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. 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.

Current wording

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 full-scale production facility.

Previous 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.

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 REEs from the previously stockpiled high-grade sample materials from the Bear Lodge REE Project to follow the completion of construction and pre-operation activities. During the year ended December 31, 2025, the Company continued work on the Demonstration Plant project as described below, and this work is expected to continue until the completion of the Demonstration Plant’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 (expected in mid-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 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 received in November 2024. The remaining $400 of the $4,400 grant total, which is conditioned on Demonstration Plant operations and a report to the WEA, will be invoiced to the WEA once that final milestone has been achieved, which is currently expected in mid-2026.

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. 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 21% 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 approximately $66,000.

Current wording

Since inception, the General Atomics-led consortium has seen increases in the Demonstration Plant’s 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 was 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. The Company currently estimates the total cost of the Demonstration Plant from inception, inclusive of operating costs estimates through December 31, 2026, to be approximately $77,500.

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 $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.

Current wording

To fund the Company’s share of these cost increases, in February 2026, the Company commenced a rights offering (the “2026 Rights Offering”) for gross proceeds of approximately $30,900, in which each holder of the Company’s common shares as of the record date of January 30, 2026, was eligible to participate. The 2026 Rights Offering closed on March 4, 2026, generating net proceeds of approximately $30,500. These funds, in conjunction with the funds already on hand will be used to progress the Company’s business strategy, which includes (i) the continuation of the operation of the Demonstration Plant for a sufficient time to provide the information to support a commercialization decision, (ii) the advancement of projects for the as-constructed Demonstration Plant beyond the current NdPr separation objectives, including applying the technology to the separation of HREEs and possibly to third party feed sources, (iii) the completion of federal and state permitting and licensing for the Bear Lodge REE Project, and (iv) other general corporate purposes.

Previous 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.

Current wording

Our consolidated net loss for the year ended December 31, 2025 was $4,899, or $0.01 per share, compared with our consolidated net loss of $18,451, or $0.04 per share, for the year ended December 31, 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 year.

Previous 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.

Current wording

During 2024, the Company recognized grant income of $2,000 with the achievement of the second milestone under the WEA Funding Agreement. There was no similar transaction during the year ended December 31, 2025. See Note 5 to the Consolidated Financial Statements for a discussion of the WEA Funding Agreement.

Previous 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.

Current wording

For the year ended December 31, 2025, we recorded accretion expense of nil compared to $236 for the year ended December 31, 2024, 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

For the years ended December 31, 2024 and 2023, our investing activities consumed cash of $1,559 and $4, respectively, with the majority of the 2024 spending related to the Land Repurchase of $1,507.

Current wording

Net cash used in investing activities of $289 for year ended December 31, 2025 was for the purchase of buildings and equipment. For the year ended December 31, 2024, our investing activities consumed cash of $1,559, with the majority of the spending related to the repurchase of property from Whitelaw Creek LLC in the amount of $1,507.

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

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 inmid-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 21% 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 approximately $66,000. 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.

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 was 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 approximately $77,500 inclusive of operating cost estimates through December 31, 2026.

Previous 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.

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 that are expected to be settled in the near term are 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

Our Bear Lodge REE Project reclamation obligation is secured by a surety bond held for the benefit of the state of Wyoming in an amount determined by the applicable federal or state regulatory agency. We also maintain a surety bond for the reclamation of the Demonstration Plant property.

Current wording

Our Bear Lodge REE Project reclamation obligation is secured by a surety bond held for the benefit of the state of Wyoming in an amount determined by the applicable federal or state regulatory agency. We also maintain a surety bond for the decommissioning and reclamation of the Demonstration Plant property.

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

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 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.