Rare Element acquires Eden Lake REE Project, to file Form 20F

TSX-V: RES

VANCOUVER, Oct. 5 /PRNewswire-FirstCall/ – Rare Element Resources Ltd. (TSX-V: RES) (the “Company”) is pleased to announce that it has signed a letter of intent to acquire 100% of the Eden Lake Rare Earth Elements (“REE”) project from VMS Ventures Inc. (“VMS” ). VMS optioned the project in 2001 and has explored the project for REEs intermittently since then. The total claim block area covers 28 square kilometers.

Eden Lake Rare Earth Element Project, Manitoba, Canada

The Eden Lake REE Project is located 35 kilometers northwest of Leaf Rapids, Manitoba. In 2003 VMS, which was then called Rare Earth Metals Corp., performed detailed geological mapping, sampling, and petrographic studies that led to the discovery of an extensive area (approximately 8 square kilometers) of hydrothermal stock-work veining, magmatic carbonatite dikes, and breccia exposed in outcrop. Carbonatite dikes and plugs were discovered at three locations, and the property geology has characteristics that suggest a large carbonatite complex.

REE-enriched minerals identified in petrographic studies include strontium-REE-apatite, britholite, allanite, and REE mineral inclusions in andradite garnet. REE enrichments occur in all hydrothermally metasomatized rocks. The highest REE concentrations encountered by VMS are in the carbonatite dikes (up to 1.6% total REO, 9,764 ppm Sr, and 745 ppm Y), and in hydrothermal REE-rich veins (up to 13.8% total REO and 5,307 ppm Y). VMS also discovered heavy REEs (Eu-Lu) on the project during their field work. Rare Element will be evaluating the carbonatite complex, which may have similarities to the Company’s Bear Lodge project, and the heavy rare earths plus yttrium in the hydrothermal veins.

A drill program was completed on the project in 2006, and the holes provided additional favourable geologic indications for a carbonatite complex, but without hitting significant REE grades. Six holes for a total of 765 meters were drilled in the northeastern half of the 8 square kilometer zone of intensely altered rocks. Most of the favourable targets have not been adequately tested, and additional exploration of the project for yttrium and heavy rare earths is warranted.

Acquisition Terms

Rare Element has agreed to acquire 100% of the Eden Lake REE Project for payment of 300,000 common shares and a 3% Net Smelter Returns (“NSR”) royalty. The Letter of Intent calls for a due diligence period, which is currently underway, and a formal purchase agreement to be signed. The common shares will be issued as 75,000 at closing, and 75,000 at 6, 12, and 18 months thereafter. Rare Element also has the right to buy 50% of the 3% NSR for $1.5 million.

Rare Element has also agreed to pay a finder’s fee of 20,000 common shares to two parties for this acquisition.

The acquisition is subject to various conditions and approvals of the Boards of Directors and regulatory authorities.

Dr. George Gale, P. Eng. is the qualified person with respect to the technical information in this news release, and the news release was reviewed by Dr. Gale.

Form 20F

The Company has also engaged an experienced contractor to assist in preparing a Form 20F with the US Securities and Exchange Commission. Rare Element currently has a “Blue Sky” exemption in the United States due its listing with Standard & Poors and trades on the US “pink sheets” market under the symbol “RRLMF”. The filing of the Form 20F will make Rare Element a fully reporting issuer in the United States. Upon completing of the filing of the Form, the Board of Rare Element will consider a listing with an exchange in the United States.

Rare Element also became a Tier One issuer on the TSX Venture Exchange in Canada earlier this year.

Rare Element Resources Ltd (TSX-V:RES) is a publicly traded mineral-resource company focused on gold and strategic metals, specifically the rare-earth elements. Rare Element Resources and Newmont have entered into the Sundance gold exploration project on the Company’s Wyoming property. Newmont has the right to earn a 65% working interest in Rare Element Resources’ property, excluding any rights to the rare-earth elements and uranium, but including rights to gold and other metals, by performing US$5 million in property work expenditures over a five-year period. Newmont also has the right to earn an additional 15% working interest by completing a positive project feasibility study. Drilling is currently being conducted for gold mineralization.

Rare Element Resources’ Bear Lodge, Wyoming property also encompasses one of the largest disseminated rare-earth occurrences in North America (M.H. Staatz, 1983, US Geological Survey Professional Paper 1049-D). In parallel with the Sundance gold-focused exploration project, Rare Element Resources has completed drilling of twelve holes, estimation of an inferred resource (NI 43-101 compatible), and testing of metallurgical samples to independently advance the rare-earth potential of its property. Last month a drilling program for rare earths was begun and two drill rigs are currently conducting resource expansion and exploration for additional rare-earth mineralization.

    ON BEHALF OF THE BOARD
    Donald E Ranta, PhD, PGeo,
    President & CEO

Donald E. Ranta, PhD, PGeo, serves the Board of Directors of the Company as an internal, technically Qualified Person. Technical information in this news release has been reviewed by Dr. George Gale and has been prepared in accordance with Canadian regulatory requirements that are set out in National Instrument 43-101. This news release was prepared by Company management, who take full responsibility for content.

    Neither TSX Venture Exchange nor its Regulation Services Provider (as
    that term is defined in the policies of the TSX Venture Exchange) accepts
    responsibility for the adequacy or accuracy of this release.

SOURCE Rare Element Resources Ltd.