RARE ELEMENT RESOURCES LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Expressed in thousands of U.S. Dollars, except share and per share amounts, unless otherwise noted)
70
Mineral properties
Mineral property acquisition costs, including indirectly related acquisition costs, are capitalized when incurred.
Acquisition costs include cash consideration and the fair-market value of common shares issued as consideration.
Properties acquired under option agreements, whereby payments are made at the sole discretion of the Company, are
capitalized as mineral property acquisition costs at such time as the payments are made. Exploration costs are
expensed as incurred. When it is determined that a mining deposit can be economically and legally extracted or
produced based on established proven and probable reserves under SEC Industry Guide 7, development costs related
to such reserves incurred after such determination will be considered for capitalization. The establishment of proven
and probable reserves is based on results of feasibility studies which indicate whether a property is economically
feasible. Upon commencement of commercial production, capitalized costs will be amortized over their estimated
useful lives or units of production, whichever is a more reliable measure. Capitalized amounts relating to a property
that is abandoned or otherwise considered uneconomic for the foreseeable future will be written off.
Restricted cash
The Company maintains at times cash deposits and/or surety bonds, as required by regulatory bodies as assurance
for the funding of future reclamation costs associated with the Company’s asset retirement obligation. These funds
held in cash deposits and/or used as collateral for surety bonds are restricted to that purpose and are not available for
the Company’s use until the reclamation obligations have been fulfilled. Restricted cash is classified as a non-
current asset.
Asset retirement obligations
Our mining and exploration activities are subject to various laws and regulations, including legal and contractual
obligations to reclaim, remediate, or otherwise restore properties at the time the property is removed from service.
Asset retirement obligations are recognized when incurred and recorded as liabilities at fair value. The reclamation
obligation is based on when spending for an existing disturbance will occur. We reclaim the disturbance from our
exploration programs on an ongoing basis and therefore the portion of our asset retirement obligation corresponding
to our exploration programs will be settled in the near term and is classified as a current liability. The remaining
reclamation associated with environmental monitoring programs is classified as a long-term liability; however,
because we have not declared proven and probable reserves under SEC Industry Guide 7, the timing of these
reclamation activities is uncertain. The fair value of the outstanding liability at the end of the period approximates
the cost of the asset retirement obligation. For exploration stage properties that do not qualify for asset
capitalization, the costs associated with the obligation are charged to operations. For development and production
stage properties, the costs will be added to the capitalized costs of the property and amortized using the units-of-
production method. We review, on a quarterly basis, unless otherwise deemed necessary, the asset retirement
obligation in connection with the Bear Lodge REE Property.
Asset retirement obligations are secured by surety bonds held for the benefit of the state of Wyoming in amounts
determined by applicable federal and state regulatory agencies.
