RARE ELEMENT RESOURCES LTD

CONDENSED CONSOLIDATED BALANCE SHEETS

(Expressed in thousands of U.S. dollars, except shares outstanding)

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Expressed in thousands of U.S. dollars, except share and per share amounts)

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Expressed in thousands of U.S. dollars)

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Expressed in thousands of U.S. dollars, except share amounts)

Three Months Ended September 30, 2025 and 2026

Nine Months Ended September 30, 2025 and 2026

1. NATURE OF OPERATIONS

Rare Element Resources Ltd. (“we,” “us,” “RER” or the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, on June 3, 1999.

The Company holds a 100%interest in the Bear Lodge rare earth elements project (the “Bear Lodge REE Project”) located near the town of Sundance in northeast Wyoming. The Bear Lodge REE Project consists of several large, disseminated rare earth elements (“REE”) deposits having a favorable distribution of neodymium-praseodymium (NdPr), as well as a number of other critical REEs. Additionally, the Company has developed and enhanced, along with General Atomics and its affiliates, innovative and proprietary REE processing and separation capabilities, currently being advanced at the Demonstration Plant (as defined below), for the processing of the Bear Lodge REE Project feed material and possibly feed materials from other sources.

If and when developed, the Bear Lodge REE Project will likely consist of a mine and a processing and separation plant to produce a commercial NdPr product. As market conditions dictate, the Company will decide whether it is preferable to develop and put into production the mine and the processing and separation plant independent of each other or to link the two into a single project.

The Company also holds a 100% interest in the Sundance Gold Project that is adjacent to the Bear Lodge REE Project and is primarily composed ofthree gold targets within the area of the Bear Lodge property (the “Bear Lodge Property”). The Sundance Gold Project has been on hold since 2011 and will likely remain so for the foreseeable future, although given the current price of gold, the Company may explore options to advance or monetize this asset.

The Company is currently focused on the advancement of a rare earth processing and separation demonstration-scale plant (the “Demonstration Plant”). The Demonstration Plant will initially process already stockpiled high-grade sample materials from the Bear Lodge REE Project, and this may be expanded to the processing of feed materials from other sources at some future date. The Company is also focused on advancing the permitting and licensing of the Bear Lodge REE Project, specifically the mine and processing facility. In January 2021, a consortium of companies, of which the Company is a part, received notice from the Department of Energy (the “DoE”) that the consortium had been selected for negotiation of a potential financial award for the engineering, construction and operation of the Demonstration Plant. The financial award was finalized in October 2021. The Company’s contractual arrangement with General Atomics, an affiliate of Synchron, the Company’s majority shareholder, with respect to the DoE award, was entered into in December 2021. See Note 4 for additional details regarding the consortium arrangement, the Cooperative Agreement, and the Cost Share Agreement with General Atomics.

To address the Company’s funding needs, including the funding required for completion of the Demonstration Plant, the Company completed a rights offering in March 2026 for gross proceeds of $30,968 (the “2026 Rights Offering”). See Note 7 for additional details regarding the terms of the 2026 Rights Offering and the planned use of proceeds. Previous rights offerings were completed by the Company in December 2021 and March 2024 for gross proceeds of approximately$25,400 and$35,800, respectively.

Since inception, the General Atomics-led consortium has experienced rising project costs for the Demonstration Plant, due to inflation, corrective actions and upgrades. As a result of these and other factors, Demonstration Plant costs through September 30, 2026 totaled approximately $64,900, with the Company now estimating total project costs (through completion of operations) of approximately $82,000 as discussed below. See Note 4 for additional details regarding the Demonstration Plant budget, DoE funding commitments, and the Cost Share Agreement.

In December 2022, the Demonstration Plant achieved its final engineering design milestone, marking the DoE’s first go/no-go decision point. A second go/no-go gating milestone was achieved in December 2023 with the issuance by the DoE of a Project Continuation Notice, allowing for the construction of the Demonstration Plant.

In September 2024, the DoE issued its final Project Continuation Notice following its approval of the revised project budget of$53,600 and confirmation of readiness for the operations phase of the Demonstration Plant. This notice, along with the U.S. Nuclear

Regulatory Commission’s (the “NRC”) operations approval under its previously issued license (received by the Company in October 2024), allowed for the commencement of Demonstration Plant operations.

Early in 2025, the Company identified several design and equipment issues during the Demonstration Plant’s operational acceptance testing phase, which followed the completion of construction activities. After identifying these issues, the Company assumed full control of the management of the project with agreement from General Atomics and initiated a complete design review in April 2025, which identified further operational readiness concerns. The implementation of corrective actions and upgrades commenced promptly thereafter and continued into early 2026. As a result, Demonstration Plant operations did not formally commence until March 2026, with full, end-to-end processing operations at the Demonstration Plant now expected in the fourth quarter of 2026.

The Company has incurred losses since its inception, and further losses are anticipated in the development of its business. As of September 30, 2026, the Company had cash and cash equivalents of $13,348 and $26,418 of short-term investments, giving it total funds on hand of $39,766. During the nine months ended September 30, 2026, the Company consumed cash of $9,980 in its operating activities, primarily associated with the Demonstration Plant project activities, the Company’s permitting and licensing activities for the Bear Lodge REE Project, and the payment of the Company’s general and administrative expenses and other ongoing costs of sustaining its properties.

The Company estimates that with the funds currently on hand and the funds it expects to receive from the DoE, the Company will have sufficient funds to complete theoperations stage of the Demonstration Plant, and the licensing and permitting for the Bear Lodge REE Project. Longer-term, in the event the Company cannot secure additional financial resources or complete a strategic transaction, the Company may need to curtail or suspend the development and commercialization of its Bear Lodge REE Project or other initiatives, or potentially liquidate its business interests, and investors may lose all or part of their investment.

2. BASIS OF ACCOUNTING AND PRESENTATION

In accordance with U.S. GAAP for interim financial statements, these unaudited condensed consolidated financial statements do not include certain information and note disclosures that are normally included in annual financial statements prepared in conformity with U.S. GAAP. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of December 31, 2025, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2025. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal, recurring nature) necessary to present fairly in all material respects the Company’s financial position as of September 30, 2026, and the results of its operations and cash flows for the three and nine months ended September 30, 2026 and 2025 in conformity with U.S. GAAP on a going concern basis. These interim results of operations for the nine months ended September 30, 2026 may not be indicative of the results that will be realized for the full year ending December 31, 2026.

Loss/Income per Share

Loss/Income per share is computed using the weighted average number of shares outstanding during the period. In March 2026, the Company completed the 2026 Rights Offering (see Note 7) whereby the Company offered existing shareholders the right to purchase additional common shares at $0.24 per share (the “Offer Price”). Because the Offer Price was significantly lower than the market trading price of the common shares at that time, the discounted Offer Price was considered a bonus element, similar to a stock dividend. As a result, the loss/income per share calculations for the three and nine months ended September 30, 2026 and 2025 have been adjusted retroactively to include the impact of the bonus element.

For the three and nine months ended September 30, 2026 and the nine months ended September 30, 2025,820,000 and 1,020,000, respectively, potentially dilutive stock options were considered anti-dilutive and excluded from the Company’s loss per share calculations because the Company was in a net loss position for those periods.

Investments

At September 30, 2026, the Company’s investment securities consisted of U.S. Treasury securities and certificates of deposit in the amounts of $24,918 and $1,500, respectively, with each investment security classified as held to maturity and carried at amortized cost. Securities are classified as held to maturity based on the Company’s intent and ability to hold the security to maturity at the time of purchase.

At September 30, 2026, the amortized cost of the Company’s held to maturity investments approximated their estimated fair values. The Company does not intend to sell, nor is it more likely than not that the Company will be required to sell, any investment, if in an unrealized loss position, before recovery of its amortized cost basis.

See Note 3 for additional information.

3. FAIR VALUE OF FINANCIAL INSTRUMENTS

U.S. GAAP defines fair value as the price that would be received to sell an asset or be paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price) and establishes a fair-value hierarchy that prioritizes the inputs used to measure fair value using the following definitions (from highest to lowest priority):

Financial assets and liabilities subject to fair value measurements on a recurring basis and the level of inputs used in such measurements by major security type as of September 30, 2026 and December 31, 2025 are presented in the following table:

Money market funds, U.S Treasury bills and notes, and certificates of deposit are valued at cost, which approximates fair value. These amounts are included on the balance sheet in cash and cash equivalents and short-term investments at September 30, 2026 and in cash and cash equivalents at December 31, 2025, based on their maturity dates. At September 30, 2026, of the $3,498 invested in certificates

of deposit, $1,998 and $1,500 were included in cash and cash equivalents and short-term investments, respectively, on the balance sheet (see Note 2).

At September 30, 2026, the Company’s investments had maturity dates of:

4. RELATED PARTY

Cost Share Agreement with General Atomics

In January 2021, a consortium of companies, of which the Company is a part, received notice from the DoE that the consortium had been selected for negotiation of a potential financial award for the engineering, construction, and operation of the Demonstration Plant. This consortium of companies is led by General Atomics, an affiliate of Synchron (the Company’s majority shareholder). A formal proposal was submitted by the consortium in response to a published Funding Opportunity Announcement in mid-2020 for the construction and operation of the Demonstration Plant utilizing proprietary technology to produce commercial-grade products. Under this original proposal, the DoE’s share of the Demonstration Plant project funding was estimated at$21,900 and represented approximatelyone-half of the total originally estimated costs for the project. The DoE agreement was executed by the DoE’s grants/agreement officer on September 27, 2021, with an effective date of October 1, 2021. The DoE award was finalized through a cooperative agreement, dated October 1, 2021 (the “Cooperative Agreement”), that was awarded by the DoE for the Demonstration Plant. The Cooperative Agreement provided that up to approximately$43,800 in allowable costs for the Demonstration Plant were to be funded on a cost-share basis,50% by the DoE and 50% by a non-federal entity.

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 the 50% of the non-federal funds incurred by, and on behalf of, General Atomics for the design, construction, and operation of the Demonstration Plant under the Cooperative Agreement. The Demonstration Plant, during its operations phase, which is currently underway, will process already stockpiled high-grade sample materials from the Bear Lodge REE Project.

On March 17, 2022, the Company executed a subcontract purchase order in the amount of$5,318 with General Atomics under which the Company agreed to provide certain services and materials to the Demonstration Plant project, including, but not limited to, providing the plant’s sample materials, engaging in site location leases and other logistics, providing operational support, and providing decommissioning, bonding and other Demonstration Plant support activities (the “Subcontract Purchase Order”). In connection with the Subcontract Purchase Order, the Company submitted monthly invoices to General Atomics for the subcontracted services performed, which were reimbursed by General Atomics withone-half of the funds coming from funds advanced by the Company under the Cost Share Agreement and, up to the original Demonstration Plant budget, one-half of the funds from the DoE.

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 cost-share funding commitment of$2,400 to fund a portion of the budget increase, with the balance coming from the Company, including any amounts in excess of the$53,600 revised budget total. The Company currently estimates the total cost of the Demonstration Plant, from inception, to be approximately$82,000, inclusive of cost estimates through completion of the Demonstration Plant’s operations phase.

On May 16, 2024, the Company and General Atomics entered into an extension agreement to the Cost Share Agreement (the “Extension Agreement”) under which the Company agreed to make additional cash advances, of up to$2,500, to General Atomics while the parties

progressed an amended project funding agreement covering the Company’s share of the additional non-federal project funding needed for the project’s completion. Pursuant to the terms of the Cost Share Agreement and Extension Agreement, the Company had advanced payments to General Atomics, as leader of the consortium, totaling$24,200 through October 31, 2024, the maximum amount of advances authorized under these agreements. In November 2024, General Atomics subsequently returned approximately$3,811 of the amounts previously funded by the Company under the Cost Share Agreement, which were used by the Company, in part, to make payments to certain other contractors for work under the Cost Share Agreement. The payments to these other contractors, all made in November 2024 and on General Atomics’ behalf, totaled$4,746.

In September 2025, at the Company’s request, General Atomics and the Company formally requested a novation of the financial assistance agreement between General Atomics and the DoE, under which General Atomics’ interests under the agreement would be transferred to the Company. The novation process, which is underway, will not change the intellectual property rights held by Synchron and its affiliates in the Company’s intellectual property. Once the novation process is complete, the Company is expected to be named the recipient of the award under the Cooperative Agreement and certain conditions are expected to be confirmed, including the potential for additional DoE funding for further operations and advancements of the Demonstration Plant.

The DoE has allowed the novation process to progress even though the financial assistance agreement’s term expired on September 30, 2025. If a novation is not completed, the DoE award to General Atomics could be terminated, and final disposition of the assets and decommissioning activities would be negotiated with the DoE. Although the Company expects the novation process to be completed by the end of 2026, there is no assurance of the process progressing in a timely manner or being completed at all.

Since inception, the Company has (i) advanced$20,389 in funds to General Atomics under the Cost Share Agreement, (ii) paid an additional$4,746 on General Atomics’ behalf to certain contractors for work performed under the Cost Share Agreement and (iii) paid directly another$15,920 in Demonstration Plant project costs. Inclusive of all amounts incurred since project inception, including amounts received from the DoE of$23,893, a total of$64,948 has been expended on the Demonstration Plant through September 30, 2026.

The following table summarizes the related party receivable activity with General Atomics for reimbursable costs incurred by the Company under the Cost Share Agreement for the nine months ended September 30, 2026:

5. WYOMING ENERGY AUTHORITY GRANT

In June 2023, the Company, and the Wyoming Energy Authority (the “WEA”) entered into a Funding Agreement (the “WEA Funding Agreement”) pursuant to which the WEA agreed to fund, subject to certain conditions, a $4,400 grant to the Company for the Demonstration Plant. The final $400 of this grant was received on June 30, 2026, and is included as grant income in the statement of operations for the nine months ended September 30, 2026.

6. LEASES

Effective September 21, 2021, the Company entered into a lease agreement (the “Property Lease”) for real property, including land and buildings in Upton, Wyoming, for the Demonstration Plant. The Property Lease, which had an initial 12-month term, allows for annual renewals, which at the Company’soption can be renewed for as long as the facility is needed. In June 2026, the Property Lease was renewed, extending the termination date to September 30, 2027.

The Property Lease, which is classified as an operating lease, generally provides for base rent and requires the Company to pay all insurance, personal property taxes on any structure or improvements made by the Company and other maintenance costs. The Property

Lease provides for an annual cost of living adjustment but contains no residual value guarantees or restrictive covenants. Pursuant to the Property Lease, the Company is obligated to remove certain Company-completed property improvements, though those items requiring removal, if any, will be confirmed with the lessor prior to the termination of the Property Lease.

For purposes of the following table, payments under the Property Lease are assumed to run through September 30, 2028 (notwithstanding that the current termination date of the Property Lease is September 30, 2027). If the completion of the Demonstration Plant operations dictates further extensions beyond this date, the Company may extend the term of the Property Lease.

Total future minimum lease payments under the Property Lease as of September 30, 2026, were as follows:

(1)As of September 30, 2026, $156 and $85 were included in current liabilities and non-current liabilities, respectively.

For the nine months ended September 30, 2026, $86 was included in operating cash flows for amounts paid for operating leases.

For the nine months ended September 30, 2026, the Company incurred interest expense on lease liabilities of $15 and right of use asset amortization expense of $85.

As of September 30, 2026, the weighted average lease term for the Company’s operating lease was 2.0 years (including expected renewal options) and the weighted average discount rate was estimated at 12%.

7. SHAREHOLDERS’ EQUITY

Stock-based compensation

As of September 30, 2026, the Company had 2,660,000 issued and outstanding stock options that were issued under the 10% Rolling Stock Option Plan, as amended and restated (the “2011 Plan”) and 820,000 issued and outstanding stock options that were issued under its 2022 Equity Incentive Plan (the “2022 Plan”).

The 2011 Plan was replaced in 2022 by the 2022 Plan and, as such, no additional stock options can be granted under the 2011 Plan. The maximum term of any stock option grant under the 2011 Plan was 10 years.

Under the 2022 Plan, as approved by the Company’s shareholders at the annual meeting of shareholders on August 23, 2022, the Board of Directors is authorized to grant stock options, stock appreciation rights, restricted stock units, performance stock units and other cash and share-based awards to eligible directors, officers, employees, or consultants up to a maximum of 17,236,689 common shares. The maximum term of any grant under the 2022 Plan is 10 years.

The following table summarizes the Company’s stock option activity for each of the nine months ended September 30, 2026 and 2025:

On January 28, 2026, being the exercise date, the 200,000 options exercised during the nine months ended September 30, 2026, had an intrinsic value of $108.

The following table summarizes the intrinsic value and weighted average remaining life for stock options as of September 30, 2026:

Stock-based compensation expense is included in corporate administration expenses within the Company’s interim condensed consolidated statements of operations. For the three and nine months ended September 30, 2026, and for the three months ended September 30, 2025, the Company didnot incur stock-based compensation expense. For the nine months ended September 30, 2025, the Company recognized stock-based compensation expense of $4.

As of September 30, 2026, all outstanding stock options were fully vested and exercisable.

2026 Rights Offering

On March 4, 2026, the Company completed the 2026 Rights Offering for gross proceeds of$30,968 in which each holder of the Company’s common shares as of the record date of January 30, 2026, was eligible to participate. Terms of the 2026 Rights Offering included the issuance of twenty-five hundredths (or 0.25) of a subscription right for each common share owned by each holder on the record date, with each whole subscription right entitling the holder to purchaseone common share of the Company at a subscription price of$0.24 per share (the “Basic Subscription Privilege”). For any holder exercising its Basic Subscription Privilege in full, the holder could also exercise an oversubscription privilege to purchase additional common shares that were unsubscribed for at the expiration of the 2026 Rights Offering, subject to availability and pro rata allocation of shares among persons exercising the oversubscription privilege. The 2026 Rights Offering, which generated$30,478 in net proceeds after deducting$490 in transaction costs, resulted in the issuance of 129,033,678 common shares of the Company.

The net proceeds from the 2026 Rights Offering are or will be used to support(i) the operation of the Demonstration Plant; (ii) the advancement of projects for the Demonstration Plant beyond the current NdPr separation objectives, including applying the technology

to the separation of heavy REEs (“HREEs”) and the processing of 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.

Loss per Share

After adjustment for the bonus element included in the 2026 Rights Offering (see Note 2), the weighted average number of shares outstanding used in the Company’s loss per share calculations for the nine months ended September 30, 2026 increased from 616,197,818 shares to 686,579,779 shares and for the nine months ended September 30, 2025 from 516,131,196 shares to 586,514,158 shares.

8. COMMITMENTS AND CONTINGENCIES

Potential environmental contingency

The Company’s exploration and development activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally have become more restrictive. The Company conducts its operations to protect public health and the environment and believes that its operations are materially in compliance with all applicable laws and regulations. The Company has made, and expects to make in the future, expenditures to comply with such laws and regulations. The ultimate amount of reclamation and other future site restoration costs associated with the Company’s existing mining interests is uncertain and may exceed current estimates. As of September 30, 2026 and December 31, 2025, these costs were estimated at $185 for each respective period.

Contract commitment – related party

Pursuant to the Cost Share Agreement between the Company and General Atomics, as extended and as expected to be amended, if required (see Note 4), the Company has agreed to assume and pay for certain allowable costs under the DoE-approved Demonstration Plant budget incurred by General Atomics and the other consortium members for the design, construction, operation, and decommissioning of the Demonstration Plant.

9. GEOGRAPHIC AND SEGMENT INFORMATION

The Company operates in asingle reportable operating segment: that segment being minerals exploration and development. The Company’s sole minerals exploration property is its Bear Lodge Property, located near the town of Sundance in the state of Wyoming. The segment, which includes the Demonstration Plant project, doesnot presently generate any revenues. The Company’s chief executive officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for evaluating financial performance. All of the Company’s long-lived assets are associated with its Bear Lodge Property and are located in the United States.

10. SUBSEQUENT EVENTS

As announced in September 2026, the Company engaged Josef Bilant as its Chief Operating Officer, effective as of October 5, 2026.