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We anticipate that our future operating costs at the Bear Lodge REE Project will vary from year to year due to a
number of factors, such as changing ore grade, metallurgy and revisions to mine plans in response to the physical
shape and location of the ore body. In addition, costs are affected by the price of commodities such as oil, gas,
reagents/chemicals, steel, rubber and electricity. Such commodities are at times subject to volatile price movements,
including increases that could make production less profitable or not profitable at all. A material increase in costs
could also impact our ability to commence or maintain future development or mining operations.
We may be adversely affected by fluctuations in demand for, and prices of, rare earth products.
Because our primary focus currently is the advancement and development of the Bear Lodge REE Project, changes
in demand for, and the market price of, REE products could significantly affect our ability to develop or finance the
Bear Lodge REE Project and eventually attain commercial production or profitability. REE product prices may
fluctuate and are affected by numerous factors beyond our control such as interest rates, exchange rates, inflation or
deflation, fluctuation in the relative value of the U.S. dollar against foreign currencies on the world market, global
and regional supply and demand for REE products, and the political and economic conditions of countries that
produce and use REEs.
As a result of the global economic crisis, REE prices declined by approximately 50% between 2008 and the end of
the third quarter of 2009. REE prices then increased significantly during 2010 and most of 2011 only to again
experience declines from 2012 through 2014. Protracted periods of low prices for REE products could significantly
reduce our ability to develop the Bear Lodge REE Project and, if we attain commercial production, to maintain
profitable operations.
Demand for REE products is impacted by demand for downstream products incorporating rare earths, including
hybrid and electric vehicles, wind power equipment and other clean technology products, as well as demand in the
general automotive and electronics industries. Lack of growth in these markets could adversely affect the demand
for REE products, which would have a material adverse effect on our Bear Lodge REE Project and our business. In
contrast, periods of high REE prices are generally beneficial to us; however, strong REE prices, as well as real or
perceived disruptions in the supply of REE, also create economic pressure to identify or create non-REE alternate
technologies that ultimately could reduce future long-term demand for REE products, and at the same time may
incentivize development of otherwise marginal mining properties. For example, automobile manufacturers have
previously announced plans to develop motors for electric and hybrid cars that do not require REE products due to
concerns about the available supply of rare earths. If the automobile industry or other industries reduce their
reliance on rare earth products, the resulting change in demand could have a material adverse effect on our business.
In particular, if prices or demand for rare earths were to decline, our share price would likely decline, and this could
also impair our ability to obtain capital needed for our Bear Lodge REE Project and our ability to find purchasers for
our products at prices acceptable to us or at all.
An increase in the global supply of rare earth products, dumping and/or predatory pricing by our competitors
may materially adversely affect our ability to raise capital, develop our Bear Lodge REE Project or operate
profitably.
The pricing and demand for REE products is affected by a number of factors beyond our control, including growth
of economic development and the global supply and demand for REE products. REE supply markets continue to be
dominated by production from China, which produced an estimated 85% of the global REE production in 2014.
China also dominates the manufacture of metals, NdFeB magnets and other products from rare earths. The threat of
increased competition may lead our competitors to engage in predatory pricing behavior or manipulation of the
available supply of REEs. Advanced technology in recycling REEs may also impact supply and prices. Any increase
in the amount of rare earth products exported from other nations and increased competition may result in price
reductions, reduced margins or loss of potential market share, any of which could materially adversely affect our
profitability. As a result of these factors, we may not be able to compete effectively against our future competitors.
