Rare Element Resources
Bear Lodge Project
Canadian NI 43-101 Technical Report
October 9
th
, 2014
10135-200-46 – Rev. 0
1-19
There are numerous risks to the financial viability of the project, as discussed below.
As such, sensitivity analysis is performed to assess the impacts on the financial
results of the project, given variations in these risk factors.
1.14 Risks
The global market and price for rare earth minerals is not as large or well established
as it is for commodity minerals. The rare earths industry is dominated by Chinese
producers and consumers with virtually all sales and purchases of rare earths
products based on contract prices negotiated privately by buyers and sellers. There
are a few relatively well-known sources of published estimated prices that are based
on surveys of market participants by the websites or organizations that publish them.
These include metal-pages.com, asianmetal.com and “Industrial Minerals” magazine.
However, prices for individual RE elements among these sources can differ markedly
even in the same timeframe and, according to some market participants, prices for
actual market transactions in rare earths sometimes differ significantly from the prices
quoted by these sources.
There are some specialized consulting firms in rare earths or industrial minerals that
perform market studies in the rare earths business and create rare earths price
forecasts for clients based on the individual project’s rare earths distribution and
intended products. These organizations tend to use conventional mineral economics
approaches to forecasting, based on historical experience in the rare earths markets
and the limited information available. Such studies and forecasts are hindered by the
lack of information in rare earths markets that lack the transparency that can be found
in many other markets for the more common mineral commodities. The relatively
recent start-up of newly created rare earths exchanges provides extremely limited
data on exchange trades of certain physical RE metals, and there is no futures
market or forward price curve for rare earths that could inform RE price forecasting.
Because of the comparatively narrow markets for REs, or REOs they cannot be
considered commodities, and their markets may be subject to conditions and
manipulations that would not be present in established commodity mineral markets.
Mineral markets are assumed to be volatile, thus currently unforeseen price level
changes are possible and could have a significant impact on the financial results of
the project.
