. I think we are just seeing the tip of the iceberg with these unique elements and many more new applications will emerge as new supply sources such as Thor Lake are brought on stream.

Cox: Describe the minerals present at Thor Lake.

Bubar: The deposits at Thor lake contain virtually every documented REE mineral species of economic importance. These include bastnaesite, xenotime, monazite, synchiste, parasite, allanite and fergusonite. In the Lake Zone we are finding sub-zones enriched in fergusonite, a rare yttrium-niobium-tantalum oxide mineral that preferentially concentrates the lanthanides of mid-atomic number from Neodymium through Dysprosium. Unlike xenotime, it has no associated thorium and instead is closely associated with zircon. We think it will it will make a superb quality REE mineral product.

Cox: What is the current status of the metallurgy for Thor Lake?

Bubar: Lots of work was done historically on the xenotime and bastnaesite mineralization in the North T deposit. Some work was done for tantalum in the Lake Zone ores in 2001-2002, which succeeded in producing a bulk tantalum-niobium-REE concentrate by flotation methods. At the present time, we are initiating a test program at SGS Lakefield Research to continue this work and optimize the process to produce a concentrate relatively enriched in fergusonite and the heavy REE.

Cox: What is the timeline for production?

Bubar: 3-5 years, with the mid-point of that range (2012) being the most likely date for initial production of concentrate. In 2008, we plan to complete a pre-feasibility study on the Lake Zone resource.

Cox: What do you see as the upside to the rare earth market over the next 3 to 5 years?

Bubar: Certainly the rapid expansion of the markets for rare earth magnets of different formulations in various applications especially in fuel efficient cars is the biggest upside. Other emerging technologies such as magnetic refrigeration also loom as important new markets. I am a big believer in the principle that increasing supply of heavy rare earths will greatly expand their markets.

Cox: What do you see as the greatest risk for the rare earth market?

Bubar: Substitution by other alternative materials in high volume markets is always the greatest threat for any raw material. For the REE magnets. this is a long term risk as there are no substitutes known at present.

Cox: What are common misperceptions about rare earths?

Bubar: There is a lot of confusion amongst the general public about rare earths as a commodity group. The relative of abundance of the lights vs. heavies and the fact that they all occur together in a given deposit requiring sequential separation and the economic consequences of this, are the biggest public misunderstandings about REE.

Cox: What is the history of the Thor Lake deposit?

Bubar: Thor Lake is a classic example of a unique mineral resource found before its time. It is enriched in many different rare metals in a number of distinct zones. Early work in the 70’s was focused on tantalum and niobium. Then the North T was discovered as a rich beryllium resource and this potential became the focus of development work through the 80’s. A bit of work was done in the late 80’s for yttrium and REE, but it was not until Avalon got involved in 2005 that the REE became the primary focus of economic interest in the property.

Cox: Where will the ore from Thor Lake be processed?

Bubar: Unknown at present but a number of scenarios will be considered. Like most mineral deposits where the minerals of economic interest occur in low concentrations, the most likely scenario is a concentrator on site, with concentrates being shipped elsewhere for refining.

Cox: What are the biggest potential uses for REE?

Bubar: Expanded uses of magnets for magnetic refrigeration and efficient power generation plus new uses in specialty alloys, glass and ceramics.

Cox: The Thor Lake site seems to be fairly complex to understand – how would you explain it in the most simple terms?

Bubar: I would describe it as a very large polymetallic rare metals resource consisting of a number of distinct mineralized zones where rare metals have been variably enriched, likely due to multiple mineralizing events. It appears to be unique in a global context and likely of considerable future strategic value because of its uniqueness.

Cox: What is the biggest advantage of Thor Lake?

Bubar: It’s exceptional enrichment in the heavy rare earths, very large size and near surface flat-lying geometry. It also has many potential valuable by-products.

Cox: What is the biggest challenge at Thor Lake?

Bubar: It’s relatively remote location in the Northwest Territories and the operational challenges that come along with it. Permitting is always a challenge for greenfields projects these days and the NWT is no exception in this regard, where on-going aboriginal land claim negotiations introduce a further complicating factor.

Cox: What has surprised you the most about the rare earths?

Bubar: Their remarkable versatility and the explosive growth in demand for the rare earth magnets.

Cox: Thanks, Don!