Overview

Pele Mountain Resources (TSX-V:GEM) "Pele Mountain" is a Canadian mineral exploration and development company formed to acquire mineral resource properties and to carry out mineral exploration and development activities in Canada. Its flagship project is its 100% owned Eco Ridge Mine uranium and rare earth elements project near Elliot Lake in Northern Ontario.

We have a renewed interest in Pele Mountain Resources because of increasing market focus on uranium, rare earth elements (REE), and gold. Pele Mountain is exploring and developing properties containing each of these resources. Pele Mountain represents for us a potentially exciting, long-term, triple play, but we are particularly excited by its emphasis on rare earth elements. On Sept 28, 2010, the company announced that, based on the production rate used in Pele's October 2007 NI 43-101 Scoping Study (the "Scoping Study") by Scott Wilson Roscoe Postle Associates ("Scott Wilson RPA"), Eco Ridge leach solutions could contain up to 218,000 kilograms of recoverable total Rare Earth Oxides ("TREO") annually, in addition to 826,000 pounds of uranium oxide. These projections are based on the Scoping Study and on rare earth oxide ("REO") assays from 30 widely spaced drill holes and the results of leach tests performed at SGS Canada Inc. Fifty percent of this TREO would be heavy rare earth oxides ("HREO") plus Yttrium.

Regarding REO market developments, Pele's rare metal's advisor, Dr. William Bird commented, "China, which produces about 97-percent of the worldwide supply of REO, has recently reduced its REO export quotas by up to 70-percent. These new export restrictions have sparked a rush to find and bring to production new sources of REO outside of China. The Elliot Lake uranium deposits, such as Pele's Eco Ridge Mine project, are ideally positioned to supply significant REO to the western world. They are well-understood deposits that have produced REO commercially in the recent past. They are in a politically stable and mining-friendly area of Ontario and much of the infrastructure is in place to very quickly produce again."

Development

All 30 drill holes that Pele Mountain has analyzed for REO to-date have contained significant REO. A total of 29 of the 30 analyzed holes were drilled over an area 2 kilometres across strike and 1 kilometre down dip within the area of the defined NI 43-101 uranium resources. The outlying hole was located north of the classified resources and intersected the down-dip continuation of both uranium and REO mineralization beyond the resource area. Assays for each individual REO are contained in the chart available at http://www.pelemountain.com/pdfs/092710_REOtable.pdf

HREO plus Yttrium have demonstrated good recoverability in leach testing on Pele's drill core at SGS Canada Inc. Section 16 of the Scoping Study states, "overall leach extraction of heavy rare earths (terbium, dysprosium, erbium, holmium, thulium, ytterbium and lutetium) plus yttrium, in all leach tests averaged 64%." http://www.pelemountain.com/pdfs/Table2_RareEarthExtraction.pdf

With regard to REE recovery, Dr. Bird stated, "This means that up to 64-percent of these valuable heavy REE, which occur with the uranium at Eco Ridge, are available in the uranium leach solutions, at no extra mining or milling costs. Chemical extraction of the REE from the uranium leach solutions at Elliot Lake has been commercially successful in the past. Pele is assessing extraction and recovery opportunities for REE by-products, along with an assessment of their potential contribution toward project economics for inclusion in future Eco Ridge Mine economic modeling purposes."

Rare Earth Element Applications

The range of applications in which REEs are used is extraordinarily wide, from the everyday (automotive catalysts and petroleum cracking catalysts, flints for lighters, pigments for glass and ceramics and compounds for polishing glass) to the highly specialized (miniature nuclear batteries, lasers repeaters, superconductors and miniature magnets). Heavy REEs, such as those found at Elliot Lake are particularly valuable and identified by the US military as strategic and critical. They are use in nuclear applications, electron and laser technology, and telecommunications. Within the defence industry, REEs are essential in the manufacture of anti-missile defence weapons, aircraft parts, communications systems, electronic countermeasures, jet engines, rockets, underwater mine detection, missile guidance systems and space-based satellite power.

The Geo-political Dimension

Despite the fact that rare earth metals are classified as critical minerals in the U.S. National Academies' "criticality matrix," the U.S. National Defence Stockpile at present contains none. This is a significant limitation given China's demonstrated willingness to use REE exports as foreign policy leverage. As China's unofficial REE embargo on rare earth exports to Japan continues into its fourth week, questions are now surfacing regarding the impact this is having on Japanese industry. Japan is particularly vulnerable to supply chain interruptions because of their reliance on "just in time" (JIT) techniques which minimize the very kind of stockpiled inventory that might provide a cushion in the event of an extended cut-off in supply.  The New York Times indicated that Japanese manufacturers might begin encountering shortages as early as late last week, and that if supplies do not resume shortly, Japan and its allies may consider filing an official WTO complaint. The irony is that China, too, may eventually have to import heavy REEs.  Chinese foreign trade sources, as far back as 1996 have stated that China is not the only country that has these deposits, but it has been carrying the lion's share of their supply for more than a decade, at the cost of quickly depleting its own resources and hurting its environment.

Trading at $0.17, on rising volume, we believe Pele Mountain, once again, offers investors the potential for significant share appreciation.

Risks:

By its nature, exploring and mining is a risky business and there is no guarantee that current exploration programs will result in profitable and accident-free mining operations. The recoverability of the carrying value of interest in mineral properties and the Company's continued existence is dependent upon the discovery of economically recoverable reserves, the achievement of profitable operations, and the ability of the Company to raise additional financing, if necessary, or alternatively upon the Company's ability to dispose of its interests on an advantageous basis.

The Company has no resource properties in production and, consequently, has no current operating income or cash flow from its mineral property exploration and development operations at this time.  The Company has recorded losses in all of the three most recently completed fiscal years and expects to continue to record losses until such time as an economic resource is identified, developed and brought into profitable commercial operation on one or more of the Company's properties or otherwise disposed of at a profit.

Finally, all phases of the Company's operations are or will be subject to environmental regulation in any jurisdictions in which it does or may operate. These regulations mandate, among other things, the maintenance of air and water quality standards and land reclamation. Environmental legislation is evolving in a manner which will require stricter standards and enforcement, increased fines and penalties for non-compliance, more stringent environmental assessments of proposed projects and a heightened degree of responsibility for companies and their officers, directors and employees. Pele is aware of these issues and actively complying with them. Social, economic and environmental impacts have been considered in all stages of the development. Extensive aquatic and terrestrial assessments have been undertaken on the project area and no significant environmental concerns have been identified.

Management:

Alan Shefsky B.A., J.D. - President & Director

Mr. Shefsky founded Pele Mountain Resources in 1996 and has been President of the Company since that time. He has provided leadership and vision in property acquisitions, financing, and negotiating joint ventures with other industry leaders. He holds a B.A. in Economics from the University of Western Ontario and a Juris Doctor degree from the Pepperdine University School of Law.

Fergus Kerr, P. Eng. - Vice President, Uranium Operations

Mr. Kerr joined the Company as a consultant to lead its Elliot Lake Uranium Mine Project in 2007, becoming a Vice-President in January 2008. He has more than 35 years of mining industry experience, including 14 years in Elliot Lake as General Manager, Manager of Mining and Mine Superintendent for Denison Mines and 7 years as mine manager at Inco's Sudbury operations. Mr. Kerr has also served as a Sector Director of the Workplace Safety and Insurance Board of Ontario and is currently an Adjunct Professor at Laurentian University, lecturing on occupational health engineering.

James Andersen, CA, CPA (Illinois), Vice President, Finance, CFO

Mr. Andersen joined the Company in 2007. He is a principal of Andersen and Company Professional Corp., an accounting firm in Toronto, and has more than 15 years experience in public accounting practice.

Dr. William Bird - Rare Earth Advisor

Dr. Bird has more than 40 years of mining-industry experience and is renowned for his expertise in rare-earth elements ("REE"). He has served as a senior executive of several successful publically traded resource companies, including as CEO of Rare Element Resources Ltd. (TSX Venture: RES), owner of the Bear Lodge REE and gold deposits, from 2005 until 2007. He is currently President and CEO of Medallion Resources (TSX Venture: MDL), which is focused on the acquisition and exploration of REE projects. Dr. Bird earned a Ph.D. in Geology from the Colorado School of Mines.

Disclosure: This is an independent report. Pele Mountain Resources has not remunerated Mark Weaver (www.MoneyinMetals.com) or Jay Taylor for these comments. Neither Mark Weaver nor Jay Taylor own shares in Pele Mountain Resources at the time of publication.