UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): November 30, 2021
RARE ELEMENT RESOURCES LTD.
(Exact name of registrant as specified in its charter)
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British Columbia, Canada |
001-34852 |
Not Applicable |
(State or other jurisdiction of
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(Commission File Number) |
(IRS Employer
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P.O. Box 271049
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80127 |
(Address of principal executive offices) |
(Zip Code) |
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Registrant’s telephone number, including area code: |
(720) 278-2460 |
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Not Applicable |
(Former name or former address, if changed since last report) |
Securities registered pursuant to Section 12(b) of the Act: None
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 1.01 |
Entry into a Material Definitive Agreement. |
On November 30, 2021, Rare Element Resources, Inc. (the “Company”), a Wyoming corporation and wholly owned subsidiary of Rare Element Resources Ltd. (the “Registrant”), and General Atomics, a California corporation (“General Atomics”), entered into a Cost Share Funding Assumption Agreement (the “Cost Share Agreement”) pursuant to which the Company agreed to assume and pay for certain costs incurred by General Atomics for the design, construction, and operation of a planned rare earth separation and processing demonstration plant near the Registrant’s Bear Lodge rare earth elements project in Upton, Wyoming.
As previously disclosed, in January 2021, the U.S. Department of Energy (the “DoE”) announced that a consortium of companies, which includes the Registrant, led by General Atomics, an affiliate of Synchron, and certain of its affiliates, and LNV, an Ardurra Group, Inc. company, as engineering and construction subcontractor, was selected for a potential financial award in the amount of $21.9 million for the engineering, construction and operation of a planned rare earth separation and processing demonstration plant. The DoE award was finalized through a cooperative agreement dated October 1, 2021 (the “Cooperative Agreement”) that was awarded by the DoE for the demonstration plant. The Cooperative Agreement provided that up to $44 million in allowable costs for the planned demonstration plant would be funded on a cost-share basis, 50% by the DoE and 50% by a non-federal entity.
Pursuant to the Cost Share Agreement, the Company agreed to assume and pay for (i) all allowable costs incurred by General Atomics under the Cooperative Agreement plus (ii) any unallowable costs incurred by General Atomics under the Cooperative Agreement that amount to up to 3.0% of the allowable costs under clause (i) above. The Cost Share Agreement will become effective on the first date on which both of the following conditions precedent have been satisfied (the “Effective Date”): (a) the rights offering approved by the board of directors of the Registrant on October 1, 2021 is completed and (b) the Registrant raises aggregate proceeds of at least $25,000,000 pursuant to such rights offering. On the Effective Date, the Company will be obligated to make a prepayment to General Atomics of $2.7 million for the first $2.7 million of Company-assumed costs for the planned demonstration plant, with the number and amount of additional prepayments to be subject to the mutual written agreement of the parties.
The term of the Cost Share Agreement will commence on the Effective Date and continue until the date of completion of the planned demonstration plant, unless terminated earlier by either party. Either party may terminate the Cost Share Agreement immediately upon written notice to the other party if any of the following events occurs: (a) the Cooperative Agreement is terminated for any reason prior to the completion of the planned demonstration plant; (b) the other party commits a material breach of its obligations under the Cost Share Agreement and fails to cure such breach within 30 days; or (c) the other party makes an assignment for the benefit of its creditors, files a petition in bankruptcy, is adjudicated insolvent or bankrupt, or commences any insolvency or bankruptcy proceedings. Upon any early termination of the Cost Share Agreement, the Company must pay for all costs incurred by or on behalf of General Atomics to wind down the planned demonstration plant other than any allowable costs for such wind-down paid for by the DoE.
The foregoing description of the Cost Share Agreement is qualified in its entirety by the terms of the Cost Share Agreement, a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference.
General Atomics is a “related party” of the Registrant under Canada’s Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) by reason of being an affiliate of Synchron (which currently owns approximately 48% of the outstanding common shares of the Company). Accordingly, the assumption and payment of the costs of General Atomics by the Company pursuant to the Cost Share Agreement constitutes a related party transaction as defined under MI 61-101. The assumption and payment of the costs of General Atomics by the Company pursuant to the Cost Share Agreement is exempt from the formal valuation requirements of Section 5.4 of MI 61-101 pursuant to Subsection 5.5(b) of MI 61-101 as the Registrant’s securities are not listed on certain specified markets listed in MI 61-101, and is exempt from the minority shareholder approval requirements of Section 5.6 of MI 61-101 pursuant to Subsection 5.7(b) of MI 61-101 as the aggregate amount of costs of General Atomics that have been assumed and are payable by the Company pursuant to the Cost Share Agreement is less than 25% of the Registrant’s market capitalization. The assumption and payment of the costs of General Atomics by the Company pursuant to the Cost Share Agreement was approved by a majority of the board of directors of the Registrant, with the Synchron nominee directors of the Registrant abstaining from voting thereon. The Registrant did not file a material change report 21 days prior to the entering into of the Cost Share Agreement as the details of the Cost Share Agreement had not been confirmed at that time.
Item 2.03 |
Creation of a Direct Financial Obligation or an Obligation under an off-Balance Sheet Arrangement of a Registrant. |
The information set forth in Item 1.01 is incorporated herein by reference.
Item 9.01Financial Statements and Exhibits.
(d)Exhibits.
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Exhibit
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Description |
10.1 |
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104 |
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Cover Page Interactive Data File (formatted in Inline XBRL and included as Exhibit 101. |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Date: December 1, 2021
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RARE ELEMENT RESOURCES LTD. |
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By: |
/s/ Randall J. Scott |
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Name: |
Randall J. Scott |
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Title: |
President and Chief Executive Officer |
Exhibit 10.1
COST SHARE FUNDING ASSUMPTION AGREEMENT
This COST SHARE FUNDING ASSUMPTION AGREEMENT (this “Agreement”) is made, effective as of the Effective Date (defined below), by and between GENERAL ATOMICS, a California corporation (“GA”), and RARE ELEMENT RESOURCES, INC., a Wyoming corporation (“RER”) (each a “Party” and collectively the “Parties”).
RECITALS
WHEREAS RER controls certain mineral rights in the Black Hills National Forest of the Bearlodge Ranger District in Crook County, Wyoming, and has developed plans for a mineral processing facility near Upton, Wyoming, expected to be a source of rare earth elements (“REEs”);
WHEREAS GA and some of its affiliates are engaged in, among other activities, the management of complex technical programs for agencies of the U.S. government, as well as the processing, separation, and production of minerals and the design and engineering of chemical extraction systems pertinent to the processing, separation, and production of REEs;
WHEREAS GA previously responded, with support from RER and others, to Funding Opportunity Announcement Number DE-FOA-0002322, as modified (the “FOA”), issued by the Office of Energy Efficiency and Renewable Energy of the U.S. Department of Energy (the “DOE”);
WHEREAS GA’s response to the FOA proposed a three-phase project consisting of the design, construction, and operation of a demonstration plant in Upton, Wyoming, with GA serving as the prime recipient and RER (and other parties) serving as subrecipients or subcontractors (the “Project”);
WHEREAS the DOE has awarded a cooperative agreement, dated October 1, 2021 (with the reference number DE-0002322), to GA for the Project (the “Cooperative Agreement”);
WHEREAS the Cooperative Agreement provides that up to forty-four million dollars (US$44,000,000) in Allowable Costs (defined below) for the Project would be funded on a cost share basis, fifty percent (50%) by the DOE and fifty percent (50%) by a non-Federal entity;
WHEREAS, in light of the Cooperative Agreement, RER desires to pay for all costs incurred by GA on the Project (including all costs for payments to its subrecipients and subcontractors on the Project) other than (i) any Allowable Costs on the Project funded by the DOE and (ii) any Unallowable Costs (defined below) on the Project above an amount equal to three percent (3.0%) of the total amount of Allowable Costs to be paid by RER, and as part of the foregoing desired commitment RER desires to assume the above-noted non-Federal entity’s fifty percent (50%) cost share funding obligation pursuant to the Cooperative Agreement, and GA desires to accept RER’s offer; and
WHEREAS the Parties desire to enter into this Agreement to memorialize the terms and conditions of the foregoing.
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AGREEMENT
NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants, and agreements contained in this Agreement, and other good and valuable consideration, the receipt, sufficiency and adequacy of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:
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2. | ASSUMPTION OF NON-FEDERAL COST SHARE AND OTHER PROJECT COSTS. |
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As between the Parties, all matters related to the Project, including but not limited to allocation to RER of a portion of the scope of work on the Project, will be governed by the terms set forth in the subaward agreement to be negotiated by the Parties.
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Notwithstanding anything to the contrary in this Agreement, this Agreement shall not become effective, and each Party’s respective obligations under this Agreement shall not become binding, until the first date on which the following conditions precedent have been satisfied (the “Effective Date”): (a) the rights offering by RER’s parent Rare Element Resources Ltd. (“RER Ltd.”), as approved by the RER Ltd. board of directors on October 1, 2021, has completed; and (b) RER Ltd. has raised aggregate proceeds of at least twenty-five million United States Dollars (US$25,000,000) pursuant thereto.
If to GA: |
General Atomics
3550 General Atomics Court
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with a copy to: |
General Atomics
3550 General Atomics Court
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If to RER: |
Rare Element Resources, Inc. Attention: Randy Scott
4 Shining Oak Drive
Littleton, Colorado 80127
Mailing Address: PO Box 271049 |
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Littleton, Colorado 80127 |
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with a copy to: |
Rare Element Resources, Inc. Attn: Kelli Kast
4 Shining Oak Drive
Littleton, Colorado 80127
Mailing Address: PO Box 271049
Littleton, Colorado 80127
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[signature page follows]
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IN WITNESS WHEREOF, each of the Parties has caused this Agreement to be duly executed by its authorized representative effective as of the Effective Date.
GENERAL ATOMICS |
RARE ELEMENT RESOURCES, INC. |
By: /s/ Robert Khan for Scott Forney Name: Scott Forney Title: President, GA-EMS |
By: /s/ Randall J. Scott Name: Randall J. Scott Title: President |
Execution Date; November 30, 2021
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