Rare Element Resources Ltd.

PART I

ITEM

1. BUSINESS

CORPORATE BACKGROUND

Rare Element was incorporated under the laws of the Province of British Columbia, Canada, on June 3,

1999 as Spartacus Capital Inc. Our executive office is located at 225 Union Blvd., Suite 250, Lakewood, Colorado

80228. The telephone number for our executive office is (720) 278-2460. We maintain a corporate website at

Effective as of October 8, 1999, we completed our initial public offering of 1,500,000 common shares at

CDN$0.20 per share, raising CDN$300,000. The common shares began trading on the predecessor exchange to the

TSX Venture Exchange (“TSX-V”) in Canada on November 15, 1999 under the ticker symbol “SCI.”

Originally organized as a “capital pool” company whose activities were focused on the identification and

completion of a qualifying transaction as required by the rules of the TSX-V, we transitioned to a “venture

company” on July 25, 2003, coincident with (1) the completion of a reverse takeover acquisition of Rare Element

Holdings Ltd. (the qualifying transaction), (2) a name change of “Spartacus Capital, Inc.” to “Rare Element

Resources Ltd.,” and (3) the completion of a CDN$551,000 private placement. Rare Element Holdings Ltd.’s main

asset, through its wholly owned subsidiary, Rare Element Resources, Inc., a Wyoming corporation, is the 100%

interest in a group of unpatented mining claims and adjacent property owned in fee, together known as the Bear

Lodge Property.

On December 20, 2004, our authorized share capital was changed from 100,000,000 common shares to an

unlimited number of common shares without par value. Our common shares began trading on the NYSE MKT on

August 18, 2010 under the ticker symbol “REE.” On May 27, 2011, we graduated from a listing on the TSX-V to

the Toronto Stock Exchange (“TSX”) and traded under the ticker symbol “RES” until December 31, 2015, when we

voluntarily delisted from and ceased to trade on the TSX. Our common shares traded on the NYSE MKT through

February 26, 2016. Since February 29, 2016, our common shares have been trading on the OTCQB Venture

Marketplace under the ticker symbol “REEMF.” As of December 31, 2015, there were 52,941,880

common shares

issued and outstanding.

SUBSIDIARIES

We have one direct wholly owned subsidiary, incorporated under the laws of British Columbia, Canada on

July 12, 1996 under the name “Rare Element Holdings Ltd.” That subsidiary has one direct wholly owned

subsidiary, Rare Element Resources, Inc., incorporated on August 21, 1997 in the state of Wyoming, USA, formerly

known as Paso Rico (USA), Inc.

DESCRIPTION OF BUSINESS

We are focused on advancing the Bear Lodge Rare Earth Element (“REE”) Project located near the town of

Sundance in northeast Wyoming. The Bear Lodge REE Project consists of several large, disseminated REE deposits

and a proposed hydrometallurgical plant to be located near Upton, Wyoming. The Bear Lodge REE Project is one

of the highest-grade REE deposits identified in North America and one of the highest-grade europium deposits in the

world. In addition, the Bear Lodge REE Project has a favorable distribution of the remaining critical rare earth

elements, which the Company defines as neodymium, praseodymium, dysprosium, terbium and yttrium.

In its development efforts for the Bear Lodge REE Project, the Company has done extensive laboratory

bench-scale and pilot plant testing on appropriate metallurgical processes to recover saleable rare earth products and

has filed five patents on its metallurgical innovations. Among them, it has pilot tested and filed for patent protection

on a rare earth separation technique that modifies conventional solvent extraction (“SX”) methods used for rare

earth separation to be more efficient and environmentally sound, involving no waste effluents being discharged from

the process. The Company believes that its innovations on conventional SX processing could also apply to other

mineral commodities, and is currently investigating opportunities to apply its processing technology to such

commodities including uranium, scandium, vanadium and others.