Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 - Rev. 0
19-10
and financial markets that prices which spike upward to unsustainable levels for
whatever the reason are often followed by price declines which overcorrect to the
downside and are often equally unsustainable. Thus, the following market factors
are observed:
Several of the six major Chinese rare earth producers designated to
consolidate the Chinese industry are reporting poor financial results;
Chinese companies are under significant pressure to implement stricter
environmental and safety controls on their operations, and Chinese labor cost
increases have been averaging 12%-15% per annum over the past few years.
One market observer estimates that the cost of environmental compliance
alone could require rare earth prices 20% higher than current levels;
Ore grades for rare earths mined by many Chinese mining companies are
declining, a phenomenon faced by producers of many mineral commodities;
The Chinese government has announced purchase prices for a domestic
stockpiling program of certain rare earths that could reduce available supplies.
The premiums to current market prices vary by element, but reports indicate
that the Chinese government is expecting to pay an overall premium of
approximately 10% above current prices;
Demand growth projections indicate that China, which currently consumes
approximately two-thirds of the global rare earths supply, may be a net
importer of many rare earths by 2020;
Geopolitical considerations, increasing environmental regulations, permitting
delays, remote locations, and high capital requirements for many potential
new rare earth projects may serve to limit new supply; and
Research and development efforts for new uses of rare earths are expected to
accelerate, driven in part by manufacturers having access to secure, non-
Chinese rare earth sources, like the Bear Lodge Project.
The use of rare earths prices from the past year appears to be a reasonable
approach to pricing the Bear Lodge product. In fact, if it is correct that current RE
prices reflect a market overcorrection; the prices might prove to be conservative.
The pricing used for rare earths in evaluating the economics of the Bear Lodge
Project are shown in table 19.1 below:
