Canada Rare Earth Acquires Additional Capabilities, Expertise and Relationships to Process Rare Earths

VANCOUVER, BRITISH COLUMBIA--(Marketwired - Sept. 2, 2015) - Canada Rare Earth Corp. ("Canada Rare Earth" or the "Company") (TSX VENTURE:LL) is pleased to announce that it has entered into an agreement dated September 1, 2015 (the "Acquisition Agreement") to acquire the assets of CEC Rare Earth Corp. ("REC"), an affiliated private British Columbia company (the "Acquisition"). Peter Shearing is a director of both the Company and REC and is therefore considered to be a non-arm's length party to the transaction. As part of the Acquisition REC's management will be engaged as consultants to Canada Rare Earth and REC will no longer be directly involved in the rare earth industry.

The Acquisition of the assets of REC (the "REC Assets") will enhance the Company's ability to develop and commercialize rare earth properties with the ultimate goal of processing and refining rare earths derived from its properties and from other sources. The REC Assets include REC's expertise, connections and business arrangements including all of the assets, contracts and business arrangements owned by or entered into by REC that relate to exploring for, mining, concentrating, sourcing, treating, separating and selling rare earths in all forms and at all stages. More specifically the REC Assets include but are not limited to cash, receivables, contracts, letters of intent, memorandums of understanding, consulting arrangements and rights associated with supplying expertise to many aspects of the rare earth industry together with rights to earn interests in rare earth projects.

The consideration to be paid by the Company to REC or at the direction of REC for the REC Assets (the "Consideration") is as follows:

1. 24,178,000 common shares to be issued by the Company, subject to an escrow agreement pursuant to which shares will be released from escrow over 18 months after issuance;

2. distributions from future contract proceeds and dividends derived from the REC Assets including: (i) 5% of the first US$70 million of non-refundable gross cash collected for the implementation and execution of contracts and business arrangements and the disposition of REC Assets; (ii) for the 12 year period following closing of the Acquisition, 5% of the non-refundable gross cash collected for the implementation and execution of contracts and business arrangements and the disposition of REC Assets plus 10% of dividends derived from REC Assets ( this second royalty may be acquired by the Company at any time during the three years following completion of the Acquisition for US$15 million less 50% of royalties paid in this regard); and (iii) 3% of the first US$70 million of non-refundable gross cash collected for the implementation and execution of contracts and business arrangements and the disposition of REC Assets ( this third royalty may be acquired by the Company at any time during the two years following completion of the Acquisition by the issuance of 15,712,000 common shares);

3. vesting of previously issued stock options to acquire 712,500 shares of the Company and continuing until November 8, 2017 the exercise period of another 4,287,500 previously granted stock options, all of which are exercisable at $0.10 per share; and

4. the immediate termination without penalty of the contract for REC to provide vertical integration implementation services.

Commenting on the rare earth sector in general and on the acquisition of the REC Assets specifically, Tracy A. Moore, CEO explained, "The success in finding mineable quantities of rare earths and the ability to produce a rare earth concentrate does not in itself lead to or allow the creation of a viable business. The separation of the rare earth concentrate into the individual rare earth elements is absolutely key to commercialization. China separates approximately 90% of the world's supply of individual rare earths and therefore existing and prospective sources of rare earths must either sell their concentrate, directly or indirectly, to a small, closely connected group of purchasers within China or they must develop their own means of separation, independent of China. Unfortunately, separation is considered a lost art (and chemical science) outside of China and there are significant risks with either reinstating mothballed separation facilities or in developing new and unproven techniques and technologies at scale.