RARE ELEMENT RESOURCES LTD

Previous wording

The following management’s discussion and analysis of the consolidated financial results and condition of Rare Element Resources Ltd. (collectively, “we,” “us,” “our,” “Rare Element” or the “Company”) for the three months ended March 31, 2025, has been prepared based on information available to us as of May 13, 2025. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of Rare Element for the year ended December 31, 2024, and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or achievements may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report. See “Cautionary Note Regarding Forward-Looking Statements.”

Current wording

The following management’s discussion and analysis of the consolidated financial results and condition of Rare Element Resources Ltd. (collectively, “we,” “us,” “our,” “RER” or the “Company”) for the three and six months ended June 30, 2025, has been prepared based on information available to us as of August 6, 2025. This discussion should be read in conjunction with the unaudited Condensed Consolidated Financial Statements and notes thereto included herewith and the audited Consolidated Financial Statements of RER for the year ended December 31, 2024, and the related notes thereto filed with our Annual Report on Form 10-K, which have been prepared in accordance with U.S. GAAP. This discussion and analysis contains forward-looking statements that involve risks, uncertainties, and assumptions. Our actual results, performance, or achievements may differ materially from those anticipated in these forward-looking statements as a result of many factors, including, but not limited to, those set forth elsewhere in this report. See “Cautionary Note Regarding Forward-Looking Statements.”

Previous wording

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 and pre-operation activities. During the first quarter of 2025, 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. During the first quarter of 2025, several design and equipment issues were identified during the Demonstration Plant’s equipment testing phase, which followed the completion of construction activities. As a result of these issues, an as-built design review was commenced in April 2025 with operations to process and separate the sample materials and recover the NdPr and other REEs now expected to commence in the fourth quarter of 2025 and extend into 2026. During the production phase, the Demonstration Plant is expected to produce up to 10 tons (9.1 tonnes) of NdPr oxide.

Current wording

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 already stockpiled high-grade sample materials from the Bear Lodge REE Project to follow the completion of construction and pre-operation activities. During the first half of 2025, 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.

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. 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, which are currently expected to occur in late 2025.

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, which are currently expected to occur in early 2026.

Previous wording

Since inception, the General Atomics-led consortium has seen increases in the Demonstration Plant project costs, including final equipment costs, due to, among other factors, inflation. As a result of these cost pressures, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant construction and operations budget of approximately $53,600, which is approximately 22% higher than the original budget of approximately $43,800. In response, the DoE pledged an additional commitment of $2,400 to help fund a portion of this budget increase, with the balance to be funded by the Company, including any amounts in excess of the $53,600 revised DoE approved budget. Even with this increase, the Company now expects that the full Demonstration Plant project costs, once operations are complete, will exceed the higher, revised DoE budget total of $53,600 and has advised the DoE that it will use Company funds, to the extent it is unable to secure other external funding sources, to cover those costs above the DoE approved cost-share budget, now estimated to be in excess of $66,000.

Current wording

Since inception, the General Atomics-led consortium has seen increases in the Demonstration Plant project costs, including final equipment costs, due to, among other factors, inflation. As a result of these cost pressures, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant construction and operations budget of approximately $53,600, which is approximately 22% higher than the original budget of approximately $43,800. In response, the DoE pledged an additional commitment of $2,400 to help fund a portion of this budget increase, with the balance to be funded by the Company, including any amounts in excess of the $53,600 revised DoE approved budget total, now estimated to be in excess of $66,000.

Previous 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

Current wording

To fund the Company’s share of these cost increases, in March 2024, the Company completed a 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

Previous wording

$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 sufficient to provide the information to support a commercialization decision, as well as for other general corporate purposes.

Current wording

business strategy, which includes the rework of the Demonstration Plant and its operation for a period of time sufficient to provide the information to support a commercialization decision, as well as for other general corporate purposes.

Previous wording

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. As a result, the Company commenced discussions with the Export-Import Bank of the United States (“EXIM Bank”) as a potential source of funds for the Bear Lodge REE Project’s development. In March 2025, the Company received a non-binding Letter of Interest from the EXIM Bank to provide debt financing of up to $553,000 for Bear Lodge’s developments. If pursued further by the Company through a loan application, and that application is approved, these funds could support the permitting, engineering, design, and construction of the Bear Lodge REE Project. However, there can be no assurance these funds will be pursued or, if pursued, approved by the EXIM Bank.

Current wording

Even with these funds and the expected receipt of the remaining WEA grant monies and DoE funds, the Company will still require substantial additional funds for the permitting, development, and build-out of the Bear Lodge REE Project. As a result, the Company commenced discussions with the Export-Import Bank of the United States (“EXIM Bank”) as a potential source of funds for the Bear Lodge REE Project’s development. In March 2025, the Company received a non-binding Letter of Interest from the EXIM Bank to provide debt financing of up to $553,000 for the Bear Lodge REE Project’s development. If pursued further by the Company through a loan application, and that application is approved, these funds could support the permitting, engineering, design, and construction of the Bear Lodge REE Project. However, there can be no assurance these funds will be pursued or, if pursued, approved by the EXIM Bank.

Previous wording

During the first quarter of 2025, we continued to monitor the general U.S. political climate and actions taken by the U.S. government to secure a domestic rare earth supply chain. Due to the dominance of China over the REE supply chain, the U.S. federal government has issued several Presidential Executive Orders, under both the Biden Administration and the first and second Trump Administrations, to encourage and support the establishment of a domestic REE supply chain and to strengthen the defense industrial base with respect to critical minerals, including REEs.

Current wording

During the first half of 2025, we continued to monitor the general U.S. political climate and actions taken by the U.S. government to secure a domestic rare earth supply chain. Due to the dominance of China over the REE supply chain, the U.S. federal government has issued several Presidential Executive Orders, under both the Biden Administration and the first and second Trump Administrations, to encourage and support the establishment of a domestic REE supply chain and to strengthen the defense industrial base with respect to critical minerals, including REEs.

Previous wording

Additionally, in early 2025, the Trump Administration announced several potential new and/or increased tariffs and other trade restrictions on imports to the United States. The impact of these trade restrictions on tariffs is unknown and could have an impact on the REE supply chain and/or our business operations. In response to the tariffs and trade restrictions imposed by the Trump and previous Administrations, China, in December 2023, announced it had banned the export of technology to make rare earth magnets, adding to its previous export ban of critical material extraction and separation technology. In December 2024, China further banned the export of certain critical minerals, including gallium, germanium, and antimony, which have widespread military applications. In February 2025, Chian expanded its export licensing requirements to include five additional minerals: tungsten, indium, bismuth, tellurium, and molybdenum. In April 2025, China imposed additional export restrictions on REEs, including both raw materials and processed products such as permanent magnets.

Current wording

Additionally, in early 2025, the Trump Administration announced several potential new and/or increased tariffs and other trade restrictions on imports to the United States. The impact of these tariffs and trade restrictions is currently unknown and could have an impact on the REE supply chain and/or our business operations. In response to the tariffs and trade restrictions imposed by the Trump and previous Administrations, China, in December 2023, announced it had banned the export of technology to make rare earth magnets, adding to its previous export ban of critical material extraction and separation technology. In December 2024, China further banned the export of certain critical minerals, including gallium, germanium, and antimony, which have widespread military applications. In February 2025, China expanded its export licensing requirements to include five additional minerals: tungsten, indium, bismuth, tellurium, and molybdenum. In April 2025, China imposed additional export restrictions on REEs, including both raw materials and processed products such as permanent magnets. As U.S.-China trade negotiations continued, the April 2025 restrictions were lifted in part, however, a Chinese rare earth licensing system remains in place, which controls the export of rare earths and technology relating to rare earths.

Previous wording

Our consolidated net loss for the three months ended March 31, 2025 was $2,395, or $0.00 per share, compared with our consolidated net loss of $3,626, or $0.01 per share, for the same period in 2024. 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 period.

Current wording

For the three and six months ended June 30, 2025, we experienced net losses of $1,180 ($0.00 per share) and $3,575 ($0.01 per share), respectively, compared with net losses of $6,179 ($0.01 per share) and $9,805 ($0.02 per share) for the three and six months ended June 30, 2024, respectively. See our discussion below for the primary drivers of these changes. As an exploration stage company, we had no properties in production and generated no revenues during either period.

Previous wording

For the three months ended March 31, 2025 and 2024, we recorded accretion expense of nil and $71, respectively, related to the Company’s option to repurchase approximately 640 acres (257 hectares) of real property in Wyoming. With the Company’s repurchase of this land during October 2024, the Company discontinued its recording of accretion expense and will not incur further accretion expense in future periods related to this repurchase option.

Current wording

For the three and six months ended June 30, 2025, we recorded accretion expense of nil (in each period) compared to $71 and $142 for the three and six months ended June 30, 2024, respectively, with the accretion expense recorded during 2024 being related to the Company’s option to repurchase approximately 640 acres (257 hectares) of real property in Wyoming. With the Company’s repurchase of this land in October 2024, the Company discontinued its recording of accretion expense and will not incur further accretion expense in future periods related to this repurchase option.

Previous wording

Net cash used in operating activities was $2,269 for the three months ended March 31, 2025, compared with $784 for the same period in 2024. The increase of $1,485 was largely attributable to the collection during the 2024 period of the $2,000 in WEA grant funds, which reduced the cash otherwise used in our operating activities. Absent the $2,000 in grant offset funds, net cash used in operating activities for the three months ended March 31, 2024 would have been $2,784.

Current wording

Net cash used in operating activities was $3,537 for the six months ended June 30, 2025, compared with $8,287 for the same period in 2024. This reduction of $4,750, partially offset by the collection in 2024 of $2,000 in WEA grant funds, was largely attributable to the decrease in our exploration and evaluation expenditures as activities shifted from Demonstration Plant equipment acquisitions and installation during 2024 to final testing and shakedown activities in 2025. Absent the $2,000 in WEA grant offset funds, net cash used in operating activities for the six months ended June 30, 2024 would have been $10,287.

Previous wording

Net cash provided by financing activities of $35,286 for the three months ended March 31, 2024, stemmed from the receipt of the net proceeds from the 2024 Rights Offering. There were no similar transactions during the three months ended March 31, 2025.

Current wording

Net cash provided by financing activities of $35,286 for the six months ended June 30, 2024 stemmed from the receipt of the net proceeds from the 2024 Rights Offering. There were no similar transactions during the six months ended June 30, 2025.

Previous wording

At March 31, 2025, we had a working capital balance of $22,383 which was a decrease of $2,438 from our December 31, 2024 working capital balance of $24,821. This decrease was largely the result of the reduction in our cash and cash equivalents balance, which decreased by $2,330 from $26,732 at December 31, 2024 to $24,402 at March 31, 2025.

Current wording

At June 30, 2025, we had a working capital balance of $21,142 which was a decrease of $3,679 from our December 31, 2024 working capital balance of $24,821. This decrease was largely the result of the reduction in our cash and cash equivalents balance, which decreased by $3,682 from $26,732 at December 31, 2024 to $23,050 at June 30, 2025.

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. 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 second milestone under the WEA Funding Agreement. The collection of this second $2,000 tranche was received in November 2024, with the remainder, or the $400 retainer, forecasted for collection in late 2025.

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 second milestone under the WEA Funding Agreement. The collection of this second $2,000 tranche was received in November 2024, with the remainder, or the $400 retainer, forecasted for collection inearly 2026.

Previous wording

Due to inflationary cost pressures on labor, equipment, and consumables, as well as cost increases associated with certain optimized plant engineering and design parameters, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant project budget of approximately $53,600, which is approximately 22% higher than the original budget of approximately $43,800. In response, the DoE pledged an additional commitment of $2,400 (increasing its total commitment to approximately $24,300) in September 2024 to help fund a portion of this budget increase, with the balance to be funded by the Company, including any amounts in excess of the $53,600 revised budget total, now estimated to be in excess of $66,000.

Current wording

Due to inflationary cost pressures on labor, equipment, and consumables, as well as cost increases associated with certain optimized plant engineering and design parameters, General Atomics, on behalf of the consortium, submitted to the DoE an updated Demonstration Plant project budget of approximately $53,600, which is approximately 22% higher than the original budget of approximately $43,800. In response, the DoE pledged an additional commitment of $2,400 (increasing its total commitment to approximately $24,200) in September 2024 to help fund a portion of this budget increase, with the balance to be funded by the Company, including any amounts in excess of the $53,600 revised budget total, now estimated to be in excess of $66,000. Through June 30, 2025, the DoE has paid a total of approximately $20,500 towards its commitment of approximately $24,200, leaving a balance of approximately $3,700 to be invoiced and collected from the DoE under the current cost share award.

Previous wording

The funds raised by the Company in the 2024 Rights Offering are expected to support the operations of the Demonstration Plant for a sufficient period of time to gather the information necessary for a commercialization decision. 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.

Current wording

The funds raised by the Company in the 2024 Rights Offering are expected to support the operations of the Demonstration Plant for a sufficient period of time to gather the information necessary for a commercialization decision. However, even with these funds and the expected receipt of the remaining WEA grant monies and DoE funds, 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.