Executive Summary

Q3 2014 showed improved losses year over year as REEMF continued as an exploration-stage company with no production revenue: net loss narrowed to $3.6M ($0.08/share) vs $6.9M ($0.15/share) in Q3 2013, driven by lower exploration/evaluation spend and corporate admin costs, partially offset by a $0.5M FX headwind .
Cash fell to $12.9M at 9/30/2014 from $16.1M at 6/30/2014 on $3.2M net cash used, primarily for permitting, engineering, and PFS-related work .
Management updated project timing due to EIS alternatives analysis delays: permit applications now expected in Q1 2015 (vs Q4 2014 prior plan), shifting expected commissioning from late 2016 to mid-2017; a 1–3 ton/day demonstration plant is planned to de-risk start-up .
The August PFS highlighted attractive economics despite weak rare earth pricing: after-tax NPV10 $330M, after-tax IRR 29%, 2.9-year payback, $290M initial capex, and a 45-year project life; proprietary processing consistently produces a 97%+ pure, near thorium-free TREO concentrate .

What Went Well and What Went Wrong

What Went Well

Positive PFS economics with low upfront capex and fast payback: after-tax NPV10 $330M, IRR 29%, 2.9-year payback; high-grade mining Years 1–9 boosts early cash flows .
Proprietary recovery process validated through additional test work and pilot operations, producing a 97%+ pure, near thorium-free TREO concentrate; “we have built on this with success in our test work on an innovative approach to separation and further optimizing of our proprietary recovery process” – CEO Randall Scott .
Cost discipline improved results: net loss narrowed YoY on a $3.3M reduction in exploration/evaluation expense and $0.5M lower corporate admin costs .

What Went Wrong

Permitting delays: USFS alternatives analysis for the EIS not completed as scheduled, pushing permit applications from Q4 2014 to Q1 2015 and commissioning target from late 2016 to mid-2017; “we currently expect that delays related to the other applications will impact our schedule by three to six months” – COO Jaye Pickarts .
FX headwind: $0.5M unfavorable currency translation variance impacted Q3 results .
Ongoing cash burn and funding need: $3.2M net cash used in Q3; company anticipates raising $45–$60M over the next two years to advance permitting, complete the FS and detailed engineering, and build/operate the larger-scale demonstration plant .

Financial Results

Income Statement and EPS – 2014 Progression

Metric	Q1 2014	Q2 2014	Q3 2014
Revenue ($M)	$0.0	$0.0	$0.0
Net Loss ($M)	$(4.4)	$(3.1)	$(3.6)
Diluted EPS ($)	$(0.09)	$(0.06)	$(0.08)

Q3 Year-over-Year

Metric	Q3 2013	Q3 2014
Net Loss ($M)	$(6.9)	$(3.6)
Diluted EPS ($)	$(0.15)	$(0.08)

Liquidity and Cash Use

Metric	3/31/2014	6/30/2014	9/30/2014
Cash & Cash Equivalents ($M)	$19.8	$16.1	$12.9
Net Cash Used in Quarter ($M)	$4.1	$3.7	$3.2

Project PFS Highlights (Selected)

Metric	Value
Initial Capex ($M)	$290
LOM Capex incl. sustaining ($M)	$453
After-tax NPV10 ($M)	$330
After-tax IRR	29%
Payback	2.9 years
Project Life	45 years
Processing purity	97%+ TREO concentrate, near thorium-free

Note: As an exploration-stage company, REEMF had no production-related revenue in Q1–Q3 2014 .

Guidance Changes

Metric/Topic	Period	Previous Guidance	Current Guidance	Change
Draft EIS timing	2015	Early/Q1 2015 (USFS schedule)	Spring 2015 (USFS intent to make up time)	Delayed
Permit applications (state/federal, NRC license, etc.)	Q4 2014–Q1 2015	Expected Q4 2014 (dependent on EIS alternatives)	Now expected Q1 2015	Delayed
Project commissioning	2016–2017	As early as late 2016 (subject to FS/permitting/financing)	Mid-2017	Delayed (≈3–6 months)
Feasibility Study (FS) start	Late 2014	Initiate in H2 2014, pending Board approval	Initiation pending Board approval; proceeding after PFS	Maintained (timing contingent)
Demonstration plant plan	2014–2016	Not previously guided	Plan to build/operate 1–3 ton/day demo plant to de-risk commissioning	New initiative
Funding requirement	2014–2016	Not previously quantified	Needs $45–$60M over next two years to advance EIS, permitting, FS, demo plant	New disclosure

Earnings Call Themes & Trends

Note: No Q3 2014 earnings call transcript was furnished; themes below are drawn from Q1–Q3 news releases and the August PFS 8-K.

Topic	Previous Mentions (Q1 and Q2)	Current Period (Q3)	Trend
Proprietary processing technology	Continued pilot testing; refined process lowered capital/operating costs (Q1) ; ongoing metallurgical/engineering test work (Q2)	“Success in our test work on an innovative approach to separation” and further optimization; 97%+ pure TREO concentrate reiterated	Improving validation
PFS / Project economics	PFS expected mid-year (Q1) ; PFS nearly complete (Q2)	PFS released: after-tax IRR 29%, NPV10 $330M, $290M capex, 2.9-year payback	Positive inflection
Permitting / EIS	Scoping completed; draft EIS anticipated early 2015 (Q2)	USFS alternatives analysis delayed; draft EIS now Spring 2015; permits slip to Q1 2015	Delayed
Commissioning timeline	Could commence as early as late 2016 (Q2)	Shifted to mid-2017 given permitting delays	Delayed
Downstream separation strategy	Initial analysis and partner identification (Q1) ; further evaluation (Q2)	Investigating downstream separation benefits; high-purity feed suggests lower separation cost potential (PFS)	Advancing analysis
Offtake/customer engagement	Provided samples; advancing conversations (Q1)	Distributing separated products from current test work to potential offtake partners	Ongoing engagement
Funding and de-risking	Not quantified (Q1–Q2)	$45–$60M funding need; demo plant to de-risk commissioning	Clearer plan, higher needs

Management Commentary

CEO Randall J. Scott: “During the quarter, we released a very positive Preliminary Feasibility Study… success in our test work on an innovative approach to separation and further optimizing of our proprietary recovery process… advancing plans for construction of a larger-scale demonstration plant… This work should allow us to smoothly transition from start-up to full operations” .
COO Jaye T. Pickarts: “We have seen some delays by the U.S. Forest Service… alternatives analysis for the EIS… We are pleased that the Forest Service has stated its intent to make up the time lost… we are shifting our anticipated timing for Project commissioning from late 2016 to mid-2017” .
CFO Paul Zink (PFS release): “Looking beyond the IRR, one has to appreciate the more than 40-year Project life, the low capital cost, the short construction cycle, the ability to mine a high-grade core… we believe we have numerous opportunities to improve the economics further” .

Q&A Highlights

No earnings call transcript was furnished in Q3 filings; management insights are drawn from the 8-K press releases and PFS 8-K .

Estimates Context

The company provided no revenue/earnings guidance in Q3 filings; results are not compared against consensus due to lack of available consensus data for this period in company materials .
As a micro-cap exploration-stage issuer with no production revenue, traditional Wall Street quarterly EPS/Revenue estimate comparison was not present in Q3 disclosures .

Key Takeaways for Investors

Positive PFS with robust after-tax IRR (29%) and NPV10 ($330M) under conservative pricing supports long-life project economics, with high-grade early years driving a 2.9-year payback .
Near-term execution risk centers on permitting: USFS delays shifted the commissioning target to mid-2017 and deferred permit filings to Q1 2015; monitor EIS alternatives progress and draft EIS timing in Spring 2015 .
The planned 1–3 ton/day demonstration plant is a meaningful de-risking step to validate materials/equipment selection and smooth start-up, addressing sector start-up challenges .
Liquidity runway is limited by continued quarterly burn ($3.2M in Q3); management anticipates raising $45–$60M over the next two years to fund permitting, FS, and demo plant construction/operations .
Proprietary processing continues to perform, producing 97%+ pure, near thorium-free TREO concentrate; potential downstream separation could enhance value capture and reduce tolling costs .
Macro sensitivity remains high: project value levered to rare earth prices and regulatory timelines; PFS sensitivity shows significant NPV movement with price/cost changes .

Appendix: Additional Data Points

Operating metrics (Years 1–9 vs LOM averages): Overall recovery 81.9% vs 79.0%; operating cost per kg TREO $11.75 vs $15.05; average annual after-tax operating cash flow $84.5M vs $52.4M .
Capital breakdown: Initial capex $290.4M including mining $57.9M, Hydromet/tailings $126.2M, contingency $47.1M; LOM capex $453.3M .
Resource summary (M&I): 18.0M tons at 3.05% TREO; high-grade subset 6.0M tons at 4.58% TREO; Proven & Probable reserves total 15.6M tons at 2.78% TREO .

Citations:

RARE ELEMENT RESOURCES LTD (REEMF)·Q3 2014 Earnings Summary