An Update on London’s Position Regarding COVID-19 with Jakob Hiller

To gain an insider’s perspective of the social changes facing London, Ryan Morfin speaks with Jakob Hiller, Chief of Staff to the General Counsel, Deloitte North-West Europe.
To gain an insider’s perspective of the social changes facing London, Ryan Morfin speaks with Jakob Hiller, Chief of Staff to the General Counsel, Deloitte North-West Europe. Since our last update about London, the UK government has provided clarity on their expectations for minimum contact between its citizens and what a person should do if they have been exposed to the virus. The United Kingdom has altered its citizens’ day-to-day lives by making any out-of-the-house activities, except shopping and exercising, punishable by law; in Italy, those who do not comply with similar rules are subject to a 1000 Euro fine.

Hiller underscores his concern about what he sees as an ongoing information crisis by articulating that, while everyone has access to copious amounts of information they, however, lack the ability to accurately determine its validity and therefore cannot effectively utilize this information. Hiller concludes by offering his perception of a silver lining behind the COVID-19 pandemic: that people will learn to appreciate the things that they may have taken for granted and that businesses will learn to embrace new management methods that do not require face-to-face meetings.

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Ryan Morfin:                    Welcome to NON-BETA ALPHA. I’m Ryan Morfin. On today’s episode, we have Jakob [inaudible 00:00:14] who’s an executive at a multinational company based in London where he oversees 12 countries strategy and operations in Europe. Today, he’s going to talk to us a little bit about his personal experience up front with the virus, as well as what’s going on on the ground in London and in Europe, in boardrooms, and on main street. This is NON-BETA ALPHA.

                                           Jakob, welcome to the show. Thanks for coming on.

Jakob:                                Hi Ryan. It’s good to see you.

Ryan Morfin:                    Well, we appreciate you making the time. I know you’re very busy right now in your role, but wanted to talk to you a little bit about your personal experience sitting in London, not only professionally, but also personally, and what life’s been like on the ground in the UK during this epidemic, given you guys are a few weeks ahead of us in the U.S. How are you doing?

Jakob:                                Yeah. Welcome to day 19 in the compound, if you will. We’ve been under lockdown for about two weeks here now, and everyone’s adjusting to new ways of working and new daily routines.

Ryan Morfin:                    And I hear the police are out and about making sure people are going about their business in an organized fashion, but they’re also providing tickets is what I hear.

Jakob:                                Yeah, the new rules are you’re allowed out to go shopping. You’re allowed out to take your daily exercise, once a day. And the police have been given authority to stop anyone and enforce those measures.

Ryan Morfin:                    And how is the food supply and food access? How is that going? And do you guys feel that the shelves are completely stocked or are you still having a hard time finding some goods on the shelves?

Jakob:                                As all of this was building, I think you probably had a similar experience in the U.S., there were a number of things that sold out right away. You couldn’t find toilet paper for about a week or two without some difficulty, which is a bit of a challenge if you’re legitimately down to your last roll. And then the other kinds of things that got sold out were some of the dry goods, basics, pasta, rice flour, also things like canned tomatoes. Those can still be pretty hard to find.

                                           But in the last couple of weeks, they’ve introduced some new measures. The first hour of shopping is reserved for elderly people, people in vulnerable populations. And it’s kind of given the grocery stores a chance to catch up with their supply chain a little bit. And we can still get fresh vegetables and fresh fruits. Sometimes which meat is available in the grocery store is a bit of a question, but I’m lucky enough, I’ve got a grocery store I’m right downstairs on the corner so I can kind of see with my window when they’re getting a delivery and then pop down there.

Ryan Morfin:                    And what’s the kind of common sentiment on the street, in the professional community in London. Are people happy with the government response? Has it been thorough and communication been good or is there a lot to be desired?

Jakob:                                I think the communication from the government has definitely been clear. Boris Johnson is absolutely living his Winston Churchill moment right now. I mean, besides a world war, the best thing that you could wish for, if your somebody like him is a global pandemic, if you want to make your mark on history. He went on TV and said, “You know what? I have a simple message. Stay home. If your friends invite you to come over and visit, say no.” That’s been the official response from [inaudible 00:00:04:27]. I think he’s got the virus itself.

                                           On the health side, that’s also been pretty clear as well. There’s been a lot of pressure on the facilities and resources available in the NHS, the national health service. They were pretty clear about what you’re supposed to do if you’ve come into contact with somebody who has the virus or if you develop symptoms yourself.

Ryan Morfin:                    I got a text message from a doctor today in New York City that they’re stopping to see patients that are over 70 years old this weekend, unfortunately. You have a nationalized health system in the UK. We don’t have that in the U.S. Do you think there’s going to be shortage of care or is the rationing on care that’s starting to pop up on conversations?

Jakob:                                Yeah, the only evidence, if you will, that I could share is obviously anecdotal, but I think one of the real differences when you have a national health service versus a more of a mixed model like there is in the U.S., is that the healthcare decisions get driven by optimizing the public health outcome. As opposed to necessarily … Obviously you choose what’s best for your patients, but there’s another consideration is as well. I think that definitely affects the way things that are being managed.

                                           I remember, I think it was in February, listening to Radio 4, which is the news channel here for the BBC, they had someone from the NHS on who said that the NHS was fully prepared for any eventuality that could happen with respect to the virus. And I just remember thinking to myself, we might as well start nominating the commissioners now for the inquiry into the Holy foreseeable disaster that’s about to hit.

                                           But I think people have been … There’s been a lot of public support for the health service. Every Thursday evening, everyone goes outside and from their isolated balconies, cheers, for all the health workers and that’s actually quite cool because you can hear everyone from around the city just erupting into applause and ringing their bells. That’s quite good.

Ryan Morfin:                    No, that is. You sit in an interesting seat looking across Europe for your business. How is the UK response at all different, or the same, what’s going on across the different countries you guys operate in.

Jakob:                                Yeah, I can give you a couple of examples. I think that the initial view is that the UK could have introduced measures a little bit sooner. The initial days when things were starting to happen here, people were still going out and not really taking it seriously. They really cracked down pretty quickly when that happened. And the other places that I can give a couple of anecdotal examples from, just speaking to colleagues in different countries, Italy is one of the countries that’s really been hit the hardest. Their health systems have been overwhelmed just by the spike in volume in patients who need hospital care. I was reading in the Italian news this morning, they’ve had to close one of the crematories in Milan, so they’re having these challenges where they just don’t have capacity for not only patients, but also people who have died as a result of the disease.

                                           And their police measures are also quite strict. If you live in Italy, you are not allowed outside, full stop. If you want to go shopping, you need to fill in a form online, ahead of time, to get police authorization. You say, where you’re going, when, for how long. If you are stopped and you don’t have that with you, you get a fine of one thousand euros.

Ryan Morfin:                    Wow.

Jakob:                                For some of my colleagues there, they’ve started to also ask for additional documentation, because we still have some essential workers who can’t do their work at home, they need to do it on location. They’re really being pretty strict.

Ryan Morfin:                    Speaking of essential workers, have the Brits figured out what that definition is? Because everybody in the U.S. thinks they’re essential workers.

Jakob:                                Everyone thinks they’re essential, but I think people also kind of like having this blitz mentality of we’re all pulling in together, and staying home, and that kind of thing.

Ryan Morfin:                    And so obviously everybody’s using Zoom and WebEx chats and video conferencing. How do you see this changing the economy in the UK, or Europe for that matter, do you think there’ll be some structural changes because of this?

Jakob:                                The initial reports from the people in my team have been actually they find their communication, working remotely, to be as good, if not better than being in the office.

Ryan Morfin:                    Yeah.

Jakob:                                And people have been able to stay connected that way. I think just at a kind of personal, daily routine level, if you’re on 10 hours of video calls a day, that’s pretty draining. It’s one of those things that really kind of cuts both ways. And everybody’s having some version of the same conversation with the people they live with, how are we going to tweak our routine on a day to day basis to make this work for everybody in the house?

                                           As far as longer term effects on the economy, besides broadly, there’s a lot of production that’s not happening at the moment that’s going to have a longterm effect, but I know that a lot of companies are putting in measures to be able to pick up the slack and operate again at full capacity as soon as possible as. As soon as they’re able to.

Ryan Morfin:                    What kind of problems is this going to cause for … I know Brexit, you guys left the EU. How much additional stress is this going to put on the potential fracture of the European union do you think?

Jakob:                                One of the things that I think has been a real silver lining of this epidemic is that that’s a word that I haven’t heard for a couple of weeks, Brexit. We’ll have to see, it really has fallen out of the news. I don’t have an update on how that’s affecting the timeline of those things. Obviously, for the prime minister, he’s focused on other things right now, but that was his platform at the last election and he won a huge majority on that platform to get Brexit done. Whether you like it or not, that seems to be the direction that the country’s heading. Something could change, but then there would have to be some kind of formal mechanism to effect that change in government as well.

Ryan Morfin:                    And you’ve mentioned to me prior to the call about a concept called an infodemic, and I thought it was a genius view into how the world’s changed and maybe what’s causing some of this, we’ll call it panic that may or may not be warranted. Share a little bit about your thoughts on that. I think it’s a fascinating point that not a lot of people are talking about.

Jakob:                                Yeah. The summary is, we have a situation post globalization, post social media, where there a lot of people who have information. Which, one, they don’t know what to do with. And two, they’re not in a position to make any kind of judgment about the quality of that information. Wind back to our last major epidemic like this. SARS happened in 2002, 2003, that was my first year of college. And I’m the same age as Mark Zuckerberg. This is before Facebook. This time that we’re having, this coronavirus epidemic, this is the first time that we’re experiencing post globalization, this kind of a global phenomenon and global situation where that sort of information, good or bad, it gets out there and it’s getting in the wrong hands faster than people are able to make sense of it. And it’s an onslaught of maybe not bad information, but questionable information.

Ryan Morfin:                    Yeah, there’s a great [inaudible 00:13:41] out there that says, don’t let your medical degree get in the way of my Google search. And we’ve all become experts because of Google, or perceived experts at least. And so I do think you’re right. I think editorial filters are more important now than ever. And I think for the most part, journalism has been corrupted by politics. And trying to figure out what is a good editorial filter to get your news is getting harder and harder to identify today. But it’s fascinating.

Jakob:                                Yeah, absolutely. It’s a learning experience. It’s a learning experience for the globalized generation. And I think we’re all going to be a lot wiser, and I think we’re all going to be taking the information that we get with a bit of a grain of salt, a bit more conscientiously after this.

Ryan Morfin:                    You do know a lot about Europe. Germany has done a great job keeping mortality rates low, and you’ve had a lot of business experience through Germany. What are your thoughts about that from a … Is it a cultural thing? Is it society is more rigid there? They believe in their politicians and they act faster? What do you think is driving that?

Jakob:                                It’s a good question. The question there is, why is the mortality rates in Germany so much lower than in other countries? And obviously, I’m not a public health expert by any means, but there were a couple of things that people were seeing as that situation has developed. One, a lot of the people who were initially affected in Germany were people who were returning from skiing holidays. Because the epicenter of a lot of these European infections was the [inaudible 00:15:30] in Austria, which has a number of popular ski resorts. I think it was last weekend, half of the cases in Norway were traceable back to one village in Austria, because that’s where people had gone skiing. The way that sort of translates into some of the numbers in Germany is that the people who are going on the skiing vacations are likely to be younger, more fit, more active so they’re not going to be as vulnerable to disinfection as older people are. That’s one thing.

                                           Second thing, Germany was just a lot better at testing people. And this goes back to you when the guy on the radio is saying we’re fully prepared in UK for any eventuality. You may think you are, but what that actually means is in an entirely different question depending on the criteria that you have for that. In addition, I think what we’ve been seeing … I was reading the German news this morning, that those numbers have been evolving a little bit. The rate of infections has been increasing in Germany. It is catching up a little bit, if you will. But one of the other big differences about Germany is, like you said, it’s a structural thing. The Germans are just more organized and their health system is also more regionally devolved. There are medical centers of excellence throughout the German federal states, whereas the UK operates on one single centralized model. Those kinds of resources just aren’t available in the UK in the way that they are in Germany.

Ryan Morfin:                    And I know you have a lot of friends in business, in Turkey. What are you hearing on the ground in Turkey?

Jakob:                                Yeah. One of the most fun things I heard actually is … Turkey is a country with a great culture of hospitality. And whenever you go to someone’s home, they welcome you with a sort of scented cologne, lemon scented, or rose scented cologne on your hands, which has a high alcohol content. And some doctor in Turkey announced to the world that that cologne was good enough to sanitize your hands. The thing that they had shortages of in Turkey was, was cologne, as soon as this thing erupted. Toilet paper, not. As one of my friends there mentioned to me, we’re civilized, we have bidets.

Ryan Morfin:                    That’s true. The middle east is a big fan of the bidet.

Jakob:                                The infection there is spreading. And I think in a country like that, there are also some, some rural areas where I think it’s going to be a lot harder to impose some of these measures.

Ryan Morfin:                    Yeah, no doubt. It’s a very large population as well. You’ve had some personal experience with the virus. Do you mind sharing a little bit about your story on a personal side?

Jakob:                                Yeah, I can. We were talking earlier, and I think some of the interest is just what’s going to happen if I get it? And two weeks ago, my boyfriend and I, and a number of our friends all came down with the virus around the same time. And about half of us had very mild symptoms, a flash of fever, you take a Tylenol and have a snack, and you’d feel fine. The other half, we’re in bed for a couple of days with fever and then after the fever broke, there was still the cough and the headache. And it seemed like it ran its course over the course of about five days or so. But that’s tough because at that time I didn’t have any other friends or family who’d had it yet and I didn’t know exactly how this thing was going to evolve.

Ryan Morfin:                    Yeah. Are there talks about getting folks like yourselves tested for antibodies? It’s a big thing here in the U.S. that we’re trying. We haven’t got organized yet to start executing on it, but I’m imagining in the weeks to come we’re going to be getting a lot of blood drawn from people who have had it and survived.

Jakob:                                I saw a headline on that in the Italian news this morning. In the UK, we’re still at the point where we’re trying to get enough tests available to be able to test more of the population. Right now in the UK, you only get tested if your symptoms are severe enough that you need to be admitted to hospital.

Ryan Morfin:                    Yeah. And that lack of testing is baffling to me why it’s taken so long globally to get that rolled out. That’s, I think, the most important thing they could be focusing on.

Jakob:                                Sometimes it just comes down to supplies. One of my colleagues in Iceland, she was saying they were really good at testing. And then I asked her a couple of days later, how that situation was going, and she said, they ran out of swabs. That was the limiting factor on their ability to test. It’s all these little steps in the supply chain that really add up because of the pressure happening all at once.

Ryan Morfin:                    That’s a good point. People thinking through that single point failure on the process.

Jakob:                                Yeah, exactly.

Ryan Morfin:                    You’re a pretty optimistic guy, what are some of the silver linings you think that come out of this when this is all over with and we go back to some type of new normal?

Jakob:                                Yeah. I think one of the real silver lining is just people are enjoying their day to day lives because they have the time and someone, at the level of the entire society in a way, has really hit pause. And so I think people are genuinely looking forward to something as simple as taking a walk with a friend or having some friends over for dinner. Those kinds of simple day to day life things are things that I think people have a new appreciation for. A new appreciation for things like just waiting for something to happen.

                                           I think those are all really good things. I don’t have a whole lot of optimism that people will retain that attitude of gratitude, if you will, for that long after we get back to our daily lives. But I think those are a couple of good things from this, for sure.

Ryan Morfin:                    Yeah. I hear you, Jakob. I don’t think it’ll last long, but it has been interesting to be at home every night for dinner or try to get home every night for dinner, which is, when you’re a road warrior and getting on planes all the time … I think it’s going to be a lot harder for me to justify getting on a plane unless it’s really important because Zoom works pretty good. I had to get used to having business conversations over Zoom. Rolling into someone’s office is great, but I think the bar’s going to move that much higher going forward so I don’t have the travel.

Jakob:                                I think you still need that initial personal contact. There’s so much information that we convey that even with video just doesn’t get across just through body language. And you can pick up some of that, but once you’ve made that initial contact, you’d be like, I’ve met everybody in our team. I sort of feel like if I didn’t take the time to go to all of those countries and meet everybody, it would be a lot harder to do my job.

Ryan Morfin:                    Jakob, as it relates to the future, I guess, of the UK kind of societal impact here, one thought we have in the U.S. is that office space, and kind of the way we work is going to permanently change after this. People are talking … I’m seeing our team work very productively. And I don’t know if that’s because of the unemployment rate skyrocketing and people are making sure they’re adding value so they can be accounted for, or if it’s just a better way to live, being at home in a comfortable place, not having to commute, not having to go to an office environment you may or may not like. What are some of your thoughts? Because you guys run a big organization.

Jakob:                                Yeah. That’s true. We run an organization that involves quite a lot of flexible working, or working on clients sites. And so we have an organization that’s already set up for that pretty well, which in this particular instance has been helpful because it makes that transition to working at home on a regular basis, fairly seamless. There are definitely advantages to being able to control your own environment, which is something that you don’t always have the opportunity of doing an in an office. And so I think for a lot of people, that definitely is a plus and just helps … Those kinds of things do have a massive effect on job satisfaction.

                                           From a management standpoint, we’ve already got most of our team in other countries, that’s something that we have to be able to do anyway, in the first place. Some of the interesting questions have come up right now where you literally can’t go in the office is, okay, I need to hire a new person who maybe I’ve met only online, but that person needs stuff like a laptop. And at least, at the beginning, will benefit from sitting right next to a colleague and being able to say, “I have a question about this.” Or overhearing some of those conversations. I think it’s one of those things where there are benefits on both sides.

                                           Obviously in a place like London, pressure on the cost of office space and desk space is at a premium and it’s rising. I do know from a management perspective, they’re having that ease a little bit will definitely be a benefit. And I think that as a result of this … You’re getting people who are used to working in quite a way, you’re learning new management skills and becoming a lot more comfortable with being able to manage their teams in different kinds of ways.

Ryan Morfin:                    And one final question, Jakob, do you think the folks in the UK are upset with the Chinese government for delaying accurate data, which we still think is flawed that they continue to say they have no new cases. Is there a conversation going on in the UK or in Europe that China could have given the world a warning to get better prepared for what was coming?

Jakob:                                [inaudible 00:27:24] an article in the Telegraph to that effect from their chief defense and foreign affairs correspondent. I think that question, it’s something that I don’t have enough information to be able to comment on really at this point. One of the things that I also want to be very careful about is kind of ugly [inaudible 00:27:53] xenophobia as well. Those kinds of things tend to come out in times of national difficulty, and that’s really not something that we need to see more of. Those kinds of questions, I think, need to be dealt with very conscientiously.

Ryan Morfin:                    As it relates to civil liberties and privacy in the UK, one of the birthplaces of constitutional law that we have here in the states, how has this crisis given the government an opportunity to change daily life in the UK, if at all?

Jakob:                                It’s a really good question. That question about just being conscientious about how easily our civil liberties are given up when these are things that people fought for, really desperately for, for a long time. I think that’s something we really need to be aware of. And I’ll give you a couple of contrasting examples.

                                           In the UK, you are not required to carry an ID card the way you are in a lot of European countries. If you’re in Germany, the police stop you, they ask for your ID, you have to be registered at a particular address. And all of that stuff can be tracked. Here in the UK, the police stop you, they can ask for your address, obviously you’re required to give them your actual address, but there is no documentation to prove that. They can’t look up and say, okay, you’ve already had your daily exercise today, this is your second one and [inaudible 00:29:35] a fine. Because of that system of trust that there is in UK I think that it is still a concern. There are some practical barriers to it.

                                           But the other example I want to give is in Iceland, for example, one of my colleagues there was saying that everyone is being encouraged to download an app, which will track your location. And that’s a country with a population of 300,000, the size of Zurich 15 years ago. That kind of question, that ability to do surveillance on the population, just because you can, doesn’t mean that you should. Will it save lives? Maybe. But these are all questions that you need to examine them in advance, because if you’re examining them afterwards, it’s too late.

Ryan Morfin:                    Fair enough. Jakob, thank you so much for your time and sharing your story with us and our viewers. And we’ll hope to hear back from you in a few months, maybe after this virus has passed and we’re seeing what happens to the global economy and how things are getting back to normal. I appreciate your time.

Jakob:                                Thanks Ryan, as always, it’s been a pleasure.

Ryan Morfin:                    Thanks a lot.


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Ryan Morfin: Welcome to Non-Beta Alpha. I'm Ryan Morfin. On today's episode, we have Pini Althaus, CEO of USA Rare Earth, talking to us about the supply chain glut in rare earth minerals. This is Non-Beta Alpha.

Ryan MorfinPini, Welcome to the show. Thank you for coming on today.

Pini AlthausThank you for having me, Ryan. Good to be here.

Ryan Morfin: So you're an investor and a miner in rare earth minerals. Can you share with our listener base, what are rare earth minerals? Why are they important and why is there a geopolitical race going on globally?

Pini AlthausYeah, I mean, rare earths are an extremely ubiquitous part of all advanced manufacturing or technology manufacturing today's day and age. Several years ago, I had not heard too much about rare earths myself. I was not that familiar with it and being involved in this sector, in this company, for the past few years has given me an education of course. And I mean, I was sad to hear that 50% of all imports into the United States contain are earth elements and it runs the gamut from consumer electronic devices that we use every day. Our cell phones, our laptops, most communication devices, medical equipment. So there's a tie with COVID, which we can touch on at your discretion. Electric vehicles, defense equipment. So pretty much anything or everything high tech today has a rare earth element or critical minerals contained within them.

Ryan MorfinAnd what are some of the names of some of the more important rare earth? I know there's lithium for batteries, but what else is considered in this category, critical?

Pini Althaus: Yeah, so lithium is a separate category to battery material. The rare earths are 17 rare earths. The four, let's call it, key rare earths that we're focused on at our company, the four rare earths that go into the permanent magnets. And these are the magnets that are found, there are a number of them in your back of your cell phone or an iPad. But if you look at an F35 striker jet, you've got about a ton of rare earth magnets in those. And we've got two heavy rare earths and two light rare earths is part of the permanent magnets. You've got dysprosium, ytterbium are the heavies, and then you've got neodymium, praseodymium as the two light rare earths. So those would be key rare earths that are the focus.

Ryan MorfinAnd you use these in, I guess, in military applications as well, but historically, where has the United States sourced the rare earth for supply chain?

Pini AlthausYeah. And that's the shocking part. We've been securing those materials from China. So China controls the rare earth sector and has done so for the past 30 years or so. And it was a significant misstep on the part of the United States, allowing China to have this control. And actually this wasn't a question of China coming in and doing anything nefarious as far as stealing IP or anything. The US government made a conscious decision about 30 years ago to allow China to come to the United States and acquire the processing capabilities for rare earths. So just as part of some background, you've got the rare earth materials containing various mining projects, but once you extract them, you have to then process them and they go through certain phases before they get to the magnet phase. And China, the thought process was let China do the mining, let China do the processing.

Pini AlthausWe don't need to do that here. And we'll buy the materials from China cheaply and the premier of China at the time, Deng Xiaoping made the comment, he said, "The Middle East has oil. China has rare earths." And unfortunately we weren't smart enough to understand what he was saying. And the Chinese understood that the future of manufacturing is going to revolve around control of the rare earth and critical mineral supply chain. So if you think about it today, Ryan, we cannot build... Forget about consumer electronics and medical equipment. We cannot build the equipment that the US Pentagon or the US armed forces require, whether it's F35 fighter jet, Tomahawk cruise missile, communications equipment, without going to China and obtaining those materials. And it's obvious to all that this should be extremely alarming. We've seen China use this as a weapon, if you will, as far as how it interacts with other countries back in 2010, when there was a dispute between China and Japan on the East China Sea.

Pini AlthausSo China cut off rare earth exports from Japan for 40 days. Japan obviously being a significant user of rare earth elements for their high-tech manufacturing sector, that was stopped after 40 days. But in fact, it was President Obama that first made the United States aware of this, formed a division within the Department of Defense to handle this issue, but not much has happened. And we continue to be relying on China for these materials. And what has been made about trade war with China and whether the trade war is really the impetus for China withholding rare earth exports. And that is a huge misnomer. Whilst China had been talking or implying that they would cut off rare earth exports, the truth of the matter is that China, under it's made in China, 2025 mandate, its belt and road initiatives and others. And you seem to control the critical minerals and rare earth supply chain so that it can continue its dominance as a manufacturer or a global supplier of these materials and finished products.

Pini Althaus: It's the backbone of its economy. And in fact, China has become a net importer of rare earths from different countries like Miramar and others. So with that, they are decreasing the exports to countries like the United States, Japan and others.

Ryan Morfin: And was it ever a risk that the Chinese were going to turn off the exports of rare earth to the US during the trade war? How close were we to that? And was that ever some saber rattling that went down during trade negotiations?

Pini AlthausYeah, I think it was saber rattling. I think it would be paramount to an act of war. I can't say with any authority that that would not happen, but it would be probably, aside from war itself, it would be one of the most significant acts of war cutting the United States off from the ability to procure rare earths. But that being said, I mean, if you look at, as an analogy, the oil and gas sector and the reliance of the United States had for many, many years on OPEC countries to supply us with the oil. And we had embargoes and we had price manipulation by OPEC. This is far more significant given the ubiquity of where these rare earths go. And yes, we're always under the threat that China can cut off exports under the guise of a trade war or for any other nefarious reasons.

Pini AlthausBut I think even more importantly, to just as the natural run of the course of things with regards to their business and their desire to maintain themselves as the global leader in manufacturing and exporting of goods, China is in a position now where it actually requires these materials for their own domestic consumption and can legitimately cut off rare earth exports by stating that they need it for manufacturing and that would actually be somewhat correct. So we're in an extremely dangerous position here with this reliance on China. And it wouldn't just be China. If it was another country, it would be similar issues, not to the same extent, but reliance on one country for these materials is dangerous.

Ryan Morfin: And it's been mentioned in the past that in 2010, China flooded the market to really kill all the competitors in the rare earth mining industry. Where was the World Trade Organization during this period? And how did that play out and how does that set the chess board for China to run the tables?

Pini Althaus:

Yeah. So the WTO stepped in when China cut off rare earth exports from Japan, I think it lasted for about 40 days because the US and Japan protested the WTO, and they stepped in and China resumed exports. While I'm not an expert on these trade matters, one thing that I am aware of is that one of the reasons why China had to resume the export of rare earths was it did not legitimately need all the rare earths for domestic consumption. So therefore it was a nefarious act, if you will, to cut off rare earth exports. Now that has changed, which means China have to cut off rare earth exports today, they have a legitimate case to say that they require these materials. There's a shortage of these materials and they require them for their own domestic purposes. It is the backbone of their economy and there's very little we could do about this today, which is why it's becoming an even more urgent issue.

Ryan Morfin:

And the US government started stockpiling some of these after that incident. Can you talk a little bit about what DOD and DOE has done to start making sure that there's not a critical supply shortage going forward, and is it enough?

Pini Althaus:

Yeah, again, there is a national defense stock pile, and there are materials still that the United States needs to procure in order to shore up its stockpile. There are magnets, the finished magnet products as well, the United States government needs to stockpile. Again, there's a limited amount that the United States government has. It requires approval from Congress, whether it's in the NDAA or other approvals from Congress, to allocate monies for the national defense stock pile of these materials. That being said, there's no endless supply of these materials. And unfortunately, the apparatus, the way it's set up right now with the US government, it's going to continue to require having a secure supply chain of those materials for many, many years to come. So it's not a question of stockpiling for 10 or 20 years, and then this complacency and saying, we'll kick the can down the road. But keep in mind as well, Ryan, that US government accounts for low single digits of overall rare earth imports into the United States.

Pini Althaus:

We're talking about defense contractors, we're talking about the manufacturing sector. The direct impact this has on the economy, jobs, the automotive sector, and others is significant. So it's not just limited to the United States government. If you look at over the past couple of weeks, the sanctions that China have put on Raytheon, Boeing, Lockheed, et cetera. I mean, the question is where are they going to get those materials? And if we go beyond that, you need rare earths for the 5G network. Now that Huawei has been banned from installing the network, not only in the US but other countries, we have to have the ability to get a secure supply of these materials as well. Which currently, again, trying to control the hundred percent. So it runs across the board, both for government, defense and manufacturing in this country.

Ryan Morfin:

Well, and so help me paint a picture for our audience. Does China have all the mines for rare earth, or they're the only ones who started mining it? Or are their mines globally dispersed and nobody's been doing the actual infrastructure to do the mining?

Pini Althaus:

Yeah. So finding rare earth projects or rare earth elements is not the difficult part. It's finding them in significant quantities that makes a project economically viable. And part of that consideration are the environmental rigors that companies in the West have to adhere to. And China, even by their own admission, have had a complete disregard for mining these materials and even for processing these materials. And in fact, just the last week or so, the BBC did an expose on this, 60 Minutes has done an expose on this. But the Chinese have not denied this and have talked about cleaning up their act, but it has an effect on the bottom line for what the costs of mining and processing are if you have no environmental standards to adhere to. So China have exploited those rare earth projects they have, primarily in inner Mongolia, and have brought a number of projects online and quite quickly, and in a significant way, with a complete disregard for the environment.

Pini Althaus:

So it was seen as an environmental no-no in the West for many years. Now, what's happened over the past few years is you're starting to see rare earth projects in different parts of the world sprout up. You've got the Mountain World project in Australia owned by Linus, which is a producer of Nd and Pr, neodymium and praseodymium. So two of the light rare earths. They may have some heavy rare earths coming online at some point in time. And you've got Arafura, which is another company in Australia that we're working with to assist them with their processing so they don't have to send the materials to China for processing. But really these are a drop in the bucket for what the requirements are for the United States. And certainly what the requirements are for allied countries, the EU, et cetera. So there is a race, if you will, worldwide to start bringing projects online. The Chinese are very active in trying to secure assets outside of China.

Pini Althaus:

So in Africa. They have ownership of a project in Greenland. So there is somewhat of a race. The Australian government has stepped in and has started limiting the ability for China to own, or have ownership in, or off takes for the Australian rare earth projects. And that's part of the strategic Alliance between Australia and the US. Canada, similar thing as well. There are a number of projects that are looking to come alive, but these projects are, for the most part, will take many, many years to come online. We have to expedite the process. We have to assist with a [inaudible 00:14:41] supply chain and the domestic rare earth sector, because previously investors have been scared off by things like China flooding the market, which is not a possibility at this point in time, given that China can't actually afford to flood the market. They are already very heavily subsidizing their mine to magnet supply chain there.

Pini Althaus:

This is more now a case of being able to get production from non-Chinese sources so that the United States and allies have a viable, secure supply chain of these materials. And it's a concern worldwide. We speak to governments all over the world, and we're all facing the same issue. Some more than others, especially countries like Japan, that don't have their own rare earth projects there and are reliant on Australia where they've made some investments there. And in the United States, they've made an investment recently in Africa. So there is this race, if you will. And I think we've got a five-year window here to at least stand up a few projects worldwide. Otherwise we've lost this race and we will be dependent on China for many, many years to come. And Ryan, it's a bit of a hypocrisy. If you look at it where you've got materials going through clean, green energy applications, like electric vehicles, wind turbines, et cetera.

Pini Althaus:

That we're sourcing these materials from China, where they've, again by their own admission, has been complete environmental devastation to water bodies around these mines and processing facilities, to the communities. People have been getting sick around these projects yet we're putting these materials into our electric vehicles or wind turbines. It makes no sense at all. And people are starting to wake up to this. And that's why the sector is starting to see a lot of support come out of Congress and bi-partisan support. And in fact, it's one of the only bi-partisan issues right now in Washington. And it's good to see that some things decided to move in the right direction.

Ryan Morfin:

And is there a special process? You talk about the expense, is it really difficult to mine these? You have to go through a special chemical process to extract and clean and purify. Is it a lot harder than, say, gold or silver or some of the other, we'll call, more traditional elements?

Pini Althaus:

Yeah. It's all about the processing to some extent. So if you look at MP Materials in California, which used to be Molycorp before they went through their bankruptcy. They are a miner of Cerium and Lanthanum, which are two of the light rare earths, the lower valued light rare earths. Given that they do not currently have processing technology, they are sending those materials to China for processing where China is tariffing those heavily. Linus is also, they're doing their processing work in Malaysia and elsewhere. So it's really about the processing at this stage. One of the things that we've done, after we put out our PDA last year with our upgraded resource, which now includes a significant amount of lithium. We make a decision that, based on the test work that we had done around our processing methodology, that we were not going to send our materials to China. That it's paramount for us to do this work in the United States and in a collaborative effort as well.

Pini Althaus:

We've been asked by some of our investors, "Well, why would you be looking to help other projects with their processing?" And the answer is simple. There's no one project or one company that's going to put China out of business or make a dent, or somehow be able to take care of the overall demand worldwide for rare earths and critical minerals. And it's very important for us to have processing capability in the West. So that was the impetus for us opening up our own rare earth and critical minerals processing facility earlier this year, which we did in Wheatridge, Colorado. And in fact, we've made some significant progress on the method that we're using for this. And we're starting to collaborate with Australian companies, Canadian companies. We're currently talking to a group over in Europe as well, because this has to be a collaborative effort.

Ryan Morfin:

How does Europe solve for these problems? Do they have this better under control than the US?

Pini Althaus:

No, they're in a far worse position than we are. The EU commission recently put out a report, I think, a couple of months ago that the requirement for rare earths is going to increase tenfold within a short period of time. Lithium 18 times. They don't really have rare earth projects. Again, there are the Greenland projects, which people have heard in the news recently. Those need to further development work so they don't have rare earth projects ready to come online there. There are a couple of lithium projects that are spread around Europe, but for the most part, Europe is in an even more precarious position. If you look at Germany with the auto manufacturers, you look at the big companies like ThyssenKrupp and others, all these countries and companies are looking for alternatives to China, because we've already seen in the news about China withholding or reducing exports of some of these rare earths that are required for these industries.

Ryan Morfin:

And you mentioned earlier the regulatory posture of the US makes it difficult to mine. Is it becoming a more bi-partisan issue that we need to maybe relax some regulation around the mining exercise, to incentivize private sector to come in and start producing this? Or is the Republican party versus the Democratic party on two separate pages of music?

Pini Althaus:

Yeah. Good question, Ryan. I mean traditionally the Republican party is obviously being more pro-mining and in favor of less regulation when it comes to these things. With regards to our project, we're on Texas state land. So we don't trigger federal environmental permitting at this point in time. And obviously Texas being Texas, a mining state and oil and gas state, things are a lot easier in Texas than they are on projects on federal land where the Bureau of Land Management controls the environmental process around that. But the thing is here, and I don't want to step into what other companies are doing, et cetera, but we do need to be reasonable about allowing projects to come online if they're adhering to environmental standards that are acceptable worldwide. And what we do know, is that China is destroying the environment and cities and water bodies around their mines and processing facilities.

Pini Althaus:

We have standards here in the United States, and I think what we need to do is make it easier for companies to mine, while at the same time protecting the environment. And there are ways to do that. And we're definitely seeing buy-in from Congress, from both sides, with regards to looking how we can stand up a secure supply chain. And, obviously under the Obama administration, they had very strict regulations when it comes to mining. And that's changed under the Trump administration. Hopefully what we start to see is some normal middle ground that'll allow other projects to come online.

Ryan Morfin:

And typically in these rare earth mines, is it amalgamation of different minerals that are all consolidated together and you have to separate them out? Or do you ever find pure play, Europium, I can't even pronounce some of these. Gadolinium, Cerium. I mean, are they all mixed together and you've got to filter and sift them through, or are they pure play mines?

Pini Althaus:

No, they're generally they have a mix. So they're polymetallic projects. They have a number of different materials. Some projects, you more to what we call the light rare earths like MP in California or Linus in Australia. Our project is actually on the opposite end of the spectrum. We have a very high concentration of heavy rare earths. That being said, we do have to go through a process of separating these materials. But the case of our project where we've got 30 materials. We're not going to produce 30 materials. We're not going to market 30 materials. So what we're doing is we're focusing on the key materials that are marketable, that we need for permanent magnets, lithium as well, and working on the separation and the optimization of those materials in particular. But we're all faced with the same processing challenges and that is something that can't be set.

Pini Althaus:

There's no easy way to do this. There are different technologies that have been used in different parts of the world. So predominantly there's a process called solvent extraction, but it's big, it's bulky, it's not benign. It's a bespoke solution for one particular project. So it doesn't work for feedstock from other projects. What we've done is we're using a processing technology that's actually been around since the 1940s. It was part of the Manhattan Project. It's called continuous ion exchange. In fact, the Chinese use it to increase the purities from 99.99 to four nines, five nines, and even six nines. So for some applications you require higher purity levels. It's a far easier processing method to scale up and to take feedstock from other projects. In fact, we've demonstrated for the Department of Energy that we can take coal waste from Pennsylvania and do high purity separation of rare earths using our processing methods. So it's not a step that can be skipped unless one needs to send it to China for processing, which is not going to help us with our objectives here.

Ryan Morfin:

How many other, we'll call it, going concerns on any other businesses that are doing this, that are trying to, I guess, start the development of these mines. Are you guys one of a few or are you one of many? And is it an international or just a US game? Who's leading the charge at going after this?

Pini Althaus:

Yeah, well, I'd say the Australians are leading it outside of China right now. You've got some really good projects in Australia. Again, more skewed toward the light rare earths. There's one more heavy rare earth project in Australia, which is not yet producing. The United States, you've got MP Materials, you've got Ucore in Alaska, you've got the Bear Lodge project in Wyoming, which is also another light rare earth project. So as far as a heavy rare earth project that looks like it will come online in the near term, that would be our project. In Canada there are a couple of projects there as well, and again, more skewed toward the light rare earths. But we really need to get as many of these projects online as possible. Because again, I don't see it as competition. We all have a problem doing supply agreements or offtake agreements for our materials.

Pini Althaus:

In fact, one of the things that we're going to have to consider is looking at potentially scaling up our production, based on the demand that we're already starting to see. And I think other companies would find that as well. So it's all about the economics of the project. You have projects that were economically viable back in 2012 or rare earth prices with 35% or so higher than they are today, and are not necessarily viable today. So that's the challenge as well, economically viable projects. And we've got to get as many of them online as possible. It takes many, many years. I mean, our project has had over $70 million put into it to get to where we are today, and we're close to getting to the production scenario. It all revolves around processing at this point in time.

Pini Althaus:

We'd be very happy to see another couple of projects come online, because this is extremely important for national security and for the economy as well. I mean, if you think about it, Ryan, if you've got a billion dollars of rare earth materials, that translates into a trillion dollars or I should say trillions of dollars of finished product. So you've got a magnet in your phone there that's worth a couple of dollars and the cell phone's a thousand dollars. And electric vehicles and defense applications even more.

Ryan Morfin:

Yeah, everyone has one of these iPhones now, and there's tremendous amounts of rare earth on the circuit boards here. And I think people take it for granted that that supply chain is not secure right now. So one question for you, there's talk of this maybe medium term to longterm, but there's talk about mining in space. Do you think that's a feasible option in the longterm, medium term? What are your thoughts on that?

Pini Althaus:

No, that's just ridiculous. I mean, we're trying to find ways to make mining on earth economically viable. I think the cost of going up to space would be more than what our capex will be bringing our entire project into production. I mean, we've got about a 350 to $400 million capex to bring 130 year mine life into production. I'm not an aerospace expert, but I think sending a rocket, building a rocket ship and sending it up, I think maybe on the fuel alone, you could bring a couple of projects into production. So unless we have a fortunate situation or an asteroid lands on earth, and fortunate if it lands somewhere where we don't care, I don't see how that happens. And if it's big enough, it's a problem as well. It's nonsense. And even, options aside of the deep sea mining for rare earths, I mean, you've got all sorts of environmental issues around that as well. I think we need to look at projects that we can bring online, that can be done so in an economic way, that can be done so in an environmentally responsible way.

Pini Althaus:

I mean, one of the things that we've done at our project is we've got in excess of 60% of the materials that have come out around top, will have a clean green energy applicability to them. So we're using the benign processing method. We're going to be using renewable energy on site. In fact, we will likely be putting a solar farm on site as well. We've talked to a couple of companies that have approached us about that, and we'll be a net producer of power for the surrounding area. So there are ways to do it which don't affect the environment. Obviously if there's a project that's situated on a sensitive area, that's a unique situation for that specific project. We've seen it with the Pebble project, which is not a rare earth project. The Pebble project in Alaska where their environmental concerns is we've been recognized by both Republicans and Democrats, but we have to be reasonable about the projects that don't have environmental concerns.

Ryan Morfin:

So Pini, in season two, we ask all of our guests a series of six questions. They're usually, yes, no questions, but trying to take a survey of our conversations. And if you want to add a little context to the yes or no, feel free, but here goes the first question. If there was a COVID vaccine available today, would you take it?

Pini Althaus:


Ryan Morfin:

Who do you think is going to win the election?

Pini Althaus:

Which election?

Ryan Morfin:

The US election.

Pini Althaus:

Well, I think it looks like Joe Biden's going to win it, but I think what happens, if we go past January six from my understanding is that the house will vote on it and it's one vote per state. But I don't know if I see it getting there at this point in time. I really don't have a crystal ball.

Ryan Morfin:

Third question. What type of economic recovery are we in? What type of shape is it taking? A V-shape, W, U, L?

Pini Althaus:

Yeah, I think 2021 is going to be challenging. I think we've been, and rightly so. I mean, we've had no choice as of almost every other country. We've been printing money for the past year because of COVID. And I think we've got to brace ourselves that, at some point in time, the chickens come home to roost. It was a necessary step. People needed it on an individual level. Businesses needed it as well, but I think we've got to do whatever we can to stimulate the economy, give people confidence to go out and work again, employ people. So I think we've got to watch ourselves, especially in 2021. And I have some concerns, but long-term, I think the approach in the United States is a healthy one.

Ryan Morfin:

During lockdown this summer and quarantine, was there anything in particular that you accomplished that you're particularly proud of?

Pini Althaus:

Yeah. A great amount of family time, which, if you would've asked me a few years ago if I could sit at home and be at home for six months, I would have told you absolutely not. I wouldn't be able to do it for six days, but it has... I'm sure it's done this with a lot of families as well. It's brought families together. We had a baby actually last year on Thanksgiving. So I was doing a lot of travel at the time and thought I wouldn't get to see my daughter in her first year or couple of years too often. And being home with her every day is actually been just the most amazing experience. So thankful at least for some silver lining in COVID.

Ryan Morfin:

Are there any silver linings that you see in the economy going into 2021?

Pini Althaus:

Yeah, I think we've gone through an absolute beating and it looks like we've got the ability to come out of it. And I think that's a testament to how strong the economy was built up in the years preceding COVID. So overall I remain an optimist. I mean, we are a country built on opportunity and going out and making it happen. And we're not a socialist country sitting and waiting for people to send us paychecks or wealth distribution or anything like that. I think the American dream still lives on. I think if you go out and you're willing to work and put your head to it and heart in it, I think we do have the ability to climb out of it. So if we look at what the economy is doing over the past few weeks, it looks like it's starting to rebound. And to me, that's assuring because it could go completely one way as well.

Ryan Morfin:

And the last question is, is there anything that you're watching, or listening to, or reading today that has been impactful on your thinking that you'd like to share with our audience?

Pini Althaus:

Yeah, that's a good question. I think it's been more personal stories. The news, I sort of take that in context or with more than a grain of salt. In some cases stay off the news channels for a number of days at a time, it became quite repetitive. But I think on the personal side, talking to friends, my family's all back home in Australia, they've just come out of 110 day lockdown, which we can't relate to that. It's been very trying on them and seeing the fortitude that they've had to come out of that and stay intact. I think the mental health issues that will come out of COVID are going to have a far longer effect than the economic issues. I think we're going to have to focus on mental health issues in this country for a long time to come.

Pini Althaus:

The impact on kids has been significant with regards to lockdown or remote schooling, et cetera. But to see people come through it. I think it's a testament to people in general and to the country and other countries as well, to see got that fortitude and survival instinct to try to get through whatever adversity we can. So hearing the personal stories, the challenges that people have gone through, I think it's made me a lot more aware of things that I have to be thankful for and where we can help out other people as well. I think we have to be united going forward because there are things...

Pini Althaus:

I think one of the things that COVID has shown us is we can get into this complacency and life goes on and we go one day to the next. And all of a sudden we get hit by something that affects everybody equally. I mean, COVID, whilst there were groups of people, whether it was the elderly or people with underlying health conditions, that got hit the worst. I mean, we all got hit in some form or another. So really, this should be something that unites us, not divides us.

Ryan Morfin:

Well, Pini, I appreciate you coming on today to talk to us a little bit about the supply chain crimp on rare earth and we'll definitely keep an eye on it and would love to have you back in the future.

Pini Althaus:

Thank you, Ryan. Thanks for having me.

Ryan Morfin:

Absolutely. Thank you. Bye-bye. Thanks for watching Non-Beta Alpha. And before we go, please remember to like, and subscribe on Apple podcasts and our YouTube channel. This is Non-Beta Alpha, and now you know.


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