Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 - Rev. 0
19-1
19 Rare Earths Markets and Pricing
19.1 Overview
Since the dramatic decline from the extraordinary price spike in rare earths in 2010-
11, supplies of rare earths are once again readily available, with prices seemingly
overcorrected to the downside. Although it appears that the price spike encouraged
some demand destruction from substitution and reduced consumption, rare earths
still offer unique qualities for many uses that make them difficult to replace without
sacrificing product performance or quality. Based on a consensus of industry
experts, annual world demand for rare earths will likely grow in the range of 7%-10%
for the next several years, assuming no new major downturn in the global economy.
According to most market sources, growth of the world’s rare earth supplies will
generally be sufficient to meet growing demand in the coming years. However, it is
not clear that, at current RE prices and with the capital constraints faced by junior
mining companies, the timing of new mine development will be such as to avoid
periodic shortages of certain individual RE elements with attendant volatility in
specific RE prices. The U.S. Departments of Defense and Energy cited several rare
earth elements as “critical”, including neodymium, dysprosium, europium, terbium and
yttrium (all of which will be produced from the Bear Lodge project and which provide
an average of approximately 49% of revenue). Several market observers (as well as
US government reports) believe that neodymium and dysprosium, in particular, could
face shortage situations over the next several years, unless additional sources of
supply are developed.
A gradual upward trend in rare earth prices over the next several years is expected,
rather than a return to the unsustainable price environment of 2010-11. This will
likely be driven by several factors including:
The incentive for several of the six major Chinese rare earth producers
designated to consolidate the Chinese industry to show improved financial
results;
Falling Chinese ore grades causing increased operating costs in many
operations;
Pressure on Chinese rare earth mining companies to implement stricter
environmental controls;
Rapidly rising Chinese labor and safety costs;
