RARE ELEMENT RESOURCES LTD SEC 10-Q Report

Rare Element Resources Ltd., a company focused on the extraction and processing of rare earth elements (REEs), has released its Form 10-Q report for the quarter ended September 30, 2024. The report provides a comprehensive overview of the company's financial performance, business operations, strategic initiatives, and the challenges it faces in the current market environment.

Financial Highlights

• Net loss: $4.734 million for the three months ended September 30, 2024, compared with $3.126 million for the same period in 2023.
• Net loss: $14.539 million for the nine months ended September 30, 2024, compared with $8.092 million for the same period in 2023.
• Loss per share - basic and diluted: $0.01 for the three months ended September 30, 2024, unchanged from the same period in 2023.
• Loss per share - basic and diluted: $0.03 for the nine months ended September 30, 2024, unchanged from the same period in 2023.
• Total operating expenses: $7.069 million for the three months ended September 30, 2024, compared with $3.179 million for the same period in 2023.
• Total operating expenses: $17.181 million for the nine months ended September 30, 2024, compared with $8.260 million for the same period in 2023.
• Interest income: $414 thousand for the three months ended September 30, 2024, compared with $130 thousand for the same period in 2023.
• Interest income: $866 thousand for the nine months ended September 30, 2024, compared with $391 thousand for the same period in 2023.
• Grant income: $2 million for the three and nine months ended September 30, 2024, with no comparable amount for the same periods in 2023.
• Net cash used in operating activities: $9.177 million for the nine months ended September 30, 2024, compared with $8.766 million for the same period in 2023.
• Net cash provided by financing activities: $35.286 million for the nine months ended September 30, 2024, compared with $23 thousand for the same period in 2023.
• Cash, cash equivalents and restricted cash - end of period: $29.876 million as of September 30, 2024, compared with $6.776 million as of September 30, 2023.

Business Highlights

• Demonstration Plant Progress: The company, along with its consortium members, continued work on the Demonstration Plant project, which is expected to be completed in 2025. The DoE issued its final Project Continuation Notice in September 2024, confirming readiness for operations, and the NRC approved operations in October 2024.
• Bear Lodge REE Project: The company holds a 100% interest in the Bear Lodge REE Project, which consists of high-grade REE deposits. The project is focused on developing a mine and separation plant to produce commercial NdPr products.
• WEA Funding Agreement: The company entered into a Funding Agreement with the WEA for a $4,400 grant to support the Demonstration Plant. As of September 30, 2024, the company had invoiced $4,000 of the grant, with the remaining $400 expected in the first quarter of 2025.
• Cost Share Agreement with General Atomics: The company has advanced $24,200 to General Atomics under the Cost Share Agreement for the Demonstration Plant. An extension agreement was entered into in May 2024 to provide additional funding.
• Inflationary Cost Pressures: Due to inflationary pressures, the Demonstration Plant project budget increased to approximately $53,600 from the original $43,800. The DoE pledged an additional $2,400 to help fund the increase, with the balance covered by the company.
• 2024 Rights Offering: The company completed a rights offering in March 2024, raising approximately $35,800 in gross proceeds. These funds are being used to support the Demonstration Plant operations and other corporate purposes.
• New Officer Appointments: Kelli Kast was appointed as Vice President, General Counsel, and Chief Administrative Officer effective July 1, 2024. Jaye T. Pickarts was appointed as Chief Operating Officer effective October 1, 2024.
• Land Repurchase: The company exercised its option to repurchase approximately 640 acres of non-core real property in Wyoming from Whitelaw Creek, closing the transaction on October 25, 2024.
• Future Outlook: The company anticipates the completion of the Demonstration Plant operations in 2025. Additional funds will be required for the full-scale development of the Bear Lodge REE Project. The company is actively pursuing additional project funding sources.

Strategic Initiatives

• Primary Strategic Initiative: The advancement of the Demonstration Plant project, which aims to showcase the company's proprietary extraction technology for processing and separating rare earth elements (REEs) from high-grade sample materials. This project is a precursor to a potential full-scale production facility.
• Funding and Strategic Partnerships: The company is focused on securing additional funding and strategic partnerships to support the development and commercialization of its Bear Lodge REE Project. Additionally, the company has entered into a Funding Agreement with the Wyoming Energy Authority (WEA) for a $4,400 grant to support the Demonstration Plant.
• Capital Management: Rare Element Resources Ltd. completed a rights offering in March 2024, raising approximately $35,800 in gross proceeds to fund the Demonstration Plant and other corporate purposes. The company also entered into a Cost Share Agreement with General Atomics, committing to fund 50% of the non-federal costs for the Demonstration Plant. As of September 30, 2024, the company had advanced $24,200 to General Atomics under this agreement. Additionally, the company has a repurchase option for approximately 640 acres of non-core real property in Wyoming, which it exercised in October 2024, resulting in the issuance of 5,000,000 common shares and a cash payment of $1,507. The company also recognized $2,000 in grant income from the WEA during the nine months ended September 30, 2024.
• Future Outlook: Looking ahead, Rare Element Resources Ltd. plans to continue its work on the Demonstration Plant, with operations expected to commence following the completion of construction in 2025. The company anticipates additional cost increases for the Demonstration Plant and is pursuing further funding sources to cover these expenses. The company will also require substantial additional funds for the permitting, development, and construction of a commercial mine and plant for the Bear Lodge REE Project. If the company cannot secure these additional financial resources or complete a strategic transaction, it may need to curtail or suspend its operational plans or potentially liquidate its business interests.

Challenges and Risks

• Operational Risks: The General Atomics-led consortium has experienced increases in the Demonstration Plant project costs, including expected final equipment costs, due to inflation and other factors. The updated budget is approximately $53,600, which is 21% higher than the original budget of $43,800. This increase in costs poses a risk to the company's financial stability and project timelines. Despite raising approximately $35,800 from the 2024 Rights Offering, the company will still require substantial additional funds for the permitting, development, and build-out of the Bear Lodge REE Project. Failure to secure these additional funds may result in the curtailment or suspension of operational plans or potentially liquidating business interests.
• Regulatory Risks: The company needs to secure additional permits and licenses for the Bear Lodge REE Project. Any delays or failures in obtaining these could significantly impact the project timeline and financial projections.
• Market Risks: The company's business is significantly influenced by U.S. government actions to secure a domestic rare earth supply chain. Changes in political climate or government priorities could impact the company's operations and market opportunities. The dominance of China over the REE supply chain and recent geopolitical tensions, including China's ban on the export of technology to make rare earth magnets, add uncertainty and risk to the company's supply chain and market position.
• External Factors: The ongoing impacts of the COVID-19 pandemic, the Russia/Ukraine war, and conflicts in the Middle East have further emphasized the need for secure domestic supply chains. These external factors could disrupt operations and supply chains, impacting the company's ability to meet its project goals.
• Management's Strategies: The company is actively monitoring and participating in U.S. government initiatives to secure a domestic REE supply chain, which is critical for the production of rare earth magnets used in various industries. The company has raised funds through the 2024 Rights Offering and is seeking additional financial resources to support the commercialization of its projects. The company is working closely with consortium members and the DoE to manage project costs and secure additional funding commitments.

SEC Filing: RARE ELEMENT RESOURCES LTD [ REEMF ] - 10-Q - Nov. 06, 2024