Initiating coverage of Rare Element Resources with Buy rating, $18.50 PT

Location, location, location. Rare Element's Bear Lodge REE project is a sizable project with good grade located in northeastern Wyoming, a very mining friendly jurisdiction combined with close proximity to existing infrastructure. Unlike other REE development companies, Rare Element will have an easier pathway towards permitting as well as lower capital costs since they will not need to construct as much infrastructure prior to going into production.

Upcoming pre-feasibility study. Rare Element is currently working to complete a pre-feasibility study for release in Q1 of 2012. We believe the study will demonstrate a positive mining scenario for Bear Lodge given the surge in REE prices along with a number of fundamental aspects of the deposit, including simple metallurgy and near surface oxide mineralization.

Multi-stage business strategy. Rare Element's vision is to first produce a REE oxide concentrate for shipment to a refinery, this will allow the company to achieve cash-flow in 2015, but concentrates do not attract the same prices as separated oxides. The second stage of the company's plan is to construct its own separation plant in the 2016/2017 timeframe. Once the separation plant is operational, Rare Element will be able to market its own separated oxide REEs, getting higher prices for its product and eliminating one intermediary between the producer and the end user.