Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 – Rev. 0
1-16
Chinese production costs are escalating, particularly for labor, safety, and
environmental protection, with some industry observers estimating that prices need to
rise by 20% to offset environmental cost increases alone;
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 by industry analysts 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, remote locations
and high capital requirements for many potential new rare earth projects may serve to
limit new supply. 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.
To establish the assumed prices for the PFS, the Company used the trailing 12
months (TTM) Chinese export values for individual rare earth oxides, derived from the
latest available customs statistics through June 2014, as reported by Metal-Pages, a
UK-based firm that reports on metals trading across numerous sectors. Customs
statistics report the value of goods exported based on actual market transactions and,
as a result, provide empirical data on the underlying market prices. The assumed
prices for gadolinium and samarium are based on published spot “FOB China” prices
as reported by Metal-Pages, because no custom statistics are available. These spot
prices are based on Metal-Pages’ survey of market participants and, according to
some market sources, can differ significantly from realized prices, since most rare
earths sales are done under private contracts.
For the PFS, the Company discounted certain of these individual rare earth oxide
export values further (including cerium, europium and praseodymium) to account for
current market conditions. Most significantly, the Company reduced the reported
value for dysprosium by two-thirds to temper the impact of significant spikes in export
values that occur in periods of high seasonal demand and that could be expected to
diminish when alternative sources of dysprosium are developed.
