Rare Element Resources Ltd 10-Q for FY2024 Q3
Rare Element Resources Ltd (REEMF)
About this 10-Q
Rare Element Resources Ltd filed this 10-Q on November 6, 2024, covering the quarter ended September 30, 2024 (FY2024 Q3).
Headline figures
Quarter ended September 30, 2024, as reported in this filing, compared with the same period a year earlier where the filing states it.
- Net loss
- $4.73M
- compared with a net loss of $3.13M a year earlier
- Diluted EPS
- -$0.01
- compared with -$0.01 a year earlier
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |
Commission file number: |
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(Exact Name of Registrant as Specified in its Charter)
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(State of other jurisdiction of incorporation or organization) | | (I.R.S. Employer Identification No.) |
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(Address of principal executive offices) | | (Zip Code) |
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( | | Not Applicable |
(Registrant’s telephone number, including area code) | | (Former name, former address and former fiscal year, if |
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ⌧
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Large accelerated filer ◻ | Accelerated filer ◻ | Smaller reporting company | Emerging growth company |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Number of issuer’s common shares outstanding as of November 5, 2024:
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TABLE OF CONTENTS
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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 17 | |
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Reporting Currency, Financial and Other Information
All amounts in this report are expressed in thousands of United States (“U.S.”) dollars, unless otherwise indicated.
Financial information is presented in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”).
References to “Rare Element,” the “Company,” “we,” “our,” and “us” mean Rare Element Resources Ltd., our predecessors, and consolidated subsidiary, or any one or more of them, as the context requires.
Cautionary Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q (this “Quarterly Report”), including “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 2 of Part I of this report, contains “forward-looking statements” within the meaning of the Securities Act of 1933, as amended (the “Securities Act”) and the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and “forward-looking information” within the meaning of Canadian securities laws (collectively, “forward-looking statements”). Any statements that express or involve discussions with respect to business prospects, predictions, expectations, beliefs, plans, intentions, projections, objectives, strategies, assumptions, future events, performance or exploration and development efforts using words or phrases (including negative and grammatical variations) such as, but not limited to, “expects,” “anticipates,” “plans,” “estimates,” “intends,” “forecasts,” “likely,” “projects,” “believes,” “seeks,” or stating that certain actions, events or results “may,” “could,” “would,” “should,” “might” or “will” be taken, occur or be achieved, are not statements of historical fact and may be forward-looking statements. Although we believe that our plans, intentions, and expectations reflected in these forward-looking statements are reasonable, we cannot be certain that these plans, intentions, and expectations will be achieved. Actual results, performance or achievements could differ materially from those contemplated, expressed or implied by the forward-looking statements contained in this Quarterly Report. Forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding the following:
| ● | our business, prospects, and overall strategy; |
| ● | progress in the development of our Demonstration Plant (as defined below) and the timing of that progress; |
| ● | planned or estimated expenses and capital expenditures, including the Demonstration Plant’s expected costs of construction, operation, decommissioning, and the sources of funds to pay for such costs; |
| ● | availability of liquidity and capital resources; |
| ● | our Demonstration Plant team’s ability to achieve the full amount of funding support from the Department of Energy (“DoE”) through the remainder of the Demonstration Plant project; |
| ● | our Demonstration Plant team’s ability to secure additional funding (in addition to the previously awarded funding) relating to the Demonstration Plant project or any further initiatives or advancements that may be undertaken relating to the Demonstration Plant; |
| ● | our ability to receive the full amount of funding in connection with the Wyoming Energy Authority grant for the Demonstration Plant; |
| ● | our ability to operate the Demonstration Plant, including in a manner to meet project objectives within the approved budget and estimated timeline; |
| ● | the source, quality, costs, and timing of materials, equipment, supplies and resources, including human resources, for the construction, operation, and decommissioning of the Demonstration Plant; |
| ● | plans for our projects or other interests, operations, or rights; |
| ● | plans and strategies during and following the completion of operations of the Demonstration Plant, including the potential for further operation of the Demonstration Plant to meet additional objectives; |
| ● | plans and strategies relating to the advancement of the Bear Lodge REE Project (as defined below); |
| ● | our ability to secure further funding for our longer-term business plans, including the advancement of the Bear Lodge REE Project through permitting and licensing, and if feasible, ultimate construction and operations of a commercial mine and plant for processing and separation of rare earth elements; |
| ● | the timing of an amendment to the Cost Share Agreement (as defined below) between the Company and General Atomics, the parent company of our majority shareholder; and |
| ● | our ability to obtain, and the timing of, necessary governmental permits and approvals for our business and projects. |
1
Forward-looking statements are based on our current expectations and assumptions that are subject to a variety of known and unknown risks, uncertainties and other factors that could cause actual events or results to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, risks associated with:
| ● | our majority shareholder’s significant influence on, or ability to control the outcome of, certain of our major corporate decisions, including our business strategies and financing options to meet our capital needs; |
| ● | our ability to protect our intellectual property rights; |
| ● | the ability of our Demonstration Plant to successfully operate and produce information that would support a decision by the Company to proceed with a potential commercial-scale production facility; |
| ● | the uncertain nature of demand for, and supply of, and their effect on prices for, rare earth products; |
| ● | technological advancements, substitutes, and the establishment of new uses and markets for rare earth products; |
| ● | the development of new, lower cost sources of supply of rare earth products; |
| ● | development, construction and operational hazards, as well as regulatory approvals; |
| ● | our reliance on the skill and expertise of third-party service providers; |
| ● | the ability of third-party service providers to meet their contractual obligations, including as a result of supply chain disruptions and the effects those disruptions could have on our timelines and costs; |
| ● | government regulations and changes in legislation and regulations relating to the mining and rare earth industries, including environmental laws and regulations that impose material compliance costs and liabilities; |
| ● | difficulty in obtaining necessary governmental permits, licenses, and approvals for our Bear Lodge REE Project; |
| ● | governmental interventions in the mining and rare earth industries, including increases in barriers to domestic production and international trade; |
| ● | uncertainties regarding our ability to maintain sufficient liquidity and attract sufficient capital resources to implement our projects and strategies; |
| ● | our ability to attract and retain key personnel; |
| ● | the impact of inflation on our business, including the costs of and our ability to complete the Demonstration Plant construction, operations and decommissioning and the Bear Lodge REE Project; |
| ● | the impact of external financial sector factors including the security of our bank and investment account deposits; |
| ● | uncertainties inherent in estimates of future operating results; |
| ● | changes in competitive factors, including the development or expansion of other projects that are competitive with ours; |
| ● | China’s dominance of the rare earth supply chain and its ability to significantly impact market supply, demand, and prices; |
| ● | our ability to complete financings and other transactions; |
| ● | pandemics, epidemics or other disease outbreaks on supply chains and the resulting disease containment measures implemented by various governments; |
| ● | the availability and costs of goods and services we need to achieve our plans and goals resulting from military conflicts or wars such as in Russia/Ukraine and the Middle East; |
| ● | information technology system and/or data disruptions, damage, theft, failures, or cyber-attacks; |
| ● | uncertainties associated with litigation matters and opposition to our plans and operations by third parties; |
| ● | share price volatility; |
| ● | whether we deregister our common shares under the Exchange Act and/or list our common shares on a securities exchange; |
| ● | foreign and domestic government actions impacting the pricing for, or supply of, rare earth products, including changes in the actual or perceived supply and demand for rare earths due to foreign government export controls; |
| ● | the OTCQB Venture Marketplace standards and the “penny stock” rules and the impact on trading volume and liquidity due to our trading on the OTCQB Venture Marketplace; |
| ● | the consequences of Synchron, the Company’s majority shareholder, discontinuing its support for the Company; |
| ● | risk factors discussed in our Annual Report on Form 10-K for the year ended December 31, 2023; and |
| ● | other factors, many of which are beyond our control. |
This list is not exhaustive of all the factors that may affect our forward-looking statements. Although we have attempted to identify important factors that could cause actual results, performance, or achievements to differ materially from those described in forward-looking statements, there may be other factors that could cause results, performance, or achievements not to be as anticipated, estimated, intended, or expected. Should one or more of these risks or uncertainties materialize, or should underlying assumptions
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prove incorrect, actual results, performance, or achievements may vary, possibly materially, from those anticipated, estimated, intended, or expected. We caution readers not to place undue reliance on any such forward-looking statements. Except as required by law, we disclaim any obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events. We qualify all of the forward-looking statements contained in this Quarterly Report by the foregoing cautionary statements. We advise you to carefully review the reports and documents we file from time to time with the U.S. Securities and Exchange Commission (the “SEC”) and with the Canadian securities regulatory authorities, particularly our Annual Report on Form 10-K for the year ended December 31, 2023. The reports and documents filed by us with the SEC are available at www.sec.gov and with the Canadian securities regulatory authorities under the Company’s profile at www.sedarplus.ca.
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PART I – FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
RARE ELEMENT RESOURCES LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of U.S. dollars, except shares outstanding)
| | September 30, 2024 | | December 31, 2023 | | ||
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| (unaudited) |
| (audited) | | ||
ASSETS: |
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CURRENT ASSETS |
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Cash and cash equivalents | | $ | | | $ | | |
Grant receivable (Note 5) | | | | | | | |
Due from related party (Note 4) | | | | | | | |
Prepaid to related party (Note 4) | | | — | | | | |
Prepaid expenses and other | |
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Total Current Assets | |
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Equipment, net | |
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Restricted cash | | | | | | | |
Right of use asset (Note 6) | | | | | | | |
Investment in land (Note 8) | |
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Total Assets | | $ | | | $ | | |
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LIABILITIES: | |
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CURRENT LIABILITIES | |
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Accounts payable and accrued liabilities | | $ | | | $ | | |
| | | | | — | | |
Repurchase option (Note 8) | | | | | | | |
Lease liability, current (Note 6) | | | | | | | |
Total Current Liabilities | |
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Reclamation obligation | |
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Lease liability, long-term (Note 6) | | | | | | | |
Other long-term liabilities | | | | | | | |
Total Liabilities | |
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Commitments and Contingencies (Note 8) | |
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SHAREHOLDERS’ EQUITY: | |
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Common shares, | |
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Additional paid in capital | |
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Accumulated deficit | |
| ( | |
| ( | |
Total Shareholders’ Equity | |
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Total Liabilities and Shareholders’ Equity | | $ | | | $ | | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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RARE ELEMENT RESOURCES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Expressed in thousands of U.S. dollars, except share and per share amounts)
(unaudited)
| | Three Months Ended September 30, | | Nine Months Ended September 30, | | ||||||||
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| 2024 |
| 2023 |
| 2024 |
| 2023 | | ||||
Operating expenses: |
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Exploration and evaluation (See Note 4 for related party costs) | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
Corporate administration | |
| ( | |
| ( | |
| ( | |
| ( | |
Depreciation and amortization | |
| ( | |
| ( | |
| ( | |
| ( | |
Total operating expenses | |
| ( | |
| ( | |
| ( | |
| ( | |
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Non-operating income (expense): | |
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Interest income | |
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Grant income | | | | | | — | | | | | | — | |
Accretion expense | |
| ( | |
| ( | |
| ( | |
| ( | |
Interest expense | |
| ( | |
| ( | |
| ( | |
| ( | |
Gain on sale of equipment | |
| — | |
| — | |
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Total non-operating income | |
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Net loss | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
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LOSS PER SHARE - BASIC AND DILUTED | | $ | ( | | $ | ( | | $ | ( | | $ | ( | |
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WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | |
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The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
5
RARE ELEMENT RESOURCES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Expressed in thousands of U.S. dollars)
(unaudited)
| | For the nine months ended September 30, | ||||
| | 2024 |
| 2023 | ||
CASH FLOWS FROM OPERATING ACTIVITIES: | | |
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Net loss | | $ | ( | | $ | ( |
Adjustments to reconcile net loss to net cash used in operating activities: | |
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Depreciation and accretion expense | |
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Right of use asset amortization | |
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Lease liability | |
| ( | |
| ( |
Stock-based compensation | |
| ( | |
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Reclamation obligation | | | — | | | |
Other | | | | | | |
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| ( | |
| ( |
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Changes in working capital: | |
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Due from related party | | | | | | ( |
Prepaid expenses and other | |
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| ( |
Accounts payable and accrued liabilities | |
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| ( |
Net cash used in operating activities | |
| ( | |
| ( |
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CASH FLOWS FROM INVESTING ACTIVITIES: | |
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Proceeds from the sale of equipment | | | | | | |
Purchase of equipment | | | ( | | | ( |
Net cash used in investing activities | |
| ( | |
| ( |
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CASH FLOWS FROM FINANCING ACTIVITIES: | |
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Financing transaction, net (Note 7) | |
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| — |
Stock option exercise | |
| — | |
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Net cash provided by financing activities | |
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Net change in cash, cash equivalents and restricted cash | |
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| ( |
Cash, cash equivalents and restricted cash- beginning of the period | |
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Cash, cash equivalents and restricted cash- end of the period | | $ | | | $ | |
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Supplemental cash flow disclosures: | | | | | | |
Cash paid for taxes | | $ | — | | $ | — |
Cash paid for interest | | $ | — | | $ | — |
| | | | | | |
| | As of September 30, | ||||
| | 2024 |
| 2023 | ||
Reconciliation of amounts in the Balance Sheet to amounts in the Cash Flow Statement | | | | | | |
Cash and cash equivalents | | $ | | | $ | |
Restricted cash, long-term | | | | | | |
Total of cash, cash equivalents and restricted cash - end of period | | $ | | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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RARE ELEMENT RESOURCES LTD.
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (DEFICIT)
(Expressed in thousands of U.S. dollars, except share amounts)
(unaudited)
| | | | | | | Additional | | | | | | | |
| | | | | | | Paid in | | Accumulated | | | | ||
|
| Common Shares |
| Amount |
| Capital |
| Deficit |
| Total | ||||
Balance, June 30, 2023 |
| | | $ | | | $ | | | $ | ( | | $ | |
Stock option exercises |
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| — | |
| — | |
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Stock-based compensation |
| — | |
| — | |
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| — | |
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Net loss |
| — | |
| — | |
| — | |
| ( | |
| ( |
Balance, September 30, 2023 |
| | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | |
Balance, June 30, 2024 | | | | | | | | | | | ( | | | |
Stock-based compensation |
| — | |
| — | |
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| — | |
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Net loss |
| — | |
| — | |
| — | |
| ( | |
| ( |
Balance, September 30, 2024 |
| | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | Additional | | | | | | | |
| | | | | | | Paid in | | Accumulated | | | | ||
|
| Number of Shares |
| Amount |
| Capital |
| Deficit |
| Total | ||||
Balance, December 31, 2022 |
| | | $ | | | $ | | | $ | ( | | $ | |
Stock option exercise | | | | | | | | — | | | — | | | |
Stock-based compensation | | — | | | — | | | | | | — | | | |
Common shares cancelled | | ( | | | — | | | — | | | — | | | |
Net loss |
| — | |
| — | |
| — | |
| ( | |
| ( |
Balance, September 30, 2023 |
| | | $ | | | $ | | | $ | ( | | $ | |
| | | | | | | | | | | | | | |
Balance, December 31, 2023 | | | | $ | | | $ | | | $ | ( | | $ | |
2024 Rights Offering | | | | | | | | — | | | — | | | |
Stock option exercises |
| | |
| — | |
| — | |
| — | |
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Stock-based compensation |
| — | |
| — | |
| ( | |
| — | |
| ( |
Net loss |
| — | |
| — | |
| — | |
| ( | |
| ( |
Balance, September 30, 2024 |
| | | $ | | | $ | | | $ | ( | | $ | |
The accompanying notes are an integral part of these unaudited condensed consolidated interim financial statements.
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RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
1. NATURE OF OPERATIONS
Rare Element Resources Ltd. (“we,” “us,” “Rare Element” or the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, on June 3, 1999.
Rare Element holds a
If and when developed, the Bear Lodge REE Project will likely consist of a mine and a separation plant to produce a commercial NdPr product. As market conditions dictate, the Company will decide whether it is prudent to develop and put into production the mine and separation plant independent of each other or whether linking the two production processes into a single project is the more prudent path.
The Company also holds a
The Company is currently focused on the advancement of a rare earth processing and separation demonstration-scale plant (the “Demonstration Plant”) project. The Demonstration Plant will process already stockpiled high-grade sample materials from the Bear Lodge REE Project.
In January 2021, a consortium of companies, of which the Company is a part, received notice from the Department of Energy (“DoE”) that the consortium had been selected for negotiation of a potential financial award for the engineering, construction and operation of a rare earth separation and processing demonstration plant, which is now the Demonstration Plant project. The consortium of companies is led by General Atomics, an affiliate of Synchron, the Company’s majority shareholder, and includes certain of General Atomics’ affiliates, and LNV, an Ardurra Group, Inc. company, as engineering and construction subcontractor. The Company, as a subrecipient of the award, along with the other consortium members, commenced work on the planning and design of the Demonstration Plant project in November 2021, with the Company’s contractual arrangement with General Atomics finalized in December 2021. The DoE’s original funding commitment was in the amount of $
To address the Company’s funding needs, including the funding required for the Demonstration Plant, the Company completed rights offerings in December 2021 (the “2021 Rights Offering”) and March 2024 (the “2024 Rights Offering,” and together with the 2021 Rights Offering, the “Rights Offerings”) for gross proceeds of approximately $
8
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
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 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.
During the nine months ended September 30, 2024, the Company continued its work on the Demonstration Plant project. This work is planned to continue until the Demonstration Plant’s expected completion of operations in 2025. 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 $
The Company has incurred losses since its inception, and further losses are anticipated in the development of its business. As of September 30, 2024, the Company had cash and cash equivalents of $
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 our audited consolidated financial statements as of December 31, 2023, which were included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. 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, 2024, and the results of its operations and cash flows for the three and nine months ended September 30, 2024 and 2023 in conformity with U.S. GAAP on a going concern basis. These interim results of operations for the nine months ended September 30, 2024 may not be indicative of the results that will be realized for the full year ending December 31, 2024.
Research & Development (“R&D”) Expenditures
Materials, equipment, and facilities acquired or constructed for R&D activities associated with the Company’s Demonstration Plant project are expensed as incurred. These materials, equipment and facilities are not expected to have an alternative future use beyond the end of the current Demonstration Plant project.
Restricted Cash
The Company periodically maintains cash deposits that are held and earmarked for a specific purpose. At September 30, 2024, the Company had $
9
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
Loss per Share
Loss per share is computed using the weighted average number of shares outstanding during the period. In March 2024, the Company completed the 2024 Rights Offering (Note 7) whereby the Company offered existing shareholders the right to purchase additional common shares at $
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):
| ● | Level 1 — Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities. |
| ● | Level 2 — Observable inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly, including quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data by correlation or other means. |
| ● | Level 3 — Prices or valuation techniques requiring inputs that are both significant to the fair-value measurement and unobservable. |
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, 2024 and December 31, 2023 are presented in the following table:
Fair value at September 30, 2024 | ||||||||||||
| | Total | | Level 1 | | Level 2 | | Level 3 | ||||
Assets: |
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Money market funds | | $ | | | $ | | | $ | — | | $ | — |
Grant and related party receivables | | | | | | | | | — | | | — |
| | | | | | | | | | | | |
Fair value at December 31, 2023 | ||||||||||||
| | Total | | Level 1 | | Level 2 | | Level 3 | ||||
Assets: |
| |
|
| |
| | |
|
| |
|
Money market funds | | $ | | | $ | | | $ | — | | $ | — |
Grant and related party receivables | | | | | | | | | — | | | — |
Money market funds are valued at cost, which approximates fair value. These amounts are included on the balance sheet in cash and cash equivalents at September 30, 2024 and December 31, 2023.
4. RELATED PARTY
Cost Share Agreement with General Atomics
In January 2021, a consortium of companies, of which the Company is a party, 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), and includes
10
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
certain of General Atomics’ affiliates, and LNV, an Ardurra Group, Inc. company, as engineering and construction subcontractor. 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 $
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
On March 17, 2022, the Company executed a subcontract purchase order in the amount of $
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 $
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, up to $
As of November 6, 2024, amendments to both the Cost Share Agreement and the Subcontract Purchase Order were still in the process of being finalized with General Atomics.
The following table summarizes transactions under the Cost Share Agreement during the nine months ended September 30, 2024:
Balance of funds remaining on deposit with General Atomics as a prepaid expense at beginning of period | | $ | |
Funds transferred to General Atomics during the period | | | |
The Company's share of Demonstration Plant project costs incurred during the period | | | ( |
Balance of funds owed to General Atomics at end of period | | $ | ( |
11
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
The following table summarizes related party receivables due from General Atomics for reimbursable costs incurred by the Company under the Subcontract Purchase Order during the nine months ended September 30, 2024:
Balance of receivables due from General Atomics at beginning of period | | $ | |
Reimbursable costs incurred by the Company during the period | | | |
Reimbursements received from General Atomics during the period | | | ( |
Balance of receivables due from General Atomics at end of period | | $ | |
5. WYOMING ENERGY AUTHORITY GRANT
In June 2023, the Company, and the WEA entered into a Funding Agreement (the “WEA Funding Agreement”) pursuant to which the WEA agreed to fund, subject to certain conditions, a $
The WEA Funding Agreement will terminate when the funding has been fully disbursed, but no later than December 31, 2025, unless terminated sooner by either party in accordance with the terms of the WEA Funding Agreement. The WEA Funding Agreement may be terminated (i) by either party if the WEA does not receive the requested funding from the ERC or if the grant funds are not allocated or available for the continued performance of the WEA Funding Agreement, or (ii) by the WEA immediately for cause if the Company fails to perform in accordance with the terms of the WEA Funding Agreement.
The following table summarizes transactions under the WEA Funding Agreement for the nine months ended September 30, 2024:
Grant receivable due from the WEA at beginning of period | | $ | |
Grant amounts invoiced to the WEA during the period | | | |
Grant reimbursements received from the WEA during the period | | | ( |
Grant receivable due from the WEA at end of period | | $ | |
The Company received payment in January 2024 of the $
6. LEASES
The Company accounts for leases in accordance with ASC 842 – Leases. This accounting standard requires all lessees to record the impact of leasing contracts on the balance sheet as a right to use asset and corresponding liability. This is measured by taking the present value of the remaining lease payments over the lease term and recording a right to use asset and corresponding lease obligation for lease payments. Rent expense is realized on a straight-line basis and the lease obligation is amortized based on the effective interest method. The amounts recognized reflect the present value of the remaining lease payments for all leases that have a lease term greater than 12 months. The discount rate used is an estimate of the Company’s incremental borrowing rate based on information available at lease commencement in determining the present value of lease payments.
12
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
In considering the lease asset value, the Company considers fixed or variable payment terms, prepayments, and
Effective September 21, 2021, the Company entered into a lease agreement for real property, including land and buildings in Upton, Wyoming for the Demonstration Plant (the “Property Lease”). The Property Lease is a
On May 14, 2024, the Company entered into a second lease agreement for modular office units for use at its Demonstration Plant site in Upton, Wyoming (the “Office Lease”). The Office Lease is for an initial
For purposes of the following table, payments under the Property Lease and Office Lease are assumed to run through September 30, 2026 and September 30, 2025, respectively. If the completion of the Demonstration Plant operations dictates further extensions beyond these dates, the Company may seek to extend the term of one or both lease agreements accordingly.
Total future lease payments under the Company’s leases as of September 30, 2024 are as follows:
2024 | | $ | |
2025 | | | |
2026 | | | |
Total lease payments | | | |
Less interest | | | ( |
Present value of lease payments | | $ |
For the nine months ended September 30, 2024, $
As of September 30, 2024 the weighted average lease term for the Company’s operating leases was
7. SHAREHOLDERS’ EQUITY
Stock-based compensation
As of September 30, 2024, the Company had
13
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
The 2011 Plan was replaced in 2022 by the 2022 Plan and, as such,
Under the 2022 Plan, as approved by our shareholders at the annual meeting of shareholders on August 23, 2022, our Board of Directors (the “Board”) 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
The Company estimates the fair value of its stock option grants using the Black-Scholes option valuation model and the closing price of our common shares on the business day prior to the grant date. The Company did not grant any stock options during the nine months ended September 30, 2024.
Risk-free interest rate | | | % |
Expected volatility | | | % |
Expected dividend yield | | | |
Expected term in years | | |
The following table summarizes our stock option activity for each of the nine months ended September 30, 2024 and 2023:
| | Nine Months Ended September 30, | |||||||||
| | 2024 | | | 2023 | ||||||
| | | | Weighted | | | | | Weighted | ||
| | | | Average | | | | | Average | ||
| | Number of Stock | | Exercise | | | Number of Stock | | Exercise | ||
|
| Options |
| Price |
| | Options |
| Price | ||
Outstanding, beginning of period |
| | | $ | | |
| | | $ | |
Granted |
| | | $ | | |
| | | $ | |
Exercised |
| ( | | $ | | |
| ( | | $ | |
Cancelled/Expired |
| ( | | $ | | |
| — | | $ | — |
Outstanding, end of period |
| | | $ | | |
| | | $ | |
| | | | | | | | | | | |
Exercisable, end of period |
| | | $ | | |
| | | $ | |
Non-vested, end of period |
| | | $ | | |
| | | $ | |
The
The following table summarizes the intrinsic value and weighted average remaining life for stock options as of September 30, 2024:
| | | | | Weighted |
| | | | | Average |
| | | | | Remaining |
As of September 30, 2024: |
| | Intrinsic Value | | Life (Years) |
Stock options outstanding | | $ | — | | |
Stock options exercisable | | $ | — | | |
Stock options non-vested | | $ | — | |
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, 2024, the Company recognized stock-based
14
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
compensation expense of $
As of September 30, 2024, there was approximately $
2024 Rights Offering
On March 11, 2024, the Company completed the 2024 Rights Offering for gross proceeds of approximately $
The net proceeds from the 2024 Rights Offering are expected to support the operations of the Demonstration Plant for a sufficient amount of time to gather the information necessary for a commercialization decision as well as support the Company’s other general corporate purposes.
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 change from time to time 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 to be incurred for existing mining interests is uncertain.
Contract commitment – related party
Pursuant to the Cost Share Agreement between the Company and General Atomics, as extended and as expected to be amended in the fourth quarter of 2024, and as discussed in Note 4, the Company has agreed to assume and pay for approximately -half of the allowable costs under the original 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.
Asset purchase agreement
On October 25, 2021, Rare Element Resources, Inc. (“RER”), a Wyoming corporation and wholly owned subsidiary of 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 RER and Whitelaw Creek (the “Asset Purchase Agreement”). The Amendment modified certain provisions of the Asset Purchase Agreement related to the terms and conditions of RER’s option to
15
RARE ELEMENT RESOURCES LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2024
(all amounts stated in thousands of U.S. dollars except share and per share amounts)
(unaudited)
repurchase (the “Repurchase Option”) approximately
Officer Appointment and Employment Agreement with Kelli Kast
On June 30, 2024, the Board appointed Kelli Kast as the Vice President, General Counsel and Chief Administrative Officer of the Company, effective as of July 1, 2024. On July 1, 2024, the Company and Ms. Kast entered into an employment agreement, which provides that (i) Ms. Kast’s initial annual base salary is $
9. SUBSEQUENT EVENTS
Officer Appointment and Offer Letter with Jaye T. Pickarts
On September 26, 2024, the Board appointed Jaye T. Pickarts as the Chief Operating Officer of the Company, effective as of October 1, 2024. On September 26, 2024, RER and Mr. Pickarts executed an employment offer letter, effective as of October 1, 2024, which provides that (i) Mr. Pickarts’ initial annual base salary is $
Land Repurchase from Whitelaw Creek
Pursuant to the terms of the Asset Purchase Agreement with Whitelaw Creek, as extended, RER exercised its option to repurchase the Property, and on October 21, 2024, entered into a purchase agreement with Whitelaw Creek to repurchase the Property (the “Land Repurchase”). The Land Repurchase closed on October 25, 2024 (the “Closing Date”). As consideration for the Land Repurchase, on the Closing Date, the Company (i) issued
NRC Operations Approval
On October 30, 2024, the NRC issued an amendment to its previously issued license, allowing for the commencement of operations at the Company’s Demonstration Plant.
16
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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 and nine months ended September 30, 2024, has been prepared based on information available to us as of November 6, 2024. 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, 2023, 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.”
All currency amounts are expressed in thousands of U.S. dollars, unless otherwise noted.
Overview and Outlook
Our primary focus has been and continues to be the engineering, permitting, licensing, construction, and planned 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.
During the first nine months of 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, expected in 2025. These efforts culminated in September 2024 with the DoE issuing 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, allows 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 for a term of up to 12 months.
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. As of September 30, 2024, the Company had met the conditions allowing for the invoicing of an additional $2,000 with collection expected 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 the first quarter of 2025).
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 amount in excess of the $53,600 revised DoE approved budget.
To fund the Company’s share of these cost increases, the Company announced, during December 2023, its intention to launch the 2024 Rights Offering to raise approximately $36,000 in gross proceeds. In March 2024, the Company completed 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, or
17
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 External Factors Impacting our Business
During the first nine months of 2024, 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 issued two Presidential Executive Orders in 2017 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. In June 2019, the Department of Commerce released its report entitled “Federal strategy to ensure secure and reliable supplies of critical minerals.” This was followed by four U.S. Presidential Determinations on July 22, 2019, directed to the Secretary of Defense. One Presidential Determination declared that “the domestic production capability for rare earth metals and alloys is essential to the national defense.” Since then, four more Presidential Determinations/Waivers have been signed that support the critical mineral industry, which includes REEs. The “Supply Chain Resilience (Waiver)” signed on February 27, 2023, allows funds to be directed towards industrial base supply chains critical to the Department of Defense, including rare earth mineral extraction, processing, and separation. These initiatives have increased the federal government’s level of interest in the rare earth industry and our potential rare earth products as a critical upstream segment of the supply chain, particularly considering China’s dominance in the global rare earth market.
In addition, the impacts of the COVID-19 pandemic and other external influences (such as the Russia/Ukraine war and conflicts in the Middle East) have further focused the U.S. government on the importance of implementing secure domestic supply chains, including for REEs, leading to a further Presidential Executive Order issued in February 2021 calling for an expedited 100-day review to address the strengthening of America’s supply chains, specifically requiring the Department of Defense to (i) submit a report identifying “risks in the supply chain of critical minerals and other strategic materials including rare earth elements” and (ii) make policy recommendations to address the risks. The 100-day review led to another Executive Order on June 8, 2021, calling for an investment in sustainable domestic and international production and processing of critical minerals, including a recommendation that Congress take actions to recapitalize and restore the National Defense Stockpile of critical minerals and materials. The Company monitors and participates in these initiatives as they are critical to the production of rare earth magnets used in the United States to support the manufacturing of, among other things, defense technologies, electric vehicles, wind turbines, consumer electronics, and oil refining equipment. In December 2023, China 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.
Results of Operations
Summary
For the three and nine months ended September 30, 2024, we experienced net losses of $4,734 ($0.01 per share) and $14,539 ($0.03 per share), respectively, compared with net losses of $3,126 ($0.01 per share) and $8,092 ($0.03 per share) for the three and nine months ended September 30, 2023, 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.
Exploration and Evaluation
Our exploration and evaluation costs increased by $3,947 over the comparative three-month period, rising from $2,508 for the three months ended September 30, 2023 to $6,455 for the three months ended September 30, 2024, and by $8,996 over the comparative nine-month period, rising from $6,183 for the nine months ended September 30, 2023 to $15,179 for the nine months ended September 30, 2024. These increases were largely attributable to the activities associated with our Bear Lodge REE Project and the Demonstration Plant as work progressed under the Cost Share Agreement. See Note 4 to the Consolidated Financial Statements for a discussion of the Cost Share Agreement.
Corporate Administration
Our corporate administrative costs decreased by $77 over the comparative three-month period, decreasing from $646 for the three months ended September 30, 2023 to $569 for the three months ended September 30, 2024, and by $110 over the comparative nine-month period, decreasing from $2,001 for the nine months ended September 30, 2023 to $1,891 for the nine months ended
18
September 30, 2024. These decreases were largely attributable to reductions in our stock option expense of $67 and $444 in the comparative three- and six-month periods, respectively, partially offset by increases in employee wages and benefits expenses in the comparative nine-month periods.
Interest Income
For the three months ended September 30, 2024 and 2023, the Company generated interest income of $414 and $130, respectively, and $866 and $391 for the nine months ended September 30, 2024 and 2023, respectively, from investments of its cash holdings. These increases from period to period were primarily the result of the higher average cash balances available for investment during the three- and nine-month periods ended September 30, 2024 due to the funds raised from the 2024 Rights Offering.
Grant Income
During September 2024, the Company recognized grant income of $2,000 with the achievement of the second milestone under the WEA Funding Agreement. There were no such transactions for the nine months ended September 30, 2023. See Note 5 to the Consolidated Financial Statements for a discussion of the WEA Funding Agreement.
Accretion Expense
We recorded accretion expense of $70 for each of the three months ended September 30, 2024 and 2023, and $212 for each of the nine months ended September 30, 2024 and 2023,in each case related to the Company’s option to repurchase approximately 640 acres of real property in Wyoming for not less than $1,200 nor greater than $1,850 in the form of cash, 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 made of $25. See Notes 8 and 9 to the Consolidated Financial Statements for a discussion of the repurchase option and subsequent exercise of this option.
Financial Position, Liquidity and Capital Resources
Operating Activities
Net cash used in operating activities was $9,177 for the nine months ended September 30, 2024, compared with $8,766 for the same period in 2023. This increase of $411 was largely attributable to an increase in amounts paid for work on the Demonstration Plant during the nine months ended September 30, 2024, partially offset by the January 2024 collection of the $2,000 WEA grant receivable balance.
Investing Activities
Net cash used in investing activities of $52 and $4 for the nine months ended September 30, 2024 and 2023, respectively, resulted from the purchase and sale of equipment during each period.
Financing Activities
Net cash provided by financing activities of $35,286 for the nine months ended September 30, 2024, stemmed from the receipt of the net proceeds from the 2024 Rights Offering. Net cash provided by financing activities of $23 for the nine months ended September 30, 2023, stemmed from the exercise of 330,000 stock options.
Financial Position, Liquidity and Capital Resources
At September 30, 2024, we had a working capital balance of $28,402, which represented an increase of $20,593 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 amounts paid by the Company during the nine months ended September 30, 2024 under the Cost Share Agreement and for the payment of other ongoing expenses.
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
19
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 is expected in the fourth quarter of 2024, with the remainder, or the $400 retainer, forecasted for collection in the first quarter of 2025.
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 cost-share funding commitment of $2,400 to fund a portion of the budget increase, with the balance coming from the Company, including from the funds raised by the Company in the 2024 Rights Offering. These additional funds are expected to support the operations of the Demonstration Plant for a sufficient amount of time to gather the information necessary for a commercialization decision.
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 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.
Contractual Obligations
There were no material changes to the contractual obligations disclosed in Item 8 of Part II of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
Disclosure Controls and Procedures
As of the end of the period covered by this Quarterly Report on Form 10-Q, an evaluation was carried out under the supervision of, and with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), of the effectiveness of the design and operations of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). Based on that evaluation, the CEO and the CFO have concluded that, as of the end of the period covered by this Quarterly Report on Form 10-Q, our disclosure controls and procedures were effective in ensuring that (i) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and (ii) information required to be disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our CEO and CFO, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Controls
There has been no change in our internal control over financial reporting during the quarter ended September 30, 2024, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
20
PART II – OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not aware of any material pending or threatened litigation or of any proceedings known to be contemplated by governmental authorities that are, or would be, likely to have a material adverse effect upon us or our operations, taken as a whole.
ITEM 1A. RISK FACTORS
During the three months ended September 30, 2024 there were no material changes to the risk factors disclosed in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
We consider health, safety, and environmental stewardship to be a core value for Rare Element Resources.
Pursuant to Section 1503(a) of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, issuers that are operators, or that have a subsidiary that is an operator, of a coal or other mine in the United States are required to disclose in their periodic reports filed with the SEC information regarding specified health and safety violations, orders and citations, related assessments and legal actions, and mining-related fatalities under the regulation of the Federal Mine Safety and Health Administration (“MSHA”) under the Federal Mine Safety and Health Act of 1977 (the “Mine Act”). During the three months ended September 30, 2024, the Company was not subject to regulation by MSHA under the Mine Act.
ITEM 5. OTHER INFORMATION
Insider Trading Arrangements and Policies
During the quarter ended September 30, 2024,
21
ITEM 6. EXHIBITS
Exhibit |
| Description |
|---|---|---|
10.1* | | |
10.2* | | |
10.3* | | |
10.4* | | |
31.1+ | | |
31.2+ | | |
32.1++ | | Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
32.2++ | | |
101.INS+ | | Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
101.SCH+ | | XBRL Schema Document |
101.CAL+ | | XBRL Calculation Linkbase Document |
101.DEF+ | | XBRL Definition Linkbase Document |
101.LAB+ | | XBRL Label Linkbase Document |
101.PRE+ | | XBRL Presentation Linkbase Document |
104 | | Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
+ | Filed herewith. |
++ | Furnished herewith. |
* Indicates a management contract or compensatory plan, contract or arrangement.
22
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| RARE ELEMENT RESOURCES LTD. | |
| | |
| | |
| By: | /s/ Ken Mushinski |
| | Ken Mushinski |
| | President, Chief Executive Officer and Director |
| | (Principal Executive Officer) |
| | |
| Date: | November 6, 2024 |
| | |
| By: | /s/ Wayne E. Rich |
| | Wayne E. Rich |
| | Chief Financial Officer |
| | (Principal Financial Officer) |
| | |
| Date: | November 6, 2024 |
23
Exhibit 10.1
May 16, 2024
General Atomics
Attn: Kevin Downey
3550 General Atomics Court
San Diego, California 92121
RE: | Agreement Extension to the Cost Share Funding Assumption Agreement |
Kevin,
This letter is to confirm the extension of the Cost Share Funding Assumption Agreement dated November 1, 2021, by and between General Atomics (GA) and Rare Element Resources, Inc. (RER) (together the “Parties) (the “Agreement”), until such time as the Parties engage in an amendment of the Agreement as set forth below (the “Agreement Extension”). Further, during the Agreement Extension, RER has agreed to provide additional cash advances to GA for the rare earth demonstration project (“Project”) as set forth below.
By GA’s acceptance of this letter agreement, the Parties agree as follows (certain defined terms not defined herein, are set forth in the Agreement):
Littleton, CO 80122
Professional Regards,
/s/ Ken Mushinski
Ken Mushinski
President and Chief Executive Officer
Agreed to and accepted by:
General Atomics
Name: ___Alec Gordon______________
Title: ____________________________
Date: ___May 21, 2024______________
Littleton, CO 80122
CERTIFICATIONS
I, Ken Mushinski, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Rare Element Resources Ltd.; |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
| /s/ Ken Mushinski |
Date: November 6, 2024 |
Ken Mushinski President, Chief Executive Officer and Director (Principal Executive Officer) |
CERTIFICATIONS
I, Wayne Rich, certify that:
| 1. | I have reviewed this Quarterly Report on Form 10-Q of Rare Element Resources Ltd.; |
| b. | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: November 6, 2024 | /s/ Wayne Rich Wayne Rich Chief Financial Officer (Principal Financial and Accounting Officer) |
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Rare Element Resources Ltd. (the “Company”) does hereby certify, based on my knowledge, with respect to the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2024 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Ken Mushinski |
Date: November 6, 2024 |
Ken Mushinski President, Chief Executive Officer and Director (Principal Executive Officer) |
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code), the undersigned officer of Rare Element Resources Ltd. (the “Company”) does hereby certify, based on my knowledge, with respect to the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2024 (the “Report”) that:
| 1. | The Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934; and |
| 2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
| /s/ Wayne Rich |
Date: November 6, 2024 |
Wayne Rich Chief Financial Officer (Principal Financial and Accounting Officer) |
The foregoing certification is being furnished solely pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (Section 1350 of Chapter 63 of Title 18 of the United States Code). It shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 (15 U.S.C. Section 78r) or otherwise subject to the liability of that section. It shall also not be deemed incorporated by reference into any filing under the Securities Exchange Act of 1934, as amended, or the Securities Act of 1933, as amended, except to the extent that the Company specifically incorporates it by reference.