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We likely were a “passive foreign investment company” (“PFIC”) for the year ended December 31, 2014, and
may be a PFIC in subsequent years, which could have adverse U.S. federal income tax consequences for U.S.
shareholders.
Investors in our common shares that are U.S. taxpayers (referred to as a U.S. shareholder) should be aware that we
believe that we were likely a “passive foreign investment company” (a “PFIC”) for the period ended December 31,
2014, and based on current business plans and financial expectations, we expect that we will be a PFIC for the year
ending December 31, 2015, and may be a PFIC in subsequent years. We will use commercially reasonable efforts to
provide information as to our status as a PFIC and the PFIC status of any subsidiary in which the Company owns
more than 50% of such subsidiary’s total aggregate voting power to U.S. shareholders who make a written request
for such information.
If we are a PFIC for any year during a U.S. shareholder’s holding period, then such U.S. shareholder generally will
be subject to a special, highly adverse tax regime with respect to so-called “excess distributions” received on our
common shares. Gain realized upon a disposition of our common shares (including upon certain dispositions that
would otherwise be tax-free) also will be treated as excess distributions.
The portion of any excess distribution, including gains treated as excess distributions, would be allocated ratably to
the U.S. shareholder's holding period. The portion allocated to the current year and to prior years before we first
became a PFIC would be treated as ordinary income in the current year. The portion allocated to all other prior years
would be taxed at the highest marginal rate applicable to ordinary income for each such year (regardless of the U.S.
shareholder’s actual marginal rate for that year and without reduction by any losses or loss carryforwards) and
would be subject to interest charges to reflect the value of the U.S. income tax deferral.
A U.S. shareholder may make a “qualified electing fund” election (“QEF election”) or a “mark-to-market” election
with respect to our common shares to mitigate the adverse tax rules that apply to PFICs, but these elections may
accelerate the recognition of taxable income and may result in the recognition of ordinary income. A U.S.
shareholder who makes a QEF election generally must report on a current basis its pro rata share of our net capital
gain and ordinary earnings for any year in which we are a PFIC, whether or not we distribute any amounts to our
shareholders. A U.S. shareholder may make a QEF election only if the U.S. shareholder receives certain information
(known as a “PFIC annual information statement”) from us annually. We will use commercially reasonable efforts
to make available to a U.S. shareholder, upon written request, an accurate PFIC annual information statement for
each year in which the Company is a PFIC. A U.S. shareholder who makes the mark-to-market election generally
must include as ordinary income each year the excess of the fair market value of our common shares over the U.S.
shareholder’s basis therein.
Additional special adverse rules also apply to U.S. shareholders who own our common shares if we are a PFIC and
have a non-U.S. subsidiary that is itself a PFIC. Special adverse rules that impact certain estate planning goals could
apply to our common shares if we are a PFIC. Each U.S. shareholder should consult its own tax advisor regarding
the U.S. federal, U.S. federal alternative minimum, U.S. federal estate and gift, and U.S. state and local
consequences of the PFIC rules and the acquisition, ownership, and disposition of our common shares if we are or
become a PFIC.
ITEM 1B. UNRESOLVED STAFF COMMENTS
We do not have any unresolved comments from the SEC staff regarding our periodic or current reports under the
Securities Exchange Act of 1934, as amended.
ITEM 2. PROPERTIES
BEAR LODGE PROPERTY (Wyoming, USA)
The Bear Lodge Property contains two projects, the Bear Lodge REE Project and the Sundance Gold Project. The
Bear Lodge REE Project consists of the Bull Hill Mine, inclusive of the Bull Hill and Whitetail Ridge deposits and
the exploration targets of East Taylor and Carbon, all of which are located near Sundance, Wyoming. The Bear
Lodge REE Project also includes the proposed hydrometallurgical plant site to be located on private property in
Upton, Wyoming that the Company currently holds an option to purchase. Additional details on each of these areas
are set forth below under the heading “Bear Lodge REE Project.” We hold our interest in the Bear Lodge Property
through our wholly owned subsidiary, Rare Element Resources, Inc. (“RER, Inc.”), a Wyoming corporation.
