NI43-101Pre-Feasibility Study Report - page 547

Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
, 2014
10035-200-46 - Rev. 0
22.3 Financial Risks / Sensitivity Analysis
There are numerous risks to the financial viability of the project, as discussed below.
As such, sensitivity analysis has been performed to assess the impacts on the
financial results of the project, given variations in these major risk factors. Because of
the complexity of evaluating federal taxes, all sensitivity analysis was performed on a
pre-federal tax basis.
22.3.1 Rare-Earths Pricing
As discussed in Section 19.2, the Pre-feasibility study assumes an average price of
$24.60 per kilogram ($11.16 per pound) of bulk mixed RE concentrates with a grade
of 97+% TREO. A sensitivity case that assumes a 20% lower price for the
concentrate ($19.68 per kilogram or $8.93 per pound) demonstrates the economic
feasibility of the project at substantially lower long-term price forecasts.
The global market price for rare earth minerals is not as large or well established as
it is for commodity minerals. Because of the comparatively narrow markets for rare
earth minerals, rare earth minerals cannot be considered commodities, and their
markets may be subject to conditions and manipulations that would not be present
in established commodity mineral markets.
Producers cannot be considered to be perfectly competitive price-takers in the
market. While the designed production level may be considered a production level at
which the global price will not be impacted, risks of market manipulation by other
producers exists.
These market conditions can significantly impact the financial results of the project.
22.3.2 Rare-Earths Price Fluctuations
While current prices are assumed efficient and may be at equilibrium, market
conditions in the long-term may shift in either direction, causing long-term change in
the mineral prices. Mineral markets are assumed to be volatile, thus currently
unforeseen price level changes are possible and could significantly impact the
financial results of the project. Price fluctuations of -20%/+20% were computed in
the model. Tables 22.3 and 22.4 present the results of these computations.
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