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| PART I – FINANCIAL INFORMATION | 4 | |
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| ITEM 1. | FINANCIAL STATEMENTS | 4 |
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| ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 16 |
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| ITEM 3. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 19 |
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| ITEM 4. | CONTROLS AND PROCEDURES | 19 |
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| PART II – OTHER INFORMATION | 19 | |
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| ITEM 1. | LEGAL PROCEEDINGS | 19 |
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| ITEM 1A. | RISK FACTORS | 19 |
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| ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 19 |
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| ITEM 3. | DEFAULTS UPON SENIOR SECURITIES | 20 |
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| ITEM 4. | MINE SAFETY DISCLOSURES | 20 |
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| ITEM 5. | OTHER INFORMATION | 20 |
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| ITEM 6. | EXHIBITS | 20 |
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| SIGNATURES | 21 | |
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ii
Reporting Currency, Financial and Other Information
All amounts in this report are expressed in thousands of United States (“U.S.”) dollars, unless otherwise indicated.
Financial information is presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
References to “Rare Element,” the “Company,” “we,” “our,” and “us” mean Rare Element Resources Ltd., our predecessors, and consolidated subsidiaries, or any one or more of them, as the context requires.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”), including* “Management’s Discussion and Analysis of Financial Condition and Results of Operations”in Item 2 of Part I of this report,* contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning of Canadian securities laws (collectively, “forward-looking statements”). Any statements that express or involve discussions with respect to business prospects, predictions, expectations, beliefs, plans, intentions, projections, objectives, strategies, assumptions, future events, performance or exploration and development efforts using words or phrases (including negative and grammatical variations) such as, but not limited to, “expects,” “anticipates,” “plans,” “estimates,” “intends,” “forecasts,” “likely,” “projects,” “believes,” “seeks,” or stating that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved, are not statements of historical fact and may be forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in these forward-looking statements are reasonable, we cannot be certain that these plans, intentions, and expectations will be achieved. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this Quarterly Report. Forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding the following:
| ● | our business, prospects, and overall strategy; |
| ● | progress in the development of our Demonstration Plant (as defined below), the timing of that progress, and prospects for completing construction and operating the Demonstration Plant; |
| ● | planned or estimated expenses and capital expenditures, including the Demonstration Plant’s expected costs of construction, operation, decommissioning, and the sources of funds to pay for such costs; |
| ● | availability of liquidity and capital resources; |
| ● | our Demonstration Plant team’s ability to achieve the full amount of funding support from the Department of Energy (“DoE”) through the remainder of the Demonstration Plant project; |
| ● | our Demonstration Plant team’s ability to secure additional DoE funding, in addition to the awarded funding, on a cost-share basis relating to the Demonstration Plant project or any further initiatives that may be undertaken relating to the Demonstration Plant; |
| ● | our ability to receive the full amount of funding in connection with the Wyoming Energy Authority grant for the Demonstration Plant; |
| ● | our ability to complete and operate the Demonstration Plant to meet project objectives within the approved budget and within the estimated timeline; |
| ● | our ability to progress the Demonstration Plant through the remaining DoE go/no-go decision point; |
| ● | the source, quality, costs, and timing of materials, equipment, supplies and resources, including human resources, for the construction, operation, and decommissioning of the Demonstration Plant; |
| ● | the plans for our projects or other interests, operations, or rights; |
| ● | plans and strategies during and following the completion of operations of the Demonstration Plant, including the potential for further operation of the Demonstration Plant to meet additional objectives; |
| ● | plans and strategies relating to the advancement of the Bear Lodge REE Project (as defined below); |
| ● | our ability to secure further funding for our longer-term business plans, including the advancement of the Bear Lodge REE Project through permitting and licensing, and if feasible, ultimate construction and operations of a commercial mine and plant for processing and separation of rare earth elements; and |
| ● | government regulations, including our ability to obtain, and the timing of, necessary governmental permits and approvals for our business and projects. |
Forward-looking statements are based on our current expectations and assumptions that are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, risks associated with:
| ● | our majority shareholder’s significant influence on, or ability to control the outcome of, certain of our major corporate decisions, including our business strategies and financing options to meet our capital needs; |
| ● | our ability to protect our intellectual property rights; |
| ● | the ability of our Demonstration Plant to successfully operate and produce information that would support a decision by the Company to proceed with a potential commercial-scale production facility; |
| ● | the uncertain nature of demand and supply and their effect on prices for rare earth products; |
| ● | technological advancements, substitutes, and the establishment of new uses and markets for rare earth products; |
| ● | risks related to the development of new, lower cost sources of supply of rare earth products; |
| ● | development risks, operational hazards, and regulatory approvals; |
| ● | our reliance on the skill and expertise of third-party service providers; |
| ● | the ability of third-party service providers to meet their contractual obligations, including as a result of supply chain disruptions and the effects those disruptions could have on our timelines and costs; |
| ● | changes in legislation and regulations relating to the mining and rare earth industries, including environmental laws and regulations that impose material compliance costs and liabilities; |
| ● | difficulty in obtaining necessary governmental permits, licenses, and approvals for our Bear Lodge REE Project, and other projects; |
| ● | governmental interventions in the mining and rare earth industries, including increases in barriers to domestic production and international trade; |
| ● | uncertainties regarding our ability to maintain sufficient liquidity and attract sufficient capital resources to implement our projects and strategies; |
| ● | our ability to attract and retain key personnel; |
| ● | the impact of inflation affecting our business, including the costs and our ability to complete the Demonstration Plant construction, operations and decommissioning, the Bear Lodge REE Project, and other projects; |
| ● | impact of external financial sector factors including the security of our bank and investment account deposits; |
| ● | risks and uncertainties inherent in estimates of future operating results; |
| ● | changes in competitive factors, including the development or expansion of other projects that are competitive with ours; |
| ● | China’s dominance of the rare earth supply chain and its ability to significantly impact market supply, demand, and prices; |
| ● | our ability to complete financings and other transactions; |
| ● | risks related to pandemics, epidemics or other disease outbreaks on supply chains and the resulting disease containment measures implemented by various governments; |
| ● | risks relating to the availability and costs of goods and services we need to achieve our plans and goals resulting from military conflicts or wars such as in Russia/Ukraine and the Middle East; |
| ● | information technology system and/or data disruptions, damage, theft, failures, or cyber-attacks; |
| ● | risks and uncertainties associated with litigation matters and opposition to our plans and operations by third parties; |
| ● | whether we deregister our common shares under the Exchange Act and/or list our common shares on a securities exchange; |
| ● | the impact of foreign and domestic government actions impacting the pricing for, or supply of, rare earth products, including changes in the actual or perceived supply and demand for rare earths due to foreign government export controls; |
| ● | the OTCQB Venture Marketplace standards and the “penny stock” rules and the impact on trading volume and liquidity due to our trading on the OTCQB Venture Marketplace; |
| ● | the consequences of Synchron, the Company’s majority shareholder, discontinuing its support for the Company; |
| ● | other factors, many of which are beyond our control. |
This list is not exhaustive of all the factors that may affect our forward-looking statements. Although we have attempted to identify important factors that could cause actual results, performance, or achievements to differ materially from those described in forward-looking statements, there may be other factors that could cause results, performance, or achievements not to be as anticipated,
estimated, intended, or expected. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results, performance, or achievements may vary, possibly materially, from those anticipated, estimated, intended, or expected. We caution readers not to place undue reliance on any such forward-looking statements. Except as required by law, we disclaim any obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.**We qualify all of the forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements.**We advise you to carefully review the reports and documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”) and with the Canadian securities regulatory authorities, particularly our Annual Report on Form 10-K for the year ended December 31, 2023. The reports and documents filed by us with the SEC are available at www.sec.gov and with the Canadian securities regulatory authorities under the Company’s profile at www.sedarplus.ca.
