yeah everybody screams "Oh everywhere in USA and terrible." Well last year China exported to the US 60 kg of disposal 10 kg of turbium it's not really a very relevant market yeah energy i don't know if you've been following what's going on in the rare earth market mate have you been paying attention rare earths have become the hottest topic in global news right china US embargos export crunchdowns it's gone mainstream like the the conversation around rare earths which is kind of crazy because we're in the world of like mining news and I don't feel like I know enough about this yet somehow the mainstream has like an opinion on rare earth like rare earth projects like share prices of weird projects are going crazy it's a it's a it's a truly bizarre time weird projects to say the least yeah so I just really wanted to kind of get to the bottom of what's going on what it means what's relevant to markets um by summoning three of the best thinkers I know that are obsessed and addicted to the rare earth industry a truly allstar crowd like rare earth observer DK sustainable dude this is you know all-star type material to actually just teach us and help us and the money miners learn about what is going on right absolute allstar crowd i'm I'm pretty excited to share this conversation this panel of absolute rare earth experts JD is brought to you by the mining experts MMS mineral mining services mate the team that specializes in maximizing operational efficiencies across WA mine sites at MMS the go-to name when it comes to turnkey contract mining services all the way technical services to your open pit mining here's what you need to know money miners they will tailor the solution to fit your needs there is no job across the state that they can't handle they just get it done jd the proof is in the pudding here with the results they've delivered for companies across the state came from nowhere they are killing it get in touch with MMS and see what value they can unlock for you get it done go MMS go MMS utterly delighted to be joined by three of the preeminent experts in the rare earth industry this expert panel is led by none other than the rare earth observer Thomas Krummer everyone would be very familiar with your blog which is prolific for anyone who wants to get up the curve in rare earth an up and cominging person who's been writing very thoughtfully is Sustainable Dude which is the frog you see on camera right now hilarious well done i'm loving that sustainable dude and to round out the panel we've got Dylan Kelly or DK of Terra Capital who has come on before and has that investor lens in the buy side kind of equities and the names and has shared with us generously in the past his rules for investing in the very complex rare earths space because buy beware a lot of the time gentlemen thank you so much for making the time to talk about rare earth what a topical commodity to be talking about right now i've never seen rare earth so hot although I'm sure they have been in the past it's not entirely rare after all for it to be topical no true i think I also made a tweet about this before interesting rare was a red flag consider a red flag and now it's a market foresight so times can change absolutely what is going on i'm struggling to make sense of what's real what's not what's policy what's conjecture what is moving markets like if we were just to kind of step back and assume that I know nothing about what's happening geopolitically right now which is true what the hell is going on i want to go straight to the goat on all things in this subject matter thomas what's what's the story mate what's is the geopolitical problem reality or is it really just a fuss about nothing well when when China started messing around with with gallium and germanmanium I I am mused that if if they would blanket bananas exports this they would shoot themselves with an elephant rifle into both feet so and actually they didn't several years ago I think somebody in the Chinese Foreign Ministry said that China does not want to aid the production of weapons that can threaten China and what they did I think over many years was to work out which are the most relevant materials and I think this seven element ban or say dual use classification may have come anyway it is not really related to the trade war and that is why the Americans have also so much trouble to make the Chinese take a step back from that because from the Chinese side it may not be really related it would have come anyway my view for all of these seven elements for each of them there is at least one Pentagon contractor who is a major user of this product of the relevant product that is probably why these seven were chosen these seven also refer to the six strategic weaknesses that the Chinese military has published i think it's less trade war related also now the result from the talks in London shows that the Chinese side has absolutely no intention to reverse this in any way i'm quite interested like dual use makes total sense to me what I found really interesting is that like the six rare earths we've seen so skinny I'm leaving aside right now because it's like you covered in very different process than the other ones generally what I find interesting is it also coincides with very I would say vulnerable feed stock supply chain i'm wondering what your thoughts are does that play a role in this what we've seen today i I think Dan can sing a song about this it is in general a problem of everyone who wants to enter rare earth that um rare earth production rare separation rarest metal making and so on that the cost are and the capex are probably three times as high as they are in China by extension it would like last year in Tokyo we had the rare earth industry association conference and I was hosting a panel of junior minor rare earth hopefuls and I just tossed the question also what level must rare earth prices be so that you become feasible and it was unisono the same prices must go up three times that is a real problem it it's also related to the knowh how say if you look at recovery rates of of jun junior earth miners in in the west they are below anything that would be licensable even in China they really squeeze the lemon dry whereas we recover anywhere between 40 and 80% you know so that already is a cost factor the the knowhow interesting would you say like putting such a system in place like we've seen with this expert licensing system is also maybe to say Myomar really gets messy like it's already messy but there's still material flowing albe it very varying per month once it if that dries up is this something to to like are the trains like hatching them themselves here is that a possible scenario you see that one very common misunderstanding is that rare earth products should be commodities it is China has made great strides to commodities them to make sure that products are interchangeable and therefore there is more competition among manufacturers and of course you can trade them on exchanges yeah in the west we have no industrial standards for rare earth products i understand the International Standards Organization ISO has been on internationalizing Chinese industrial rare earth standards for 10 years and I'm not sure if that is the preference of the ISO but they've come up with sustainability standards recycling standards packaging standards you know all the fringe stuff but nothing of substance i asked one member of the group at ISO who is at it and he claimed that the United States part of the ISO is not so really interested in having standards for rare earth products so these are not commodities every user has his own purchase specification you know and their own test processes and so on nothing is standardized so you can't in the west these are specialty chemicals yeah and also you have to must really look at what are we actually buying in China about 60 to 70% of the imports of the US of Japan of the EU are the rare earth elements lansenum and cereal what do we use them for well we use them for the production of fossil fuels and the consumption thereof yeah so we are talking about fluid cracking catalyst for producing gasoline diesel whatever you want you know and we are talking about the catalytic converter in internal combustion engine and hybrid cars that is our main dependency in rare earth products no one talks about that magnet dependency that is written on a different piece of paper in terms of rare earth yeah everybody screams oh heavy rare earth and USA and terrible well last year China exported to the US 60 kg of disposium 10 kg of turbium metal yeah as metal not as oxide 10 tons of lancenum metal 12 kilos of scandium and 236 kilos of of metal alloys these are the metals if you go into the compounds there is a slightly different picture yeah but you know it's not really a very relevant market yeah no that's that's definitely a very good point i think would you say the main concern with the USA government would be more in the high performance magnets now that we see humanoids potentially being deployed EVs these kind of things yeah see the the primary dependence of the west is on the products that are made from rare earth including rare earth permanent magnets we have no value chain behind it that's why it's so funny you know if there's someone who says "Oh we are going to produce 4,000 tons of NDPR per year you know in Europe right?" So who do you sell it to there is nobody you need a metal maker who makes metal out of this and then you need a magnet maker who takes the metal but there is another little detail that everyone always forgets you know you leave the two elements neodyinium and prainium in the proportion that you found them in your deposit you don't separate them but these proportions are different from deposit to deposit like liners say 78 to 22 I don't know right now offh hand what is at MP materials you know the standard prescribes 75 to 25 85 to 15 70 to 30 you will not go lower than 70 to because then praodinium will kind of affect the cohesivity of the magnet these are not commodities you get chemical compositions prescribed by your customer and that says you have a 78 to 22 product and the customer wants 75 to 25 what do you do nobody is separating ND and PR so where should the balance come from to make a metal that is according to the specification of the customer yeah really people don't go into the details so that kind of throws into doubt the entire ability to have supply chain independence you know what I mean the specifications matter it's almost implausible to build out an entirely independent supply chain that can meet unique customer demands independent of China well it sounds to me like to that point policy makers are pushing far too hard thinking that they can build a supply chain out without realizing the full complexity of how many steps there are between pit top and finished product the second part being how much noise is thrown at the wrong end of that argument and continually sort of pushed ahead without really thinking through the complexity the cost and the economics of this it's farical to think that we're ever going to chase you know supply chains that are this discombobulated with some sort of economic return of any stretch even if we were to increase prices you know three to fourfold so in my mind I think there's so many mainstream narratives that are spun on this space that just don't hold up to reality i think Thomas you're making some good points just cutting them off but what do you make Thomas is the world going mad over something that's largely relevant there are several points to observe first of all I think it is important to understand that the higherformance NDFB magnets so these are the ones that still perform at high working temperature say 180° you know they are arguably maybe only half of the market you have to visualize that China last year exported 58,147 tons of rarest permanent magnets to 130 countries these are often commodity magnets that can stand a working temperature of maybe 80° C but which of our rare earth hopefuls wants to go for these magnets nobody all of them claim for themselves that they can manage the high-tech composition of permanent magnets that are reaching a working temperature of 180° C or even 230° C so they're trying the impossible rather than to go from the simple end first because you know since 2009 there has been no NDFB production in the United States you know in Germany Vakum have the minority joint venture with Juno San in Beijing where they get the blanks and ship them off to their subsidiaries for the final processing we should have actually gone from the simple stuff that we may be able to do then of course after 2014 when China lost the WTO case of the EU Japan and the US all efforts in the US rested everything just fell apart in the EU they continued but it was more to prove activity rather than to come up with something tangible so it was very important to support projects that are sustainable and environmentally benign it was not on getting something done we approached from two different ends and had nothing in the middle say it doesn't help us if we mine a rare earth or concentrates if we do not have the industry that uses this and separates the rare earth produces the more than 50 different compounds of rare earth that China exports to us and then a further downstream industry which takes part of this makes metals to supply those users who require metals yeah I think that's very unique about the supply chain as we see nowadays especially when we're trying to build a new west is we're trying to build this from upstream to downstream normally you would do it the other way around from downstream to upstream and like Thomas mentioned these these aren't really commodities in a general sense so there's there's so much variety between the the mineral concentrates you treat the carbonate if it's oxide the many many things and now we're seeing a host of junior mining projects which are trying to market their products they're finding no western buyers it's all going into China because China has many companies which can take these these very various products so I think one of the most important things to do is like Thomas said build your magnet capacity in the west and then go search for feed stock subsequently I would say like five six years ago we should have simply started doing NDFB magnets and we would have sourced the metals in China and we would have dared them not to supply them and at that time China had absolutely no appetite for confrontation so we may have actually succeeded of course what is always getting buried a little bit is the role that our Japanese friends played in this whole mess first of all Japan is regularly 40 to 50% of China's total rare compound and metal exports of the export value not of the volume the volume is smaller and they were sitting on the core patents for the NDFB magnets and Hitachi Methods had the arrogance to believe that they can influence the supply and demand of NDFB magnets if they control the licensing of their process that they don't give a license to anyone who wants one yeah but look at the whole market picture and see oh would this throw the market off balance you know and that is why the Chinese sued Hitachi medals they said they they're abusing their market power because the Hitachi matters if somebody was using Hitachi's process and starting to produce NDFB in China Hitachi would sue them but had this manufacturer asked for a license he wouldn't have gotten it from Itachi Metals had It Hit Itachi Metals not had this policy we would have probably a much larger distribution of NDFB magnets left right center and do you see any joint initiatives between the Japanese and the US in Europe now you have this project that involves solve less common metals and carrista and they based on the assumption that they can get the NIA Nibia critical metals project loft going which is benot time with a very favorable proportional composition but you know this project is moving at snail speed and I do not think it will get going before 2030 maybe not even beyond feed is definitely a problem which you see in many projects in the west I do think we see a changing western perspective on how we source especially heavy rare it concentrates we saw the recent MU M it's still an MOU but Linus entering an agreement with the Malaysian state of I've forgotten the state name but for ionic clay concentrate I think it might be a watershed point where western companies may follow suit here in Malaysia that western companies are opening themselves up for yeah what is effectively insitu ionic clay leeching which is environmentally questionable I would say I think Thomas and Dylan have some more perspective on this but I do know that that Malaysia is really looking to expand their industry i think they want to target like 30,000 tons of trio by 2030 10,000 tons of NDPR which is I think there might be Western companies that looking to tap into that i think that's an interesting interesting point who would have thought that the Malaysians would actually want to increase the amount of rare earth production is coming out of the country does it the license still expires in a couple years doesn't it no they they'll continue to roll it just long as the WLP doesn't come anywhere near them near them but I think yeah there's well one one point I wouldn't mind touching on is this notion that we all think about clays as being hosted in certain parts of southern China branching off into Myanmar but as we know clays somewhat abundant and there seems to be a whole series of discoveries after discoveries scattered all over the place at high rainfall areas minister Ice and the Caldera with MEI and VMM come to mind but also what Sarah Verto's got we're talking about some of the clays that are occurring up and down the Malaysian Peninsula i mean in my mind it seems like we're discovering them relatively frequently but the ability to actually bring these things into production is still another question thomas I wanted to get your thoughts on that in my mind I was working the thesis that if clay's work at Sarah Verde and it gets up and works and makes money we probably don't need to build another hard rock rare earth vertically integrated mine but it sounds like there's some troubles there there's still some questions over it first of all I would like to challenge the notion that we don't have enough feed stock china imported last year as direct feed stock to the rarest industry 177,000 tons what is the lack of feed stock here then on top of that if you add to that the heavy mineral sands which by and large in average may contain about 1% monoid some two some nothing china imported 6.8 8 million tons of that with the clear objective to extract monoite from it see a totally different problem here that is that rare earths love radioactivity so inevitably for practically most of the feed stocks which sometimes includes ionic clay there will be radioactive waste in the US there is only one private company that is licensed to dispose of such radioactive waste that is energy fuels in Europe because of not in my backyard there are only temporary reception facilities for nuclear waste it is almost impossible to to get some permanent facility going i understand they are commissioning now something for nuclear fuel rods in Finland but for this type of waste mostly thorium but then you have you have uranium you have actinium you have radium you know nobody wants to have it i mean so they still have thousands of tons lying around in the l shell factory since 1992 you know the total quantity got distributed this about 6,000 tons plus the rest of the quantity somewhat distributed in temporary shelters across France you know so the real point here is the the particularly the EU but also the Americans they actually can't handle it because they don't know where to put this waste and frankly they don't want to incur it because what the the the products say like electric vehicles shall appear appeal to to environmentalists also you know so how is that if if at the front door you know there are fights over permanent disposal facility for the radioactive waste that incurs when you want to produce the magnets for this electric vehicle you know then suddenly it doesn't feel so green anymore and that is actually behind EU policy they are looking for strategic partners you know as far as possible away so all this mess from mining and the radioactive waste subject is totally out of mind and out of sight you know they selected a project in Malavi as a strategic project for rare earth at their very front door at the EU affiliate in Norway there is a gigantic deposit that is really high in trio and that is very very prospective it beats anything else anywhere near the EU but it has not become a strategic project because it comes with ample portion of radioactive waste yeah that is the fact on on top of that they are also victims of the fog horns of junior rare earth miners who try to make people believe that you delight can be a a rare earth resource you know the research into separating rare earths out of udial has been going on in Russia since 1930 so far we don't have anything and now one of the miners in Sweden with a udilyte deposit he now says oh we looking for financing to first dig the UDLite out and then leave it there and wait until a process is found how to ext well we have the Russians have waited for 95 years you know so maybe wait another 95 yeah and it's the same in Greenland pin was tested in the URA program and I got very interested so I looked up all the documentation and everything but it was not clear if they ever managed to extract any rare earth from that so I wrote to the company who did the separation you know two times they didn't reply because they knew that I knew that they had failed you know this is of course a side say war zene but the real issue here is the environmental problems that the politicians in the US and also in the EU do not want to have these discussions about permanent disposal facilities of radioactive waste and things like that isn't the permanent disposal facility isn't that a sticking point for Linus in Malaysia like aren't they aren't they supposed to be building a a PDF in country there yes they do at great expense they also build a facility to produce rare carbonate in Australia and extract the thorium content there the composition of what is mined at Mount W has changed a little bit based on the previous composition Liner's output of sorium per year was approximately 150 tons in a huge stack of phospho gypsson i I think the company had a point when saying this is really almost irrelevant but Malaysia has been through the bucket mirror disaster of Asia rare earth a Mitsubishi company where the contractor who had been hired to dispose of the sorium waste properly had dutyfully discharged it wherever he deemed fit by the roadside basically you know and that created higher cancer rates miscarriages deformationations at birth and things like that the whole line so in Malaysia the rare earth mining that is now being supported from the ionic clays is called nonraactive rare earth mining so back to liners they had to build a facility but it's I mean what is a facility they dig a big hole and then they line it out with two liners of polyethatylene plastic and then they pile the phosphogen on it versus what we're doing in what Kouli throwing it on the back of a truck and just putting it back in pit no need carefree contrast it is it is seriously a problem and I think it would be much better if this was discussed openly and a solution would be offered rather than everybody keeps it under the carpet every junior miner who sends samples for analysis for every drill hole he gets the full composition of everything that is inside and if you read the drug reports you also see that sorium and uranium was tested but they never publish the results you have to dig that out you know and calculate back and then you come to a value that is the probably likely content of of radioactive material you know like this Pensana thing in Angola the whole area was pedled by the Angolan government for uranium and thorium you know and then early early Pensana in their previous incarnation as Rift Valley were careless enough to publish the results of thorium and uranium as well you know they will have 10 times the output of liners and no one looks at the consequences i think one point I'd add to there Thomas when it comes to the radioactive elements around the clays i managed to go out and visit Anstow not so long ago and I know I'm going to butcher some of the quotes there but one of the elements I came away from was the existence of lowgrade in a concentrate or low grade in situ issue it's what happens when you treat it in any sort of way you get this activation of isotopes of those elements into some far nastier things that perhaps well I couldn't actually name some of the elements that were getting thrown off but they sounded particularly bad and perhaps I just simplified that whole sector as being simple okay there's it's all the bad stuff has been washed away in situ it's all clean and green but it turns out hang on you add a little bit of add a little bit of heat add some chemicals among my Yeah it can dramatically accelerate the concentration of those nasties and make it a a transport handling issue and ultimately a disposal issue yeah and and I see hopeful in Brazil had the experience of that i look at it very primitively the generally thorium will drop out during flotation but the uranium content is water soluble you know this goes this can go all the way to the final product which also an American rare earth hopeful has experienced and this is really something that needs to be dragged out into the open i do not believe that we will get to any rare earth solution if we do not address these issues see the Chinese monazite is typical usual suspect monazite the classic monzite has about 5 to 6% of thorium and about 0.5 to 0.6% 6% of uranium inside plus other nasties but that is basically it you know so monazite is actually a fantastic or to use for rare earth you know for a rare separation it's not bad China banned the mining in 2012 because they had absolutely no control over where this waste is going and it was going into rivers and lakes you know and landfills and so on you know 2014 14 they closed all known IA deposits in South China also for environmental reasons this this this leeching with with ammonium sulfate is is a disaster for the water resources be it groundwater or surface water and if you I mean I'm sorry to say but in in in Malaysia I' I've seen two environmental risk assessments filed on ministry websites and the assessments were very open about it and they disappeared from the websites strangely you know this there this you know on the internet things evaporate you know you can't control it so this is something that they completely ignore in Malaysia this and that is not Good because what you know what is the alternative to INC2 leeching inc2 leeching you can leave the trees where they are if you go for strip mining and tank leeching you know what do you do to the rainforest yeah no absolutely intentioning might be even more environment actually I think iron absorption claims plays on aberration it's not going on top of that you know since we are not good at it we've seen that with junior miners with their trial leechings they manage to leech the physically bonded ions but the chemically bonded ones not so our recovery rates are anywhere between 40 and 60% on an already low trio resource yeah this is all not very good so I think it's an aberration i really think we should go for the traditional ores that are provenly working i'll happily take the other side of that trade just a bit the arbiter of companies doing things better than what they've been done in the past is your view there DK that insitu will return and it'll be done responsibly or do you think it'll be you know tank leing if it's going to be in Western hands through North American Australian listed group you're not going to get away with full stop it's just never going to get off the ground investors won't back it we won't back it these guys need to bend over backwards to ensure that whatever they're doing the footprint and the externalities environmentally are rock solid i mean I think every site visit that we went to in Brazil always went through the process about looking at what nearby mining operations from Borkside had done on the rehab front and there seems to be a pretty simple case about the fact that it's so low strip it's relatively like thick and therefore the footprint isn't actually that big and in such a high rainfall area the ability to regenerate was pretty high but it was all about the chemistry set about what you putting back into the ground i mean get rid of the ammonium sulfate of course but what was being put back in and I think that's what I observe to be probably spending a lot more time in terms of the test work trying to understand how can they put something back that's inert and the cost associated with that always seem to be lots of different tanks and lots of different complex parts of the flowheet trying to get that right can it be done well I'm not sure sure I haven't seen it yet but to do what what is like a cottage industry function in certain parts of southern China and now Myanmar they can't doing it like they've done it's not going to happen anywhere else that's got Western oversight so I kind of feel we could do it but at what cost and could they ever raise capital i doubt it what is going on with Sierra Verde at the moment i know that they needed more capital recently some ramp up challenges but will more capital fix their issues and they'll find a way to be profitable yeah so it's really hard sorry go ahead Thomas sorry no please go ahead no I I only have a few words to say about this i mean they're private we don't hear really much about them or they're not really putting any information out there there are some voices in the industry that say like they have problem with their filter systems which are kind of ruining recoveries there that's all I know so from what I've heard the ramp up is not going as planned maybe Thomas can give more perspective on this but this certainly has like influence on what what what we'll see happening in Meteoric and Fidas yeah the mining doesn't only happen in Myanmar it also happens in Laos at everinccreasing rates and also in Malaysia we are seeing more and more coming out of Malaysia i know some a couple of guys there there is of course Chinese capital and Chinese labor involved in Malaysia anyway it is done the cheapest possible way and if you pump ammonium sulfate solution into the ground 10 millions of liters you know it's naive to assume that you could clean this up in any way this simply doesn't happen so tank leeching well we know that these type of clays they are found in areas of heat and a lot of rain so that's basically tropical rainforest so if we say okay this deposit is very wide it is only 40 m deep or let it be 50 m we strip mine it you have to remove all the greenery and you will not restore a forest within a few years it simply doesn't happen there are also cases where strip mining is removing a layer of clay that used to be holding the water you know so that the soil remained humid and suddenly you have desertification some satellite photos from Myanmar suggest that happening you know so I really do not believe in iron absorption clays being a solution of the problem so that raises an interesting question say we don't want to source heavy from ionic clays where do we source them i mean very small deposits it's al sometimes part of monzite deposits monzite itself tends to have a favorable composition and don't forget we are engineering for example for the magnet rare earths whether in the west or in the east particularly in China we are engineering the heavy rare earths out because well this is something that most junior rare earth miners simply don't understand the rare earth's inherent imbalance every deposit has a different proportional composition but none of them has a composition that is exactly according to the market demand so that means if we want to produce enough neodyenium for the market demand we overproduce lansenome serium and samarium and we underproduce disprosium turbium and probably so if we then say ah no no no we change that we make this proium the target and we produce this proium according to market demand then we will overproduce also neodyinium and proinium and everything else for that matter and god save us if tulium one day should take off the whole balance will be screwed you have to there's a reason why lansenon costs only 60 cent there's a reason why serium only costs $160 there's a reason why turbium costs $1,000 you throw the whole thing out of balance whatever you do and this is something the Chinese have been wrestling with for decades and people from the outside who look at it they think "Oh they are manipulating the prices they keep it cheap in order to keep us out of the market." Nothing could be further from the truth it is supply and demand and it's a living hell of the rare earth inherent imbalance that you see at work that's all very good points i totally agree with you there which does raise an interesting question you talked about natural ratios we've seen big carbon tides in monoite cenotime is very different but since I only know of one pure play cenotime deposit which has like a small chance of making it brown range I think you know it very well so what could we if we don't want to do insitu leeching what could possibly fill this gap are there more pure cenino time deposits do price need to rise in order for bronze range to be economical uh first of all there are two projects under development one is northern minerals and the other one is Namibia critical metals these are the famous ones under development the other thing is and that is also where China is the trailblazer they engineer this proium and turbium out of the magnet for example they have a technology and it's patent and it's grain boundary diffusion the idea is okay we need to alloy the NDFB magnet so it becomes more heat resistant but where does the heat impact the magnet on the surface not inside so inside you don't need that much disposium you actually don't need any at all you need it at the outside this grain boundary diffusion technology allows them to reduce the disposium content while maintaining the temperature resistance You know so so the there are two ways to address this one is of course produce a little bit more but the other one is to engineer them out of the applications as far as possible to what degree do you think like the easy gains have been made on that front like has been around for a couple years like yes we see a man plateau here or will we see further reduction well there's there's another trend that was discussed last year at the Rare Earth Industry Association conference i do not know what has become of this but it's simply cooling you have a cooling system you have batteries that get hot and when they get hot they don't perform that well so there are automotive developers who work on an electric vehicle cooling system in which case you don't need a working temperature for the magnet of say 180° C but you could maybe live with 150 or even lower that's the application research we must not forget that the western automotive manufacturers like things cheap the neodyinium magnet is the most energy efficient and powerful and lightweight magnet that we know and but you know do we do we need passenger vehicles with 400 horsepowers that accelerate from 0 to 100 kilometers an hour in 3 seconds in on our highways and in our congested cities i mean I had a car in Toronto you know jogging was faster so to say there are alternative motors say magnet based ones or you look at BMW they who build a complete power train all this is possible of course then defenders of NDFB and of top performance will say oh but then the battery then you don't get a range of 800 kilmters you only get 600 km who cares seriously battery technology is moving on we are going to see the solid solid state battery with a range of,00 kilm given an NDFB motor if it then with a ferite motor only delivers 700 km who cares yeah pk you've had a long time view on backing the incumbents i'm curious to hear your somewhat enthusiasm from an equity perspective on the Ionics have your rules changed so let's go back over the rules quickly so back the incumbents barriers to entry far too high capital cost operating cost economic returns are a no-go number two never go full stay upstream you go from a mine to a concentrate maybe a carbonate and that way you're probably going to just do a forest gump or a rainman like to go any further downstream into separated oxides through through corn mix carbonate crack it separated that's to go full that's like I am Sam simple jack simple jack so very very sort of precise focus on the strategy blow sheet and the test work final element if we do start straying into large scale separation tech you need the explicit backing of a state so what we've seen with Aluca coming in being backed by Australia Bosi by the US what Lionus did had with the Japanese that sort of equivalent sort of backing so the strategies I thought were appealing around Clay's remained relatively positive i think everything was hinging on this Sarah Verde getting up and the trouble that we just discussed briefly before indicates that well the problems are perhaps more than we thought and if it's a black box and no news is getting out and I think Thomas has put out a couple of posts citing the fact that they've had some straggly export trade data come out that indicates that it's perhaps not working well maybe the work wasn't done enough maybe it was forced at the wrong time by a private equity group that perhaps wasn't necessarily focused on the problems on the ground with solving that needed to happen on the flow sheet in my mind I find it very hard to get constructive on other types of development plays in the equity space i think Brazilian rare earths and what they're doing or perhaps what they've got with this high-grade high uranium you know high-grade core was it TRO values of over 10% 4,000 ppm uranium that's something different that's interesting that's high NSR material but obviously there's the problems of the flow so in my mind MEI BMM they still have a strategic appeal in terms of that potential sort of disruption concept but I think Thomas is making some good points there around rehab treatment properly and I think some of our recent technical discussions or deeper dives there have indicated that we've perhaps simplified the radionucleide issues to a point where we're overlooking far bigger problems like the chemistry set in these things is unbelievably complicated no matter which set you look at clays are something different only a couple of stages basic bleaching but every time I've looked at project the closer you dig the more convoluted and complex it becomes so I think in my mind you're still backing the incumbents and I say smaller isolated exposure to those that can disrupt the market through conventional simple means by only going upstream focusing on those names i found that point on Sierra Verde interesting JD like you know what what may maybe some work wasn't done properly to understand things when you were doing the work to put it all together maybe things were you know is that a function of the amount of drilling that was done is that a function of the sample management because you know what sorts out both of those things poking a few holes in mate really drilling and if you are going to drill mate there's only one team to go with the mighty K drill K drill mate doesn't matter if there's a few exploration holes or a multi-year program to prove it up they'll look after you and like you were saying mate not just a matter of punching in the meters right you want to get it done safely and you want to get it done productively no downtime no dramas no hassle adriill beyond productive drilling you want sampling sample matters mate it's got to be reliable clean accurate no contamination you've got to be able to trust the numbers and last but not least mate the team has got decades of years of experience they'll mobilize quickly and they'll just get the job done doesn't matter where in the state they are they get the job done for you it doesn't matter the type of drilling they find a way it's just simple as that go K drill look at the market caps of Lionus and MP and what like Linus is like a $9 billion Australian company now and doesn't make money like topline revenue in the entire like between MP and Linus is like 550 million last quarter and look at the collective market cap at those two companies it's it's enormous so the equity valuations are baking in much much much higher prices is it realistic to think that way about the future i suppose it's more of a discussion for the team here look in my mind businesses like this it's not a producing a commodity it's producing specialty chemical product they can do so at high margin to a very grateful customer base that's got some sort of certainty for an exchina supply chain it's hard to do barry's the most enormous they probably should be trading at something like a uranium chemico kind of multiple i don't necessarily think about this in terms of like an NDPR function but you've got to value these guys somehow on a commodity price in the future but this is a very complicated product to put wrap your head around in terms of the supply and demand function and what's going on in China so all I'll say and I'll lead into my two colleagues here in my mind yes prices need to rise what three-fold in order to get to incentive levels for western developers but what's missing from that discussion is what cost of production is for an upstart in the developing world and their cost of production and their cost of capital in my mind there's a lot of supply that can come on as we know it's pretty abundant in the Earth's crust if there's a simple processing mechanism that can be tapped we've got to be thinking about this alongside an existing cost of production competition yeah those are very interesting points you make that and I totally agree also to your point of investing upstream to the concentrated carbonate level i totally agree there especially when you're producing concentrate we see so many miners who just fill at the PA studies for the concentrate so they just decide to go to carbonate but the funny fact is carbonet it's a 0% margin value at there it's not making any money it's even just inflating your capex and your ability to get this mine online i actually do take the counterpoint there i think there's a lot of supply that might come online in the next few years in the short term 3 to 5 years have quite some confidence in energy fuels the main cost structure in producing oxide is the concentrate itself what energy fuels is doing very smartly is they're sourcing their monocide byproducts from their heavy mineral sands so they can probably source at like half the concentrate cost of other producers which gives them some flexibility for their extraction circuit and oxide production there to do that low cost also on Brazilian raids I'm finding these guys pretty interesting i do agree that the flowheet it's probably more complex than we've seen to date in many miners they found this new mineral face it's called Chef Kenite we haven't seen this on a commercial scale to date in the industry but actually published today some pretty interesting metallergy results on their em so they produced clean em just with direct leaching of their ore which is interesting i do agree like from a capital return perspective almost none of these miners are going to make it like let's look back at the last 20 years we've seen an MP resort we've seen Mount Wealth come into production and Zer Fury that's three minds in 20 years how many juniors are there out there probably 100 so you're really looking for these juniors if you're looking at hard work you're looking at like a high starter path high grades probably 15% trio some somewhere around that range if you want to have a capital payback and then you can go lower but let's realize that at MP it's like 6% trio which is already loss making so that's probably your lower boundary there i think if I may say why did Linus work because of course they have a very very patient financer who also had to rescue them in between and the more important thing they had a ready market Japan japan is the only functioning rare earth market outside China the rest of us are only extras basically so liners had the support from Japan from the Japanese non-government entity that is very governmental and the Japanese market that is very very important this is how they could grow MP materials in my opinion they could reopen the mind because the Chinese shareholder offered them the market to sell the concentrate mp were making money until they started fiddling around with things trying to introduce a separation process and separate NDPR and probably also some serum and that that I think is where the misery started because see liners now want to increase product capacity and but already now where does their NDPR go japan has a market of 5,200 tons of neodyinium and NDPR per year so where does the rest go china and then they conveniently stop separating at the pratium gap so they have the so-called SEG which is samarium herbium gadalinium and holmium which the concentrate of which they sent to China and they they can be so grateful that China is taking it and you know then then this me too company called Brazilian rare earth yeah they go and say oh we will produce a carbonate that is marketable marketable to whom please who will buy this yeah and then we will also have an SEG that will find a ready market where please you know assuming that China will forever be the trash can for junior rare earth minor concepts you know I would not be so sure we what we are looking at in the current politics may well be China getting selective on what it buys from whom previously China was not interested in what rare earth was produced from imported rare earth raw materials since this year it is so everything falls under quotota and then they've clearly shown that they may become selective because the Malaysian government has been asking China for rare earth technology for years for licensing so ahead of Xi Jinping's recent visit licenses were prepared for the INC2 leeching and the carbonate production from IA deposits a week before Xi Jinping went to Malaysia these licenses were ready to be sent but this is something that the miners in Malaysia already have they have the Chinese workers there they have the experts they have the geologists the ge geochemists everything is there they didn't need this but the Malaysian government of course didn't know so they were really really grateful about these licenses yeah but China has absolutely no intention to go beyond that one thing I'd like to remark with regard to carbonate also there's a very clearly visible trend that instead of shipping a comparatively low price carbonate Myanmar La and also recently Malaysia actually ship mixed oxides so after calcination basically the the difference is you do not the end user does not need to calcinate anymore and can probably go directly into the solvent extraction so this increases also the number of customers so anyway but you know I think we we have to slowly get used to a situation where China is not available anymore to take junior minor raw materials and that we are stuck with do it yourself and then we also have to look at you know producing market adequate quantities it doesn't help you if you have a gigantic separation facility if only for a fraction you have a market domestically and need to export the rest against China you know so I think we need a complete rethink isn't it kind of perplexing then if we all kind of agree that the equity case for almost every opportunity is dismal is it perplexing how much brain power we all put into this specialty commodity no m ever spent any time looking at some of the detailed financials about how much mining companies actually make that's a very good point and I mean what's also interesting is when we look at all these juniors they all publish their MP studies you you name it like you say it's dismissal like almost none of these can ever make money but I think something we have to accept is look at MP look at blindness they traded like five times their MPV fee like that's just marked reality so it's very risky to invest in a junior based on that perception that after once you start producing it's going to rerate to such an level but it's something we have to keep in mind but basically if you're still a junior and you value it on an NFV basis it's very risky and none of these juniors are except a couple in my mind are interesting to look at as a long-term investment we're also a little bit unfair in our western civilized nations we completely lack the value chain of rare earth so for junior miners to show something that is interesting they have to get into something that they are actually not experts in and can never be for a minor he's turning out a concentrate that's it he's not supposed to produce any FEB magnet the networking capital will crush him forget it it just doesn't work or have you ever heard of an iron ore miner who's producing precision steel tubes yeah so this would be the equivalent yeah so it's maybe the expectation level is too high what I would recommend is having a really really close look how the value chain is structured in China which is everyone is a specialist in his particular part of the value chain and these are companies that are independent that they have their own profit loss and balance sheet to make sure that at every step of the chain there's at least break even and at every step of the chain you have your own imbalances in rare earth so if you try to bring that under one roof you will create one big mess keep it separate one specialist one specialist one special one specialist do not force your junior miners to to produce something they have no clue about it's not fair mind a magnet that's the mission of the junior miner that isn't even a minor yet that's that's super special in that case that's like Yeah oxides is one thing metal then to magnets no that's that's brain dead so this this is like a pregnancy you know at the beginning in months one you you produce some ore and probably nine months later you know you will finally produce some marketable product in form of a separated metal yeah not good and I think this unfair because it also drives the capital requirements through the roof and all that the approach of UKOR is actually quite okay unfortunately they have a process there which probably doesn't work because I mean the masters of grand the grandmasters of rare earth in China have given up on a similar process already in 2011 but this is actually the correct approach and some private companies particularly in the US and Europe who also say no no no we don't do any mining we do this separation that's our job and then LCM come in metal maker metal expert nobody will challenge them because they are the guys who know how to do this yeah and the same goes further downstream than for example for the magnet makers thomas what are we what are we to the to make of I mean you talked about like why was Liner successful they had the market before the selling we live in a time now where you know a project like any other is is getting financed there's no market for that product so now the government's coming in and that will be the market they'll buy the product like what what are we meant to make of that like which project alucas any Australia my primitive view is you you can already not profitably mine nickel in Australia what makes you think that will be any better so I really think that the capital expenditure amounts that are put out there for these projects in general are way too high i mean even heavy mineral sands you know the amounts are just flabbergasting this this doesn't fly i think that is more of a general problem in Australia yeah and $2 billion for a separation of monazite is if we're lucky Australian dollars of course but this is it's too much it cannot it cannot be yeah cannot work what do you make of the current status of geopolitical dynamics with rare earth being this real point of leverage do we expect any change here do we think things will ease on any of the fronts in that respect or do you think this is the new status quo the capacities in China are gigantic you have basically three dominant compound manufacturers plus about several dozens of independents and the the I I don't want to be too specific but I think the the base capacity for separation in China is 510,000 tons and then you have a rare earth permanent magnet capacity that is above 600,000 tons already last year the utilization rate in rare earth permanent magnet in China was barely 60% i've done metal business for about 20 years and in my opinion any utilization rate below 70% and you start writing losses you know with this in the background I completely fail in understanding how China wants to hamper exports as I mentioned last year they exported 58,147 tons of rare earth permanent magnets to 130 countries This is an enormously dominant position and now they force practically the main players to have their own supply where does this leave China's monopoly where does this leave the advances that they made it will all come to nothing we must hear the explosions and we must do something so and I think in in terms of of EU the idea with so and carrista is nice but we have to address the issue of processing primary raw materials in the EU with the resulting radioactive waste this must come onto the table this is the problem of the origin countries you cannot do that this is not okay if you want to benefit from the added value you also have to deal with the problems and don't forget all of them signed on to the treaty of nuclear non-prololiferation the NPT there are accession protocols where there are quantities inside which define how much radioactive material you can produce a year and all of them will exceed them so the IAA would need to be involved if you want to leave it in the countries of origin so I think there we should be more forthcoming and honest no I totally agree there and I think that's a very big advantage that China has china is a country lead by engineers by smart people who see this as it is we also tend to be very emotional in that sense i guess radioactive is is bad stuff it is bad but if you handle it in a proper way it's effects can be mitigated very efficiently and if you want to produce anything of volume in in the west we need to deal with this stuff we need to deal with thorium glacer relatively low on thorium but any hard project that's not passenger side will be high in thorium you can produce a relatively clean thorium concentrate you can put it back back in the pit there are multiple solutions there we need to address this if we want to make have a chance as a western supply chain yeah I think for me perhaps I was being a bit dismissive of the sector in terms of its ability to generate cash in my mind it's very simple for us to over simplify what's going on here if we've learned anything from the last 30 years of BHP and Rio eliminating the downstream it's always to focus on what it can do best focus on the upstream we're a country or in this part of the world or primary markets we're a digging ship economy we're still pushing product offshore so I think to do the advanced chemical engineering takes a different set of skills and a different set of knowledge to be able to navigate how to do this in an economic way in my mind I'm still still find it fascinating i still think there's a lot of alpha to be found but understanding the chemistry and the complexity of these flowheets and the permitting I think there's a lot more work still to be done but I'm still enjoying it and particularly enjoying talking about it with these two gents is there any like market activity we can anticipate like guys have any theories about deals in the space that make sense or are likely can we go back to that it was only a very small news blip but Lionus and MP possibly coming together it's old news but I always like the notion that if we're going to compete with China in any way shape or form you're doing you're better off doing this together consolidating rest of world supply I think strategically and from a marketing perspective makes a lot of sense not that I know anything in particular but that's something that's rattling around in the back of my head and the ability to grow in with manufacturing reshoring nearshoring going on I think that opens up several possibilities so in my mind that's something I'm keeping a close eye on i'm also keeping an eye on what's happening with I Luca in terms of third party feed stock that's something that continues to burn in the back of my mind and what opportunities that may open up whether it's for an NTEU there's some development company or development projects that look pretty good on face value that might be coming in into the space we still need to see how they're going to get a price that's going to justify the investment so coming back to that point around price bifocation which I think is a bit of a fantasy maybe we do not need to start seeing what we what happened in the US whereby correct me if I'm wrong here Thomas but there was some sort of domestic incentive price or floor price given to US producers of a domestically manufactured magnet was it $25 or $30 US relative to the Chinese price at the time which was something around 20 if you produced it in the US there's a $5 there's a $5 head start that type of mechanism I thought was really interesting and might lead the way in terms of getting us to figure this out on the downstream economic side of things how this should work and also a free open checkbook from the Australian government or the US also helps excellent guys thank you so much for sharing your insights this has been just awesome truly grateful for the shared expertise of the three of you it's been an absolute delight so thanks so much guys cheers cheers thank you thanks how good was that i think we got some partners to thank after that absolutely ripping conversation jd hey after that ripping conversation we've got some ripping partners to thank a big thank you to Mineral Mining Services Grounded Sandbit Ground Support Cadriel Crossboundary Energy ODO now remember I'm an idiot jd is an idiot if you thought any of this was anything other than entertainment you're an idiot and you need to read out a disclaimer