Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2019 | Aug. 07, 2019 | |
Document And Entity Information | ||
Entity Registrant Name | Rare Element Resources Ltd | |
Entity Central Index Key | 0001419806 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2019 | |
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 Shell Company | false | |
Entity Common Stock, Shares Outstanding | 79,591,880 | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2019 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
CURRENT ASSETS | ||
Cash and cash equivalents | $ 1,493 | $ 2,523 |
Prepaid expenses and other | 77 | 37 |
Total Current Assets | 1,570 | 2,560 |
Equipment, net | 58 | 61 |
Investment in land | 600 | 600 |
Total Assets | 2,228 | 3,221 |
CURRENT LIABILITIES | ||
Accounts payable and accrued liabilities | 276 | 386 |
Total Current Liabilities | 276 | 386 |
Reclamation obligation | 132 | 132 |
Deferred intellectual property license income (Note 4) | 578 | 706 |
Option liability (Note 4) | 323 | 331 |
Repurchase option | 600 | 600 |
Total liabilities | 1,909 | 2,155 |
Commitments and Contingencies | ||
SHAREHOLDERS' EQUITY: | ||
Common shares, no par value - unlimited shares authorized; shares outstanding June 30, 2019 and December 31, 2018 - 79,591,880 | 106,494 | 106,494 |
Additional paid in capital | 23,797 | 23,763 |
Accumulated deficit | (129,972) | (129,191) |
Total Shareholders' Equity | 319 | 1,066 |
Total Liabilities and Shareholders' Equity | $ 2,228 | $ 3,221 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Statement of Financial Position [Abstract] | ||
Common Stock, Par Value | $ 0 | $ 0 |
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 | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Operating expenses: | ||||
Exploration and evaluation | $ (224) | $ (188) | $ (454) | $ (276) |
Corporate administration | (238) | (274) | (479) | (600) |
Depreciation | (2) | (4) | (3) | (8) |
Total operating expenses | (464) | (466) | (936) | (884) |
Non-operating income/(expenses): | ||||
Interest income | 11 | 16 | 19 | 29 |
Recognized deferred income on the sale of intellectual property (Note 4) | 64 | 65 | 128 | 129 |
Gain (loss) on revaluation of option liability (Note 4) | (7) | 21 | 8 | 252 |
Other income (expense) | 0 | 0 | 0 | (2) |
Total non-operating income/(expenses) | 68 | 102 | 155 | 408 |
Net loss | $ (396) | $ (364) | $ (781) | $ (476) |
LOSS PER SHARE - BASIC AND DILUTED | $ 0 | $ 0 | $ (0.01) | $ (0.01) |
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING | 79,591,880 | 79,591,880 | 79,591,880 | 79,591,880 |
CONSOLIDATED UNAUDITED STATEM_2
CONSOLIDATED UNAUDITED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
CASH FLOWS FROM OPERATING ACTIVITIES: | ||
Net loss for the period | $ (781) | $ (476) |
Adjustments to reconcile net loss for the period to net cash and cash equivalents used in operating activities: | ||
Depreciation | 3 | 8 |
Gain on revaluation of option liability | (8) | (252) |
Recognized deferred income on the sale of intellectual property | (128) | (129) |
Stock-based compensation | 34 | 57 |
Total adjustments | (880) | (792) |
Changes in working capital | ||
Prepaid expenses and other | (40) | (32) |
Accounts payable and accrued liabilities | (110) | 141 |
Net cash and cash equivalents used in operating activities | (1,030) | (683) |
Decrease in cash and cash equivalents | (1,030) | (683) |
Cash and cash equivalents - beginning of the period | 2,523 | 4,360 |
Cash and cash equivalents - end of the period | $ 1,493 | $ 3,677 |
CONDENSED CONSOLIDATED STATEMEN
CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) $ in Thousands | Common Stock | Additional Paid-In Capital | Accumulated Deficit | Total |
Beginning, shares at Dec. 31, 2017 | 79,591,880 | |||
Beginning, amount at Dec. 31, 2017 | $ 106,494 | $ 23,659 | $ (127,427) | $ 2,726 |
Stock-based compensation | 57 | 57 | ||
Net loss | (476) | (476) | ||
Ending, shares at Jun. 30, 2018 | 79,591,880 | |||
Ending, amount at Jun. 30, 2018 | $ 106,494 | 23,716 | (127,903) | 2,307 |
Beginning, shares at Mar. 31, 2018 | 79,591,880 | |||
Beginning, amount at Mar. 31, 2018 | $ 106,494 | 23,688 | (127,539) | 2,643 |
Stock-based compensation | 28 | 28 | ||
Net loss | (364) | (364) | ||
Ending, shares at Jun. 30, 2018 | 79,591,880 | |||
Ending, amount at Jun. 30, 2018 | $ 106,494 | 23,716 | (127,903) | 2,307 |
Beginning, shares at Dec. 31, 2018 | 79,591,880 | |||
Beginning, amount at Dec. 31, 2018 | $ 106,494 | 23,763 | (129,191) | 1,066 |
Stock-based compensation | 34 | 34 | ||
Net loss | (781) | (781) | ||
Ending, shares at Jun. 30, 2019 | 79,591,880 | |||
Ending, amount at Jun. 30, 2019 | $ 106,494 | 23,797 | (129,972) | 319 |
Beginning, shares at Mar. 31, 2019 | 79,591,880 | |||
Beginning, amount at Mar. 31, 2019 | $ 106,494 | 23,778 | (129,576) | 696 |
Stock-based compensation | 19 | 19 | ||
Net loss | (396) | (396) | ||
Ending, shares at Jun. 30, 2019 | 79,591,880 | |||
Ending, amount at Jun. 30, 2019 | $ 106,494 | $ 23,797 | $ (129,972) | $ 319 |
1. NATURE OF OPERATIONS
1. NATURE OF OPERATIONS | 6 Months Ended |
Jun. 30, 2019 | |
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. Following receipt of proceeds from the transaction with Synchron, in October 2017 (Note 4), the Company commenced a work plan to (i) continue the confirmation and enhancement of our proprietary technology for rare earth processing and separation through pilot plant testing (or “piloting”), (ii) develop a work plan to progress engineering work to optimize our mine plan and corresponding processing operations, and (iii) update and supplement environmental baseline data in anticipation of the potential resumption of permitting and licensing efforts. During the six months ended June 30, 2019, the Company focused on Items (i) and (iii) above by entering into a formal engagement with Umwelt- und Ingenieurtechnik GmbH Dresden (“UIT”), an affiliate of General Atomic Technologies Corporation and Synchron, to continue technology review and advancement (Note 5), and by completing updated environmental baseline studies. The Company further focused on government relations in response to the U.S. federal government’s initiatives aimed at securing a domestic, non-Chinese rare earth supply chain. 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. 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. Further, without additional near-term funding or further reduction in spending, the Company projects it would run out of cash within the next 12 months. As a result, there is substantial doubt about the Company’s ability to continue as a going concern within one year from the filing date of these financial statements. |
2. BASIS OF PRESENTATION
2. BASIS OF PRESENTATION | 6 Months Ended |
Jun. 30, 2019 | |
Accounting Policies [Abstract] | |
BASIS OF PRESENTATION | In accordance with U.S. GAAP for interim financial statements, these condensed consolidated interim 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 condensed consolidated interim financial statements should be read in conjunction with our audited consolidated financial statements as of December 31, 2018, which were included in our Annual Report on Form 10-K for the year ended December 31, 2018. 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 June 30, 2019, and the results of our operations and cash flows for the three and six months ended June 30, 2019 and 2018 in conformity with U.S. GAAP. Interim results of operations for the three and six months ended June 30, 2019 may not be indicative of results that will be realized for the full year ending December 31, 2019. |
3. EQUIPMENT
3. EQUIPMENT | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
EQUIPMENT | June 30, 2019 December 31, 2018 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 1 $ 1 $ – $ 1 $ 1 $ – Furniture 13 13 – 13 13 – Geological equipment 346 290 56 346 288 58 Vehicles 87 85 2 87 84 3 $ 447 $ 389 $ 58 $ 447 $ 386 $ 61 |
4. SHAREHOLDERS' EQUITY
4. SHAREHOLDERS' EQUITY | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
SHAREHOLDERS' EQUITY | Transaction with Synchron On October 2, 2017, the Company and Synchron, an affiliate of General Atomic 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, less a $500 preliminary payment received in August 2017; 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 exercise, is limited to 49.9% of the Company’s common shares issued and outstanding. Pursuant to an 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 received rights to use and improve the Company’s intellectual property relating to our patents-pending and related technical information. The Company retains the right to use any 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, 2018 on Form 10-K as filed with the SEC on March 29, 2019. 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 relative fair value to cost of equity, operating expenses and reduction to deferred income as they related to each component, respectively. 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 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 as of June 30, 2019 and December 31, 2018 was $323 and $331, respectively. The gain (loss) on the revaluation of the Option liability was $(7) and $21 for the three months ended June 30, 2019 and 2018, respectively, and $8 and $252 for the six months ended June 30, 2019 and 2018, respectively. The Option was valued utilizing the Black-Scholes valuation model on both June 30, 2019 and December 31, 2018. The significant assumptions were as follows: June 30, 2019 December 31, 2018 Risk-free interest rate 1.74% 2.46% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 2.3 2.8 Estimated forfeiture rate Nil Nil Estimated exercise price $0.34 $0.34 Estimated enterprise value per common share $0.00 $0.00 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 months ended June 30, 2019 and 2018, we amortized $64 and $65, respectively, of deferred intellectual property income. During the six months ended June 30, 2019 and 2018, we amortized $128 and $129, 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. Stock-based compensation As of June 30, 2019, we have 4,074,000 options outstanding that were issued under the 10% Rolling Stock Option Plan (“RSOP”). The compensation expense for stock option awards recognized in our condensed consolidated financial statements for the three months ended June 30, 2019 and 2018 was $19 and $28, respectively. The compensation expense for stock option awards recognized in our condensed consolidated financial statements for the six months ended June 30, 2019 and 2018 was $34 and $57, respectively. As of June 30, 2019, there was approximately $53 of total unrecognized compensation cost related to 1,225,000 unvested stock options that is expected to be recognized over a weighted-average remaining vesting period of 1.1 years. The fair value of stock option awards granted to directors, officers, employees and/or consultants of the Company are estimated on the grant date using the Black-Scholes option valuation model and the closing price of our common shares on the business day prior to the grant date. There were 850,000 and nil options granted during the six months ended June 30, 2019 and 2018, respectively. The significant assumptions used to estimate the fair value of stock option awards using the Black-Scholes option valuation model are as follows for the six months ended June 30, 2019: Risk-free interest rate 2.49% Expected volatility 141% Expected dividend yield Nil Expected term in years 5.0 Estimated forfeiture rate Nil The following table summarizes our stock option activity for each of the six months ended June 30, 2019 and 2018: 2019 2018 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,385,400 $ 0.44 4,031,400 $ 0.94 Granted 850,000 0.07 – – Cancelled/Expired (161,400) 1.00 (250,000) 1.34 Outstanding, end of period 4,074,000 $ 0.21 3,781,400 $ 0.38 Exercisable, end of period 2,849,000 $ 0.20 3,031,400 $ 0.42 Weighted-average fair value per share of options granted during period $ 0.07 N/A |
5. COMMITMENTS AND CONTINGENCIE
5. COMMITMENTS AND CONTINGENCIES | 6 Months Ended |
Jun. 30, 2019 | |
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 ultimate amount of reclamation and other future site-restoration costs to be incurred for existing mining interests is uncertain. Contract commitment – related party On February 14, 2019, the Company executed a technology test work agreement with UIT to further validate the Company’s rare earth processing technology at pilot plant scale. Because Synchron is a significant shareholder of the Company, the two members of the board of directors of Rare Element who were appointed by Synchron abstained, and the remaining members of the board of directors approved the UIT engagement. The results of the UIT pilot plant test work are expected in the second half of 2019. The UIT pilot plant agreement is for an amount not to exceed $700. Since the execution of the February 2019 UIT agreement, the Company has incurred approximately $263 in costs related thereto, $150 of which is included in Accounts payable and accrued liabilities as at June 30, 2019. |
3. EQUIPMENT (Tables)
3. EQUIPMENT (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Property, Plant and Equipment [Abstract] | |
Schedule of equipment | June 30, 2019 December 31, 2018 Cost Accumulated depreciation Net book value Cost Accumulated depreciation Net book value Computer equipment $ 1 $ 1 $ – $ 1 $ 1 $ – Furniture 13 13 – 13 13 – Geological equipment 346 290 56 346 288 58 Vehicles 87 85 2 87 84 3 $ 447 $ 389 $ 58 $ 447 $ 386 $ 61 |
4. SHAREHOLDERS' EQUITY (Tables
4. SHAREHOLDERS' EQUITY (Tables) | 6 Months Ended |
Jun. 30, 2019 | |
Equity [Abstract] | |
Fair value assumptions | June 30, 2019 December 31, 2018 Risk-free interest rate 1.74% 2.46% Expected volatility 75% 75% Expected dividend yield Nil Nil Expected term in years 2.3 2.8 Estimated forfeiture rate Nil Nil Estimated exercise price $0.34 $0.34 Estimated enterprise value per common share $0.00 $0.00 Risk-free interest rate 2.49% Expected volatility 141% Expected dividend yield Nil Expected term in years 5.0 Estimated forfeiture rate Nil |
Stock option activity | 2019 2018 Number of Stock Options Weighted Average Exercise Price Number of Stock Options Weighted Average Exercise Price Outstanding, beginning of period 3,385,400 $ 0.44 4,031,400 $ 0.94 Granted 850,000 0.07 – – Cancelled/Expired (161,400) 1.00 (250,000) 1.34 Outstanding, end of period 4,074,000 $ 0.21 3,781,400 $ 0.38 Exercisable, end of period 2,849,000 $ 0.20 3,031,400 $ 0.42 Weighted-average fair value per share of options granted during period $ 0.07 N/A |
3. EQUIPMENT (Details)
3. EQUIPMENT (Details) - USD ($) $ in Thousands | Jun. 30, 2019 | Dec. 31, 2018 |
Cost | $ 447 | $ 447 |
Accumulated depreciation | 389 | 386 |
Net book value | 58 | 61 |
Computer equipment | ||
Cost | 1 | 1 |
Accumulated depreciation | 1 | 1 |
Net book value | 0 | 0 |
Furniture | ||
Cost | 13 | 13 |
Accumulated depreciation | 13 | 13 |
Net book value | 0 | 0 |
Geological equipment | ||
Cost | 346 | 346 |
Accumulated depreciation | 290 | 288 |
Net book value | 56 | 58 |
Vehicles | ||
Cost | 87 | 87 |
Accumulated depreciation | 85 | 84 |
Net book value | $ 2 | $ 3 |
4. SHAREHOLDERS' EQUITY (Detail
4. SHAREHOLDERS' EQUITY (Details) - $ / shares | 6 Months Ended | 12 Months Ended |
Jun. 30, 2019 | Dec. 31, 2018 | |
Risk free interest rate | 1.74% | 2.46% |
Expected volatility | 75.00% | 75.00% |
Expected dividend yield | 0.00% | 0.00% |
Expected term in years | 2 years 3 months 18 days | 2 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 | $ 0 |
10% Rolling Stock Option Plan | ||
Risk free interest rate | 2.49% | |
Expected volatility | 1.41% | |
Expected dividend yield | 0.00% | |
Expected term in years | 5 years | |
Estimated forfeiture rate | 0.00% |
4. SHAREHOLDERS' EQUITY (Deta_2
4. SHAREHOLDERS' EQUITY (Details 1) - $ / shares | 6 Months Ended | |
Jun. 30, 2019 | Jun. 30, 2018 | |
Number of Stock Options | ||
Outstanding, beginning of period | 3,385,400 | 4,031,400 |
Granted | 850,000 | 0 |
Cancelled/expired | (161,400) | (250,000) |
Outstanding, end of period | 4,074,000 | 3,781,400 |
Exercisable, end of period | 2,849,000 | 3,031,400 |
Weighted Average Exercise Price | ||
Outstanding, beginning of period | $ 0.44 | $ 0.94 |
Granted | 0.07 | 0 |
Cancelled/expired | 1 | 1.34 |
Outstanding, end of period | 0.21 | 0.38 |
Exercisable, end of period | 0.20 | $ 0.42 |
Weighted-average fair value per share of options granted during period | $ 0.07 |
4. SHAREHOLDERS' EQUITY (Deta_3
4. SHAREHOLDERS' EQUITY (Details Narrative) - USD ($) $ in Thousands | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2019 | Jun. 30, 2018 | Jun. 30, 2019 | Jun. 30, 2018 | |
Equity [Abstract] | ||||
Compensation expense | $ 19 | $ 28 | $ 34 | $ 57 |
Unrecognized compensation cost | $ 53 | $ 53 | ||
Unrecognized compensation cost period for recognition | 1 year 1 month 6 days |