Standard metallographic preparation of a two-phase alloy, RFe 2 plus R, where R represents a Dy + Tb metal phase, has shown that one often finds a blue phase in the regions suspected to be the Dy + Tb metal phase. By examining chemical shifts of the rare earth metals in both the Auger and electron loss spectra it is demonstrated that the blue phase is a rare earth dihydride. A new technique, reflected electron loss mapping, is shown to provide an excellent method for revealing the location of the dihydride phase. Sputtering experiments confirm that the blue phase is located only near the polished surface and it is concluded that this rare earth dihydride forms upon mechanical polishing. Other evidence is presented which shows that dihydride formation can be a common problem in the metallographic preparation of rare earth alloys.