Mr. Randall Scott reports

RARE ELEMENT ANNOUNCES SEPTEMBER 30, 2012 FIRST QUARTER FINANCIAL RESULTS

Rare Element Resources Ltd. has filed its unaudited consolidated interim financial statements on form 10-Q for the quarter ended Sept. 30, 2012, on SEDAR and the U.S. Securities and Exchange Commission.

Regarding the first-quarter fiscal 2013 financial report filing, Randall J. Scott, president and chief executive officer, stated: "This quarter's expenditures were focused on our targeted 2012 drilling program, continued progress on permitting and developing additional metallurgical data to support the start of our definitive feasibility study. The quarter's drilling program continues a successful year of supporting an expansion and upgrade of the Bull Hill and Whitetail Ridge resources, and delineation of the heavy-rare-earth-element-enriched mineralization at the Carbon target located approximately one kilometre to the northwest of Bull Hill. The 2012 drill program of 22,000 metres will result in an updated resources report in the first quarter of 2013. We continue to safeguard our healthy cash balance as we position ourselves to meet our calendar year 2013 goals."

Update on the Bear Lodge REE project

Project development work

Current development efforts are progressing as planned and focusing on acquiring additional key information in support of a definitive feasibility study, the next major project milestone, which we expect to complete during the fourth quarter of 2013. The current drilling program, metallurgical testwork, continuing partner and offtake discussions, and environmental and social impact studies are concentrated on advancing the project and maximizing stakeholder value. The company intends to start the formal portion of the definitive feasibility study during the first quarter of 2013.

The company expects to submit a revised plan of operations to the U.S. Forest Service (USFS) before the end of 2012. This submittal will formally start the environmental impact statement (EIS) assessment for the project. The 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 a permit to mine by the end of 2014. A Wyoming industrial siting permit application will also be submitted in late 2013.

Drilling

The company is on track to complete at least 15,000 metres of core drilling and 7,000 metres of reverse-circulation (RC) drilling during the 2012 drilling season. Four core drill rigs and one reverse-circulation drill rig are currently on site. The objectives of the drilling program in 2012 were to: (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 indicated category; and (iii) delineate the zone of HREE enrichment at the Carbon exploration target. The company expects to provide a second update on its partial drill results soon.

Metallurgy

A co-ordinated effort of Rare Element geologists and metallurgists provided a selection of 11 sample sites, which 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.

Nagrom Research Laboratories, Perth, Australia, is conducting additional HREE testwork on sample material from the Whitetail Ridge and Carbon areas. Physical upgrading methods have been applied in this phase of testwork, which include gravity concentration, flotation and magnetic separation. Based on the results from this testwork and results from exploration drilling at Whitetail Ridge, RER has determined that the Whitetail Ridge resource area will be integrated into the development phase of the project, which includes the definitive feasibility study and permitting timeline for the Bear Lodge REE project. The addition of Whitetail Ridge into the development phase may provide enhanced project economics.

Metallurgical testwork is also under way with the Australian Nuclear Science and Technology Organization (ANSTO). The first phase of testwork identified that further purification processing is required for the production of rare-earth-element (REE) products either as a mixed concentrate or as a series of defined products. This testwork was successful in removing many of the impurities associated with REE processing. The company's current strategy is to commence production of samarium, gadolinium and europium (SEG); neodymium-praseodymium (also known as didymium); cerium products; lanthanum products; and other HREEs, including dysprosium and terbium. As this purification and separation work advances, the company may adjust the product suite to add or further separate additional products. The next phase of testwork will study upgrading and additional purification 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 (REO). The specifications for the individual REO will be determined by customer requirements.

First quarter ended Sept. 30, 2012, financial highlights

Please note that financial results published by the company are all stated in U.S. dollars.

As an exploration stage company, the company has no production revenues to report. The net loss for the first quarter ended Sept. 30, 2012, totalled $5.9-million or 13 cents per share as compared with a net loss of $10.9-million or 25 cents per share for the same period in 2011. The $5.0-million positive variance in net loss between the periods was due to the following:

• Increased exploration expense of $1.5-million;
• Higher corporate administration expense of $800,000 due to increased corporate administrative expenses, excluding stock-based compensation expense, due to a full quarter of near-full staffing in the company's Lakewood, Colo., headquarters and at its Sundance Wyoming development office;
• Reduced stock-based compensation expense, included in corporate administration expense, of $2.3-million due to a decrease in stock-based compensation expense due to fewer option grants at lower share prices;
• Positive variance in currency translation of $5.3-million due to a $1.8-million foreign exchange gain in the current quarter compared with a $3.5-million foreign exchange loss in the comparable quarter from the prior year. The Canadian dollar strengthened by 3.6 per cent in the current quarter compared with the Canadian dollar weakening by 7.2 per cent in the comparable quarter from the prior year;
• Negative variances in non-operating income and expenses amounted to $200,000.

Cash and cash equivalents, and short-term investments at Sept. 30, 2012, were $47.3-million compared with $51.7-million as of June 30, 2012. The $4.3-million decrease in cash and cash equivalents, and short-term investments was primarily due to spending related to exploration and corporate administrative costs, and partially offset by foreign exchange gains on the company's Canadian cash balances.

The audited financial statements are available through the Canadian securities regulatory authorities on SEDAR and with the Securities and Exchange Commission. They are also available on the company's website.

We seek Safe Harbor.