Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 - Rev. 0
19-9
The reasonableness of the assumed level of the discount was further checked in
several ways. First, the Company calculated a blended tolling charge, based on
reported tolling charges in the RE market of $5.00/kg for light rare earth concentrates
and $20-$25/kg for heavy rare earth concentrates. Based on the Company’s rare
earth distribution, this blended charge was estimated to be approximately $5.50-
$5.70/kg. Second, metal-pages.com regularly quotes the price of only one
concentrate in its market price survey, that of a cerium carbonate concentrate with a
total REO content of 45%. Despite the much higher purity of Rare Element’s
concentrate relative to RE oxides, the quoted FOB China export prices for cerium
carbonate concentrate were compared to the quoted FOB China export prices for
cerium oxide (99% minimum purity) over the past two plus years through June 2014.
The average differential between concentrate and oxide over this time period was
25.2%.
The third method used to check the validity of the discount assumption was to use the
empirical data from recent financial results published by Molycorp, Inc. and Lynas
Corporation, both of which produce rare earth products from minerals similar to those
found at Rare Element’s Bear Lodge Project. Although the rare earth distribution in
each deposit is different, there are some similarities in the relative make-up of rare
earths in these companies’ projects that make them somewhat comparable to Bear
Lodge. Molycorp has published segment information that is more useful than the
overall “average selling price” (ASP) that Lynas discloses for its production. Lynas’s
ASP for the second half of 2013 was US$21.90 per kilogram, as reported in their
financial statements.
Relative to Molycorp’s disclosures, it is expected that the 97+% TREO concentrate
produced at Bear Lodge should attract a market value somewhere between the 55%-
60% TREO concentrate produced from Molycorp’s Mountain Pass mine in California
($15.43 average price for the 7 quarters ended 6/30/14) and the average value per
kilogram received by their Chemicals and Oxides segment ($31.66 average for the
past 7 quarters) for more pure, upgraded material (heavily weighted toward cerium
and lanthanum). For the trailing seven quarters ending June 30, 2014, the mean
average value per kilogram of material sold from Mountain Pass and from the
Chemicals and Oxide business segment was US$23.54. Again, based on empirical
data, the assumed and Bear Lodge’s more favorable mix of critical rare earths,
market price for Bear Lodge production of US$24.60 appears reasonable.
The final perspective on pricing is based upon the behavior of markets broadly, not
just the market for rare earths. It has been observed historically in many commodity
