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Our 100% interest in the 499 unpatented mining claims was, in part, acquired from Phelps Dodge
Exploration Company (now a subsidiary of Freeport-McMoRan Copper Inc. (“Freeport”)) by way of a Mineral
Lease and Option for Deed in 2000, and 404 claims were transferred from Newmont Mining Corporation
(“Newmont”) to us in May 2010. A portion of the Newmont-transferred claims had been held in a joint venture
between Newmont and the Company since 2006 until such joint venture was terminated in May 2010. A portion of
the Newmont-transferred claims (approximately 327) are subject to a perpetual 0.5% production Net Smelter Return
(“NSR”) royalty on minerals except for rare earth minerals, which are excluded from any royalty obligation. In
addition, and in connection with the Newmont joint venture termination, we assumed all obligations of Newmont
under a consulting agreement with Bronco Creek Exploration and Mining, Inc. (“Bronco Creek”) requiring us to pay
as a finder’s fee, 3% of exploration expenditures made during each quarter until a cap of $500,000 has been paid.
The claims covered by the Bronco Creek consulting agreement, which are located outside of the rare earth deposits,
are further subject to a 0.25% NSR royalty with a cap of $3,000,000. We located additional unpatented mining
claims in 2011 and 2012, and now have a 100% interest in 499 total unpatented mining claims.
Some of our mining claims and a portion of a defined area of influence surrounding the claims were
previously subject to a production royalty of 2% of NSR royalty payable to Freeport, but the Company purchased
the royalty in March 2009. As a result of the agreements above, we hold an unencumbered rare earth project,
including all 499 unpatented mining claims, free of third-party royalties for rare earth production.
The Company acquired 257 hectares (634 acres) of fee property in 2013 through a land exchange with the
state of Wyoming, State Board of Land Commissioners within the Bear Lodge REE Project area and now owns that
land in fee (the “Land Exchange Property”). The Wyoming patent to the land issued by the State Board of Land
Commissioners provides for a production royalty retained by the state of Wyoming for any minerals produced from
the Land Exchange Property, at a rate to be determined by the parties commensurate with similarly situated mineral
royalties in the state of Wyoming at the time of production. Notwithstanding the above, the Land Exchange
Property was acquired for ancillary facilities in support of the actual mining operation on adjacent land, and we do
not intend at this time to extract minerals therefrom. The Wyoming patent states that the mineral estate of the Land
Exchange Property will revert to Wyoming state ownership at the conclusion of mining and termination of the
Company’s mining permit.
Exploration has been carried out on the Bear Lodge Property since its discovery in 1949. In addition to
Freeport, several mining companies have conducted exploration and drilling programs at or near the Bear Lodge
Property since the discovery of mineralization. No mining or operations were conducted at the Bear Lodge Property
by any of the prior owners.
Necessary infrastructure, such as housing, food and fuel is available in communities in close proximity to
the Bear Lodge Property. Supplies can be delivered on both U.S. Interstate Highway 90 and rail lines. A Burlington
Northern rail transport line also runs through Moorcroft, 55 kilometers west of Sundance, and through Upton, the
site of the proposed hydrometallurgical plant, 64 kilometers south of Sundance. The Gillette, Wyoming area,
located approximately 89 kilometers to the west, has two coal-fired power plants and is currently a major logistics
center for Powder River Basin coal mining activity and will serve as such for any development at the Bear Lodge
Property. The current size of the Bear Lodge Property is sufficiently large to support a mining operation, with no
foreseeable obstacles regarding expansion, subject to a favorable outcome with regard to permitting.
We are not aware of any outstanding environmental liabilities associated with the Bear Lodge Property,
except for required reclamation work associated with our exploration and drilling activities. Previous exploration
activities were approved by both the USFS and the Wyoming Department of Environmental Quality. We have an
approved reclamation plan and a posted surety bond to cover the required reclamation.
Additional local, state and federal permits will be required for mining, beneficiation and processing
operations, should we decide to proceed to mine development and operations.