Mr. Randall Scott reports

RARE ELEMENT ANNOUNCES JUNE 30, 2012 YEAR END AND FOURTH QUARTER FINANCIAL RESULTS

Rare Element Resources Ltd. has released its consolidated financial statements and Form 10-K for the year ended June 30, 2012, and filed on SEDAR. All figures are shown in U.S. dollars, unless otherwise specified.

As to the completion of the fiscal year and financial report filing, Randall J. Scott, president and chief executive officer, stated: "This was a year of continued substantial progress for our Bear Lodge property. With a planned 15,000-metre calendar year 2012 drill program, and encouraging results to date, the future of this exceptional project is coming together in a timely way. We look forward to continuing to meet our goals and milestones as we move toward production and will be keeping our shareholders up to date as we work diligently throughout the remainder of 2012 and into 2013."

Fourth quarter ended June 30, 2012, financial highlights

As an exploration company, Rare Element does not report revenues at this time. The net loss for the fourth quarter ended June 30, 2012, totalled $8.6-million or 19 cents per share as compared with a net loss of $7.1-million or 16 cents per share for the same period in 2011. The $1.5-million negative variance in net loss between the periods was due to the following:

• Increased corporate administrative expenses, excluding stock-based compensation expense, due to a larger number of employees ($1.1-million);

• Increased exploration spending at the Bear Lodge property ($1.0-million);

• Writedowns of exploration properties during 2012 ($900,000);

• Increased foreign exchange loss due to the impacts on the company's Canadian dollar cash balances related to exchange rate fluctuations in the U.S. dollar on the balance sheet date ($500,000);

• Positive variance in stock-based compensation of $2.1-million due primarily to a lower share price and smaller number of options granted;

• Negative variances in non-operating income and expenses amounted to $100,000.

Cash and cash equivalents, and short-term investments at June 30, 2012, were $51.6-million compared with $56.0-million as of March 31, 2012. The $4.4-million decrease in cash and cash equivalents was primarily due to exploration, corporate administrative costs and foreign exchange losses on the company's Canadian cash balances.

Fiscal year ended June 30, 2012, financial highlights

The net loss for the year ended June 30, 2012, totalled $35.0-million or 79 cents per share as compared with a net loss of $16.7-million or 43 cents per share for the same period in 2011. The $18.3-million negative variance in net loss between the periods was due to the following:

• Increased exploration spending at the Bear Lodge property ($6.7-million);

• Increased foreign exchange loss due to the impacts on the company's Canadian dollar cash balances related to exchange rate fluctuations in the U.S. dollar on the balance sheet dates ($5.7-million);

• Increased corporate administrative expenses, excluding stock-based compensation expense, due to Bear Lodge project development-related expenditures and due to more employees ($3.3-million);

• Increased non-cash stock-based compensation expense due primarily an increase in the number of employees and the effects of expensing past grants ($3.3-million);

• Writedowns of exploration properties during 2012 ($1.9-million);

• Positive variance in unrealized losses on derivatives due to decreases in the stock price between periods ($2.4-million);

• Positive variance in interest income of $200,000.

Cash and cash equivalents, and short-term investments decreased $20.6-million for the year ended June 30, 2012. The decrease in cash and investments was primarily due to spending for exploration, corporate administrative and Bear Lodge development-related costs, and foreign exchange losses on translating the company's Canadian cash balances to U.S. dollars.

Update on the Bear Lodge REE (rare earth elements) project

Project development work

Current development efforts are progressing as planned and focusing on acquiring additional key information in support of the company's definitive feasibility study, its next major project milestone, which it expects to complete during the third quarter of 2013. The current drilling programs, metallurgical testwork, strategic partner and off-take discussions, and environmental and social impact studies are concentrated on advancing the project and maximizing stakeholder value. Rare Element intends to start the formal portion of the definitive feasibility study during the first quarter of 2013.

Rare Element expects to submit its revised plan of operations to the U.S. Forest Service before the end of 2012. This submittal will formally start the environmental impact statement assessment for the project. Rare Element's goal is to obtain a favourable record of decision (ROD) from the USFS in 2014. The Wyoming mine permit application is expected to be submitted in late 2013 with the goal of receiving the company's permit to mine by the end of 2014. A Wyoming industrial siting permit application will also be submitted in late 2013.

Drilling

Rare Element is on track to complete 15,000 metres of drilling in the 2012 drilling season. It mobilized three core drill rigs and one reverse circulation drill rig in June, 2012, at the Bear Lodge project. A fourth core rig was added to the project in August, 2012. The objectives of the drilling program in 2012 include: (i) increase the measured and indicated resources at the Bull Hill deposit; (ii) upgrade a significant portion of the Whitetail Ridge heavy-rare-earth-enriched resource to the measured and indicated categories; and (iii) delineate the zone of HREE enrichment at the Carbon exploration target.

Results to date from the 2012 drilling program include:

• Completed development drilling consists of 19 core holes and one reverse circulation hole at the Bull Hill deposit. Fourteen holes are split and shipped for assay. Assays are received from six drill holes and will be reported in an upcoming news release. An additional 15 drill holes are planned for the Bull Hill development program.

• Infill and step-out exploration drilling at the growing Whitetail Ridge HREE-enriched deposit is designed to expand the current resource and upgrade a significant portion to the measured and indicated categories. The planned program includes 35 drill holes. The Whitetail Ridge deposit is enriched in the more critical and valuable heavy rare earth elements relative to the Bull Hill deposit, as described in a press release dated May 7, 2012.

• Ten core and four reverse circulation drill holes are complete at the Whitetail Ridge resource area, for a total of 12,313 feet. Nine of the holes were shipped for assay, and assays are in hand for five drill holes and will be reported in an upcoming news release.

• Six drill holes were completed at the Carbon target, for a total of 3,790 feet. The objective is the delineation of a zone of strong HREE enrichment in FMR dikes and stockwork.

• Condemnation drilling is complete for the physical upgrade plant (nine drill holes) and stockpile/waste facility sites. Condemnation drilling on the stockpile/waste facility site in state Section 16 included results from 18 reverse circulation drill holes, two groundwater monitor well drill holes and five geotechnical drill holes.

Supporting exploration activities include the company's extensive geological mapping, soil and rock chip geochemical surveys, and bulk sampling with large-diameter core for metallurgical testing purposes.

Metallurgy

A co-ordinated effort of RER geologists and metallurgists provided a selection of 11 sample sites that exhibit variable mineralogy and are spatially representative of the expanded mine pit footprint. SGS Lakefield is currently conducting confirmatory metallurgical testwork using the current process flowsheet.

Mountain States Research and Development, under the direction of Dr. Roshan Bhappu, is conducting the HREE testwork on sample material from the Whitetail Ridge, Carbon and East Taylor areas. Physical upgrading methods have been applied in the first phase of testwork. Based on the preliminary results from this testwork and results from exploration drilling at Whitetail Ridge, and preliminary drilling at Carbon and East Taylor, Rare Element will make a determination as to whether to integrate development of one or more of the HREE-enriched areas into the definitive feasibility study and permitting timeline for the Bear Lodge REE project. An affirmative decision to include one or more of these zones in the DFS may provide enhanced project economics.

Testwork is also under way with the Australian Nuclear Science and Technology Organization (ANSTO). The company's current strategy is to commence production of a bulk mixed RE carbonate, and if feasible, progress to the separation of the bulk RE concentrate into defined products: samarium, gadolinium and europium (SEG); neodymium-praseodymium (also known as didymium); and cerium and lanthanum products using solvent extraction technology. As this separation work advances, Rare Element may adjust the product suite to add or further separate additional products. The separation testing and development work will be performed in two phases. The first phase is under way and will identify whether any further purification processing is required for the production of a mixed RE carbonate and how REE separation through solvent extraction can be successfully integrated into the current process. The second phase will identify solvent extraction processes that will chemically achieve the desired separated REE products. Once these tasks are successfully accomplished, the company plans to continue testing of separation into individual rare earth oxides. The specifications for the individual REO will be determined by customer requirements.

Corporate

The company has added key additional technical staff, both geological and engineering, at the project site in Sundance, Wyo. Further, Rare Element added Kelli Kast, Esq, as vice-president, general counsel, and chief administrative officer to the management team in July, 2012, with 16 years of in-house legal experience in the U.S. mining industry.

In September, Rare Element announced a change in its fiscal year-end from June 30 to Dec. 31, effective as of Dec. 31, 2012. This change will better align the company's financial and year-end results to its drill season and budgeting process. The transition period between the end of the current fiscal year on June 30, 2012, and the end of the new fiscal year on Dec. 31, 2012, will be covered by an annual report on Form 10-K, to be filed in accordance with applicable regulations.

We seek Safe Harbor.