Document and Entity Information
Document and Entity Information - shares | 9 Months Ended | |
Sep. 30, 2018 | Nov. 07, 2018 | |
Document And Entity Information | ||
Entity Registrant Name | Rare Element Resources Ltd | |
Entity Central Index Key | 1,419,806 | |
Document Type | 10-Q | |
Document Period End Date | Sep. 30, 2018 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Is Entity's Reporting Status Current? | Yes | |
Entity Filer Category | Non-accelerated Filer | |
Entity Emerging Growth Company | false | |
Entity Small Business | true | |
Entity Common Stock, Shares Outstanding | 79,591,880 | |
Document Fiscal Period Focus | Q3 | |
Document Fiscal Year Focus | 2,018 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 3,129 | $ 4,360 |
Prepaid expenses and other | 67 | 41 |
Total Current Assets | 3,196 | 4,401 |
Equipment, net | 77 | 88 |
Investment in land | 600 | 600 |
Total Assets | 3,873 | 5,089 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 236 | 52 |
Total Current Liabilities | 236 | 52 |
Reclamation obligation | 132 | 132 |
Deferred intellectual property license income (Note 4) | 770 | 963 |
Option liability (Note 4) | 348 | 616 |
Repurchase option | 600 | 600 |
Total liabilities | 2,086 | 2,363 |
Commitments and Contingencies | ||
SHAREHOLDERS' EQUITY: | ||
Common shares, no par value - unlimited shares authorized; shares outstanding September 30, 2018 and December 31, 2017 - 79,591,880 | 106,494 | 106,494 |
Additional paid in capital | 23,744 | 23,659 |
Accumulated deficit | (128,451) | (127,427) |
Total Shareholders' Equity | 1,787 | 2,726 |
Total Liabilities and Shareholders' Equity | $ 3,873 | $ 5,089 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Statement of Financial Position [Abstract] | ||
Common Stock, Par Value | $ 0 | $ .07 |
Common Stock, Shares Authorized | Unlimited | Unlimited |
Common Stock, Shares Outstanding | 79,591,880 | 79,591,880 |
CONSOLIDATED UNAUDITED STATEMEN
CONSOLIDATED UNAUDITED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS - USD ($) $ in Thousands | 3 Months Ended | 9 Months Ended | ||
Sep. 30, 2018 | Sep. 30, 2017 | Sep. 30, 2018 | Sep. 30, 2017 | |
Operating expenses: | ||||
Exploration and evaluation | $ (423) | $ (208) | $ (699) | $ (228) |
Corporate administration | (217) | (150) | (817) | (723) |
Reclamation obligation revision | 0 | 0 | 0 | 116 |
Depreciation | (3) | (4) | (11) | (14) |
Total operating expenses | (643) | (362) | (1,527) | (849) |
Non-operating income/(expenses): | ||||
Interest income | 15 | 0 | 44 | 0 |
Recognized deferred income on the sale of intellectual property (Note 4) | 64 | 0 | 193 | 0 |
Gain on revaluation of option liability (Note 4) | 16 | 0 | 268 | 0 |
Other income (expense) | 0 | 1 | (2) | 23 |
Total non-operating income | 95 | 1 | 503 | 23 |
Net loss | $ (548) | $ (361) | $ (1,024) | $ (826) |
LOSS PER SHARE - BASIC AND DILUTED | $ (0.01) | $ (0.01) | $ (0.01) | $ (0.02) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 79,591,880 | 52,941,880 | 79,591,880 | 52,941,880 |
CONSOLIDATED UNAUDITED STATEM_2
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss for the period | $ (1,024) | $ (826) |
Adjustments to reconcile net loss for the period to net cash and cash equivalents used in operating activities: | ||
Depreciation | (11) | (14) |
Gain on revaluation of option liability | (268) | 0 |
Recognized deferred income on the sale of intellectual property | (193) | 0 |
Reclamation obligation revision | 0 | (116) |
Stock-based compensation | 85 | 31 |
Total adjustments | (1,389) | (897) |
Changes in working capital | ||
Prepaid expenses and other | (26) | 3 |
Accounts payable and accrued liabilities | 184 | 11 |
Net cash and cash equivalents used in operating activities | (1,231) | (883) |
CASH FLOWS FROM FINANCING ACTIVITIES: | ||
Advance payment for common share issuance | 0 | 500 |
Net cash and cash equivalents provided by financing activities | 0 | 500 |
Decrease in cash and cash equivalents | (1,231) | (383) |
Cash and cash equivalents - beginning of the period | 4,360 | 927 |
Cash and cash equivalents - end of the period | $ 3,129 | $ 544 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 9 Months Ended |
Sep. 30, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
NATURE OF OPERATIONS | Rare Element Resources Ltd. (“we,” “us,” “Rare Element” or the “Company”) was incorporated under the laws of the Province of British Columbia, Canada, on June 3, 1999. Rare Element has historically been focused on advancing the Bear Lodge REE Project and the Sundance Gold Project, both located near the town of Sundance in northeast Wyoming. The Bear Lodge REE Project consists of several large disseminated REE deposits and a proposed hydrometallurgical plant to be located near Upton, Wyoming. The Sundance Gold Project contains an inferred mineral resource primarily composed of three gold targets within the area of the Bear Lodge property. During the first quarter of 2016, the Company announced extensive cost-cutting measures and the placement of the Bear Lodge REE Project on care-and-maintenance to enable us to move the Bear Lodge REE Project forward when market conditions improve. Following the receipt of proceeds from the transaction with Synchron on October 2, 2017 (discussed in Note 5), the Company commenced an updated work plan to (i) further confirm progress and enhance our proprietary technology for rare earth processing and separation, (ii) optimize our mine plan, and (iii) determine the timing for the formal resumption of permitting and licensing efforts. During the nine months ended September 30, 2018, the Company focused on Items (i) and (iii) above by entering into a formal engagement with a technical services vendor to continue technology review and advancement (discussed in Note 6), by communicating with various agencies having jurisdiction over the Bear Lodge REE Project, and by supplementing our environmental baseline studies. The Company plans to continue its focus on these two activities through the remainder of 2018. As a result of the Company’s current focus on the Bear Lodge REE Project and in light of ongoing volatile economic conditions for gold, no drilling or exploration on the Sundance Gold Project has been conducted since the end of 2011. Further exploration will be required in order to define the extent of the gold occurrences. The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business beyond the next 12 months following the filing date of this Quarterly Report on Form 10-Q. The Company has incurred losses since inception and further losses are anticipated in the development of its business. Even with the transaction with Synchron, we do not have sufficient funds to fully complete feasibility studies, permitting, licensing, development and construction of the Bear Lodge REE Project. Therefore, the achievement of these activities will be dependent upon future financings, off-take agreements, joint ventures, strategic transactions, or sales of various assets. There is no assurance, however, that we will be successful in completing any such financing, agreement or transaction. |
2. BASIS OF PRESENTATION
2. BASIS OF PRESENTATION | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | In accordance with U.S. GAAP for interim financial statements, these condensed consolidated financial statements do not include certain information and note disclosures that are normally included in annual financial statements prepared in conformity with U.S. GAAP. Accordingly, these unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2017, which were included in our Annual Report on Form 10-K for the year ended December 31, 2017. In the opinion of management, the accompanying unaudited condensed consolidated financial statements contain all adjustments (which are of a normal, recurring nature) necessary to present fairly in all material respects our financial position as of September 30, 2018, and the results of our operations and cash flows for the three and nine months ended September 30, 2018 and 2017 in conformity with U.S. GAAP. Interim results of operations for the three and nine months ended September 30, 2018 may not be indicative of results that will be realized for the full year ending December 31, 2018. |
3. RECENT ACCOUNTING PRONOUNCEM
3. RECENT ACCOUNTING PRONOUNCEMENTS | 9 Months Ended |
Sep. 30, 2018 | |
Accounting Changes and Error Corrections [Abstract] | |
RECENT ACCOUNTING PRONOUNCEMENTS | Nonemployee Share-Based Payments The Financial Accounting Standards Board issued ASU No. 2018-07, Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployee Share-Based Payment Accounting. ASU No. 2018-07, supersedes the guidance for equity-based payments to non-employees (Topic ASC 505-50). Under the new standard, an entity should treat equity-based payments to nonemployees the same as stock-based compensation to employees in most cases. The new guidance is effective for interim and annual periods beginning after December 15, 2018, with early adoption permitted. Effective July 1, 2018, the Company adopted the new guidance. The Company performed an assessment of the standard and the impact on the Company’s Consolidated Financial Statements and disclosures. Based on the Company’s analysis, adoption of the standard did not materially change the Company’s share-based compensation expense recognition and disclosures. |
4. EQUIPMENT
4. EQUIPMENT | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | September 30, 2018 December 31, 2017 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 61 $ 61 $ - $ 61 $ 61 $ - Furniture 13 13 - 13 13 - Geological equipment 437 364 73 437 357 80 Vehicles 87 83 4 87 79 8 $ 598 $ 521 $ 77 $ 598 $ 510 $ 88 |
5. SHAREHOLDERS' EQUITY
5. SHAREHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Transaction with Synchron On October 2, 2017, the Company and Synchron, a subsidiary of General Atomics Technologies Corporation (“Synchron”), completed a transaction in accordance with the following terms. Pursuant to an investment agreement (the “Investment Agreement”), the Company (i) issued to Synchron 26,650,000 common shares of the Company, which constituted approximately 33.5% of the issued and outstanding common shares of the Company; (ii) received gross proceeds of $4,752 in cash; and (iii) granted Synchron an option (the “Option”) to purchase approximately an additional 15.49% of the Company’s fully diluted common shares immediately after its exercise for an aggregate exercise price of an additional $5,040. Synchron’s ownership percentage, immediately after giving effect to such Option exercise, is limited to 49.9% of the Company’s issued and outstanding common shares. As set forth in the option agreement (the “Option Agreement”), the Option is exercisable for a period of up to four years from the initial investment. Additionally, the parties executed an intellectual property rights agreement (the “IP Rights Agreement”), whereby Synchron and its affiliates received rights to use and improve the Company’s intellectual property relating to our patents-pending and related technical information. The Company maintains the rights to such improvements. For a detailed discussion regarding the transaction with Synchron, see Note 6 to the Company’s Consolidated Financial Statements for the year ended December 31, 2017 on Form 10-K as filed with the SEC on March 28, 2018. The Company engaged a third-party valuation firm to determine the fair value of each component of the Synchron transaction: the Investment Agreement, the Option Agreement and the IP Rights Agreement. As of the closing date of the Synchron transaction, the gross value of each component was determined to be as follows: $2,900 for the Investment Agreement, $825 for the Option Agreement and $1,027 for the IP Rights Agreement. The costs incurred to complete the transaction were allocated to each component based on the relative fair value of each respective component. The value of the common shares was determined using a probability-weighted expected return method (“PWERM”) analysis, which included six different probability-weighted scenarios based on the calculated enterprise value of the Company utilizing assumptions from the pre-feasibility study completed in 2014 and a trailing five-year average rare earth pricing in a discounted cash flow analysis. Due to the variability in the number of common shares that may be issued upon exercise, the Option is considered a derivative liability. As a result, we revalue the Option liability at the end of each reporting period, until the Option is exercised or expires. Any gains or losses from the revaluation are recorded to the Consolidated Statements of Operations. The fair value of the Option liability as of September 30, 2018 and December 31, 2017 was $348 and $616, respectively. The gain on the revaluation of the Option liability was $16 and $268 for the three and nine months ended September 30, 2018, respectively. The Option was valued utilizing the Black-Scholes valuation model on both September 30, 2018 and December 31, 2017. The significant assumptions are as follows: September 30, 2018 December 31, 2017 Risk-free interest rate 2.88% 2.06% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 3.0 3.8 Estimated forfeiture rate Nil Nil Exercise price $0.34 $0.34 Estimated enterprise value per common share $0.00 $0.07 The decrease in estimated enterprise value is primarily due to a decrease in the five-year trailing average of the market price of rare earth elements, which is utilized for accounting purposes but not necessarily indicative of current or future trading values of the common shares of the Company. The incremental difference between the estimated value of the exclusive and non-exclusive IP Rights Agreement was added to the value from the Black-Scholes model to arrive at the total value of the Option. Because Synchron and its affiliates will obtain exclusive rights to the intellectual property if it exercises the Option, the value of the IP Rights Agreement is considered deferred income as the Company retains exclusive title to the intellectual property until Synchron exercises the Option. We amortize the deferred income using the straight-line method over the term of the Option Agreement as this is the period of the Company’s performance obligation related to the IP Rights Agreement. During the three and nine months ended September 30, 2018, we amortized $64 and $193, respectively, of deferred intellectual property income. The value of the IP Rights Agreement at the transaction date was determined using a PWERM analysis for six different probability weighted scenarios using the relief from royalty method based on market royalty rates for similar agreements. Warrants As of September 30, 2018, the Company had nil warrants outstanding due to the expiration on April 29, 2018 of the 2,876,924 warrants previously outstanding with an exercise price of $0.85. Each outstanding warrant was exercisable for one of the Company’s common shares and was issued to investors in connection with the registered direct offering of the Company that closed on April 29, 2015. Stock-based compensation As of September 30, 2018, we had 3,716,400 options outstanding that were issued under the 10% Rolling Stock Option Plan (“RSOP”). The compensation expense recognized in our consolidated financial statements for the three months ended September 30, 2018 and 2017 for stock option awards was $28 and $nil, respectively. The compensation expense recognized in our consolidated financial statements for the nine months ended September 30, 2018 and 2017 for stock option awards was $85 and $31, respectively. As of September 30, 2018, there was approximately $52 of total unrecognized compensation cost related to 750,000 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 1.07 years. The following table summarizes our stock option activity for each of the nine-month periods ended September 30, 2018 and 2017: Nine Months Ended September 30, 2018 2017 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 4,031,400 $ 0.44 3,694,900 $ 0.94 Granted – – 150,000 0.15 Cancelled/Expired (315,000) 1.53 (253,500) 2.98 Outstanding, end of period 3,716,400 $ 0.35 3,591,400 $ 0.76 Exercisable, end of period 2,966,400 $ 0.38 3,591,400 $ 0.76 Weighted-average fair value per share of options granted during period N/A $ 0.15 |
6. COMMITMENTS AND CONTINGENCIE
6. COMMITMENTS AND CONTINGENCIES | 9 Months Ended |
Sep. 30, 2018 | |
Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | Our commitments and contingencies include the following items: Potential Environmental Contingency Our exploration and development activities are subject to various federal and state laws and regulations governing the protection of the environment. These laws and regulations are continually changing and generally have become more restrictive. The Company conducts its operations to protect public health and the environment and believes that its operations are materially in compliance with all applicable laws and regulations. We have made, and expect to make in the future, expenditures to comply with such laws and regulations. The Company’s reclamation liability of $132 as of September 30, 2018 is related to prior exploration activities. The ultimate amount of reclamation and other future site-restoration costs to be incurred for future development and mining activities is uncertain . Contract Commitment – Related Party On April 24, 2018, the Company executed an agreement with Umwelt-und Ingenieurtechnik GmbH Dresden (“UIT”), an affiliate of General Atomics and Synchron, to validate the Company’s rare earth processing technology, as well as, progress the Company’s intellectual property. Because Synchron is a significant shareholder of the Company, the two directors of Rare Element appointed by Synchron abstained and the remaining members of the board of directors of Rare Element approved the UIT engagement on April 17, 2018. The UIT agreement is for an amount not to exceed $600 and the work is anticipated to be concluded in early 2019. Since the execution of the UIT agreement, the Company has incurred approximately $202 in costs related thereto, of which $159 is included in Accounts payable and accrued liabilities at September 30, 2018. |
4. EQUIPMENT (Tables)
4. EQUIPMENT (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Property, Plant and Equipment [Abstract] | |
Schedule of equipment | September 30, 2018 December 31, 2017 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 61 $ 61 $ - $ 61 $ 61 $ - Furniture 13 13 - 13 13 - Geological equipment 437 364 73 437 357 80 Vehicles 87 83 4 87 79 8 $ 598 $ 521 $ 77 $ 598 $ 510 $ 88 |
5. SHAREHOLDERS' EQUITY (Tables
5. SHAREHOLDERS' EQUITY (Tables) | 9 Months Ended |
Sep. 30, 2018 | |
Equity [Abstract] | |
Fair value assumptions | September 30, 2018 December 31, 2017 Risk-free interest rate 2.88% 2.06% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 3.0 3.8 Estimated forfeiture rate Nil Nil Exercise price $0.34 $0.34 Estimated enterprise value per common share $0.00 $0.07 |
Stock option activity | Nine Months Ended September 30, 2018 2017 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 4,031,400 $ 0.44 3,694,900 $ 0.94 Granted – – 150,000 0.15 Cancelled/Expired (315,000) 1.53 (253,500) 2.98 Outstanding, end of period 3,716,400 $ 0.35 3,591,400 $ 0.76 Exercisable, end of period 2,966,400 $ 0.38 3,591,400 $ 0.76 Weighted-average fair value per share of options granted during period N/A $ 0.15 |
4. EQUIPMENT (Details)
4. EQUIPMENT (Details) - USD ($) $ in Thousands | Sep. 30, 2018 | Dec. 31, 2017 |
Cost | $ 598 | $ 598 |
Accumulated depreciation | 521 | 510 |
Net book value | 77 | 88 |
Computer equipment | ||
Cost | 61 | 61 |
Accumulated depreciation | 61 | 61 |
Net book value | 0 | 0 |
Furniture | ||
Cost | 13 | 13 |
Accumulated depreciation | 13 | 13 |
Net book value | 0 | 0 |
Geological equipment | ||
Cost | 437 | 437 |
Accumulated depreciation | 364 | 357 |
Net book value | 73 | 80 |
Vehicles | ||
Cost | 87 | 87 |
Accumulated depreciation | 83 | 79 |
Net book value | $ 4 | $ 8 |
5. SHAREHOLDERS' EQUITY (Detail
5. SHAREHOLDERS' EQUITY (Details) - $ / shares | 9 Months Ended | 12 Months Ended |
Sep. 30, 2018 | Dec. 31, 2017 | |
Equity [Abstract] | ||
Risk free interest rate | 2.88% | 2.06% |
Expected volatility | 75.00% | 75.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected term in years | 3 years | 3 years 9 months 18 days |
Estimated forfeiture rate | 0.00% | 0.00% |
Estimated exercise price | $ 0.34 | $ 0.34 |
Estimated enterprise value per common share | $ 0 | $ .07 |
5. SHAREHOLDERS' EQUITY (Deta_2
5. SHAREHOLDERS' EQUITY (Details 1) - $ / shares | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Number of Stock Options | ||
Outstanding, beginning of period | 4,031,400 | 3,694,900 |
Granted | 0 | 150,000 |
Cancelled/expired | (315,000) | (253,500) |
Outstanding, end of period | 3,716,400 | 3,591,400 |
Exercisable, end of period | 2,966,400 | 3,591,400 |
Weighted Average Exercise Price | ||
Outstanding, beginning of period | $ 0.44 | $ 0.94 |
Granted | 0 | 0.15 |
Cancelled/expired | 1.53 | 2.98 |
Outstanding, end of period | 0.35 | 0.76 |
Exercisable, end of period | 0.38 | 0.76 |
Weighted-average fair value per share of options granted during period | $ 0 | $ 0.15 |
5. SHAREHOLDERS' EQUITY (Deta_3
5. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) $ in Thousands | 9 Months Ended | |
Sep. 30, 2018 | Sep. 30, 2017 | |
Equity [Abstract] | ||
Compensation expense | $ 85 | $ 31 |
Unrecognized compensation cost | $ 52 | |
Unrecognized compensation cost period for recognition | 1 year 25 days |