Annual Information Form For the Year Ended August 31, 2012 Dated as of November 28, 2012 Annual Information Form For the year ended August 31, 2012 and dated as of November 28, 2012 Table of Contents 1. PRELIMINARY INFORMATION ........................................................................................................................ 4 1.1. FINANCIAL STATEMENTS....................................................................................................................................... 4 1.2. DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS ....................................................................................... 4 1.3. NATIONAL INSTRUMENT 43-101 – QUALIFIED PERSONS ............................................................................................ 5 1.4. CAUTIONARY NOTE TO U.S. INVESTORS CONCERNING ESTIMATES OF MEASURED, INDICATED AND INFERRED MINERAL RESOURCES ................................................................................................................................................................... 5 2. CORPORATE STRUCTURE ................................................................................................................................ 5 3. GENERAL DEVELOPMENT OF THE BUSINESS ................................................................................................... 6 4. DESCRIPTION OF THE BUSINESS ..................................................................................................................... 9 4.1. GENERAL........................................................................................................................................................... 9 4.2. NECHALACHO PROJECT ........................................................................................................................................ 9 4.3. OTHER PROPERTIES AND ASSETS .......................................................................................................................... 34 4.3.1. The Separation Rapids Project ............................................................................................................. 35 4.3.2. The Warren Township Anorthosite Project .......................................................................................... 38 4.3.3. East Kemptville Project ........................................................................................................................ 40 4.3.4. Spor Mountain Rare Metals Property .................................................................................................. 44 4.3.5. Miramichi Tin Project ........................................................................................................................... 44 4.3.6. Lilypad Lakes Tantalum-Cesium Property ............................................................................................ 45 4.3.7. Other Assets ......................................................................................................................................... 47 4.4. EMPLOYEES ..................................................................................................................................................... 47 4.5. SAFETY AND ENVIRONMENTAL POLICY .................................................................................................................. 47 4.6. CORPORATE SOCIAL RESPONSIBILITY (“CSR”) ........................................................................................................ 49 4.7. RISK FACTORS .................................................................................................................................................. 50 5. DIVIDENDS ................................................................................................................................................... 56 6. DESCRIPTION OF CAPITAL STRUCTURE ......................................................................................................... 56 7. MARKET FOR SECURITIES ............................................................................................................................. 56 7.1 TRADING PRICE AND VOLUME ............................................................................................................................. 56 7.1.1 Common Shares ................................................................................................................................... 56 7.1.2 Warrants .............................................................................................................................................. 58 7.2 PRIOR SALES .................................................................................................................................................... 58 8. DIRECTORS AND OFFICERS ........................................................................................................................... 59 8.1. NAME, OCCUPATION AND SECURITY HOLDING ....................................................................................................... 59 8.2. CEASE TRADE ORDERS, BANKRUPTCIES, PENALTIES OR SANCTIONS ............................................................................. 63 8.3. CONFLICTS OF INTEREST ..................................................................................................................................... 63 9. LEGAL PROCEEDINGS AND REGULATORY ACTIONS ...................................................................................... 64 10. INTEREST OF MANAGEMENT AND OTHERS IN MATERIAL TRANSACTIONS ............................................... 64 11. TRANSFER AGENT AND REGISTRAR .......................................................................................................... 64 12. AUDIT COMMITTEE AND RELATED INFORMATION ................................................................................... 64 12.1. CHARTER ..................................................................................................................................................... 64 12.2. COMPOSITION .............................................................................................................................................. 64 12.3. PRE-APPROVAL POLICIES AND PROCEDURES....................................................................................................... 65 Avalon Rare Metals Inc. Page 2 Annual Information Form For the year ended August 31, 2012 and dated as of November 28, 2012 12.4. EXTERNAL AUDITOR SERVICE FEES.................................................................................................................... 65 13. MATERIAL CONTRACTS ............................................................................................................................. 66 14. INTERESTS OF EXPERTS ............................................................................................................................. 66 14.1. NAMES AND INTERESTS OF EXPERTS ................................................................................................................. 66 15. ADDITIONAL INFORMATION ..................................................................................................................... 66 APPENDIX A - CHARTER OF THE AUDIT COMMITTEE ............................................................................................ 68 Avalon Rare Metals Inc. Page 3 Annual Information Form For the year ended August 31, 2012 and dated as of November 28, 2012 1. Preliminary Information In this Annual Information Form (the “AIF”), Avalon Rare Metals Inc. is referred to as “Avalon” or the “Company”. All information contained herein is as at August 31, 2012 and all monetary amounts are stated in Canadian dollars, unless otherwise stated. 1.1. Financial Statements This AIF should be read in conjunction with the Company’s consolidated financial statements and management’s discussion and analysis for the 12 months ended August 31, 2012. The consolidated financial statements and management’s discussion and analysis are available on the Company’s website at www.avalonraremetals.com and under the Company’s profile on the SEDAR website at www.sedar.com. All financial statements are prepared in accordance with Canadian generally accepted accounting principles and are reported in Canadian dollars. 1.2. Disclosure Regarding Forward-Looking Statements Certain of the statements that are not historical facts contained in this AIF are forward-looking statements within the meaning of Canadian and United States securities legislation that involve risks and uncertainties that could cause actual events or results to differ materially from estimated or anticipated events or results reflected in the forward-looking statements. Readers can identify many of these statements by looking for words such as “believe”, “expects”, “will”, “intends”, “projects”, “anticipates”, “estimates”, “continues” or similar words or the negative thereof. There can be no assurance that the plans, intentions or expectations upon which these forward-looking statements are based will occur. Such statements reflect the Company’s current views with respect to future events and are subject to risks and uncertainties and are necessarily based upon a number of estimates and assumptions that, while considered reasonable by the Company, are inherently subject to significant business, economic, competitive, political and social uncertainties and contingencies. Forward-looking statements include,