RARE ELEMENT RESOURCES LTD

Previous wording

Our primary focus has been and continues to be the engineering, permitting, licensing, construction, and operation of the Demonstration Plant at the planned location site in Upton, Wyoming. If successful, this Demonstration Plant will show that our propriety extraction technology is able to process and separate certain REEs from high grade sample materials extracted from our Bear Lodge REE Project in a more efficient and economical manner than traditional processing methods and will serve as a precursor to inform the design and estimated cost for a future full-scale production facility.

Current wording

Our primary focus has been and continues to be the engineering, permitting, licensing, construction, and operation of the Demonstration Plant. If successful, the Demonstration Plant will show that our proprietary extraction technology is able to process and separate certain REEs from high grade sample materials extracted from our Bear Lodge REE Project in a more efficient and economical manner than traditional REE processing methods and will serve as a precursor to inform the design and estimated cost for a future full-scale production facility.

Previous wording

During 2023, the Company, along with the other consortium members, continued their work on the Demonstration Plant, and this work is expected to continue through the project’s expected completion date in 2025. In December 2022, the

Current wording

Throughout 2024, the Company, along with the other consortium members, continued their work on the Demonstration Plant project, and this work is expected to continue until the completion of the project’s operations. In September 2024, the DoE issued its final Project Continuation Notice, confirming the Demonstration Plant’s readiness for operations. This notice, along with the NRC’s approval of operations received in October 2024, cleared the path for operations of the Demonstration Plant to formally commence, with operations to process and separate the REE from the stockpiled mineral sample to follow the completion of construction activities. During the production phase, which is expected to commence in mid-2025, the Demonstration Plant is expected to produce up to 10 tons (9.1 tonnes) of NdPr oxide.

Previous wording

In June 2023, the Company entered into a Funding Agreement with the WEA for its previously announced award of a $4,400 grant from the WEA to be used toward the advancement of the Demonstration Plant. This award, along with the funds raised from the Company’s 2021 rights offering, will be used to fund the Company’s fifty percent (50%) share of the Demonstration Plant’s originally estimated cost of approximately $43,800 with the other fifty percent of the funding coming from the DoE. Through December 31, 2023, the Company had paid a total of $15,700 toward its share of the expected cost of the Demonstration Plant (see Note 4 to our Consolidated Financial Statements for a more complete discussion). As of December 31, 2023, the Company had met the conditions allowing for the invoicing of $2,000 of the $4,400 WEA grant total but no grant funds had yet been received. This $2,000 was subsequently received on January 31, 2024 (see Note 14 – Subsequent Events).

Current wording

In June 2023, the Company entered into the WEA Funding Agreement for its previously announced award of a $4,400 grant from the WEA to be used toward the advancement of the Demonstration Plant. This award, along with funds contributed by the Company and the DoE, is being used to fund the Demonstration Plant’s construction and operating costs. As of December 31, 2023, the Company had met the conditions allowing for the invoicing of $2,000 of the $4,400 WEA grant total. This $2,000 was subsequently received on January 31, 2024. By September 30, 2024, the Company had met the conditions allowing for the invoicing of an additional $2,000, which was subsequently received in November 2024. The remaining $400 of the $4,400 grant total, which is conditioned on the achievement of other, future milestones, will be invoiced to the WEA once those final milestones have been achieved (expected in mid-2025).

Previous wording

Since inception, the General Atomics-led consortium has seen increases in the Demonstration Plant project costs, including expected final equipment costs, due to, among other factors, inflation. Accordingly, the project team has commenced discussions with the DoE and other government agencies regarding further cost-sharing opportunities to offset the increase in the anticipated project costs and further project objectives. In part to fund the Company’s share of these cost increases, the Company announced, during December 2023, its intention to launch a rights offering to raise approximately $36,000 in gross proceeds. In March 2024, the Company completed the rights offering for gross proceeds of approximately $35,800 in which each holder of the Company’s common shares as of the record date of December 15, 2023 was eligible to participate. The proceeds from this rights offering will be used to progress the Company’s business strategy to support commercialization and fund activities to support the advancement of the Bear Lodge REE Project, which includes funding the operation of the Demonstration Plant for a period of time that is expected to be sufficient to provide the information to support a commercialization decision, acquiring real property, updating the mineral resource model and technical reports, and advancing permitting, environmental support, and basic engineering, as well as for other general corporate purposes. Even with these funds, however, the Company will still require substantial additional funds for the full permitting, development, and buildout of the Bear Lodge REE Project. Ultimately, in the event the Company cannot secure additional financial resources, or complete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans regarding the Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

Current wording

To fund the Company’s share of these cost increases, the Company announced, during December 2023, its intention to launch a rights offering. In March 2024, the Company completed the rights offering (the “2024 Rights Offering”) for gross proceeds of approximately $35,800, in which each holder of the Company’s common shares as of the record date of December 15, 2023, was eligible to participate. The proceeds from the 2024 Rights Offering are being used to progress the Company’s business strategy to support commercialization, which includes funding the operation of the Demonstration Plant for a period of time that is expected to be sufficient to provide the information to support a commercialization decision, as well as for other general corporate purposes. Even with these funds, however, the Company will still require substantial additional funds for the permitting, development, and build-out of the Bear Lodge REE Project. Ultimately, in the event the Company cannot secure additional financial resources, orcomplete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans regarding the Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

Previous wording

Our consolidated net loss for the year ended December 31, 2023 was $8,996, or $0.04 per share, compared with our consolidated net loss of $9,426, or $0.04 per share, for the same period in 2022. See our discussion below for the primary drivers of this change. As an exploration stage company, we had no properties in production and generated no revenues during either year.

Current wording

Our consolidated net loss for the year ended December 31, 2024 was $18,451, or $0.04 per share, compared with our consolidated net loss of $8,996, or $0.04 per share, for the same period in 2023. The loss per share amounts in each year of $0.04 were approximately the same due to the greater number of shares outstanding at December 31, 2024 as compared to December 31, 2023 as a result of the shares issued in the 2024 Rights Offering. See our discussion below for the primary drivers of this change. As an exploration stage company, we had no properties in production and generated no revenues during either year.

Previous wording

Our exploration and evaluation costs totaled $8,242 for the year ended December 31, 2023, compared with $4,155 for the same period in 2022. This increase of $4,087 was largely attributable to the activities associated with our Bear Lodge REE Project and the Demonstration Plant as work progressed under the Cost Share Agreement (as defined below). See Note 4 to the Consolidated Financial Statements for a more complete discussion of this Cost Share Agreement.

Current wording

Our exploration and evaluation costs totaled $18,479 for the year ended December 31, 2024, compared with $8,242 for the same period in 2023. This increase of $10,237 was largely attributable to the activities associated with our Bear Lodge REE Project and the Demonstration Plant as work progressed under the Cost Share Agreement (as defined below). See Note 4 to the Consolidated Financial Statements for a more complete discussion of the Cost Share Agreement.

Previous wording

Our corporate administration costs decreased by $2,278 on a comparative year-over-year basis, falling from $5,106 in the year ended December 31, 2022 to $2,828 for the year ended December 31, 2023. This decrease was largely driven by a decrease in our stock-based compensation costs of $2,453.

Current wording

Our corporate administration costs decreased by $162 on a comparative year-over-year basis, falling from $2,828 in the year ended December 31, 2023 to $2,666 for the year ended December 31, 2024. This decrease was largely attributable to reductions in our stock option expense of $505, partially offset by increases in our employee wages and benefits expenses of $304.

Previous wording

For the years ended December 31, 2023 and 2022, the Company generated interest income of $476 and $258, respectively**,** on investments of its excess cash balances. The increase in 2023 interest income was primarily the result of the substantially higher short-term interest rates that existed during the year, partially offset by the lower average cash balances available for investment during the year** **ended December 31, 2023.

Current wording

For the years ended December 31, 2024 and 2023, the Company generated interest income of $1,182 and $476, respectively**,** on investments of its cash holdings. The increase in 2024 interest income was primarily the result of the

Previous wording

During December 2023, the Company recognized grant income of $2,000 with the achievement of the first milestone under the WEA Funding Agreement. There were no such transactions for the year ended December 31, 2022. See Note 5 to the Consolidated Financial Statements for a more complete discussion of the WEA Funding Agreement.

Current wording

During each of the years ended December 31, 2023 and 2024, the Company recognized grant income of $2,000, with the achievement of the first and second milestones, respectively, under the WEA Funding Agreement. See Note 5 to the Consolidated Financial Statements for a more complete discussion of the WEA Funding Agreement.

Previous wording

For the years ended December 31, 2023 and 2022, we recorded accretion expense of $283 and $284, respectively, related to the Company’s option to repurchase approximately 640 acres of non-core real property in Wyoming for not less than $1,200 or greater than $1,850 in the form of cash, common shares of the Company, or a combination of cash and common shares of the Company. Accretion expense is recorded each reporting period to increase the Repurchase Option liability to the maximum exercise price of $1,850, less any annual option payments of $25. See Note 8 to the Consolidated Financial Statements for a more complete discussion of the Repurchase Option.

Current wording

For the years ended December 31, 2024 and 2023, we recorded accretion expense of $236 and $283, respectively, related to the Company’s option to repurchase approximately 640 acres (257 hectares) of non-core real property in Wyoming for not less than $1,200 or greater than $1,850 in the form of cash, common shares of the Company, or a combination of cash and common shares of the Company. Accretion expense was recorded each reporting period to increase the Repurchase Option liability to the maximum exercise price of $1,850, less any annual option payments of $25. With the Company’s repurchase of this land during October 2024, the Company discontinued its recording of accretion expense and will not incur accretion expense in future periods. See Note 8 to the Consolidated Financial Statements for a more complete discussion of the Repurchase Option.

Previous wording

At December 31, 2023, we had a working capital balance of $7,809 which represented a decrease of $9,819 from our December 31, 2022 working capital balance of $17,628. This decrease was largely the result of amounts paid by the

Current wording

At December 31, 2024, we had a working capital balance of $24,821 which represented an increase of $17,012 from our December 31, 2023 working capital balance of $7,809. This increase was largely the result of the $35,286 in net proceeds received from the 2024 Rights Offering, partially offset by increased amounts paid by the Company during the year ended December 31, 2024 under the Cost Share Agreement (as defined below) and for the payment of other ongoing expenses.

Previous wording

In June 2023, the Company entered into the WEA Funding Agreement for its previously announced award of a $4,400 grant from the WEA to be used toward the advancement of the Demonstration Plant. The WEA grant is a cost-reimbursement award that is available to the Company for the reimbursement of Demonstration Plant expenses. As of December 31, 2023, the WEA had been invoiced for the first $2,000 of the $4,400 grant total for the achievement of the first milestone under the WEA Funding Agreement. The Company received payment of this $2,000 in January 2024. The remaining $2,400, which is conditioned on the achievement of future milestones, will be invoiced to the WEA upon achievement of those milestones.

Current wording

In June 2023, the Company entered into the WEA Funding Agreement for its previously announced award of a $4,400 grant from the WEA to be used toward the advancement of the Demonstration Plant. Following the achievement of the first milestone under the WEA Funding Agreement, the Company received in January 2024 the first $2,000 of the $4,400 grant. In September 2024, a second funding request of $2,000 was submitted to the WEA with the achievement of the

Previous wording

With the funds raised from the 2024 rights offering, the Company will have sufficient funds to complete construction and operation of the Demonstration Plant; however, even with these funds and the expected receipt of the remaining WEA grant monies, the Company will still require substantial additional funds to complete fully the permitting and licensing, and ultimate construction and operation of a commercial mine and plant for the Bear Lodge REE Project. Ultimately, in the event the Company cannot secure additional financial resources, or complete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans regarding the Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

Current wording

With the funds raised from the 2024 Rights Offering, the Company expects to have sufficient funds to complete commissioning and operation of the Demonstration Plant; however, even with these funds and the expected receipt of the remaining WEA grant monies, the Company will still require substantial additional funds to complete the permitting and licensing, and ultimate construction and operation of a commercial mine and plant for the Bear Lodge REE Project. Ultimately, in the event the Company cannot secure additional financial resources, or complete a strategic transaction in the longer term, the Company may need to curtail or suspend its operational plans regarding the Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

Previous wording

On November 30, 2021, the Company and General Atomics entered into a Cost Share Funding Assumption Agreement (the “Cost Share Agreement”) pursuant to which the Company agreed to assume and pay for certain costs incurred by General Atomics and the consortium for the design, construction, and operation of a rare earth separation and processing Demonstration Plant near the Bear Lodge REE Project in Upton, Wyoming.

Current wording

On November 30, 2021, the Company and General Atomics entered into a cost share agreement (the “Cost Share Agreement”) pursuant to which the Company agreed to assume and pay for the non-federal share of funds incurred by, and on behalf of, General Atomics for the design, construction, and operation of the Demonstration Plant.

Previous wording

On October 25, 2021, the Company and Whitelaw Creek LLC, a Wyoming limited liability company (“Whitelaw Creek”), entered into an amendment (the “Amendment”) to the asset purchase agreement dated October 20, 2016 between the Company and Whitelaw Creek (the “Asset Purchase Agreement”). The Amendment modified certain provisions of the Asset Purchase Agreement related to the terms and conditions of the Company’s option to repurchase (the “Repurchase Option”) approximately 640 acres of non-core real property located in Crook County, Wyoming, that is under consideration for a waste rock facility for the Bear Lodge REE Project. Pursuant to and subject to the terms of the Amendment, among other things, the term of the Repurchase Option (which was to expire on October 26, 2021) was extended for up to three additional years, subject to annual option extension payments from the Company to Whitelaw Creek of $25 in cash per year (each, a “Repurchase Option Extension Payment”); and the exercise price of the Repurchase Option was increased from $1,000 to a price to be determined by a mutually agreed upon real estate appraiser (the “Repurchase Price”), provided that (i) the Repurchase Price must not be less than $1,200 or greater than $1,850 and (ii) any Repurchase Option Extension Payments paid by the Company to Whitelaw Creek must be credited toward the Company’s payment of the Repurchase Price if the Repurchase Option is later exercised. In October 2023, the Company made the $25 Repurchase Option Extension Payment to Whitelaw Creek to extend the term of the Repurchase Option through October 26, 2024.

Current wording

On October 25, 2021, the Company and Whitelaw Creek entered into an amendment (the “Amendment”) to the asset purchase agreement dated October 20, 2016 between the Company and Whitelaw Creek (the “APA”). The Amendment modified certain provisions of the APA related to the terms and conditions of the Company’s option to repurchase (the “Repurchase Option”) approximately 640 acres (257 hectares) of real property located in Crook County, Wyoming, that was under consideration for a stockpile facility for the Bear Lodge REE Project. Pursuant to the terms of the APA, as

Previous wording

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. The amounts which involve significant estimates include reclamation obligations and income tax.

Current wording

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

Previous wording

programs on an ongoing basis and, therefore, the portion of our reclamation 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 as defined under Item 1300 of Regulation S-K, the timing of these reclamation activities is uncertain as the reclamation areas will be utilized once the project is operating. 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 are 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 reclamation obligation associated with our properties.

Current wording

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. Reclamation 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 reclamation 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 as defined by Item 1300 of Regulation S-K or NI 43-101, the timing of these reclamation activities is uncertain as the reclamation areas will be utilized once the project is operating. 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 are 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 reclamation obligation associated with our properties.

Previous wording

The Company applies the provisions of Financial Accounting Standards Board Accounting Standard Codification (“ASC”) 740 Income Taxes. The Standard requires an asset and liability approach for financial accounting and reporting for income taxes and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Due to losses from inception, the Company has no tax liability. Currently, the Company has no deferred taxes arising from temporary differences between income for financial reporting and income tax purposes as a full valuation allowance has been recorded against the deferred tax assets.

Current wording

The Company applies the provisions of Financial Accounting Standards Board Accounting Standard Codification (“ASC”) 740 Income Taxes. The Standard requires an asset and liability approach for financial accounting and reporting for income taxes and the recognition of deferred tax assets and liabilities for the temporary differences between the financial reporting basis and tax basis of the Company’s assets and liabilities at enacted tax rates expected to be in effect when such amounts are realized or settled. Due to losses from inception, the Company has no tax liability. Currently, the Company has no