RARE ELEMENT RESOURCES LTD (REEMF)·Q2 2015 Earnings Summary

Executive Summary

• Q2 2015 showed continued progress on separation technology and permitting, while losses narrowed year over year: net loss of $2.1M ($0.04/share) vs $3.1M ($0.06/share) in Q2 2014, driven by lower exploration and corporate admin costs, partially offset by FX .
• Liquidity improved: cash ended Q2 at $8.4M (vs $7.5M at 3/31/15), reflecting a $3.1M April financing that more than offset $2.2M cash used in the quarter; management believes cash is sufficient for planned 2015 activities .
• Project timeline updated: Draft EIS expected in 2H15 (unchanged), but Final Record of Decision shifted to 2H16 (from 1H16 previously), extending the regulatory path; pilot plant separation testing targeted for completion by year-end 2015 .
• No production revenue yet; management emphasized strategic importance of a North American rare earth supply chain, highlighting magnet materials demand and Bear Lodge’s critical REE mix as long-term drivers .

What Went Well and What Went Wrong

• What Went Well

  • Demonstrated high-purity separated rare earth products using an innovative process, advancing to a larger-scale pilot plant to produce separated products for potential off‑take partners (“to demonstrate… meet their specifications”) .
  • Cost discipline: YoY decline in net loss on lower exploration/evaluation (-$0.8M) and corporate admin (-$0.3M) expenses in Q2 .
  • Strengthened liquidity: $3.1M direct registered financing in April offset $2.2M quarterly burn, lifting quarter-end cash to $8.4M .

• What Went Wrong

  • Regulatory timeline slippage: Final ROD now expected in 2H16 vs prior expectation of 1H16, extending project uncertainty and pushing potential commissioning timing .
  • FX headwinds: $0.2M unfavorable variance in currency translation partially offset cost reductions in Q2 .
  • Macro rare earth volatility persists; management noted dramatic market changes even as long-term demand fundamentals remain positive, underscoring near-term pricing uncertainty .

Financial Results

Quarterly trend (oldest → newest):

YoY comparison for the quarter:

Notes:

• Company remains pre‑revenue; no production-related revenues reported .
• Q1 2015 net loss is a simple arithmetic derivation from reported 1H15 and Q2 figures .

No segment reporting is applicable; the company is a pre-revenue developer focused on the Bear Lodge Project .

Guidance Changes

Earnings Call Themes & Trends

No Q2 2015 earnings call transcript was located in our database; themes are drawn from company press releases.

Management Commentary

• “During the quarter, we reported our success at producing high‑purity separated rare earth products using our innovative process… We are excited to build on this success… developing a larger‑scale, pilot plant… to demonstrate to potential off‑take partners our ability to meet their specifications.” – Randall J. Scott, President & CEO .
• “The final Record of Decision (ROD)… is currently expected in the second half of 2016… We also submitted applications for two important permits… Our goal is to secure all the permits and licenses necessary to operate at approximately the same time as the final documents from the EIS process become available.” .
• “While the rare earth market has seen some dramatic changes… Longer‑term demand fundamentals remain positive… Prices are also expected to increase as Chinese firms deal with… regulatory costs, new resource taxes and environmental issues.” .

Q&A Highlights

No Q2 2015 earnings call transcript or Q&A session was available in our document set; no analyst Q&A to summarize [List results show none: 0 earnings-call-transcript for 2015].

Estimates Context

• Wall Street consensus estimates (S&P Global) for Q2 2015 EPS and revenue were unavailable or could not be retrieved due to data limits; no comparison to consensus is provided. As a pre‑revenue developer, the company does not report production revenue, and EPS is primarily driven by operating costs and FX .
• Where estimates are unavailable, investors should focus on operational milestones (EIS timing, pilot plant progress) and cash runway as the primary drivers of value near term .

Key Takeaways for Investors

• Cost actions are working: Q2 net loss narrowed to $2.1M ($0.04) vs $3.1M ($0.06) YoY, driven by reduced exploration (-$0.8M) and admin (-$0.3M) costs, partially offset by FX (-$0.2M) .
• Regulatory timeline pushed: ROD moved from 1H16 to 2H16, modestly extending the path to project sanctioning and potential commissioning .
• Technical de‑risking advancing: high‑purity separated products achieved; pilot plant targeted to complete testing by year‑end 2015, enabling qualified samples for off‑take discussions—an important commercial catalyst .
• Liquidity supports 2015 plan: $8.4M cash at 6/30/15 after $3.1M financing, with management indicating sufficiency for current 2015 activities; monitor burn (~$2.2M in Q2) and potential future financing needs .
• Macro remains a swing factor: rare earth price volatility persists, but management emphasizes long‑term demand for magnet materials and North American supply chain importance—potentially supportive over time .
• Near‑term trading focus: watch for Draft EIS (2H15) and pilot plant test completion (by YE15) as catalysts; any slippage or positive validation from off‑take partners could move shares .

KPIs and Operating Milestones

Additional Details and Cross-References

• Six-month 2015 net loss was $4.6M ($0.09/share) vs $7.5M ($0.16/share) in 1H14, reflecting lower exploration (-$2.5M) and admin (-$0.6M) costs, partly offset by FX and derivative mark-to-market (+$0.2M unfavorable) .
• Cash sufficiency: management states 6/30/15 cash “believed to be sufficient to conduct our currently planned 2015 activities,” with flexibility to defer/reduce spend if warranted .
• Development path: Engineering studies, larger-scale demonstration plant, feasibility study, off‑take agreements, and permits are prerequisites to construction; construction estimated 12–16 months post decision .

Citations:

• Q2 2015 8‑K/press release and operational update ; filing context .
• Prior period (Q4 2014) 8‑K/press release for baseline and guidance history .