Upon completion of the Preliminary Feasibility Study (PFS) in April 2012, several metallurgical test programs were identified as necessary to provide additional data to support the FS. The following test programs were initiated after April 2012.

1. Variability testwork to quantify the metallurgical performance of all parts of the Bull Hill deposit. Eleven different composite samples that reflect the mineralogical and spatial distribution of the REE mineralization in the Bull Hill deposit are being used in the test program.
2. Process development for the mineralized heavy rare earth element (HREE) samples from the Whitetail Ridge deposit, and the East Taylor and Carbon HREE target areas.
3. Preliminary paste tailing physical characteristic testwork to determine the optimum tailing density and material handling requirements.
4. Process testing and development for separated rare earth products. The first phase of this program is designed to remove impurities remaining in the process leach solution (PLS). Upon successful completion of this program, an investigation to produce separate rare earth products will be conducted using solvent extraction and/or other technologies.

Pilot Plant Summary

The data developed by the pilot plant testwork supporting the PFS indicate that additional testwork is needed to completely quantify the metallurgical performance of the ore body. The physical upgrade results were encouraging, and show that upgrading is dependent on ore characteristics.

The leach extraction results are also encouraging, but indicate that additional work is needed to maximize the REE recovery.

Variability Bench Scale Testwork

Exploration drilling conducted during the 2011 drilling season included areas in the main Bull Hill deposit and the Bull Hill Northwest deposit. Samples were collected from drill core representing the mineralogical and spatial distribution of mineralization in the deposits. Bench scale testwork is currently being conducted by SGS Lakefield Canada on these samples to quantify metallurgical performance issues, if any.

The test program includes Physical Upgrade (PUG) grade work to develop baseline data for REE mineral concentration of each ore sample. The PUG bench attrition grinding and screening work is being performed to maximize the total rare earth oxide (TREO) content in the physical pre-concentrate, while reducing the overall mass. In addition, Hydrometallurgical Optimization Tests by using HCl leaching are being conducted on each of the pre-concentrate samples produced in the PUG.

Forensic mineralogy of metallurgical filter cake product is also being conducted, using QEMSCAN high definition mineralogy. Forensic mineralogy is a useful tool to decrease rare earth oxide (REO) losses, improve overall recoveries, and enhance the viability of the project.

The variability bench scale testwork is scheduled for Q4 2012.

HREE Testwork

A new resource estimate was derived for the Whitetail Ridge resource area upon completion of the 2011 exploration drilling season. The 2011 drilling identified significant potential in previously undrilled areas between the Bull Hill and Whitetail Ridge deposits, and defined HREE-enriched resources in the East Taylor and Carbon targets. Mountain States R&D International (MSRDI), Vail, Arizona is currently conducting scoping metallurgical testwork on bulk samples from these areas. The major objective of this project (Phase I) is to provide mineral characterization of the three areas and to develop a conceptual processing method for the extraction of the light and heavy REEs. The test plan will explore and evaluate a variety and combination of pre-concentration methods, followed by acid leaching and recovery, if applicable. Samples from each of these areas will be characterized and tested independently. The Company is also conducting a detailed mineralogical evaluation in support of the metallurgical testwork. Additional metallurgical test work is scheduled to start in Q4 2012 at Nagrom, located in Western Australia.

The proposed characterization study includes determination of the following:

• Size distribution of the minerals of interest
• Density range of the contained minerals
• Magnetic characteristics of the valuable minerals
• Leaching characteristics of the mineralized material, and
• The most technically and economically effective pre-concentration method(s).

The initial HREE testwork results are expected by Q1 2013.

Paste Tailing Testwork

Two waste streams will be produced at the Hydromet Plant as a result of the hydrometallurgical process. The first is an iron hydroxide precipitate that is produced in the neutralization of the process leach solutions. The second stream is a bi-sulfate residue that is produced during the hydrochloric acid regeneration process. Knight Piésold and Co., Denver, Colorado, is designing the tailing storage facility which will consist of an engineered embankment and double synthetic-lined basin. The two streams will be combined, dewatered and deposited as a paste or thickened material into the basin. By dewatering the mixture, the tailings become more stable, and contaminated water is recycled and reused in the hydrometallurgical process. Knight Piésold is currently conducting mixing tests on the materials to determine the physical characteristics. These data will be used to design the storage facility. The facility will be designed as zero discharge and the paste mixture will provide a very stable and easily reclaimable material.

REE Separation Testwork

Following their earlier testwork, ANSTO Minerals, Australia, is currently conducting the REE separation testwork. The work is being performed in two stages. The first stage will identify whether any further purification work is required for the production of a rare earth carbonate, and whether solvent extraction or other separation methods can be integrated to improve on the current process described in the PFS.

The main objectives of the proposed testwork are to:

• Carry out single-batch bench scale tests, under conditions consistent with the current flowsheet design
• Take a sample of physically upgraded concentrate through to rare earth carbonate
• Obtain an extensive suite of impurity analyses for the main liquor streams
• Carry out a radionuclide analyses on the samples generated
• Investigate the suitability of the PLS for direct solvent extraction to produce a rare earth carbonate product, and
• Investigate whether a solution produced from rare earth carbonate dissolution is amenable for rare earth separation.

As expected, the solution stream, prior to carbonate precipitation, contains some impurities which could exceed the desirable quantities for effective processing to separated products. Test work is underway to remove the impurities through early stage solvent extraction or alternate means.

Preliminary solvent extraction tests were carried out on neutralization liquor to determine the possibility of separating rare earths from the impurities. The initial results indicate that the rare earths can be selectively loaded onto the solvent at a pH of 2.5-3, leaving impurities such as manganese in the raffinate.

To view the “pH Curve for 1.1 M Extractant” figure, please visit the following link: http://media3.marketwire.com/docs/pHCurve101012.jpg

The second stage of work will identify and evaluate additional processes to achieve a clean REE product. This stage will begin in Q4 2012.

Rare Element Resources Ltd. (TSX:RES)(NYSE Amex:REE)(NYSE MKT:REE) is a publicly traded mineral resource company focused on exploration and development of REEs. In addition to the REE exploration and evaluation efforts, the Company controls the Sundance gold project, which is located on the same property in Wyoming.

For information, refer to the Company’s website at www.rareelementresources.com.

Forward Looking Statements

This news release contains forward-looking statements within the meaning of securities legislation in the United States and Canada. Except for statements of historical fact, certain information contained herein constitutes forward-looking statements. Forward looking statements are usually identified by our use of certain terminology, including “will”, “believes”, “may”, “expects”, “should”, “seeks”, “anticipates”, “has potential to”, or “intends’ or by discussions of strategy or intentions. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results or achievements to be materially different from any future results or achievements expressed or implied by such forward-looking statements. Forward-looking statements are statements that are not historical facts, and include but are not limited to, estimates and their underlying assumptions; statements regarding plans, objectives and expectations with respect to the effectiveness of the Company’s business model; future operations, products and services; the impact of regulatory initiatives on the Company’s operations; the size of and opportunities related to the market for the Company’s products; general industry and macroeconomic growth rates; expectations related to possible joint and/or strategic ventures and statements regarding future performance.

Cautionary Statement

Jaye T. Pickarts, P.E., serves as the Chief Operating Officer of the Company and as an internal, technically Qualified Person. Technical information in this news release has been reviewed by Mr. Pickarts, and has been prepared in accordance with Canadian regulatory requirements that are set out in National Instrument 43-101. For a description of the key assumptions, parameters and methods used by the Company to estimate mineral reserves and resources, as well as data verification procedures and a general discussion of the extent to which the estimates may be affected by any known environmental, permitting, legal, title, taxation, socio-political, marketing or other relevant factors, please see the Technical Reports for our project as filed on SEDAR at www.sedar.com.

Cautionary Note to U.S. Investors – The United States Securities and Exchange Commission permits U.S. mining companies, in their filings with the SEC, to disclose only those mineral deposits that a company can economically and legally extract or produce. We may use certain terms in public disclosures, such as “measured,” “indicated,” “inferred” and “resources,” that are recognized by Canadian regulations, but that SEC guidelines generally prohibit U.S. registered companies from including in their filings with the SEC. U.S. investors are urged to consider closely the disclosure in our Form 10-K which may be secured from us, or from the SEC’s website at http://www.sec.gov.