NI43-101Pre-Feasibility Study Report - page 546

Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
, 2014
10135-200-46 – Rev. 0
22.2 Model Assumptions
The cash flow model (model) includes the following major assumptions:
All amounts are constant dollars, not adjusted for inflation;
Financial periods are equal to one year;.
A constant basket price for the product is assumed over the life of the project
The mixed REO material would still have to undergo separation into individual
rare earth oxides before these prices could be obtained, therefore Company
assumed an estimated 25% discount to reflect the average cost of separation.
The 25% discount was based upon a survey of various market sources and
also reflects the high-quality and low impurities in RER’s product;
Mining costs vary on a year–by-year basis depending on the mine production
rate. Costs for power, labor and reagents are vary on a year-by-year basis
depending on the constituents found in the ore and the quantity of ore in a
given year. Tailings storage operating costs, General and Administrative costs
as well as Miller Creek road maintenance costs were held constant over the
life of the mine;
High-grade ore is mined in the first nine years of operation. In year ten, the
ore grade drops off and the mining rate increases to maintain a relatively
constant level of REO production;
Initial capital expenditures in years 0 through 3 total $291 million. In year 10
the PUG plant is expanded to upgrade the Hydromet feed as the head grade
from the mine is reduced;
Initial net working capital for receivables, material and supplies inventory,
product inventory and payables total $24.6 million;
Closure costs are assumed to begin after the final year of production with the
closure extending three years beyond the final year of production;
No perpetual costs related to closure are included;
Except for the PUG expansion in year 10, no capitalized equipment
replacements or upgrades requiring capitalization after the beginning of
production are included other than the mining equipment replacement
included in the mining capital cost;
Periodic tailings dam raises have been added to the sustaining capital cost
according to design engineers’ recommendations;
Working capital is assumed to cover operating costs that occur during initial
operations while revenue from operations is delayed by 90 days. This working
capital is recovered when operations cease.
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