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Aclara Resources Inc. — Management Reports 2025
Nov 7, 2025
48255_rns_2025-11-07_09c33c02-e5bc-402d-8690-aa9bbcfa722c.pdf
Management Reports
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aclara
ACLARA RESOURCES INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following management's discussion and analysis ("MD&A") has been prepared as of November 7, 2025, and is intended to assist readers in understanding the operational performance and financial condition of Aclara Resources Inc. (hereinafter, the "Company" or "Aclara"). The Company is, and will remain, a holding company and the only business of the Company is that of the business of its subsidiaries. The Company's material assets consist of interests in: (i) Aclara Resources Mineracao Ltda. ("Aclara Brazil"), a wholly-owned Brazilian subsidiary that holds the Carina Project (as defined below) and performs exploration activities in Brazil; (ii) REE Uno SpA ("REE Uno"), a majority-owned Chilean subsidiary that holds the Penco Module (as defined below); (iii) Aclara Technologies Inc. ("Aclara Technologies"), a wholly-owned U.S. subsidiary with the objective of developing a project for the separation of mixed rare earth carbonates ("MREC") from the Carina Project and the Penco Module into individual rare earth oxides ("REO"); (iv) Aclara Metals SpA ("Aclara Metals") and Aclara Metals Inc. ("Aclara Metals Inc."), 50%-owned Chilean and U.S. subsidiaries, respectively, both established with the objective of developing a project for the conversion of individual REOs to metals and alloys for the manufacture of rare earth permanent magnets; (v) Prospecciones Greenfield SpA ("Prospecciones"), a majority-owned indirect Chilean subsidiary that holds other exploration concessions located in Chile; (vi) Fundacion de Beneficencia Publica, Medioambiental, Cientifica, Cultural y Social Queule ("Fundacion"), a majority-owned indirect Chilean subsidiary that performs charitable work through implementing, promoting and supporting initiatives and projects pertaining to environmental conservation and heritage rescue, as well as Chilean cultural, social and scientific development; (vii) Polaris Creek LLC ("Polaris"), a wholly-owned indirect U.S. subsidiary that performs exploration activities in the United States; and (viii) Aclara Resources Peru S.A.C. ("Aclara Peru"), a wholly-owned Peruvian subsidiary that provides administrative services to Aclara and performs exploration activities in Peru.
This MD&A provides information concerning the Company's interim consolidated financial condition and results of operations for the three (3) and nine (9) months ended September 30, 2025 and September 30, 2024. This MD&A should be read in conjunction with the Company's interim unaudited consolidated financial statements and the notes thereto for the three (3) and nine (9) months ended September 30, 2025, and September 30, 2024 (collectively, the "Interim Unaudited Consolidated Financial Statements"). The Interim Unaudited Consolidated Financial Statements were prepared in accordance with IAS 34 "Interim Financial Reporting", International Financial Reporting Standards ("IFRS") and its interpretations adopted by the International Accounting Standards Board ("IASB").
As used in this MD&A, references to "Q1", "Q2", "Q3" and "Q4" are to the three months ended March 31, June 30, September 30, and December 31, respectively, of the applicable fiscal year, references to "H1" and "H2" are to the six months ended June 30 and six months ended December 31, respectively, of the applicable fiscal year, and references to "FY" are to the 12 months ended December 31 of the applicable fiscal year. Unless otherwise specified, the financial information contained in this MD&A is reported in United States dollars ("$" or "US$"). Certain totals, subtotals and percentages throughout this MD&A may not reconcile due to rounding. Additional cautionary statements regarding forward-looking information and mineral reserves and mineral resources can be found under the section of this MD&A entitled "Cautionary Statements and Reader Advisories".
COMPANY OVERVIEW
Aclara is a company focused on the development of a vertically integrated supply chain for rare earths alloys used in permanent magnets, and it is listed on the Toronto Stock Exchange ("TSX") under the ticker symbol "ARA".
Aclara's business strategy is supported by its ion-absorption clay ("ionic clay") deposits in Brazil and Chile, which feature large concentrations of heavy rare earths ("HREE"), which provides the Company with unique access to a reliable, long-term source of these critical minerals. Aclara has also developed and patented an innovative technology to extract rare earths from ionic clay deposits through recycling and circular economy processes, which results in low water consumption and minimal carbon emissions.
Aclara's flagship project is its Carina project, a 9,863-hectare HREE ionic clay project located in Nova Roma, Goiás, Brazil (the "Carina Project"). The Company is also advancing the Penco Module project, a 600-hectare HREE ionic clay project located in Biobío, Chile (the "Penco Module"). The Company has successfully completed the pre-feasibility study technical report ("Carina PFS") for the Carina Project and preliminary economic assessment ("PEA") for the Penco Module, the results of which are respectively detailed in the following technical reports:
- "NI 43-101 Technical Report & Pre-Feasibility Study on the Carina Project, Goiás, Brazil", dated effective October 22, 2025 (the "Carina Project PFS Technical Report"); and
- "Amended and Restated NI 43-101 Technical Report – Preliminary Economic Assessment for Penco Module Project", dated effective September 15, 2021 (the "Penco Module Technical Report").
The Company holds an aggregate of approximately: (i) 83,185 hectares of mining rights in Chile, distributed in the regions of Maule, Ñuble and Biobío; and (ii) 50,266 hectares of mining rights in Brazil, distributed in the states of Goiás, Bahia, Minas Gerais and Paraná. The Company aims to identify additional opportunities to enhance potential future HREE production through its greenfield exploration programs in Chile and Brazil, alongside the development of further project "modules" within its mining concessions.
Aclara, through its wholly-owned U.S.-based subsidiary, Aclara Technologies, is focused on enhancing product value through the development of a rare earths separation plant in the United States (the "U.S. Separation Project"). Aclara Technologies aims to source high purity MREC from Aclara's mining projects to further refine and separate it into individual REOs. Additionally, Aclara is developing rare earths alloy-making capabilities to convert refined oxides into the alloys needed for fabricating permanent magnets. The Company's vertical integration strategy seeks to address the demand for a geopolitically independent supply chain of permanent magnets, focused on traceability, high environmental standards throughout the value chain, cost-competitiveness and expedited access to market. Aclara is well-positioned to become the first vertically integrated HREE company outside of Asia.
BUSINESS DEVELOPMENT AND OVERALL PERFORMANCE HIGHLIGHTS
Mining Projects Development
During Q3 2025, the Company continued to advance the development of the Penco Module and the Carina Project and made consistent investments in respect of evaluation and exploration assets ("E&E") and property, plant and equipment assets ("PP&E").
In Q3 2025, the Company invested $7.47 million in E&E and $0.40 million in PP&E. In comparison, investments in Q3 2024 totaled $4.25 million for E&E and $0.20 million for PP&E. Aggregate expenditure for E&E and PP&E as of Q3 2025 totaled $23.09 million and $0.53 million, respectively, compared to the aggregate expenditure as of Q3 2024 of $11.00 million and $0.29 million. Aggregate expenditure for E&E and PP&E in FY 2024 totaled $19.29 million and $0.32 million, respectively.
Carina Project and Future Outlook
On November 6, 2025, the Company successfully delivered the Carina Project PFS Technical Report, reaffirming the project's robust economic feasibility: (i) net present value at an 8% discount rate of ~$1.1 billion; (ii) estimated internal return rate of 22% over the 18-year life-of-mine and payback period of 4.5 years; (iii) average annual net revenue and EBITDA of $487 million and $352 million, respectively (excluding the first year of ramp-up and last year of ramp-down); and (iv) average net smelter return of $49.5 per tonne processed, compared to an average production cost of $13.0 per tonne processed.
Following the positive results obtained at the Carina Project, and in an effort to move the Carina Project towards an investment decision, the Company has advanced or is advancing the following activities in parallel:
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Drilling Campaigns. The Company has drilled a total of 25,990 meters across 1,823 drill holes as part of Phase 2 of the drilling campaign, which has supported the conversion of inferred mineral resources into the measured and indicated categories.
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Metallurgical Tests. The Company is currently conducting the metallurgical tests on samples obtained from the Carina Project through a sonic drilling campaign, providing key inputs for the preparation of the feasibility study technical report ("Carina FS"). The metallurgical testing campaign is expected to be completed in Q4 2025, with results to be incorporated into the Carina FS. The sonic drilling campaign resulted in a total of 1,257 meters of drilling from 86 drill holes. This total includes 940 meters from 59 drill holes completed in 2024 and 317 meters from 27 drill holes completed in 2025.
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Pilot Test Campaign. During Q3 2025, the Company successfully completed the semi-industrial scale pilot operation in Aparecida de Goiânia, Brazil, following its relocation from Concepción, Chile in Q3 2024. The pilot campaign operated continuously, incorporating the optimized configuration of the Company's proprietary Circular Mineral Harvesting ("CMH") process. In total, the pilot plant processed approximately 130 tonnes of ionic clay, producing over 150 kilograms of high-purity MREC. The objectives of the campaign were to: (i) confirm the processing parameters and final process flowsheet design for the Carina Project PFS Technical Report and Carina FS; (ii) produce high purity MREC for separation trials in support of future off-take agreements; and (iii) demonstrate the environmental sustainability of the process design to relevant stakeholders.
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Technical Development. The Company has mobilized activities related to the Carina FS since July 2025, which follows the completion of the Carina Project PFS Technical Report delivered on November 6, 2025.
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Environmental Baselines and EIA Development. The Company has successfully completed all baseline studies for the Carina Project in Q1 2025 and submitted the environmental impact assessment ("EIA", or "Preliminary License") in May 2025 to the Secretariat of the Environment and Sustainable Development ("SEMAD") of the State of Goiás, Brazil. Following regulatory updates, the Company resubmitted the EIA in Q3 2025 to ensure compliance with the revised requirements. The Company anticipates receiving approval for the EIA by Q1 2026 that will include authorization for early works.
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Commercial Efforts. The Company is developing a separation project in the United States to refine the Carina Project's MREC into individual rare earth oxides. Additionally, in partnership with CAP S.A. ("CAP"), the Company is advancing a metals and alloys project to produce the alloys needed for high-performance permanent magnets. As part of this strategy, the Company is engaged in commercial discussions with potential counterparties regarding offtake agreements, offering flexibility in product options including MREC, individual rare earth oxides and metals and alloys derived from the Carina Project and the Penco Module.
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Carina Project Schedule. The Company has updated its previously announced short-term milestones and/or targets in respect of the Carina Project as follows:
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Receive EIA Approval Q1 2026
- Complete Carina FS H1 2026
- Commencement of Early Works Construction H1 2026
On October 20, 2025, the Company signed a memorandum of understanding ("MoU") with the State University of Goiás to collaborate on technical and scientific initiatives related to REE. The MoU, which establishes a framework for academic and technical cooperation, aims to integrate innovation, teaching and university activities with the practical training of students through internships and technical-scientific exchanges. The partnership focuses on the development of technology and initiatives related to agricultural sciences, sustainability, and technological
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sciences, creating a solid academic foundation to advance studies on the CMH process for rare earths from ionic clays in Goiás, Brazil.
On October 1, 2025, the Company announced an updated mineral resource estimate for the Carina Project. The new estimate reported that 79% of previously inferred mineral resources were successfully upgraded to the indicated category, resulting in 236 million tonnes ("Mt") of indicated resources and 48 Mt of inferred resources, compared to 298 Mt of inferred resources reported in 2024.
On September 2, 2025, the U.S. International Development Finance Corporation ("DFC"), the United States Government's development finance institution, committed up to $5 million in project development funding (the "Project Development Funds") for the Carina Project. The funding, provided under DFC's Project Development Program, will primarily support the Carina FS, which was initiated in July 2025 and is expected to be completed by H1 2026. The Carina FS is being conducted by Hatch Consultoria em Projetos Ltda. ("Hatch Brazil") as a continuation of the Carina Project PFS Technical Report delivered on November 6, 2025. The Project Development Funds will be disbursed progressively based on the achievement of milestones that form integral components of the Carina FS. Under the terms of DFC's commitment, the Project Development Funds may be converted into equity of the Company upon completion of a single financing event of more than $50 million, or multiple financing events totaling at least $75 million within a twelve-month period, related to the construction of the Carina Project. DFC will also have a preferential option to be mandated to directly provide and/or arrange for financing or investment in the Carina Project upon the occurrence of such financing event. The Project Development Funds bear no interest, and no security interest will be granted by the Company in connection therewith. Repayment of the Project Development Funds may be triggered upon the Company achieving a qualifying financing event for the construction of the Carina Project. On September 10, 2025, the Company received an initial disbursement of $0.5 million under the DFC commitment.
On August 16, 2024, the Company signed an MoU with the state of Goiás and the municipality of Nova Roma, recognizing the strategic nature of the Carina Project. This strategic relationship aims to accelerate the analysis and evaluation of the permitting process and support the execution, implementation and development of the Carina Project. The Company has also committed to hiring and developing the local workforce, as well as local suppliers. As a result of these efforts, the Company will reinforce its positive impact on the social and economic development of Nova Roma and Goiás regions, further positioning Brazil as a key player in the sustainable supply of critical minerals.
Penco Module and Future Outlook
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EIA Application. During Q3 2023, the Company revised its permitting strategy with the primary aim of addressing concerns related to native forests located within the Penco Module project site, while minimizing substantial impacts to the Penco Module's development timeline. To effectively implement the revised permitting strategy, the Company decided to prepare and submit two (2) EIAs, which will collectively cover the full life-of-mine of the Penco Module. On June 10, 2024, the Company filed the first EIA ("EIA 1"), which encompasses the first six (6) years of the full life-of-mine of the Penco Module. The evaluation of EIA 1 by the Environmental Assessment Service (the "SEA") is expected to take approximately between 18 and 24 months. During H2 2024, the Company received the consolidated clarification report ("Technical ICSARA") and the citizen consolidated clarification report, both of which were duly addressed and filed through an Addendum on March 28, 2025. Thereafter, the SEA published a Complementary Technical ICSARA on May 14, 2025 ("Complementary ICSARA"), incorporating additional observations and requiring an update to the citizen participation responses, to which the Company formally responded through the submission of a Complementary Addenda on October 14, 2025.
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Social License. The Company will continue maintaining efforts to strengthen its relationship with the local community through continuous engagement at "Casa Aclara", (a community center located in the central Penco community), and through several social initiatives including education, technical training, development of local suppliers, reforestation and sports programs. The Company will maintain open dialogue and incorporating community feedback into its plans for the Penco Module.
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Technical Development. During Q3 2025, the Company resumed the preparatory work for the Penco Module feasibility study technical report ("Penco FS"), focusing on integrating outcomes from pilot testing and research initiatives to refine the engineering design and update operating and capital cost estimates. These activities aim to enhance operational efficiency and ensure alignment with the project's revised development schedule.
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Commercial Efforts. The Company is pursuing the same commercial strategy for the Penco Module as with the Carina Project, as described above under "Mining Projects Development – Carina Project and Future Outlook – Commercial Efforts". In parallel, the Company has shipped high purity MREC samples produced in the Company's pilot plant in Chile to more than 15 separation firms located within the United States, Europe and Asia, in an effort to validate product specifications and assess potential partnerships.
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Updated Penco Module Schedule. As a result of its updated permitting and development strategy, the Company is working to achieve the following proposed milestones and/or targets in respect of the Penco Module:
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Receive EIA 1 Approval
- Complete Penco FS
Q4 2025 / Q1 2026
H2 2026
Separation of MREC to Individual Oxides and Future Outlook
Aclara Technologies is expected to source high purity MREC from the Company's ionic clay projects in Chile and Brazil and convert them into individual rare earths oxides in its recently announced Louisiana separation facility.
During Q3 2025, the Company completed a new conceptual study for its U.S. Separation Project, which resulted from previous metallurgical testing and optimization work. Based on this new conceptual study, the Company is continuing to advance the following activities as part of the next stage of development of its U.S. Separation Project:
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Basic Engineering ("FEL 3"). Hatch Ltd. ("Hatch") has been retained to develop the engineering of the U.S. Separation Project in addition to its work relating to the Carina Project. The FEL report is expected to start in Q4 2025 and by completed by Q2 2026.
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Pilot Operation. In parallel and based on the new flowsheet configuration, Aclara started the construction of a separation pilot plant at the Virginia Tech Corporate Research Center ("VTCRC"). The operation is scheduled to start in Q1 2026 and to run throughout 2026. By the time production is expected to start at the U.S. Separation Project, Aclara expects to have accumulated approximately 1.5 years of feed-specific operational data that will serve to accelerate the ramp-up, optimize efficiency and maintain steady-state operations.
On October 24, 2025, the Company announced that it has entered into a partnership with the State of Louisiana to establish its first U.S.-based separation project at the Port of Vinton, located within the Lake Charles region. Louisiana was selected as the preferred location due to its Louisiana Economic Development ("LED") Certified Site designation, which ensures fully serviced infrastructure and fast-track construction due to the prior completion of substantial permitting and zoning due diligence, as well as its proximity to major chemical suppliers and port facilities, all of which are expected to contribute to lower capital and operating costs. The project also benefits from the State's pro-business environment, skilled industrial workforce, and robust industrial ecosystem. As part of the partnership, the Company will receive approximately $46.4 million in state-level incentives, including benefits under the Industrial Tax Exemption Program, High Impact Jobs Program, Infrastructure Grant, and the LED FastStart Workforce Development Program.
On August 11, 2025, the Company announced that it has signed an MoU with Virginia Polytechnic Institute and State University ("Virginia Tech") to collaborate on the operation of a REE separation pilot plant. The facility, currently being implemented at the VTCRC, will demonstrate the Company's solvent extraction technology for producing high-purity light and REO. The pilot plant has been designed based on the characteristics of the Carina Project mixed rare earth carbonate production and will utilize a sustainable feedstock supplied by Aclara's pilot plant in Aparecida de Goiânia, Goiás, Brazil.
In May 2025, the Company became a member of Securing America's Future Energy ("SAFE"), a leading nonpartisan organization focused on strengthening U.S. supply chains for critical minerals. This strategic alignment supports the Company's objective of establishing a fully integrated and independent rare earths supply chain for advanced technologies. Through its Energy Security Leadership Council and the Center for Critical Minerals Strategy, SAFE plays a pivotal role in shaping U.S. policy and fostering public-private collaboration in the critical minerals sector.
Greenfield Exploration and Future Outlook
During Q3 2025, the Company continued to advance its greenfield exploration activities in order to identify REE mineralization and potential new modules for further development. The Company incurred total expenses of $0.68 million in Q3 2025, as compared to $0.08 million incurred in Q3 2024.
Additionally, in July 2025, the Company entered into a long-term Letter of Intent ("LOI") with Stanford University's Mineral-X initiative, a leading research program focused on applying artificial intelligence to critical minerals. Pursuant to the LOI, the parties aim to develop predictive AI models to enhance the exploration of ionic clay-hosted REE and to promote academic and technical exchange. This collaboration supports the Company's strategy to build a resilient and sustainable HREE supply chain and provides the framework for future joint research and pilot initiatives.
Commercial Update
During Q3 2025, the Company continued hosting a series of visits to its pilot plant facility in Aparecida de Goiânia, Brazil, as part of the commercial engagement strategy. Attendees included representatives from magnet manufacturers, government-related development agencies and other industry stakeholders. The visits provided an opportunity to demonstrate the Company's proprietary CMH technology under operational conditions and to highlight the environmental and technical attributes of the Carina Project.
On July 9, 2024, the Company announced that it has signed a MoU with VACUUMSCHMELZE GmbH & Co. KG ("VAC"), which establishes a preliminary agreement to jointly approach potential clients as a "mine-to-magnets" solution for the production of ESG-compliant permanent magnets. VAC is considered the largest producer of rare earths magnets outside of Asia, with more than 40 years' experience in magnet-making technology. VAC, whose main permanent magnet facility is located in Hanau, Germany, recently executed a contract with General Motors ("GM") to supply GM with permanent magnets by building a new magnet plant in the state of South Carolina, United States. Pursuant to the MoU, each of the parties will engage in collaborative efforts, through a preferred supplier-purchaser relationship with cooperative marketing, customer relations and related matters.
Corporate Development
On June 16, 2025, the Company appointed Hugh Broadhurst as Chief Operating Officer. Based in the United States, Mr. Broadhurst assumed technical leadership over the Company's upstream projects, including the Carina Project and the Penco Module, as well as its U.S. downstream initiatives in rare earth separation, metals and alloys.
On December 23, 2024, the Company announced a non-brokered private placement financing of 51,303,573 common shares of the Company for aggregate gross proceeds of $25 million at a price of C$0.70 per common share (the "Private Placement") which closed on February 20, 2025. As a result of the Private Placement, the total number of issued and outstanding common shares of the Company increased from 166,409,223 to 217,712,796. Additionally, each of CAP, HM Holdings and New Hartsdale respectively hold 22,163,143, 42,787,104 and 80,340,876 common shares, representing approximately 10.18%, 19.65% and 36.90% of the issued and outstanding common shares of the Company.
On March 12, 2024, the Company entered into a strategic investment agreement (the "CAP Investment Agreement") with CAP, a publicly listed company on the Chilean Stock Exchange, providing for, amongst other things: (i) a $29.1 million capital contribution to be made by CAP in REE Uno in exchange for a 20% equity ownership interest, payable in three tranches upon closing and subsequently in January 2025 and January 2026; (ii) the grant of an option to invest an additional $50 million by CAP in REE Uno for an additional 20% equity ownership interest upon the
Company obtaining the requisite environmental permit in respect of the Penco Module; (iii) the grant of an option exercisable by CAP to acquire up to 19.9% of the outstanding common shares of the Company in any private placement or public offering of common shares made by the Company within the 36 month period following the effective date of the CAP Investment Agreement, including a residual top-up right to maintain pro-rata voting rights; (iv) a demand subscription right for up to an aggregate of 19.9% of the outstanding common shares of the Company exercisable upon the satisfaction of certain conditions and continuing for a maximum period of 18 months beginning on the third anniversary of the CAP Investment Agreement; and (v) the terms on which CAP and the Company will form a joint venture to develop metals and alloys for the rare earths permanent magnet industry and contemplates an investment of $3 million in consideration for 50% of the ownership interests in such joint venture entity. On April 17, 2024, the Company announced the successful closing of the acquisition by CAP and receipt by the Company of the initial payment of approximately $9.7 million in connection with such acquisition. Subsequently, in January 2025, the Company reported the receipt of the second payment, amounting to approximately $12.5 million.
Cash Balance and General Administrative Expenses
Cash Balance
As at Q3 2025, the Company's consolidated cash balance was $27.08 million, consisting of $5.59 million from the Company, $5.18 million from its wholly-owned subsidiaries (Aclara Brazil, Aclara Technologies, Polaris Creek and Aclara Peru) and $16.31 million from its majority-owned Chilean subsidiaries (REE Uno, Prospecciones and Fundación). Comparatively, as at Q3 2024, the Company's consolidated cash and cash equivalents were $25.42 million. In addition, as at Q3 2025, the cash balance of the Company's joint venture Aclara Metals was $0.06 million. In June 2025, the Company, through its subsidiary REE Uno, received a cash value-added tax ("VAT") refund of $6.9 million under Chile's export VAT regime.
General Administrative Expenses
In Q3 2025, the Company incurred $1.63 million in administrative expenses, which was primarily comprised of: (i) management compensation; (ii) continuous public disclosure and marketing activities; and (iii) ancillary activities undertaken for the development of the Penco Module, the Carina Project and vertical integration projects. In comparison, in Q3 2024, the Company incurred $2.35 million in administrative expenses.
Estimated Budget for 2025
The Company's forecast for FY 2025 is $51.2 million, which is comprised of estimated costs relating to the development of the Penco Module, development of the Carina Project, development of the U.S. Separation Project, development of the metals and alloys project and exploration activities aimed at identifying potential new modules. Key aspects of the FY 2025 forecast include, among others: (i) $10.4 million in expenses related to the development of the Penco Module, which is comprised of permitting and community relations expenses ($3.4 million), purchase of surface land ($1.3 million), engineering activities ($1.6 million), expenses related to the maintenance of concessions ($0.2 million), administrative and personnel expenses ($4.0 million); (ii) $24.3 million in expenses related to the development of the Carina Project, which is comprised of mineral resource drilling work ($6.5 million), contracts related to surface land ($0.5 million), engineering activities and piloting works ($10.0 million), permitting and community relations expenses ($1.8 million), maintenance of mining concessions ($0.1 million), administrative and personnel expenses ($5.5 million); (iii) $1.9 million in mining concession maintenance costs and exploration in new areas; (iv) $7.6 million in expenses related to the development of the U.S. Separation Project, which is comprised of engineering and piloting activities ($6.1 million) and administrative and personnel expenses ($1.5 million); (v) $5.7 million in administrative expenses, personnel and for general corporate and working capital purposes; and (vi) $1.9 million for the metals and alloys project expenses.
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DISCUSSION OF RESULTS AND OPERATIONS UPDATE
Exploration Activities
Infill Drilling - Carina Project
Based on the initial auger drilling campaign results, the Company planned a two-phased Reverse Circulation (RC) drilling campaign at greater depths, aimed at increasing the inferred mineral resources and then converting them into a measured and indicated category.
During Q3 2025, the Company received all chemical assay results from its Phase 2 drilling campaign, which enabled the consolidation of the geological database and the preparation of the resource model to support the Carina Project PFS Technical Report.
The cumulative Phase 2 drilling activities concluded in Q2 2025 totaled 25,990 meters across 1,823 drill holes, comprising of 15,281 meters from 928 RC drill holes and 2,892 meters from 460 auger drill holes completed during 2025, and 7,817 meters from 435 RC drill holes completed during 2024. Phase 2 drilling activities represent a substantial increase in exploration efforts compared to Phase 1, which comprised 4,134 meters of drilling and served as the basis for the initial Carina Project PEA.
Comparatively, during Q3 2024, the Company continued advancing the Phase 2 RC drilling campaign, which comprised a total of 5,820 meters drilled across 321 holes.
Greenfield Exploration - Brazil
During Q3 2025, the Company continued executing its greenfield exploration strategy, focusing on community screening and environmental assessments to evaluate the baseline conditions for future drilling campaigns. Furthermore, follow-up scout drilling was carried out within the Company's mineral rights concessions, aiming to gather geological data to support planned subsequent exploration stages. A total of 807 meters were completed from 144 auger drill holes, out of a planned 85 holes.
Comparatively, during Q3 2024, the Company advanced its greenfield exploration activities in other high-priority areas within the states of Goiás, Bahia and Tocantins, aiming to enhance its understanding of regional geology and lithological variations to refine its exploration methodology.
Brownfield Exploration - Penco Module
During Q3 2025 and Q3 2024, the Company did not report any brownfield exploration activities within the Penco Module.
Greenfield Exploration - Chile
During Q3 2025 and Q3 2024, the Company did not report any greenfield exploration activities in Chile.
Project Development Activities
Carina Project
General Engineering
During Q3 2025, the Company completed the consolidation of operating and capital cost estimates for the Carina Project PFS Technical Report, in collaboration with Hatch Brazil. These efforts focused on incorporating process improvements validated through the ongoing semi-industrial pilot campaign in Goiás, Brazil. In parallel, the Carina FS design phase was initiated in July 2025, also with Hatch Brazil, while the powerline – including the main substation and grid connection – is progressing toward feasibility study level of detail. The Company continued
advancing the detailed design and construction planning for early works, which are expected to transition to execution in the first half of 2026, following anticipated EIA approval by SEMAD in Goiás.
Comparatively, during Q3 2024, the Company delivered an updated PEA for the Carina Project, and initiated activities for the Carina Project PFS Technical Report, which included site visits by Hatch Brazil to review potential locations for the processing plant and disposition zones, as well as potential water and power supply intakes and the completion of a trade-off analysis for the dry stacking facility.
Mining Study
During Q3 2025, the Company completed the development of the mineral resource estimation in support of the Carina Project PFS Technical Report. This updated work provides the basis for open pit mine design and economic assessment. The Company continues to advance its understanding of the "Modifying Factors", which include the technical, economic and environmental parameters required to convert Mineral Resources into Mineral Reserves. In parallel, the Company conducted and completed a third hydrogeological campaign focused on groundwater level monitoring and water quality analysis. Data generated from this work will support the development of piezometric models to be incorporated into the geotechnical stability assessments for the Carina FS phase.
Comparatively, during Q3 2024, the Company completed the first stage of the Carina Project PFS Technical Report, which included a gap analysis of available mine engineering products, trade-off studies for the mine fleet and a geotechnical assessment with the definition of fieldwork requirements.
Process Design
During Q3 2025, the Company successfully completed the pilot plant campaign in Aparecida de Goiânia, Brazil, producing over 150 kilograms of MREC. The metallurgical tests confirmed a high purity product with deleterious elements contents below detection limits, validating the robustness of the Company's REE extraction and purification process. The facility remains open for technical and investor visits during Q4 2025, while preparatory work has begun for its relocation to Chile, planned for H1 2026.
In addition, during Q3 2025, the Company achieved significant progress on the Carina PFS, with the updated mine plan and optimized plant capacity resulting in improved mass balance efficiency, thickening performance, and filtration design. These enhancements have further strengthened the technical and economic foundations of the Carina Project and established a robust basis for the transition to the Carina FS.
Comparatively, during Q3 2024, the Company conducted metallurgical tests, which resulted in valuable insights for the second stage of the Carina Project PFS Technical Report and the subsequent Carina FS. Additionally, the Company relocated its pilot plant from its warehouse in San Pedro de la Paz, Chile, to a new warehouse in Aparecida de Goiânia, Goiás, Brazil.
Penco Module
General Engineering
During Q3 2025, the Company progressed its review of opportunities to optimize CAPEX and OPEX and established a strategic roadmap to guide the transition into the Penco FS phase.
Comparatively, during Q3 2024, the Company focused its efforts on advancing the EIA 1 filing requirements including attending community meetings organized by the SEA, and reviewing technical questions received from various Chilean governmental entities. Additionally, a site visit was conducted by Essbio S.A., the recycled water supplier for the Penco Module, to review the detailed engineering study for water intake infrastructure related to the Penco Module.
Mining Study
During Q3 2025, the Company continued advancing mine planning studies for the Penco Module, with a focus on refining design parameters and updating key technical and economic assumptions supporting the Penco FS. These efforts encompassed the iterative optimization of pit designs, mine sequencing, and production scheduling, aimed at validating and enhancing the Penco Module's operational framework. Concurrently, the Company carried out analyses to further assess the sensitivity of critical operational variables – including mining productivity, equipment utilization and water management strategies – under the high-precipitation conditions typical of the Penco Module area.
Comparatively, during Q3 2024, the Company focused on the development of a conceptual design for the Neptuno deposition zone and conducted hydrogeological fieldwork, coinciding with the high rainfall season. This work involved assessing six (6) drill holes of interest to measure depth and physicochemical parameters. During the same period, a geostatistical analysis of granulometry was performed and results were used for adequate mine scheduling.
Process Design
During Q3 2025, the Company focused on enhancing the project design for the Penco Module and ensuring readiness for the Penco FS stage. The Company developed a revised disposal strategy adapted to local climatic conditions, eliminating the need for drying of the processed material. Additionally, the Company advanced planning for the Penco FS, incorporating these improvements and defining a flexible implementation schedule.
Comparatively, during Q3 2024, the Company did not undertake any process design activities related to the Penco Module.
Aclara Technologies - Separation
During Q3 2025, the Company initiated the implementation of its separation pilot plant at the VTCRC. Installation of the analytical laboratory and the first solvent extraction unit progressed during the quarter, while fabrication of the main process equipment was awarded and is currently underway. Following the metallurgical testing, the Company also completed a new conceptual study, establishing the technical foundation for its separation process, supporting a Class 5-AACE CAPEX and OPEX estimate developed by Hatch, and providing the basis for advancing to the FEL 3 phase. At the same time, the Company advanced environmental and permitting planning, mitigating regulatory risks and confirming the availability of power and industrial utilities at the site.
Comparatively, during Q3 2024, the Company completed an initial conceptual engineering study for its rare earth separation project. The separation flowsheet concept, based on solvent extraction, was developed in collaboration with the Saskatchewan Research Council. The conceptual engineering study was intended to support a Class 5-AACE CAPEX and OPEX estimate completed by Hatch, while also incorporating robust environmental features such as significant waste reduction and zero liquid discharge.
Environmental, Social and Governance
Penco Module
Environment and Permits
During Q3 2025, the Company advanced the preparation of the Complementary Addendum in response to the second Complementary ICSARA issued by the SEA on May 14, 2025. The activities included additional field studies encompassing flora, fauna, soils, and both human and indigenous environments, as well as the development of new environmental models and corresponding mitigation measures. In parallel, the Company conducted further consultations with indigenous and non-indigenous community organizations to collect primary information and integrate their feedback into the revised documentation.
On October 14, 2025, the Company formally submitted the Complementary Addenda to the SEA, successfully completing a critical milestone to advance to the final stages of the environmental evaluation process for EIA 1.
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Comparatively, in Q3 2024, the SEA concluded the "Citizen Participation Process" that began on July 8, 2024. During this period, the Company participated in three (3) assemblies and four (4) town hall meetings, engaging nearly 300 participants who provided feedback on the EIA 1. Additionally, during Q3 2024, the Company held its first technical meeting with various stakeholders at the SEA offices, followed by a field visit on July 9, during which the SEA and other agencies evaluated the project site and conducted a preliminary assessment of the potential environmental impacts of the Penco Module. Furthermore, during Q3 2024, the technical services submitted their observations on EIA 1, which were consolidated by the SEA into a first clarification report ("ICSARA") released on September 12, 2024.
Social License
During Q3 2025, the Company successfully held its first supplier event in the Biobío Region, reaffirming its commitment to local and regional development. The event brought together more than 150 participants, including existing and potential suppliers, and served as a platform to present the Company's local procurement strategy and strengthen collaboration across the regional supply chain. Additionally, the Company maintained active dialogue with regulatory authorities and hosted a visit from Chile's main industrial trade association ("SOFOFA"), which brought together more than 40 business leaders from Chile and a representative from the European Union, underscoring the Penco Module's relevance to both the national and international business communities.
Comparatively, during Q3 2024, the Company made significant progress on its social investment programs for the local Penco community related to education, technical training, reforestation, and athletics, among others, training 75 individuals in various technical fields and supporting over 120 children across varying activities. In addition, workshops on agriculture and reforestation were conducted for community leaders, resulting in the introduction of more than 1,800 native species in areas of Penco (located in the Biobío region) that were affected by wildfires.
Carina Project
Environment and Permits
During Q3 2025, the Company successfully resubmitted the EIA to SEMAD of the State of Goiás, following regulatory, normative and systemic updates introduced by the environmental authority. The resubmission incorporated adjustments to ensure full compliance with the updated requirements. The Company expects to receive SEMAD's authorization to conduct the public hearing and subsequently expects to receive approval of the preliminary license during Q1 2026.
Comparatively, during Q3 2024 the Company advanced the environmental baseline studies required for the Carina Project EIA and obtained the necessary license to proceed with its Phase 2 drilling campaign, supporting the ongoing geological program.
Social License
During Q3 2025, the Company continued to advance the Carina Project through initiatives aimed at generating local value, strengthening institutional relations, and promoting sustainable regional development. In partnership with the National Service for Industrial Training ("SENAI"), the Company completed the first cycle of its local professional training, offering courses in residential electricity and heavy machinery mechanics. These programs enhance the technical qualifications of the local workforce and improve employability across the region.
During the quarter, the Company also launched the second phase of its Local Supplier Development Program to consolidate the regional supply chain and foster partnerships with local businesses. The initiative is designed to strengthen competitiveness, retain value within the territory, and stimulate employment. Additionally, the Company entered into a technical cooperation agreement with the Municipality of Nova Roma to support sustainable and orderly implementation of the Carina Project. Under this agreement, the Company will provide technical assistance through studies related to basic sanitation and urban planning, aimed at improving local infrastructure conditions.
Comparatively, during Q3 2024, the Company signed a MoU with the State of Goiás and the municipality of Nova Roma, recognizing the strategic nature of the Carina Project. This strategic relationship aims to accelerate the
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analysis and evaluation of the permitting process and support the execution, implementation and development of the Carina Project. In addition, during this quarter, the Company completed the first stage of its social communication plan in Nova Roma, conducting 51 activities that reached a total of 789 local residents.
Occupational Health and Safety
During Q3 2025, the Company recorded no lost time incidents and continued to strengthen its occupational health and safety culture through continuous improvement initiatives and the implementation of enhanced safety management systems, in preparation for the upcoming phases of the Carina Project.
Comparatively, during Q3 2024, the Company reported one (1) lost time injury incident in Brazil.
OPERATIONAL PERFORMANCE
Unless otherwise specified, the financial information contained in this section of the MD&A entitled "Operational Performance", and the subsections thereunder, is reported in thousands of United States dollars.
As at Q3 2025, the Company's expenditures in respect of exploration, technical development, environmental, social and governance and administration activities were $24.94 million, which were partially offset by a VAT recovery of $6.92 million, and a capital contribution of $36.64 million, totaling a net cash inflow of $11.71 million and a total cash balance of $27.08 million. Comparatively, as at the end of Q3 2024, the Company's net cash outflow was $7.83 million, and the total cash balance was $25.42 million.
Overview of Operating Expenditure and Costs
The Company incurred an aggregate of $2.14 million in losses from continuing operations before income tax during Q3 2025, as compared to an aggregate of $1.95 million in losses during Q3 2024.
| Three months ended September 30 | Nine months ended September 30 | |||
|---|---|---|---|---|
| (in thousands of US $) | 2025 | 2024 | 2025 | 2024 |
| Exploration expenses | 682 | 82 | 1,662 | 295 |
| Administration expenses | 1,633 | 2,348 | 5,596 | 6,460 |
| Other (expenses) income | - | - | - | (135) |
| Share of loss of a joint venture | 139 | 21 | 329 | 31 |
| Financial costs | 82 | 10 | 172 | 40 |
| Financial income | (417) | (485) | (892) | (1,331) |
| Exchange differences | 17 | (29) | (94) | 51 |
| Loss from continuing operations before income tax | 2,136 | 1,947 | 6,773 | 5,411 |
| Attributable to: | ||||
| Equity shareholders of the Parent | 2,118 | 1,890 | 6,677 | 5,308 |
| Non-controlling interests | 18 | 57 | 96 | 103 |
Exploration Expenses
The breakdown of exploration expenses incurred by the Company for the three (3) and nine (9) months ended September 30, 2025 and 2024 are as follows:
| Three months ended September 30 | Nine months ended September 30 | |||
|---|---|---|---|---|
| (in thousands of US $) | 2025 | 2024 | 2025 | 2024 |
| Personnel expenses | 55 | 42 | 138 | 82 |
| Professional fees | 240 | - | 815 | 3 |
| Mining rights | - | - | 90 | - |
| Rental | 8 | 21 | 30 | 107 |
| Repair and maintenance | - | - | - | 4 |
| Analysis & technical | 19 | - | 19 | - |
| Studies | 5 | - | 61 | 4 |
Exploration expenses comprise all activities related to and arising from greenfield exploration. The purpose of greenfield exploration is to identify additional resources that may support new development and operation modules. Greenfield activities include surface mapping works, geophysics and topographic studies, among others.
During Q3 2025, the Company conducted superficial mapping and soil sampling, resulting in personnel expenses of $55, costs related to renting of geology equipment of $8, and other study-related expenses of $5. Additionally, the Company incurred costs of $240 for legal, technical, and analytical advisory services, which included hydrogeological assessments and mineral title analysis in support of potential land acquisition evaluations in the United States. Comparatively, during Q3 2024, the Company incurred nil in professional fees, personnel expenses of $42 and costs related to renting geology equipment of $21. In addition, the Company incurred travel expenses of $16, laboratory supplies and other related expenses of $33, as compared to $19 in Q3 2024.
In Q3 2025, the Company incurred contractors and services expenses of $306, comprised of drilling expenses, as compared to nil in Q3 2024.
Other Income (Expenses)
The breakdown of other income (expenses) incurred by the Company for the three (3) and nine (9) months ended September 30, 2025 and 2024 are as follows:
| (in thousands of US $) | Three months ended September 30 | Nine months ended September 30 | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Contractors and services | - | - | - | (135) |
| Total | - | - | - | (135) |
As of H1 2024, the Company incurred other income (expenses) due to a reversal of an exploration expense provision of $135 in 2023. The provision included expenses related to contractors and services such as equipment leasing, drilling and topography which were overestimated at the time of provisioning the expenses.
Administration Expenses
The breakdown of administration expenses incurred by the Company for the three (3) and nine (9) months ended September 30, 2025 and 2024 are as follows:
| (in thousands of US $) | Three months ended September 30 | Nine months ended September 30 | ||
|---|---|---|---|---|
| 2025 | 2024 | 2025 | 2024 | |
| Personnel expenses | 473 | 779 | 2,080 | 2,645 |
| Professional fees | 157 | 209 | 897 | 883 |
| Depreciation and amortization | 183 | 303 | 546 | 972 |
| Contractors and services | 371 | 794 | 1,105 | 1,198 |
| Travel expenses | 84 | 125 | 323 | 391 |
| Marketing expenses | 269 | 60 | 464 | 201 |
| Other expenses | 96 | 78 | 181 | 170 |
| Total | 1,633 | 2,348 | 5,596 | 6,460 |
In Q3 2025, the Company incurred personnel expenses of $473 to support its management and administration team, as compared to $779 in Q3 2024. The decrease primarily reflects the capitalization of personnel costs related to the Chief Operating Officer and Executive Vice President roles during Q3 2025.
Professional fees of $157 incurred during Q3 2025 comprised accounting, tax, and legal expenses for the Company's annual tax and legal processes, as compared to $209 incurred for a similar purpose in Q3 2024. In addition, during Q3 2025, the Company incurred travel expenses of $84, marketing expenses of $269 and other expenses of $96, as compared to $125 in travel expenses, $60 in marketing expenses and $78 in subscriptions and other expenses incurred in Q3 2024. The increase in marketing expenses is primarily in relation to lobbying-related activities totaling $200, as compared to Nil in 2024.
In Q3 2025, the Company incurred depreciation and amortization expenses of $183, as compared to $303 in Q3 2024. In addition, during Q3 2025, the Company incurred contractor and services expenses of $371, primarily driven by Board-related expenses, as compared to $794 in Q3 2024. The decrease is primarily in relation to restricted stock units granted to Board members in July 2024, as compared to Nil in Q3 2025.
Financial Income and Costs
In Q3 2025, the Company's net financial income and costs amounted to $335 and were associated with the Company's investments in short-term deposits, interest-bearing bank accounts and bank commissions, as compared to net financial income and costs of $475 in Q3 2024.
| Three months ended September 30 | Nine months ended September 30 | |||
|---|---|---|---|---|
| (in thousands of US $) | 2025 | 2024 | 2025 | 2024 |
| Financial costs | 82 | 10 | 172 | 40 |
| Loss from continuing operations before income tax | 82 | 10 | 172 | 40 |
| Three months ended September 30 | Nine months ended September 30 | |||
| --- | --- | --- | --- | --- |
| (in thousands of US $) | 2025 | 2024 | 2025 | 2024 |
| Financial income | (417) | (485) | (892) | (1,331) |
| Loss from continuing operations before income tax | (417) | (485) | (892) | (1,331) |
During Q3 2025, the Company incurred an increase in interest and bank commission expenses related to the administration of its bank accounts, resulting in such expenses of $82 as compared to $10 during Q3 2024. In addition, in Q3 2025, financial income decreased to $417 as compared to $485 in Q3 2024, primarily due to a decrease in interest earned on investments in short-term deposits and a reduced cash and cash equivalents.
Evaluation and Exploration Assets
In accordance with IFRS accounting principles regarding capitalization of E&E assets, costs of mineral properties are capitalized on a project-by-project basis. As at the end of Q3 2025, the Company's principal business included the development of the Penco Module and Carina Project. The Company capitalizes expenses related to brownfield exploration and infill drilling, metallurgical testing and process design, engineering of the mine, processing plant and project infrastructure, permitting and administration activities and services. The following table sets out an overview of the Company's capitalized E&E asset balance:
| (in thousands of US $) | Total |
|---|---|
| Balance at January 1, 2024 | 95,152 |
| Additions | 10,999 |
| Foreign exchange effect | (1,820) |
| Balance at September 30, 2024 | 104,331 |
| Additions | 8,295 |
| Foreign exchange effect | (10,402) |
| Balance at December 31, 2024 | 102,224 |
| Additions | 23,093 |
| Disposals | (90) |
| Foreign exchange effect | 5,923 |
| Balance as at September 30, 2025 | 131,150 |
| Accumulated amortization and impairment | |
|---|---|
| Balance at January 1, 2024 | 1,111 |
| Additions | 343 |
| Foreign exchange effect | (22) |
| Balance at September 30, 2024 | 1,432 |
| Additions | 426 |
| Foreign exchange effect | (146) |
| Balance at December 31, 2024 | 1,712 |
| Additions | 369 |
| Foreign exchange effect | 39 |
| Balance as at September 30, 2025 | 2,120 |
| Net book value as at September 30, 2024 | 102,899 |
| Net book value as at December 31, 2024 | 100,512 |
| Net book value as at September 30, 2025 | 129,030 |
The total investments in the Carina Project, the Penco Module and the U.S. Separation Project capitalized as E&E as at the end of Q3 2025, Q3 2024 and FY 2024 are as follows:
| (in thousands of US $) | Nine months ended September 30 | Year ended December 31 | |
|---|---|---|---|
| 2025 | 2024 | 2024 | |
| Personnel expenses | 5,324 | 3,212 | 4,593 |
| Professional fees | 5,267 | 2,482 | 3,059 |
| Environmental impact study | 1,808 | 940 | 1,367 |
| Drilling services | 2,432 | - | - |
| Engineering services | 543 | - | - |
| Mining rights | 384 | 461 | 2,858 |
| Rent building, vehicles, others | 1,681 | 857 | 1,086 |
| Analysis & technical | 1,506 | 963 | 1,590 |
| Contractors and Services | 2,488 | 1,091 | 3,256 |
| Other | 1,660 | 993 | 1,485 |
| Total | 23,093 | 10,999 | 19,294 |
In the nine (9) months ended September 30, 2025, the Company incurred personnel expenses of $5,324, as compared to the same period in 2024, in which the Company incurred personnel expenses of $3,212. The increase in personnel expenses is primarily due to the growth in headcount in Brazil and the U.S. to support the development of the Carina Project and U.S. Separation Project, respectively. For purposes of calculating the Company's personnel expenses under its E&E asset balance sheet, the Company's employee headcount as at the end of Q3 2025 was 82, as compared to 68 as at the end of Q3 2024.
Each category of the Company's costs in relation to its investment in the Penco Module, the Carina Project and the U.S. Separation Project in Q3 2025 has been discussed elsewhere in this MD&A. During the three (3) and nine (9) months ended September 30, 2025 and 2024, expenses related to the technical development of the Penco Module, the Carina Project, and the U.S. Separation Project were comprised of costs related to engineering services, feasibility studies, professional fees, rent building and vehicle expenses, analysis and technical, contractor services and other related expenses, each of which are discussed under the sections of this MD&A entitled "Project Development Activities", "Exploration Activities" and "Aclara Technologies - Separation" above.
In the nine (9) months ended September 30, 2025, expenses relating to permit-related activities were comprised of costs associated with the environmental impact study and are described in greater detail under the section entitled "Environmental, Social and Governance" above. The environmental impact study expenses incurred by the Company totaled $1,808 as at the end of Q3 2025, as compared to the same period in 2024, in which the Company incurred environmental impact study expenses of $940.
Expenses related to mining rights, which consisted of costs relating to exploration and exploitation of the Company's concessions, totaled $384 as at the end of Q3 2025 as compared to $461 incurred as at the end of Q3 2024. As at the end of Q3 2025, the Company's concessions were comprised of 83,185 hectares in respect of the Penco Module and 50,266 hectares in respect of the Carina Project, as compared to the end of Q3 2024, in which the Company's
concessions were comprised of 83,785 hectares in respect of the Penco Module, 68,788 hectares in the Carina Project and 30,100 hectares related to other concessions.
Properties, Plants and Equipment
The breakdown of PP&E capitalized by the Company as at the end of Q3 2025 and FY 2024 are as follows:
| (in thousands of US $) | Land | Plant and equipment | Total |
|---|---|---|---|
| Balance at January 1, 2024 | 9,234 | 2,877 | 12,111 |
| Additions | - | 394 | 394 |
| Foreign exchange effect | (1,106) | (85) | (1,191) |
| Balance at December 31, 2024 | 8,128 | 3,186 | 11,314 |
| Additions | - | 527 | 527 |
| Foreign exchange effect | 288 | 54 | 342 |
| Balance as at September 30, 2025 | 8,416 | 3,767 | 12,183 |
| Accumulated amortization and impairment | |||
| Balance at January 1, 2024 | - | 821 | 821 |
| Additions | - | 619 | 619 |
| Foreign exchange effect | - | (46) | (46) |
| Balance at December 31, 2024 | - | 1,394 | 1,394 |
| Additions | - | 135 | 135 |
| Foreign exchange effect | - | 5 | 5 |
| Balance as at September 30, 2025 | - | 1,534 | 1,534 |
| Net book value as at December 31, 2024 | 8,128 | 1,792 | 9,920 |
| Net book value as at September 30, 2025 | 8,416 | 2,233 | 10,649 |
As at nine months ended September 30, 2025, the Company incurred expenses of $527 due to equipment purchases, primarily associated with the construction of the U.S. Separation Project, compared to $394 during FY 2024.
SUMMARY OF QUARTERLY RESULTS
| (in thousands of US $) | September 30
2025 | June 30
2025 | March 31
2025 | December 31
2024 |
| --- | --- | --- | --- | --- |
| Revenues | - | - | - | - |
| Net income (loss) from continuing operations | (2,136) | (2,838) | (1,799) | (2,003) |
| Net income (loss) and comprehensive income (loss) | (2,136) | (2,838) | (1,799) | (2,003) |
| Basic and diluted net income (loss) (per share) | (0.01) | (0.01) | (0.01) | (0.01) |
| | September 30 | June 30 | March 31 | December 31 |
| (in thousands of US $) | 2024 | 2024 | 2024 | 2023 |
| Revenues | - | - | - | - |
| Net income (loss) from continuing operations | (1,947) | (2,101) | (1,363) | (6,015) |
| Net income (loss) and comprehensive income (loss) | (1,947) | (2,101) | (1,363) | (6,015) |
| Basic and diluted net income (loss) (per share) | (0.01) | (0.01) | (0.01) | (0.04) |
During Q3 2025, the Company incurred lower net losses from continuing operations as compared to Q2 2025, primarily due to a decrease in administrative expenses of $626, a decrease in exploration expenses of $107, an increase in exchange rate expenses of $109, an increase in financial income of $134, an increase in its share of loss of a joint venture of $7, and an increase in financial costs of $49. The decrease in administrative expenses was primarily in relation to personnel costs of $268 related to the departure of the Chief Operating Officer, and legal expenses of $212 incurred for continuous disclosure filings, as compared to nil in Q3 2025. The decrease in exploration expenses was primarily explained by the absence of the write-off of acquisition costs related to mining concessions recorded in the previous quarter.
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During Q2 2025, the Company incurred higher net losses from continuing operations as compared to Q1 2025, primarily due to an increase in administrative expenses of $555, an increase in exploration expenses of $598, a decrease in exchange rate expenses of $73, an increase in financial income of $91, an increase in share of loss of a joint venture of $74 and a decrease in financial costs of $24. The increase in administrative expenses was mainly explained by higher personnel expenses of $410, resulting from performance bonuses and severance payments made to the former Chief Operating Officer, along with increased consulting and professional expenses of $80, and contractor-related services of $82. These increases were partially offset by lower travel and other expenses of $17. The increase in exploration expenses was primarily due to technical and fieldwork activities conducted in Brazil and the United States, including geological mapping, environmental assessments, drill site preparation and technical reviews of mineral titles, which led to higher technical and analysis services of $573 and other related expenses of $25.
During Q1 2025, the Company incurred lower net losses from continuing operations as compared to Q4 2024, primarily due to a decrease in administrative expenses of $75, a decrease in exchange rate expenses of $161, a decrease in financial income of $134, a decrease in share of loss of a joint venture of $26 and an increase in financial costs of $32. The impacts were partially offset by a decrease in exploration expenses of $108, primarily due to lower travel, rentals and studies expenses.
During Q4 2024, the Company incurred higher net losses from continuing operations as compared to Q3 2024, primarily due to an increase in exploration expenses of $217, an increase in exchange rate expenses of $171, a decrease in financial income of $159, an increase in share of loss of a joint venture of $63 and an increase in financial costs of $15. The impacts were partially offset by a decrease in administrative expenses of $569, primarily due to lower Board related costs associated with restricted share unit compensation.
During Q3 2024, the Company incurred lower net losses from continuing operations compared to Q2 2024, primarily due to a decrease in exploration expenses of $36, an increase in financial income of $135, a decrease in exchange rate expenses of $32, an increase in share of loss of a joint venture of $10, a decrease in financial costs of $4, partially offset by an increase in administrative expenses of $44, primarily due to higher personnel expenses.
During Q2 2024, the Company incurred higher net losses from continuing operations compared to Q1 2024, primarily due to an increase in administrative expenses of $496, a decrease in financial income of $146, a decrease in exchange rate expenses of $69, an increase in exploration expenses of $24, and an increase in share of loss of a joint venture of $10, partially offset by a decrease in other (expenses) income of $135 and a decrease in financial costs of $2. The increase in administrative expenses was as a result of higher personnel expenses of $440, higher legal and professional expenses of $132 and other expenses of $63, partially offset by lower depreciation and amortization expenses of $139.
During Q1 2024, the Company incurred lower net losses from continuing operations compared to Q4 2023, primarily due to a decrease in administrative expenses of $952, a decrease in exploration expenses of $3,517, an increase in exchange rate expenses of $136, an increase in other (expenses) income of $135, a decrease in other income of $24 and an increase in financial income of $208. The decrease in administrative expenses was as a result of lower legal and professional expenses of $32, personnel expenses of $487, permit expenses of $369, depreciation expenses of $211 and marketing expenses of $77. The decrease in exploration expenses was as a result of the capitalization of expenses related to the Carina Project, resulting in lower chemical assays and drilling services of $2,802, personnel expenses of $529, travel expenses of $120, and other expenses of $67.
During Q4 2023, the Company incurred higher net losses from continuing operations compared to Q3 2023, primarily due to an increase in administrative expenses of $1,619, exploration expenses of $2,814, financial cost of $26, other income of $22, and a decrease in financial income of $262 and lower exchange rate expenses of $126. The increase in administrative expenses was primarily as a result of expenses related to the exploration in the Carina Project and the incorporation of the local administrative team to support operations carried out in Brazil, resulting in higher legal and professional expenses of $165, personnel expenses of $698, concessions and related permit expenses of $474, marketing expenses of $139 and depreciation and amortization expenses of $314. In addition, the decrease in administrative expenses was as a result of travel expenses of $29, contractor services expenses of $91 and other expenses of $51. The increase in exploration expenses relates to additional exploration works in the regions of Minas Gerais and Goiás, Brazil, and the preparation of preliminary economic assessments,
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which resulted in higher chemical assays of $246, personnel expenses of $260, geophysical and topographic studies, laboratory and related services of $1,602, travel expenses of $85, legal and professional expenses of $267, rental expenses of $303 which includes vehicles for transporting staff, warehouses and offices, and other expenses of $51.
The Company is in the development phase of both the Penco Module, the Carina Project and the U.S. Separation Project, which includes technical and feasibility studies and conducting exploration, as discussed in greater detail under the sections of this MD&A entitled "Development Activities", "Exploration Activities" and "Aclara Technologies - Separation" above. The Company has not generated any operating income as at Q3 2025.
FINANCIAL INSTRUMENTS
Nature and Extent
The Company's consolidated financial instruments consist of cash and cash equivalents. Cash and cash equivalents are included in current assets due to their short-term nature. The fair value of cash and cash equivalents approximates their book value.
The Company's consolidated financial instruments for Q3 2025, Q3 2024 and FY 2024 are as follows:
| Nine months ended September 30 | Year ended December 31 | ||
|---|---|---|---|
| 2025 | 2024 | 2024 | |
| Cash and cash equivalents | |||
| Current demand deposit accounts | 27,083 | 25,421 | 15,375 |
| Total Cash and cash equivalents | 27,083 | 25,421 | 15,375 |
Financial Instrument Risks
The Company manages risks to minimize potential losses by investing cash in the short term to reduce inflationary risks. The terms of the Company's short-term financial instruments are on arm's length terms and entered into with banks and institutional lenders. The primary objective is to ensure that the risks are properly identified and that the capital base is adequate in relation to those risks. The Company's risk exposure in respect of its financial instruments is summarized below.
Foreign Currency Risk
The Company is a development-stage mineral resources company and, accordingly, no income or operating costs have been recorded. The principal disbursements are denominated in Chilean pesos and Brazilian reals. The Company has deposits, trade and other payables and account payables to related parties stated in United States dollars.
Credit Risk
Credit risk relates to the Company's inability to make payment of their obligations as they become due. The Company is not exposed to credit risk as it does not currently engage in commercial activities.
Liquidity Risk
Liquidity risks relate to the Company's inability to obtain funds required to comply with its commitments, including the inability to sell a financial asset quickly enough and at a price close to its fair value. Management regularly monitors the Company's level of short- and medium-term liquidity and access to credit lines, in order to ensure appropriate financing is available for its operations. As of the date of this MD&A, Aclara Brazil has access to project development funding of up to $5 million under the DFC commitment, as described in the "Carina Project and Future Outlook" section of this MD&A.
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LIQUIDITY AND CAPITAL RESOURCES
Working Capital Requirements
The Company has working capital of $6.34 million as at the end of Q3 2025, and the Company's cash and cash equivalent position as at the end of Q3 2025 was $27.08 million.
Off-Balance Sheet Commitments
A summary of the Company's contractual obligations that must be satisfied with cash, and their approximate timing of payment, is as follows:
| (in thousands of US $) | Q4 2025 | FY 2026 | FY 2027 | FY 2028 | FY 2029 | FY 2030 | After 2031 |
|---|---|---|---|---|---|---|---|
| Operating Leases (1) | 155 | 186 | - | - | - | - | - |
| Other Obligations (2) | 131 | 1,137 | 759 | - | - | - | - |
| Total Contractual Obligations | 286 | 1,323 | 759 | - | - | - | - |
(1) Operating leases include office, warehouse, and vehicle leases.
(2) Other obligations include land acquisitions.
Cash and Liquidity
The Company did not have any commercial debt as at the end of Q3 2025. During the same period, the Company's financial position included project development funding of $0.5 million for the Carina Project. As at the end of Q3 2025, the Company had a cash and cash equivalent balance of $27.08 million.
On January 15, 2025, the Company received the second tranche payment of $12.5 million from CAP's strategic investment in REE Uno. To date, CAP has deposited two (2) of the three (3) tranches owed pursuant to the CAP Investment Agreement, totaling $22.2 million. The final tranche of $6.9 million is scheduled for deposit in January 2026.
On February 19, 2025, the Company received $25 million from its Private Placement. These funds, along with the cash balance from its wholly-owned subsidiaries, will finance planned capital and operating expenditures for the Carina Project throughout 2025. Additionally, the Company received a VAT refund of $6.92 million in cash during Q2 2025, related to a VAT tax benefit for the Penco Module project expenses. The Company's present cash resources are sufficient to meet all its current liabilities and administrative and overhead expenses for the next 18 months.
Capital Resources
The Company's focus in FY 2025 is the continued advancement and development of the Penco Module, the Carina Project, the U.S. Separation Project and any potential future modules located in the concessions beneficially held by the Company.
The primary uses of capital resources in 2025 are expected to include:
| (in thousands of US $) | 2025 |
|---|---|
| Activities in connection with the Penco Module | 10,429 |
| Permitting and community engagement expenditures | 3,415 |
| Engineering activities | 1,555 |
| Surface land purchase and mining concessions | 1,495 |
| Administrative and personnel expenses | 3,964 |
| Activities in connection with the Carina Project | 24,264 |
| Drilling and related exploration expenses | 6,487 |
| Engineering and piloting | 9,970 |
As the Company does not currently generate cash flow from operating activities, the Company will be relying on further equity and/or debt financing, or a strategic partnership, as the most likely sources of additional funds for the development of the Penco Module, the Carina Project, the U.S. Separation Project, and any potential future modules, to the extent necessary.
RELATED PARTY TRANSACTIONS
Key Management Compensation
Key management personnel include those persons having authority and responsibility for planning, directing, and controlling the activities of the Company.
As at the nine months ended 2025, the remuneration of the Company's key management totaled $4.19 million, as compared to the same period in 2024 in which remuneration of the Company's key management totaled $3.66 million.
| September 30 | September 30 | |
|---|---|---|
| (in thousands of US $) | 2025 | 2024 |
| Compensation of key management personnel | ||
| Shared-based payments (1) | 512 | 1,051 |
| Short-term employee benefits | 3,682 | 2,609 |
| Total compensation paid to key management personnel | 4,195 | 3,660 |
(1) Amortized share-based payment expenses due to restricted share units granted to management.
Related Party Transactions
The Company was subject to the following related-party balances and transactions as at nine months ended September Q3 2025, Q3 2024 and FY 2024:
| Accounts payable | |||
|---|---|---|---|
| Nine months ended September 30 | Year ended December 31 | ||
| (in thousands of US $) | 2025 | 2024 | 2024 |
| Compañia Minera Ares S.A.C. | 2 | 2 | 19 |
| CAP | - | - | 6 |
| Total | 2 | 2 | 25 |
| Accounts receivable | |||
| Nine months ended September 30 | Year ended December 31 | ||
| (in thousands of US $) | 2025 | 2024 | 2024 |
| Aclara Metals - Joint venture | - | 11 | 17 |
| CAP | 6,937 | 19,417 | 19,418 |
| Total | 6,937 | 19,428 | 19,435 |
Compañia Minera Ares S.A.C., as a member of Hochschild Mining PLC, is a related party and provides intercompany administrative services pursuant to the terms of a transition services agreement that continues to date.
CAP, a related party and investor in REE Uno, has made a capital contribution to REE Uno in exchange for 20% of the issued and outstanding share capital of REE Uno. As a result, the Company has an accounts receivable for one (1) of the three (3) installments of this contribution.
Accounts payable with Compañía Minera Ares S.A.C. amounted to $2 as at September 2025, compared to accounts payable of $2 as at September 2024.
Accounts receivable with CAP amounted to $6.93 million as at September 2025, compared to accounts receivable of $19.42 million as at September 2024. This decrease was primarily due to paying the second installment in relation to the capital contribution made by CAP.
OUTSTANDING SHARE DATA
As of the date of this MD&A, the Company's issued and outstanding share capital is comprised of an aggregate of 219,985,221 common shares and 3,977,216 restricted share units, which were issued in accordance with the terms of the Company's long-term incentive plan.
SIGNIFICANT ACCOUNTING POLICIES
The Company's accounting policies are described in Note 2 to the Financial Statements.
SIGNIFICANT EQUITY INVESTEE
Disclosure related to the Company's significant equity investee is provided under Notes 2 and 18 to the Financial Statements.
CAUTIONARY STATEMENTS AND READER ADVISORIES
Cautionary Note Regarding Forward-Looking Information
This MD&A includes "forward-looking information" and "forward-looking statements" within the meaning of applicable securities legislation (collectively referred to herein as "forward-looking statements") that is based on the opinions and estimates of management and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be 'taken', "will occur" or "will be achieved". All statements other than statements of historical fact are forward-looking statements and, in particular, any statements that refer to expectations, intentions, estimations, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances and similar words suggesting future outcomes or statements regarding an outlook. All statements in this MD&A that address events or developments that the Company expects to occur in the future are forward-looking statements.
Forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements. Such risks and
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uncertainties include, but are not limited to: operating in a foreign jurisdiction (including local political and socioeconomic issues); continued compliance with applicable laws and regulations; failure to obtain necessary permits and licenses or to renew them; timing and requirements of permits and third-party consents (as may be required); impact of social and environmental activism; relations and agreements with local communities; government regulation of mining operations; environmental compliance; actual production, capital and operating costs differing from those anticipated; price volatility of REE; statements regarding anticipated exploration, drilling, development, construction, permitting and other activities or achievements of Aclara; expectations, strategies and plans for the Penco Module, the Carina Project and the U.S. Separation Project, including in relation to geology, metallurgy, engineering, title, and environmental matters; expected costs and timing of development of the Penco Module, the Carina Project and the U.S. Separation Project; costs, location and timing of potential future exploration and drilling and the uncertain nature of such exploration and drilling activities; the impact of competition and applicable laws and regulations on the Company's operations and results; environmental risks and hazards; future objectives of the Company and growth and other strategies to achieve those objectives; future financial or operating performance of the Company; global markets for the demand and supply of REE; continued availability of required expertise and manpower; continued access to capital markets; future trends that may affect the Company's business and results of operations; possible emergence of new global pandemics and their impact on Aclara's operations; continued qualification for listing on the TSX; Aclara having further potential through exploration at the Penco Module and the Carina Project, and those risks associated with the mining industry, including delays or changes in plans with respect to exploration or development projects or capital expenditures; the uncertainty of resource estimates; the uncertainty of estimates and projections in relation to production, costs and expenses and health, safety and environmental risks; the risk of commodity price and foreign exchange rate fluctuations; as well as other factors identified and described in more detail in Aclara's most recent annual information form and its other filings with securities and regulatory authorities, which are available on SEDAR+ at www.sedarplus.ca.
Readers are cautioned that the foregoing list of risks, uncertainties and other factors is not exhaustive. The forward-looking statements contained in this document are made as of the date hereof and the Company undertakes no obligation to update publicly or revise any forward-looking statements or those in any other documents filed with Canadian securities regulatory authorities, whether as a result of new information, future events or otherwise, except in accordance with applicable securities laws. The forward-looking statements are expressly qualified by this cautionary statement.
Cautionary Note Regarding Mineral Reserves and Mineral Resources
This MD&A was prepared in accordance with Canadian standards for reporting of mineral resource estimates and the requirements of the securities laws in effect in Canada. In particular, and without limiting the generality of the foregoing, the terms "mineral reserve", "proven mineral reserve", "probable mineral reserve", "mineral resource", "measured mineral resource", "indicated mineral resource" and "inferred mineral resource" as may be used or referenced in this MD&A are Canadian mineral disclosure terms as defined in accordance with NI 43-101 and the guidelines set out in the Canadian Institute of Mining, Metallurgy and Petroleum (the "CIM") Standards on Mineral Resources and Mineral Reserves (the "CIM Standards"), adopted by the CIM Council, as amended. Such terms used but not otherwise defined herein have the meanings ascribed to them in the CIM Standards.
The mineral resource estimates noted in this MD&A are preliminary in nature and include inferred mineral resources that at present are considered too geologically speculative in nature to enable categorization as mineral reserves. There is no certainty that such preliminary economic assessments will be realized.
APPROVAL
The Board of Directors of Aclara has approved the disclosure contained in this MD&A.
ADDITIONAL INFORMATION
Additional information relating to the Company and its other continuous disclosure materials, including the annual information form, annual management's discussion and analysis and audited annual financial statements,
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consolidated financial statements, and notice of annual meeting of shareholders and management information circular is available on Aclara's website at www.aclara-re.com and on SEDAR+ at www.sedarplus.ca.