Mr. Randall Scott reports

RARE ELEMENT RESOURCES REPORTS THIRD QUARTER RESULTS

Rare Element Resources Ltd. has filed its unaudited consolidated financial statements on Form 10-Q for the three and nine months ended Sept. 30, 2015.

"We continue to make progress on multiple fronts with the Bear Lodge project," said Randall J. Scott, president and chief executive officer. "We are excited with the success at taking our innovative separation technology to the next level by completing the first phase of pilot plant testing. This work confirmed our ability to upgrade the Bear Lodge concentrate to more than 99.9 per cent pure while selectively removing 85 per cent of the cerium and all the detectable thorium in the initial stage of separation using only three steps. This also indicates a significantly more efficient and environmentally attractive process than traditional separation methods and sets an excellent foundation for the remaining separation testwork. While permitting remains generally on track, the draft environmental impact statement (EIS) is now not expected until the end of the year, which likely means the final record of decision (ROD) will be in late 2016. We continue to work closely with the relevant government agencies for timely completion of the process."

Financial results (financial results published by the company are all stated in United States dollars)

The company does not have production-related revenues at this time. The net loss for the quarter ended Sept. 30, 2015, totalled $2.6-million, or five cents per share, compared with a net loss of $3.6-million, or eight cents per share, for the same period in 2014. The key drivers behind the year-over-year decrease in net loss for the quarter were:

• A decrease in exploration and evaluation expenses of $800,000, from a reduction in exploration and technical and economic evaluation work with the focus shifting to permitting and separation testing;
• Lower corporate administrative costs of $200,000, primarily due to the company's cost containment efforts and a reduction in stock-based compensation.

The consolidated net loss for the nine-month period ended Sept. 30, 2015, was $7.1-million, or 14 cents per share, compared with $11.1-million, or 23 cents per share, for the same period in 2014. The key drivers behind the decrease in net loss were:

• A decrease in exploration and evaluation expenses of $3.3-million;
• Lower corporate administrative cost of $800,000;
• Partially offset by an unfavourable variance in currency translation and unrealized gains on derivatives, collectively of $200,000.

Cash balance

As of Sept. 30, 2015, the company had cash and cash equivalents of $6.2-million, compared with $8.4-million at June 30, 2015. Cash used during the quarter was $2.2-million. Cash and cash equivalents at Sept. 30, 2015, are believed to be sufficient to conduct the company's current planned activities for the next 12 months.

During the next 12 months, the company expects to:

• Support the U.S. Forest Service in its preparation of the draft EIS on the project, currently expected before the end of 2015;
• Complete the evaluation of phase one of the elemental separation pilot plant testwork, the successful preliminary results were announced on Oct. 14, 2015;
• Continue to work with regulatory agencies on permit applications, with the goal of having all the necessary permits/licences at the same time as the final record of decision (ROD), currently expected at the end of 2016;
• Incorporate the results of the geotechnical confirmation and condemnation drilling work into detailed engineering studies;
• Pursue strategic relationships and continue discussions with potential offtake partners, including providing upgraded, separated product samples and regular project updates;
• Seek additional financing to support the 2016 planned activities.

The company will look to support continued advancement of the Bear Lodge project on the preferred timeline by raising additional capital, most likely through strategic relationships or offtake agreements. The company continues to monitor market conditions, both in the rare earth sector and in the equities markets. If it is not successful in raising additional capital, the company has the ability to defer certain activities to reduce its rate of expenditures.

Pilot plant success

During the quarter, the company designed, built and operated a pilot plant for testing its patent-pending rare earth separation technology. The results of the first phase of testing, reported in early October, confirmed the ability to upgrade the concentrate coming from the hydrometallurgical plant to over 99.9-per-cent-pure total rare earth oxide. Equally significant was the ability to remove 85 per cent of the cerium and all the detectable thorium from the concentrate in only three initial solvent extraction (SX) steps. The process represents meaningful improvement over traditional SX methods, and it is expected to reduce capital and operating costs associated with separation, be more efficient and result in no waste discharge, making it more environmentally friendly.

Unique to the process was the ability to strip the separated cerium and thorium from the metal-bearing organic solution outside of SX with the barren organic and stripping agent being recycled. While additional testwork is planned, the demonstrated success of phase one represents a solid foundation for the next level of testing aimed at separating the greater-than-99.9-per-cent-pure concentrate into separate, sellable products. For additional details on the preliminary results of the pilot plant, please see the company's press release dated Oct. 14, 2015.

Permitting update

The U.S. Forest Service (USFS) continues its work on the draft EIS, expected to be complete in December. While the EIS is not a permit, it does result in the USFS ROD for the construction, operation and closure of mining operations on public lands. Because the final EIS and related ROD are the overarching decision documents relating to operations at Bear Lodge, all other permits are dependent on it. The USFS has stated it will complete the final EIS and the final ROD within one year after completion of the draft EIS. Other permit applications are being made to align with the proposed USFS EIS timeline.

Development tasks and timing

The company has a number of other activities to undertake on the project prior to a construction decision by the board of directors. These include engineering studies and advanced metallurgical work in support of a feasibility study; design, construction and operation of a planned, larger-scale demonstration plant; completion of a feasibility study; and securing offtake agreements and/or identification of strategic partners. Because of the success of the company's separation technology testwork and the anticipated value it represents, the company plans to evaluate the means and economic benefit of incorporating separation into its planned operations as part of the feasibility study.

These activities are subject to additional financing and other factors. A construction decision will be dependent on the completion of these activities as well as receipt of all necessary permits, the availability of adequate capital, completion of a positive feasibility study and securing of offtake customer agreements for some or all of the project output. From the time of the successful completion of the tasks listed above and a development decision from the board, project construction is expected to take 12 to 16 months.

The unaudited quarterly financial statements are available through the Canadian securities regulatory authorities at SEDAR, and with the U.S. Securities and Exchange Commission. They are also available on the company's website.

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