Ann: Scoping Study shows viability of Viscaria Pr, page-6

re: Ann: Scoping Study shows viability of Vis... RFC Ambrian Report 6 June 2012

Recommendation — BUY; Target Price A$0.32 We raise our rating of Avalon to a BUY, with a target price of A$0.32.

Avalon replaced management in February 2012. In control now
is the same team that discovered and developed Discovery Metals and,more recently, Meridian Minerals. The core team of Jeremy Read and Quinton Hills has an excellent track record, having returned +400% growth in share value over four years at Discovery and 700% in two years at
Meridian. This value was delivered through increasing resources from 20Mt @ 1.2% to 103Mt @ 1.4% and 8Mt to 18Mt @ 10% Pb+Zn combined at Discovery and Meridian respectively.
The Viscaria Project has many similarities to the projects
that management has worked on previously, especially Discovery Metals’ Boseto Copper Project. Therefore, Avalon’s new management has implemented a similar two-fold strategy, based on assessing a combined open-pit and underground operation. If economic, as anticipated,
management will then increase resources from further exploration.
Following our site due diligence, we believe the project’s full value can be significantly improved, with implementation of the new management’s strategy already in full swing. We believe the orebody has the potential to deliver a higher-grade and larger resource. This will
increase mine life, and, combined with the improved economics from underground mining, we believe more value can be derived from the Viscaria Project. Share price performance has bucked the general trend
and seen 67% growth since new management joined; this further illustrates the broader market’s vote of confidence in the management. Recommendation — BUY; Target Price A$0.32 We raise our rating of Avalon to a BUY, with a target price of A$0.32, or A$92.3m based on a risked 0.6x NAV. Upcoming catalysts nclude:
? Assays from the current 2,000m drill programme — June 2012
? Underground and open-pit scoping study — 2Q12
? Capital raising for BFS and exploration — 2H12
? Commence BFS and larger-scale exploration & drilling — 3Q12