12
Exercise responsible cash management, while seeking additional funding sources to finance construction of
a planned demonstration plant and ensure continued timely progress toward project construction.
Continue to cultivate relationships with potential off-take partners, including supplying upgraded product
samples and providing project progress updates.
Design planned demonstration plant.
Initiate the FS, pending Board approval, incorporating PFS information, project budgets, schedules and
other information.
Certain planned activities and potential strategic initiatives are subject to additional financing and other factors
including:
Construction of the planned demonstration plant.
Confirmation of positive results of rare earth separation test work done to date in larger-scale pilot plant
testing.
Submission of application for a license to possess [radioactive] source material to the U.S. Nuclear
Regulatory Commission. This task is dependent upon completion of the alternative assessment portion of
the EIS.
TRENDS AND DESCRIPTION OF THE REE MARKET
Uses for REE products
REEs are used in computers, cellular telephones, TV screens, wind turbines, fuel cells, magnetic refrigeration
technologies, fluorescent and LED lights, petroleum-refining catalysts and numerous other modern specialty
technologies. REEs are also used in hybrid-electric vehicles and all-electric vehicles, many of which contain REE-
bearing nickel-metal-hydride batteries and REE “super” magnets within electrical motors and generators. Prices of
REEs are affected by the supply and demand fundamentals of the market.
Trends affecting supplies of REE products
Global REE supply continues to be dominated by production from China, which produced an estimated 85% of the
world’s REE output in 2014, according to the Industrial Minerals Company of Australia Pty Ltd (“IMCOA”) and
Curtin University. Over the past nine years China has reduced its export quotas for REEs by more than half (with a
marked reduction in the summer of 2010) and increased related export taxes. The quota reductions resulted in
significantly higher REE prices beginning in 2010, when quotas were reduced by approximately 40%. Since then,
the slowdown in global economic growth, coupled with decreased demand due to elevated REE prices in 2010 and
2011 and significant supply from accumulated REE stockpiles, caused dramatic REE price declines from 2012
through 2014. Chinese export quotas for 2014 were set at a roughly equivalent level with those of 2013.
After an initial adverse ruling from the World Trade Organization (“WTO”) in March 2014, and an affirmation of
that ruling against China’s trade practices on appeal in August 2014, China abolished export quotas as of January 1,
2015, on rare earths, tungsten and molybdenum. The quotas have been replaced by an export licensing system that
many industry sources believe will continue and perhaps even tighten China’s control over REE exports. The WTO
ruled against the Chinese in a case brought by the U.S., Europe and Japan alleging that China’s export quotas and
export taxes on rare earths violated global trade rules. China argued unsuccessfully that the quotas and taxes were
needed to protect its environment and to conserve its resources, while the plaintiffs complained that the restrictions
gave Chinese domestic producers an unfair competitive advantage. China has left its export taxes in place at least
until early May 2015, but is reported to be working on an alternative system to achieve its objectives while still
complying with WTO rules. It is expected that such a system will include imposition of a domestic, ad valorem,
resource tax on REE production.
