Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 – Rev. 0
22-1
Economic Analysis
22
22.1 Economic Analysis Summary
The economic analysis for the Bear Lodge Project was undertaken utilizing the
Discounted Cash Flow (DCF) methodology and was based on the mine production
schedule, capital and operating cost estimates for the mine, processing plant, and
associated infrastructure. The mine plan was developed to produce a variable flow
of ore to the PUG plant in order to balance the pre-concentrate delivery with the
maximum design capacity of the Hydromet plant.
Capital costs include a factored cost for indirects and contingency. The initial capital
cost has an indirect factor of 16.0% and a contingency of 19.0%. These factors were
determined by calculating a weighted average of the indirects and contingency for
individual cost items during the period. The replacement capital cost items consist
mainly of mining equipment and continued expansion of the tailings storage facility.
These items have a price that was more accurately identified and had less indirect
cost associated with them. Therefore, the indirect factor and contingency dropped to
6.3% and 9.0% respectively.
The basket price for rare earth oxides is a critical input to the economic evaluation,
and the derivation of this price is described in chapter 19. Capital and operating
costs are another critical input and are described in chapter 21. The key economic
assumptions and technical parameters that were used in the financial analysis are
summarized in Table 22.1.
Table 22.1 - Economic Input Parameters
Parameter Description
Value
Unit
Rare Earths Basket Price
$22,317
$USD/short ton
$24.60
$USD/Kg
Mill Rate
76
mills
Severance Tax Rate
2.0
(%)
Land Tax Rate
9.0
(%)
Industrial Property Tax Rate
11.5
(%)
Crook County Ad Valorum Tax
Federal/Alternative Min. Tax
6.15
35 / 20
(%)
(%)
Mine Life
Discount Rates
45
8, 10 & 12
Years
(%)
(Roche, 2014)
A cash flow forecast is presented in Table 22.2.
