The Anchor House, Inc.

By Stanley Trout

Often we describe a specific time in human history as an age, such as the age of reason, the bronze age or the middle ages. Many people call the time we live in today the “Information Age” because of the rise and dominance of computers in our lives, and I would agree that it is an apt description. However, I would like to discuss another name that may well describe the time we live in, especially the future, and that is the “Age of Sensors”.

Why sensors? It really is a natural consequence of our heavy use of computers. Computers give us a great tool for handling data of all kinds: the names and addresses of all our contacts may be organized in Outlook, our checkbook may be organized by Quicken and all our correspondence may be stored as Word files. Computers handle all this data and much more with ease. In fact, if we think about how we interact with the computer, by keyboard, mouse, scanner, web cam, etc., they are all just ways to enter information into the computer. With such a useful tool at our fingertips, I think that the challenge of our time, our new frontier, is finding more and better ways to bring information to computers and that is why I say we live in the age of sensors. Let me offer just one simple example.

I had the opportunity this summer to rent a Toyota Prius for a week. It is a great example of modern automotive technology. The actual fuel economy numbers are really impressive and significantly better than the new EPA mileage ratings. (see www.fueleconomy.gov) I drove almost 1600 miles and consumed a little over 30 gallons of gasoline, for an average of just over 52 miles per gallon. (The metric numbers are 2500 km, 115 liters and 4.5 l/100 km.) But my initial interaction with this car was of a much more mundane matter. I had a low tire pressure warning. Checking with my tire gauge revealed the pressure in one of my tires was just 22 psi (1.5 x 105 Pa), well below the 35 psi (2.4 x 105 Pa) recommended by Toyota, yet not low enough to be readily noticeable to someone just looking at the tire. In this case, a small sensor from the tire was giving me the warning. Technically, this is a difficult sensing problem. It must be done wirelessly since the tire must be free to rotate, yet this technology is available on most cars these days.

This example gives us a clue about how much sensing technology has improved in the last few decades. Our automobiles are now a vast collection of sensors, continuously feeding a wide variety of information to the onboard computer about the condition of the car, its passengers and its environment. Sensors give us the ability to optimize the performance of the car, provide troubleshooting information to our mechanic and improve our personal comfort as we drive. Over time we can expect the number, the sophistication and the benefits of sensors to increase.

What is at the heart of a sensor? The simplest sensors are merely switches, that turn on and off in response to a particular stimulus. The automotive crash sensor is a good example of this idea, and since it is a magnetic sensor, it is one of my favorites. Here the sensor is normally off, but under the proper conditions – the rapid acceleration of a crash – the sensor switches on, deploys the air bag and may even initiate an automatic call to OnStar® for help. This sensor is an example of excellent engineering, since the sensor must activate with absolute certainty during a crash, and never at any other time. Not deploying during a crash is dangerous for the passengers and a false deployment is expensive and also potentially dangerous.

More complicated sensors are proportional, meaning that the response to a stimulus varies with the magnitude of the stimulus. A photosensor in a camera is a good example of this technology. The exposure is adjusted in response to the ambient light. The less available light the longer the exposure and the greater the aperture opening.

There are two great challenges on the horizon for sensors. One is coming up with new materials to make new sensing devices. This is an active area of research operating at the intersection of physics, chemistry, materials science, electrical and mechanical engineering. The goal of this research is to find new ways to take advantage of some unusual material characteristics to measure some parameter. That parameter could be almost anything, speed, time, temperature, distance, pressure, etc. While many sensors have some sort of magnetic connection, not all sensors are based on magnetic phenomena.

The other challenge is learning to apply the sensor technologies we already have to solve some nagging control problems. Advances in this technology have brought us vehicles that are far more efficient, less-polluting and safer than they were just a decade or so ago. They allow us to control rush hour traffic by adjusting traffic signals in response to the prevailing traffic pattern, to control the temperature and lighting of our homes, to monitor our factories remotely, for example. All we need is a sensor, a computer and some software. But we should expect wider deployment of sensors in all facets of our daily lives, as we learn more about how to use sensors. This means that if you have a device that you would like to control, either a system already exists, or it will be available soon.

This is why I am so optimistic about this technology and believe that we are in the “Age of Sensors”.

More information about Stanley Trout can be found at http://www.spontaneousmaterials.com/.

By Terry Gatchell

Tuscaloosa, AL On June 22-26, more than 150 researchers from seventeen countries met at the University of Alabama’s Shelby Hall to share and discuss the latest developments in lanthanide science and technology at the 25th Rare Earth Research Conference. The triennial event is marked by the presentation of the Frank H. Spedding Award for Outstanding Contributions to the Science and Technology of the Rare Earths. This year’s recipient, William J. Evans of the University of California, Irvine, is a pioneer in the area of lanthanide-based reduction chemistry. His groundbreaking suite of reduction reactions involves not just europium, ytterbium and samarium, but all the metals in the lanthanide series. Previously considered impossible, the development of these new types of reduction reactions has carved a new niche for the rare earths and may have significant implications for energy research.

William J. Evans of UC Irvine, received the Spedding Award for his work in lanthanide reduction chemistry

Fullerene chemist Luis Echegoyen of Clemson University reported breakthroughs in his “trapped buckyballs.” The conformation of these molecular cages changes depending on the trimetallic rare earth nitrides trapped inside – namely gadolinium, neodymium, promethium and cerium – allowing for their isolation and determination of their electrochemical behavior.

In the area of materials science, James H. Dickerson of Vanderbilt University has assembled europium oxide nanocrystals into both translucent and opaque thin films, which can be employed in photoactive coatings and dielectric devices. His research group has produced stable, monodisperse (i.e. not aggregated), sub-3 nanometer europium, terbium and gadolinium oxide nanocrystals with the robust optical properties desirable for use in high-resolution video displays and luminescent probes in immunoassay applications. Possibly the most interesting aspect of Dickerson’s research is the discovery of unexpected magnetization reversal in the smallest europium sulfide nanocrystals, which have a diameter less than 2.0 nanometers.

James H. Dickerson of Vanderbilt University

In the area of solid state cooling, work has been done by T. Takabatake of Hiroshima University in Japan which shows promise for cerium, ytterbium, and europium-based thermoelectric materials.

Biomedical applications such as lanthanide-based nanoprobes for MRI applications are also a prevalent area of research. Highly sensitive, nanoscale probes have many advantages, including the potential to detect changes occurring at cellular and sub-cellular levels. The lanthanides are of particular interest because their unique paramagnetic properties may provide magnetic resonance multi-contrast imaging probes, as investigated by Enzo Terreno at the Molecular Imaging Center at the University of Torino, Italy.

Also on the horizon are cleaner, more efficient methods of extraction and separation of lanthanides and their chemical cousins, the actinides. This is good news for both the rare earth mining industry and the environment. Highlights from the conference include dithiophosphinic acids (DPAH) and phosphonium ionic liquids such as Cyphos®. The DPAHs have been recently developed by Dean R. Peterman et al at the Idaho National Laboratory and can separate americium and europium with a separation factor of ~100,000 at low pH, resulting in a derivative that is stable for long periods when exposed to ambient atmospheric conditions.

As the field of rare earth research grows, so does our understanding of the fascinating electronic, magnetic and optical properties of the once obscure lanthanides. Consequently, the scientific community will come to use these chemically coherent elements as a “17 position dial,” as described by Paul C. Canfield, of the Ames Laboratory and Department of Physics at Iowa State University. With increasing precision, properties such as the size of the unit cell, anisotropy, and band filling can be tuned to suit a wide range of applications.

By Clint Cox

The World Resource Conference was held in Vancouver on June 15-16. Cambridge House International put on another great show, with a well-attended show. People commented that it may have been a little smaller than past shows, but there was good attendance on Monday (the second day of the show). There was a pretty good “Potash! Get some potash!” buzz in the hallways, but I tried to stay focussed on what was happening in the REE business. New during this conference was the very prominent presence of a Toyota Prius hybrid sitting between two Rare Earth companies (Great Western Minerals and Avalon Ventures):

The great thing about the visual aid was the posters listing how the REEs were used throughout the vehicle. It will be interesting to see if this type of display can help the investing public understand how REEs will affect us all moving forward.

Even if the investing public has not yet caught on — many junior exploration companies have decided that REEs are a hot topic and worth pursuing. There are an increasing number of companies taking a closer look at their projects for Rare Earths, and many are now assaying for the REEs. Undoubtedly, some interesting projects will come out of this, and we look forward to looking at new data as it becomes available!

Next week we will have a person on the ground at the 25th Rare Earth Research Conference in Alabama.

Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA) answered the following quetions via written response in March 2008.

Clint Cox: Please describe the history of your involvement with the Rare Earth industry.

Dudley Kingsnorth: In 1990 I was head-hunted by Ashton Mining Ltd (who jointly owned the Argyle Diamond Mine with Rio at the time and have subsequently been taken over by Rio) to manage the Mt Weld Rare Earths Project; which I did until 2000. Since then I have maintained an interest in the rare earths industry by maintaining contact with the people I met during that period when the rare earths industry went through a roller coast ride as it adjusted to the entry and subsequent domination by China. I have written the last three editions of Roskill’s “The Economics of Rare Earths and Yttrium” (2001, 2004 and 2007) which has enabled me to remain abreast of developments. Currently, I am an independent rare earths consultant which keeps me abreast of current and future developments through the companies and people with whom I work and consult.

Cox: Please talk about the most notable changes in the history of the industry, with particular reference to China.

Kingsnorth: The most notable changes in the industry over the past few years may be considered in two parts:

1. The growing dominance of China over the past twenty to thirty years. This commenced in the 1980s with the separation of the rare earths as a by-product of the Bayan Obo Iron Ore Mine in Inner Mongolia. Today 40-50% of the world’s rare earths are sourced from this mine; constituting over 60% of the global supply of light rare earths. Then in the 1990s ionic clays became the dominant source of heavy rare earths; such that today this is the source of over 85% of the global supply of heavy rare earths.

2. The problem of ‘balance’ – in which the ratio of the rare earths mined/processed does not comply with the ratio of demand – has undergone several changes. In the 1950s and 1960s europium, for use in the phosphors in the ‘new’ color TVs, was the driver of the industry, with the Mountain Pass in the USA the major supplier. In the 1980s and early 1990s the demand for cerium for TV and computer monitors, where it is used to polish the screens and as a decolorizer, drove the demand; which, in turn helped the Bayan Obo Mine, with its high cerium content, to become the major force in global rare earths supply. Today, it is the rapidly increasing consumption of neodymium, praseodymium and dysprosium in the production of rare earth magnets that is driving demand. Tomorrow it could well be the consumption of europium, terbium and yttrium in the manufacture of phosphors that could dictate the patterns and sources of rare earths production.

Cox: How intentional are the Chinese about their long term REE plans? Are REEs a national or regional priority in China?

Kingsnorth: It is my belief that the Chinese authorities at all levels are utilizing their rich rare earths endowment, not only their resources but their technology and expertise, as a key instrument in the achievement of their goal to find jobs for the millions of people that will move from an agricultural environment to and urban one between now and 2020. Due to their unique properties and their use in minor quantities rare earths provide significant leverage in the creation of jobs in the manufacture of electronic, automotive and catalytic items. Accordingly, I do not believe that China’s motives are ideologically or directly financially founded. This is best illustrated by the fact that the authorities at all levels are putting an increasing range of caveats with respect to ‘adding value’ on the current and future development of rare earth resources. Several Provinces, through the controlling interest they hold in rare earth enterprises, are now making value adding manufacture, such as LCDs and electric motors, a pre-condition for continued access to their rare earth resources.

Cox: In the larger context of their manufacturing base, how aware are the Chinese of REE?

Kingsnorth: They are keenly aware of their strategic importance and are using that to expand their manufacturing base.

Cox: Recently, there have reports that the Chinese REE resources are finite, as a consequence of which they are limiting supply to an extent that the West may be starved of REEs within 5 years. Can you comment?

Kingsnorth: First I would comment that the Chinese rare earths industry currently supplies in excess of 95% of global demand for rare earths; which in itself raises issues of sovereign risk. There appears to be some general consensus amongst the Western major manufacturers of LCDs, mobile phones, computers, electric motors, etc. that there is a reluctance to place more than 60-70% of their manufacturing capability within China. This indicates that subject to the normal caveat of ‘reasonable pricing’ these Western companies would support non-Chinese projects in order to achieve this goal.

Over the past two years several Chinese officials have raised issues about supply from Bayan Obo (where there could be supply constraints in the medium term associated with the shift to a new mining area where the rare earths concentration is lower and the time required to develop suitable methods of recovering the million of tons of rare earths contained within the tailings ponds) and, more importantly, the supply of heavy rare earths from the ionic clays of Southern China which are finite and cause significant environmental damage during their processing.

It is the combination of sovereign risk and the uncertainties associated with the supply that are creating the opportunities for non-Chinese rare earth projects. Based upon the comments made by the Chinese officials and a conservative forecast growth in demand of 8-11%pa there could be a potential shortfall of 30-40,000tpa in 2012, which would need to be filled by the current potential but un-committed non-Chinese rare earth projects, as shown in the figure below:

I suppose, the next question is would China starve the West of rare earths and allow prices to increase to record levels if these projects did not come on-stream? The simple answer is no; the Chinese authorities are pragmatists and would not allow this to happen for the following reasons:

1. If prices were to rise to really high levels (in historical terms the current prices are not high in real terms) then the temptation for illegal mining and processing to re-commence in China would be almost unstoppable, leading to chaos, environmental problems and a sharp fall in prices. The authorities wish to remain in control.

2. High prices would drive more dollars to the search for substitutes; particularly in Japan.

3. China could be subject to action by the WTO.
In summary, I believe that China will ensure that there are adequate supplies, albeit at higher although not outrageous prices, but the real price would be the shift of more manufacturing to China.

So, as I noted at a recent conference the time has come for the would be non-Chinese rare earth projects to step up to the plate and deliver on their promises to meet this potential shortfall!

Cox: Please describe the differences between the US, Japan and Europe’s concept of REEs:

Kingsnorth: Very few people within the USA appear to understand the role that rare earths play in our society today i.e. put simply, the fact that the most efficient electric motors contain rare earth magnets is of little relevance when the purchasing decision is made on the basis of price.

In Japan:
“Oil is the blood of industry,
Steel is the rice of industry
Rare earths are the vitamins of industry.”

Outside China, Japan is the major investor in rare earths application R&D.

In Europe they are aware of the importance of rare earths, but lack the resources to address the lack of diversity of supply. Nevertheless, there are R&D programs associated with rare earth applications.

Cox: How important are India and Russia to the REE industry?

Kingsnorth: They do have the potential to play a key role in meeting the potential shortfall identified above. However, past performance suggests that their impact will be minimal.

Cox: Turning to China; please comment on the relationship between end users and that country.

Kingsnorth: For many non-Chinese users it is not a preference but a question of ‘no choice’ of supply. Although there have been significant improvements in the reliability of supply from China, many companies still have some way to go to meet Western standards of quality control. Nevertheless, it needs to be acknowledged that it is an issue of which the industry is well aware and is committed to continuous education/improvement.

Cox: What are the 3 greatest risks for the REE sector?

Kingsnorth:
• Overpricing, due to Chinese supply constraints and taxes, will foster substitution.
• Poor environmental management in China could lead to a boycott of products that are not produced by ‘green’ companies.
• A break-out in supply in China due to high prices which will drive down prices in the medium term which will force cut-backs in research and quality control.

Cox: What are the chances of making a brand new discovery that changes the market?

Kingsnorth:
• In the next 5 years minimal, possibly in 5-10 years.
• Developing a commercial process is the key, for example it has taken over 15 years for Lynas and its predecessors to develop a commercial extraction process for Mt Weld.

Cox: Will end users partner with exploration companies to expedite the development of alternative sources of rare earths?

Kingsnorth: Not directly, but through supply chain management with other users.

Cox: Describe the current relationship between end users and REE exploration companies.

Kingsnorth: The major end-users are coming to realize that they need to have a full understanding of their supply source – right to the mine site. So, they are becoming more ‘interested’, but for most the idea of contracting at the top of the supply chain is not an option. However, they do have an ‘interest’ in how their suppliers source their raw materials, such that it could impact on their purchasing decisions; an ‘interest’ that I see increasing as China increases its grip on the market. In other words, I foresee a greater interest in totally transparent supply chains from mine to customer on the part of the major rare earth consuming manufacturers

Cox: Will REE exploration companies outside China be able to compete? What will it take for them to be profitable?

Kingsnorth: At current prices non-Chinese projects appear to be profitable from the feasibility study results published to date. So it appears that they will be profitable, but will probably not be able achieve the margins of their counterparts in China.
As long as the current export tax and quota system remains in place, which effectively distorts the market, and they are supported by the non-Chinese consumers then the non-Chinese companies will be able to survive.

Cox: How would you describe the present state of the rare earth market?

Kingsnorth: “We live in interesting times”. The key to a dynamic future for the rare earths industry is the successful development of non-Chinese rare earth suppliers, who will give the confidence required by industry to continue to research and use this unique group of elements

Cox: What do you think is the most common misperception about rare earths?

Kingsnorth: Rare earths are the play things of university research departments. The industry as a whole has a responsibility to educate the general public about the unique role that rare earths play in our society today.

Dudley Kingsnorth of Industrial Minerals Company of Australia (IMCOA) answered the following quetions via written response in March 2008.

Cox: Will the Japanese stockpile REE?

Kingsnorth: The Japanese have always taken the opportunity to stockpile strategic materials when the conditions are appropriate i.e. as long as the purchases do not trigger major price increases. From the trade statistics it appears that Japan has been stockpiling rare earths over the past 2-3 years.

Cox: Will the US stockpile REE?

Kingsnorth: Not that I am an American citizen, it is a question that I suggest you raise with your local Member of Congress or Senator. As you are aware over the last few years the US Government has made a conscious decision to sell down the stocks of strategic materials. However, more recently the US Department of Defense appears to be putting ‘USA made’ policies in place, which may lead to a rebirth of the REE industry in the USA.

Cox: What are the 4 most important things to know about each REE?

Kingsnorth:

• The current and future (potential) applications.
• Growth of each application.
• Propensity for substitution.
• The balance between supply and demand for that REE.

Cox: Could you name the three people who have most influenced your association with the rare earths industry?

Kingsnorth:
• Barry Kilbourne (dec’d) of Molycorp who devoted his career to promoting a better understanding of rare earths. “Cerium – A Guide to its Role in Chemical Technology” and “A Lanthanide Lanthology”, both of which are well regarded references today are testament to his dedication.
• Peter Gundy, the founder of Neo Material Technologies (formerly AMR Technologies) whose commitment to the industry and the wellbeing of the people and communities within which the company works in China has raised the general standards of the industry as a whole.
• Rob Duncan of Lynas Corporation whose dedication to the understanding of the complex orebody at Mt Weld has played a key role in its progression from exploration play to producer (in 2009).

By Clint Cox

Great Western Minerals Group and Titan Mining Group LLC hosted a group tour of their new Deep Sands project on 25 February 2008. There were a number of us present at the SME conference in Salt Lake City, and since it is only about 3 hours away, they offered a one day excursion to the site:

The picture above shows the site from the east (looking west). The site includes almost the entirety of what you see from left to right at the foot of the mountains.

John Pearson, VP of Exploration for Great Western, discussed the site location on a map:

The site is vast — over 66 square miles and is a joint venture in which Great Western holds a 25% interest in the REEs (they can earn a 100% by completing the necessary work for a Preliminary Economic Assessment Report, determining a fair value for the property and entering into a definitive purchase arrangement). Titan holds the remaining interest. The area includes much of the Lake Bonneville paleo beaches, so they will be looking for REEs in sandy material — not hard rock. Random samples have shown the area to have from 0.14% to 0.80% TREO.

They have just begun work at the site, but they were able to show us several holes with magnetite showings (that also have monazite) and also two outcroppings.

The first hole:

The blackish layer near the bottom of the pit is the magnetite layer. Because this was during the SME conference, we had excellent commentary about the geology and markets from a diverse group of knowledgeable REE sources.

From this hole we drove across the property to observe an outcropping. After that we had lunch and then journeyed to a second, larger outcropping:

At this point, several of us climbed the side of the hill, dug a hole, and took samples of the sand:

Once again, we are looking for the dark layers of magnetite.

We spent a few hours on site, and then headed back to Salt Lake City. Perhaps the most entertaining part of the day was a short stop at a rock shop in Delta, Utah, on the return trip. It can be a load of fun to see a van load of geologists and rock hounds descend on the local rock shop at closing time!

Deep Sands is in the very early stages and there is plenty of work to be done, but we will be following the progress of the project as they explore further and look for areas of concentrated REE.

Thanks to Great Western and Titan Mining for a great day in the desert.

By Clint Cox

On February 26th, the rare earth community gathered for an entire morning of REE talks during a special session at the annual SME conference in beautiful Salt Lake City (the Great Salt Lake pictured below).

The session was titled “Rare Earths – Mining, Geology, and Metals” and was chaired by James Hedrick of the US Geological Survey. It was well attended. The schedule is listed below (my comments follow each):

Magnetic Refrigeration/Heat Engines
K. Gschneidner and V. Pecharsky; Ames Laboratory and Department of
Materials Science and Engineering, Iowa State University, Ames, IA

Karl Gschneidner gave excellent insight as to what the future may hold in magnetic refrigeration. Gadolinium is the chief rare earth element used in the technology, but he also made it clear that there are lots of materials being researched for this application. On 20 February 1997, magnetic refrigeration was proven to be viable, but we may still be years away from mainstream magnetic refrigeration. At this point 29 machines have been built (that we know of).

Significance of REE-, BA-, and F-RICH Primitive, Ultrapotassic Dikes
in the Southern Mountain Pass District, Mojave Desert, California
G. Haxel; U.S. Geological Survey, Flagstaff, AZ

Gordon Haxel gave a fascinating — and highly technical — presentation on the shonkinites at Mountain Pass. He gave great insight about the different rock types and essential elements of the Mountain Pass geological structures.

Criteria for the Evaluation of REE Deposits on a World Level
A. Mariano1, J. Hedrick2 and C. Cox3; 1Consultant, Carlisle, MA; 2Minerals
Information Team, U.S. Geological Survey, Reston, VA and 3The Anchor
House, Inc.

Anthony N. Mariano spoke about evaluating REE deposits around the world. The key slide he presented discussed the criteria for evaluating REE deposits:

Dr. Mariano went on to give specific examples of critical REE minerals and their deposits.

Thorium and rare earths in the Lemhi Pass region
R. Reed1 and V. Gillerman2; 1Idaho Engineering & Geology, Inc., Boise, ID and Idaho Geological Survey, Boise, ID

Reed and Gillerman provided a fresh look at the Lemhi Pass region of Idaho using new and updated data. They have established that the project has a large amount of thorium and 0.52% REO.

Ion-Absorption Type Lanthanide Deposits
R. Grauch1 and A. Mariano2; 1Mineral Resources Team, US Geological Survey, Denver, CO and 2consultant, Carlisle, MA

Grauch gave the best presentation I have ever heard on the South China ion-absorption clays. He stressed the importance of the clays to the REE industry. He showed a detailed map of the five provinces that have the deposits and explained that there were more than 100 such sites known in China.

Rare Earths Supply: the Alternatives to China
D. Kingsnorth; Industrial Minerals Company of Australia, Perth, WA, Australia

Kingsnorth furnished great statistics for the standing-room only crowd. He predicted a 9-11% growth rate for the industry, and displayed charts showing that China may absorb the entirety of its own production by 2012. He discussed the shortage of dysprosium (Dy), neodymium (Nd), europium (Eu), and terbium (Tb). He also explained that provinces that produce rare earth want to encourage the growth of local manufacturing by having companies come in and build plants there rather than exporting the rare earths.

Geology, Setting and Development of the Hoidas Lake Rare Earth Element Deposit
G. Billingsley, J. Pearson and K. Halpin; Great Western Minerals Group Ltd., Saskatoon, SK, Canada

Billingsley gave an update on progress at the Hoidas Lake project. He detailed some of the new developments in sorting and processing the ore, and updated the value of the oxides at Hoidas. During my trip to Salt Lake I was able to go with Great Western to their new Deep Sands project — I will have more on that soon.

Rare-Earth Operations at Chevron’s Mountain Pass Mine, California
J. Benfield; Chevron Mining Inc., Mountain Pass, CA

Benfield gave a thorough update on recent plans for Mountain Pass. Chevron Mining has been training new managers and is gearing up for a three phase start-up. They hope to be in full operation by 2012. They are also actively researching new technologies to use rare earths.

It was a wide-ranging conference covering distinctly different aspects of the REE industry. The crowd was a good mix of REE legends, new-comers, geologists, engineers, and financiers. I certainly hope that they decide to do this again next year, as it was an excellent forum to learn many aspects of the business and get to mingle with some very knowledgeable people.

Donald Ranta, President, CEO, and Director of Rare Element Resources, answered the following questions via written response on 18 February 2008.

Clint Cox: When did you join Rare Element Resources (RES)?

Donald Ranta: Beginning of October 2007.

Cox: What is your mining background?

Ranta: 35+ years in the mining industry; I began as an exploration geologist and had steadily increasing responsibilities in exploration and in the evaluation of projects–worked for Kennecott Copper, Gulf Mineral Resources, AMAX/Climax Molybdenum, Phelps Dodge as head of North American Exploration, and Echo Bay Mines as VP worldwide exploration. About ten years ago I entered an entrepreneurial phase in my career by contributing to the start-up of four companies, three of which are continuing to progress, and then I joined RES.

Cox: What was attractive about the RES story?

Ranta: The high-quality of the people associated with the company; the excellent opportunities of the Bear Lodge property for both rare-earth elements and for gold.

Cox: How did you get interested in the Rare Earth Elements (REE)?

Ranta: I had toured Molycorp’s Mountain Pass Mine some years ago, and had followed the exploration activities at a number of alkalic systems for many years. The opportunity of learning more about alkalic systems and REE deposits, along with a substantial gold play on the same property was a compelling draw to join RES.

Cox: What role do the REE play in today’s society?

Ranta: An ever-increasing role. China is the leader in this area and they have set up a large research facility to test and develop new uses for the unique properties of rare earths. Magnets, hybrid vehicles, and refrigeration are some of the current uses but the biggest R&D successes for rare-earths are probably yet to come.

Cox: What are some of the other metals commonly associated with REEs?

Ranta: Iron, copper, uranium, thorium, palladium, platinum, etc

Cox: Please provide some detail about the recent assay results you received for Bear Lodge.

Ranta: The highlight of the recent assay results is an aggregate true thickness of 111.9 feet over four separate mineralized intervals averaging 4.69% REO in drill-hole RES07-1. The rare-earth mineralization encountered in drill-hole RES07-1 is contained within three well-defined carbonatite dikes, and one FMR (iron-manganese-rare-earth element) dike, which all intrude a body of heterolithic intrusive breccia of the Southwest Bull Hill target. This geologic setting is similar to that hosting other REE intercepts on the Bear Lodge property. Two additional core drill holes, RES 07-2 and RES 07-3, were completed during the 2007 rare-earth drill program, and REE assay results for these drill holes are pending. All intervals with visual REE mineralization have been sent to the metallurgical testing laboratory and will be used if the assays are adequate.

Cox: What are the biggest challenges for the Bear Lodge project?

Ranta: We know that significant occurrences of REEs are on the Bear Lodge property based on 24 drill holes; now we have to determine how much bigger it is via additional drilling; and are there multiple deposits on the property? We are also working on finding the best way to process the REE-bearing material and economically extract the metals, including from both the near-surface oxidized (FMR) material and the deeper non-oxidized carbonatites. We are assembling all the drill-hole information into a digital database so that an NI 43-101-compliant resource estimate can be made. Once all of this is well along we can look more in depth at the issues of marketing and sales of potential REE products.

Cox: Describe the minerals present at Bear Lodge.

Ranta: Rare-earth mineralization in the near-surface oxidized dikes consists of very fine-grained bastnaesite-group rare-earth minerals complexly intergrown with gangue minerals often occurring in hexagonal bodies up to a few centimeters in diameter.
Rare-earth mineralization in the non-oxidized carbonatites also commonly occurs within hexagonal pseudomorphic bodies, but the mineral constituents are coarser-grained and consist of the strontium-rare-earth-carbonate mineral, ancylite, which is intergrown with strontianite and minor barite.

Cox: Are the gold and REEs found together or separately at Bear Lodge?

Ranta: Gold occurrences at Bear Lodge that have been recently drilled are adjacent to and nearly surround the REE-mineralized area at Bull Hill. Some weakly anomalous gold is found in the area of the Bull Hill REE mineralization.

Cox: What is the current status of the metallurgy for Bear Lodge?

Ranta: A number of preliminary tests had been run on the REE mineralization including leaching and flotation with a hot-flotation step, but neither of the first two test programs provided definitive results. Beneficiation tests are currently being conducted by MSRDI of Tucson, Arizona, primarily on both mixed and non-oxidized rare-earth mineralized samples to determine the feasibility of producing commercial rare-earth concentrates. Building on the previous metallurgical test work, they will investigate a number of conventional and non-conventional processing methods such as concentrating (or removing) the larger weight percentage of the gangue by appropriate processing techniques leaving behind smaller weight percentage of the valuable minerals in the residue (tailings).

Cox: Do you have any cost estimates for how much it would take to get Bear Lodge into production?

Ranta: Not at this time, but our goal, following successful metallurgical testing, resource estimation, and expansion of the mineralized zone, will be to determine order-of-magnitude operating and capital costs.

Cox: How will you acquire the funds needed for ongoing operations?

Ranta: We are backed by a well-connected finance team that has always been able to raise the funds necessary to Rare Element. We have $2 million in the bank now and expect another $750,000 in 2008 from warrant exercises. If we need to finance more, it is market dependent, but has not been a problem in the past.

Cox: What is the timeline for developing Bear Lodge?

Ranta: It is totally dependent on completing the technical work noted above, and following up with marketing and sales investigations.

Cox: How has the Bear Lodge project changed over the last year?

Ranta: During 2007, Rare Element continued to explore the Bull Hill area carbonatite dikes with core drilling of three holes. Confirmation drilling of two holes at the Bull Hill Southwest target, which contains the historical resource, successfully collected larger amounts of carbonatite samples, which are being used to continue metallurgical studies of this known area of rare-earth mineralization. The Company has confidence that MSRDI will investigate a variety of concentration methods to determine which methodology works best for both the mixed and non-oxidized rare-earth occurrences at the Bear Lodge property.

In addition Newmont has drilled 15 holes testing and expanding the gold mineralization.

Cox: What are common misperceptions about rare earths?

Ranta: Probably their name – that they are “rare”. They are very abundant on earth and mining companies are finding occurrences of them all the time. Because of rare-earths’ physico-chemical properties, they are not often concentrated in exploitable deposits. Those same properties also make it difficult to concentrate rare-earths in laboratory or plant settings. Deposits such as Bear Lodge with a high grade of approximately 3.8% REEs are very unusual.

Cox: Talk about China and REEs.

Ranta: China produces nearly 100% of the world REE supply. Their near monopoly on production allows them to increase tariffs and prices on their products. The Chinese government recently increased export tariffs on Chinese rare-earths to between 15 and 25%. Is China a reliable supplier of REEs at reasonable prices for the long term?

Cox: Who is most concerned about China?

Ranta: Users of rare-earth elements produced by China, because of their near monopoly.

Cox: What deposits are currently being looked at worldwide?

Ranta: Mountain Pass, California; Bear Lodge, Wyoming; Mt. Weld, Australia; Nolans Bore, Australia; Olympic Dam, Australia; Hoidas Lake, Saskatchewan; Thor Lake, Northwest Territories; Palabora, South Africa; Bayan Obo etc in China.

Cox: Are there any significant stockpiles of rare earths in the world today?

Ranta: The tailings dam at Bayan Obo in China or one of the other mines there may be considered a stockpile.

Cox: What is the history of the Bear Lodge deposit?

Ranta: The first prospecting activity in the Bear Lodge area probably took place in the late 19th century when gold prospectors worked placers and small veins in the Bear Lodge Mountains. Thorium and REE mineralization was recognized in 1949 and resulted in a flurry of prospecting activity. The lack of a readily available market for these minerals in the 1950’s caused active exploration to cease. The US Geological Survey studied the Bear Lodge Mountains in the 1970s and reported that one of North America’s largest disseminated REE deposits is found there, according to MH Staatz (1983) in Profession Paper 1049-D.

Hecla Mining Company explored the Bear Lodge rare-earth mineralization in the late 1980s, identifying a swarm of carbonatite dikes at the Bull Hill Southwest target. Hecla drilled 12 core holes into the system intercepting multiple rare-earth concentrations in nearly every hole; earlier, four holes drilled by Duval and Molycorp also had intercepted rare earths. Based on the 16 holes with rare-earth intercepts completed by 1991, Hecla estimated a REE resource, which is considered historical, of 3.9 million metric tonnes (4.3 million tons) averaging 3.8% rare-earth oxides (not compliant with requirements of NI 43-101).

Rare Element has explored the Bull Hill area carbonatite dikes with core drilling of three holes in 2004, two holes in 2005, and three holes in 2007. All but two holes (RES 04-3 and RES 05-1) encountered significant intercepts of oxidized (FMR) and non-oxidized carbonatite dikes that host rare-earth mineralization. The Company’s drill holes were designed to confirm the presence of high-grade REE mineralization, to tighten drill-hole spacing within the mineralized zone, to expand the known mineralized zone of the Bull Hill Southwest target, to gather metallurgical test samples, and to test other REE targets. The historical grades and thicknesses of rare-earth-bearing mineralization defined by Hecla as occurring in FMR and carbonatite dikes have been verified by Rare Element’s recent drilling programs. Metallurgical test work has been previously conducted at two laboratories and a new metallurgical testing program is ongoing using samples from the 2007 drilling program.

Cox: Describe the geology that allows for the presence of this deposit.

Ranta: The Bear Lodge Mountains are composed of the upper levels of a mineralized Tertiary alkaline-igneous complex that has intruded and domed the surrounding Paleozoic and Mesozoic sedimentary rocks in the early Tertiary (approximately 38-50 million years ago). A few large Precambrian rock inclusions are found within the complex and host some of the gold mineralization. The alkaline complex has surface dimensions of approximately 4.5 by 10 km (2.8 by 6 miles) elongate in a northwesterly orientation, with a number of small intrusive outliers cutting sedimentary rocks outside the complex. Rare-earth-element mineralization occurs in the north-central core of the Bear Lodge dome, which consists of multiple intrusions of phonolite, trachyte, and other alkaline igneous rocks, and a variety of associated breccias and diatremes.

Extensive rare-earth occurrences in well-defined near-surface FMR (iron oxide-manganese oxide-REE) dikes and deeper carbonatite (a high-carbonate igneous rock) dikes are surrounded by a number of more widely distributed gold occurrences. One swarm of dikes, striking northwesterly and dipping steeply to the southwest, intrudes a body of heterolithic intrusive breccia of the Bull Hill diatreme. FMR (iron oxide-manganese oxide-rare earth) dikes and veins are interpreted to be intensely oxidized and leached equivalents of the carbonatite bodies that have been strongly weathered from surface to about 120 m (400 ft) deep and moderately weathered another 30 m (100 ft) or so. Carbonatite dikes are interpreted to transition toward the surface into FMR and range in size from veinlets to large dikes approaching 15 m (50 ft) in width. Virtually all of these REE occurrences in the Bear Lodge area are controlled by Rare Element Resources’ claims.

Drill holes in the Bull Hill Southwest target have penetrated the dike swarm including one main thick dike ranging up to 15 m (50 ft) in true thickness, but the dikes have been demonstrated to pinch and swell in both strike and dip directions. The dike swarm has been traced with drill holes up to 240 m (800 ft) along strike and 300 m (1000 ft) down dip, and the dikes appear open down dip and in a southeasterly direction.

Cox: What is the current status of permitting at Bear Lodge?

Ranta: Environmental and permitting activities are being coordinated by Newmont for both gold and REE exploration. A systematic program of drill testing for grade and tonnage of a potentially large gold system is expected to proceed once a new exploration permit is in place allowing much greater flexibility for drill-hole locations than is currently available. Newmont’s permitting efforts are progressing in order to allow an expanded drill program on up to 200 acres. This permit also would allow much greater flexibility for the locating of drill holes for REE exploration. Permit approval could occur later in 2008.

Cox: Which area are you most excited about?

Ranta: The Bull Hill Southwest target is the most advanced with a historical resource, open for expansion in several directions, and, thus, the highest priority. Additional work here would most likely provide the greatest benefit, and metallurgical testing is being done on material from here. The Bull Hill Northwest target has an historical Hecla drill hole with excellent REE results, which has not been adequately offset and explored. The Potential Carbonatite Plug target indicated by an REE-mineralized carbonatite stockwork zone is interpreted to lay at depth southwest of Bull Hill Southwest. The stockwork zone was detected in past holes drilled by the Company, Hecla, and Molycorp. It is interpreted to be a carapace, or shell, over a potential large plug-like intrusive body of carbonatite. This plug is hypothesized to be the feeder structure for the Bull Hill dike-swarm and other carbonatite dikes in the vicinity. Because of its possible size, the potential for a large mineralized plug is one of the most attractive REE exploration targets in the district.

Cox: What are the most significant uses for REE?

Ranta: Industrial uses include:
• Catalysts, including petroleum cracking & auto emissions
• Rechargeable batteries, super magnets
• Hydrogen storage, nuclear reactors, magnetic refrigeration
• Metal-alloying, ceramics & glass additives
• Fiber optics, lasers, phosphors, computer memory

Consumer product uses include:
• About 20 kilograms of REEs in every hybrid car
• TVs, computers, cell phones, DVD players, cameras
• Nickel-metal-hydride batteries, fluorescent lighting
• Medical Magnetic Resonance Imaging equipment
• Car catalytic converters, computers & electrics

Cox: Are there any advantages to the mineral ancylite?

Ranta: Ancylite is the principal rare-earth mineral, which is intergrown with strontianite, in non-oxidized carbonatite dikes of the Bear Lodge property. Ancylite is a carbonate and, as such, is easily amenable to acid leaching once it is concentrated. It contains about 43% total REE, so it has less total REE than bastnaesite, which contains about 75% total REE. Our current metallurgical testing program should provide a more complete answer to the question.

Cox: Are there any significant world deposits known to contain ancylite?

Ranta: I am in the process of learning about the mineralogy of different REE deposits around the world. At this time I do not know of any other deposits with ancylite as the principal rare-earth mineral.

Cox: How much thorium is present in the minerals?

Ranta: Preliminary analysis has indicated a range from a few ppm up to a few hundred ppm thorium in the REE-mineralized material at Bear Lodge. Thorium-bearing minerals in thorium-rare-earth element veins and dikes tend to be stable under natural conditions and concentrate as detrital, relatively insoluble, resistate minerals, even in low pH conditions. Thorite and thorianite have been identified at Bear Lodge, and it is uncertain if any thorium occurs in REE minerals.

Cox: Who do you rely on for your REE market research?

Ranta: Only limited market research has been done by RES. We use several sources such as conferences, several websites, industry experts, the Mining Journal, Metal-Pages Ltd. – from which we get the regular price updates, and various other industry participants like ourselves that put such information on their websites.

Cox: What is the biggest advantage of Bear Lodge?

Ranta: An identified and historically estimated resource of high-grade REO with significant expansion potential located in an easily accessible area with excellent infrastructure nearby; also located in Wyoming which is a state that is friendly to mining and mineral development.

Cox: What is the biggest challenge at Bear Lodge?

Ranta: Initially the biggest challenge is to determine the amenability to metallurgical extraction of rare earths from the relatively high-grade rare-earths mineralization on the Bear Lodge property.

Cox: What has surprised you the most about the rare earths?

Ranta: My biggest surprise is to learn about how rare it is to find economic deposits of rare earths and secondly how widely they are used and the potential for expanding those uses. Also it is surprising that China currently produces nearly all of the rare earths used worldwide.

Don Bubar, President and CEO of Avalon Ventures, answered the following questions via written response on 18 February 2008:

Clint Cox: How did you get interested in the Rare Earth Elements (REE)?

Don Bubar: It followed from an initial interest in the rare metals lithium and tantalum. After we acquired Thor Lake as an additional rare metals asset, it soon became apparent that (because of the enrichment in the HREE) that the REE represented the best near term development opportunity for this polymetallic rare metals resource.

Cox: What role do the REE play in today’s society?

Bubar: An evermore important role in many emerging “green” and “clean” technologies. I think we are just seeing the tip of the iceberg with these unique elements and many more new applications will emerge as new supply sources such as Thor Lake are brought on stream.

Cox: Describe the minerals present at Thor Lake.

Bubar: The deposits at Thor lake contain virtually every documented REE mineral species of economic importance. These include bastnaesite, xenotime, monazite, synchiste, parasite, allanite and fergusonite. In the Lake Zone we are finding sub-zones enriched in fergusonite, a rare yttrium-niobium-tantalum oxide mineral that preferentially concentrates the lanthanides of mid-atomic number from Neodymium through Dysprosium. Unlike xenotime, it has no associated thorium and instead is closely associated with zircon. We think it will it will make a superb quality REE mineral product.

Cox: What is the current status of the metallurgy for Thor Lake?

Bubar: Lots of work was done historically on the xenotime and bastnaesite mineralization in the North T deposit. Some work was done for tantalum in the Lake Zone ores in 2001-2002, which succeeded in producing a bulk tantalum-niobium-REE concentrate by flotation methods. At the present time, we are initiating a test program at SGS Lakefield Research to continue this work and optimize the process to produce a concentrate relatively enriched in fergusonite and the heavy REE.

Cox: What is the timeline for production?

Bubar: 3-5 years, with the mid-point of that range (2012) being the most likely date for initial production of concentrate. In 2008, we plan to complete a pre-feasibility study on the Lake Zone resource.

Cox: What do you see as the upside to the rare earth market over the next 3 to 5 years?

Bubar: Certainly the rapid expansion of the markets for rare earth magnets of different formulations in various applications especially in fuel efficient cars is the biggest upside. Other emerging technologies such as magnetic refrigeration also loom as important new markets. I am a big believer in the principle that increasing supply of heavy rare earths will greatly expand their markets.

Cox: What do you see as the greatest risk for the rare earth market?

Bubar: Substitution by other alternative materials in high volume markets is always the greatest threat for any raw material. For the REE magnets. this is a long term risk as there are no substitutes known at present.

Cox: What are common misperceptions about rare earths?

Bubar: There is a lot of confusion amongst the general public about rare earths as a commodity group. The relative of abundance of the lights vs. heavies and the fact that they all occur together in a given deposit requiring sequential separation and the economic consequences of this, are the biggest public misunderstandings about REE.

Cox: What is the history of the Thor Lake deposit?

Bubar: Thor Lake is a classic example of a unique mineral resource found before its time. It is enriched in many different rare metals in a number of distinct zones. Early work in the 70’s was focused on tantalum and niobium. Then the North T was discovered as a rich beryllium resource and this potential became the focus of development work through the 80’s. A bit of work was done in the late 80’s for yttrium and REE, but it was not until Avalon got involved in 2005 that the REE became the primary focus of economic interest in the property.

Cox: Where will the ore from Thor Lake be processed?

Bubar: Unknown at present but a number of scenarios will be considered. Like most mineral deposits where the minerals of economic interest occur in low concentrations, the most likely scenario is a concentrator on site, with concentrates being shipped elsewhere for refining.

Cox: What are the biggest potential uses for REE?

Bubar: Expanded uses of magnets for magnetic refrigeration and efficient power generation plus new uses in specialty alloys, glass and ceramics.

Cox: The Thor Lake site seems to be fairly complex to understand – how would you explain it in the most simple terms?

Bubar: I would describe it as a very large polymetallic rare metals resource consisting of a number of distinct mineralized zones where rare metals have been variably enriched, likely due to multiple mineralizing events. It appears to be unique in a global context and likely of considerable future strategic value because of its uniqueness.

Cox: What is the biggest advantage of Thor Lake?

Bubar: It’s exceptional enrichment in the heavy rare earths, very large size and near surface flat-lying geometry. It also has many potential valuable by-products.

Cox: What is the biggest challenge at Thor Lake?

Bubar: It’s relatively remote location in the Northwest Territories and the operational challenges that come along with it. Permitting is always a challenge for greenfields projects these days and the NWT is no exception in this regard, where on-going aboriginal land claim negotiations introduce a further complicating factor.

Cox: What has surprised you the most about the rare earths?

Bubar: Their remarkable versatility and the explosive growth in demand for the rare earth magnets.

Cox: Thanks, Don!

Don Bubar, President and CEO of Avalon Ventures, answered the following questions via written response on 18 February 2008:

Clint Cox: Describe the current state of the Rare Earth market.

Don Bubar: Tight. Demand is growing while supplies are increasingly constrained. Potential new non-Chinese supply sources of LREE are still at least a year or two away from production and they cannot alone fill the growing demand. Potential new sources of HREE are fewer and even further away from production. Prices are likely to stay buoyant for a few years.

Clint Cox: Talk about China and REEs.

Don Bubar: For the global market to grow, new sources of supply are needed. The Chinese also recognize this. They also recognize the need for new supply sources to emerge that are enriched in HREE.

Clint Cox: Who is most concerned about China?

Don Bubar: Japan. REE are vital to many Japanese industries, yet they have no domestic sources of supply of raw materials and they are totally reliant on China.

Clint Cox: Describe the difference between the HREEs & LREEs.

Don Bubar: Like Gold and Silver…both precious and typically found together but like silver, the far greater abundance of the LREE compared to the HREE makes them much less valuable.

Clint Cox: Which elements are you most excited about?

Don Bubar: Terbium, dysprosium and especially lutetium. Lutetium is already extremely valuable (at several thousands of dollars per kg) and has many exciting potential applications that are not being exploited because of its rarity. It is virtually absent in most REE deposits but is enriched at Thor Lake and could add enormous value to the ore.