Arsenal of Democracy & U.S. Space Command with Tidal McCoy Former Assistant Secretary of the Air Force

Tidal W. McCoy shares his knowledge concerning COVID-19, Chinese relations, space travel and the troubling powers of mainstream media.
Tidal W. McCoy is the former Assistant Secretary of the Airforce under Ronald Reagan. In this episode of Non-Beta Alpha, he shares his knowledge concerning COVID-19, Chinese relations, space travel and the troubling powers of mainstream media. McCoy is involved in a group called the Arsenal of Democracy which works toward logistically strategizing our nation in response to foreign affairs. One of McCoy’s main concern is that, recently, the Chinese have proven to be a threat to the world by deploying their citizens into foreign nations worldwide, including the United States, to collect a wide variety of commercial and other valuable data.

In addition, McCoy’s Air Force background has granted him the privilege of being invested in the United States’ current space travel efforts. Space travel is being purposed both for exploration and economic gain by many countries. This may lead to space conflict and it underscores the need for a military branch in space which has already been announced by President Trump. Following this announcement, France made similar claims and China has also restructured to allocate resources toward a space-based branch of its military.

View Transcript

Ryan Morfin:

Welcome to Non-Beta Alpha. I’m Ryan Morfin. On today’s episode we have former Acting Secretary of the U.S. Air Force, Tidal McCoy, Chairman of IronGate as well as the Chairman of the Space Transportation Agency, talking to us about the Arsenal of Democracy and the future of U.S. Space Command. This is Non-Beta Alpha.

Ryan Morfin:

Secretary McCoy, welcome to the show, sir. It’s an honor to have you. Thank you for the time this morning. You’ve been sitting in some very interesting historical seats through your career in the military and as a civilian. These are really interesting times right now. I wanted to put some historical context on the conversation for a lot of our viewers regarding the Arsenal of Democracy because we did not necessarily get to where we are today as an economic superpower by accident. It was people like yourself who helped design the 20th century and are helping us design the 21st century chess game that’s going on.

Ryan Morfin:

Would you mind chatting a little bit about the Arsenal of Democracy and what that means to you and where we are in that cycle?

Tidal McCoy:

Yes, Ryan. Thank you very much for asking me to join you as the leader of Wentworth and all of your friends and colleagues and investors and people that are interested in both national security and the capitalist component that goes with it. We have been called the Arsenal of Democracy from some time in the past. I think it started back at before World War II when we had an army of 100,000 people, and we recognized that the European wars were going to come our way regardless of what we wanted, and we had to ramp up production. They stopped all production of cars in Detroit for four years. They started making airplanes.

Tidal McCoy:

We basically overwhelmed the enemy with our logistics. As they say, logistics is strategists are more interested in logistics, and amateurs are more interested in the tactics of things. We produced and outproduced the Axis powers flying the free fighters and overwhelmed the enemy. We fielded 10 million men, which was a pretty good number considering our population at that time from 100,000. We had a good cadre of officers that had graduated from the academies that helped staff up this rapid mobilization. That was one form of the Arsenal of Democracy as the preparation for war had to be undertaken once we were bombed at Pearl Harbor. Then a week later, Germany declared war against us.

Tidal McCoy:

Since then, we have tried to maintain and field a large standing army knowing that we would have much less time, particularly with nuclear missiles and fast-reacting enemy forces, to engage in a longer-term mobilization as we did in World War II. Therefore, the cost of a large-standing force with very complex systems has had to be born. Only about 4% of general gross dimensional product has been able to do that. But nonetheless, it was we lagged behind a bit because we thought once the Soviet Empire went down, the end of history would allow freedom and democracy to flourish in the world.

Tidal McCoy:

It turns out, many of the people we defeated got new management or they were very unhappy about losing. Russia, China, all of the Evil Empire that Reagan put together on his list to take down that we worked hard in the White House and the Pentagon to strategize against them. It took a lot of money. It took a lot of effort. There were small wars along the way without having to clash directly with the Russians or the Chinese. Then we sort of relaxed and took some time off, and everybody got some good benefits.

Tidal McCoy:

The management of the adversary nations meanwhile were looking to come out of bankruptcy and reboot and come back for a second match, which they are now, particularly in the case of China, which is huge country, a big market. They have absorbed a lot of our technology. They have educated a lot of their population, many of whom have been educated in the United States. Now they have a very adventurous and ambitious leader who is maintaining his power by promising to do things for his country and his military that probably could lead to a clash, a direct clash, between U.S. and Chinese forces. He is starting down a path that he may find perilous in either way. If he goes forward, it’s perilous in starting a war. If he holds back, his position internally may be at risk. Therefore, this is a very dangerous period of time because miscalculations tend to start wars rather than people just deciding in a rational way to go to war.

Ryan Morfin:

The wave of technology that we’ve enjoyed economically for the economy to grow its productivity has often come from, like you said, the war efforts that we’ve gone through historically to identify new ways to do things, move people and equipment around the world. Can you talk a little bit about how the military industrial complex got set up after World War II? Then how it evolved into Silicon Valley and how it evolved into where we are today?

Tidal McCoy:

Yes. In the early days as we mobilized in World War II, the big firms that became big and then merged over time were led by engineers, buccaneers, the aerospace industry, early California. They were like wildcatters in aerospace. They built up the machine that helped us win World War II, and they continued with that for a while as we won the Cold War under Ronald Reagan. After the Cold War, it was seen by Congress and many others to cut the defense budget substantially. Many of the defense primes went out of business. They changed hands. Financial managers took over trying to pad the bottom line. There was lack of creativity. This was recognized by many.

Tidal McCoy:

In order to fill the gap of acknowledging a lack of creativity of new weapon systems and new technology, some said, “Let’s just depend on Silicon Valley to be the Arsenal of Democracy 2.0.” Over time, that dream has not materialized, that hope. Many of the firms out there are somewhat anti-military. Some of them have been easily penetrated by Chinese technology spies and others. It turns out that the Silicon Valley has made a lot of money for individual entrepreneurs and actually using some defense technologies, but they have not really replenished the technology stock and the technology capability of the war fighters.

Tidal McCoy:

Arsenal of Democracy really didn’t pan out very well, and that’s why we have started working at IronGate to, really, what we call a reboot and reemphasize and evangelize the need for an Arsenal of Democracy 3.0 where we have capital that can be very, very well profited from its investments but also can get to work investing in technologies with entrepreneurs who have more of a patriotic understanding and understand the world situation.

Ryan Morfin:

I think that’s a critical point you bring up is that we had Silicon Valley launch a rapid enhancement in computing power, and we won the Cold War. There’s a bit of victory lap. What happened after we won in the ’90s to the military industrial complex? Why has there been a divergence between Silicon Valley and the Beltway?

Tidal McCoy:

It’s a combination of things. The cuts in the defense budget led to the Secretary of Defense in 1994. Bill Perry, calling in the 12 to 15 CEOs of the major defense primes saying, “There’s not enough money to go around. You guys need to buy each other out. You go guys need to merge.” Everybody looked around the table to see who was going to be a buyer or a seller, who was going to get taken out. It did happened, and now we’re down to about four or five major since primes.

Tidal McCoy:

There are many ways a replication almost of the rather slow-moving careful plodding bureaucracy of the Pentagon acquisition system itself. The acquisition system in many cases is slow, broken, too many people involved, nobody willing to take a risk. The Pentagon in effect duplicated itself by some of the decisions of that sort where they told everybody to merge and there wasn’t enough money to go around to have two or three competitors for technologies and weapon systems. All of a sudden the ability to field superior technology, superior advanced secret technology, to our forces in the field so that they could overcome overwhelming numbers was no longer there.

Tidal McCoy:

That’s when the recognizing the intellectual gap that there was no creativity. There was no particular advanced technology to be had in a rapid way. The idea began to be talked of about having Silicon Valley fill that role. That was a really never a very workable idea in many ways because they are much more commercially-oriented, looking for the bigger market in the commercial sector rather than smaller amounts they can sell to the military, at least, sell to the military for a while before taking the technology out to the public.

Tidal McCoy:

The Arsenal of Democracy ossified the old Arsenal of Democracy 1.0, the Arsenal of Democracy that was touted, Silicon Valley has failed to delivery and failed to really give priority to the war fighters. That’s the reason we’re trying to reemphasize that capital needs to be deployed to entrepreneurs who have a equal part or a strong interest in the technologies being first available to U.S. forces and companies and companies with a patriotic orientation. In addition to the fact that that money also will make very good profits. It’s just that it will not be immediately placed in the hands of giant marketplaces and entrepreneurs that are beholden to the Chinese state or to other foreign adversaries.

Ryan Morfin:

The Chinese have this concept of Military-Civil Fusion. It seems to be working well for at least the PLA and for their, we’ll call it, military strategic interests of accelerating their catching up. There’s been some testimony on the Hill recently where executives from the Pentagon have come out and pretty much said, “These are no longer near-peer issues. We’re now at a peer level.” Can you discuss the importance of what that means geopolitically that we’ve gone from near-peer to peer with China?

Tidal McCoy:

Yeah, the Chinese have sent many of their top students, the Thousand Talents Program, here. Some of them go back and take all the knowledge we have in our best universities and labs. They work in labs as lab assistants. Some stay here and probably are legitimate, and some just stay here and keep stealing technology and sending it back to China because the Chinese government knows exactly who they are. They’re briefed before they leave the country. They are told that they have to do what the state says otherwise their families will be under threat. If they come back, they’ll have a great job. They’ll be able to develop things, work in systems there.

Tidal McCoy:

As a result, the Chinese have been able to field a very large force of both land-based missiles, hypersonic missiles they’re developing now, satellite systems, underseas systems that really push out the ability of forward deployed U.S. forces, the Seventh Fleet and others, that are navigating the Western Pacific, the South China Sea, the Taiwan Straits around Japan. There’s a very heavy overhang of large numbers of very capable weapon systems that are targeted on and ready to fire upon U.S. capital ships and take them out in a lighting fast attack if it looks like there’s going to be a showdown over [inaudible 00:13:25].

Ryan Morfin:

Well, and the Chinese just launched two new aircraft carriers last week, and they squirted the Straits of Taiwan there. Hong Kong just lost its autonomous status. This seems to be a very much more assertive Chinese state than it was even six months ago. What do you make of this newfound confidence in the military there?

Tidal McCoy:

The President, Xi Jinping, has risen to power is that he has played off a number of the factions in the Chinese government to achieve supreme power as opposed to just being one of seven votes on the standing committee of the polit bureau of the Chinese Communist Party. The other six people don’t seem to have much to say anymore when it was a little bit of collective leadership.

Tidal McCoy:

He’s done that by promising great objectives to the Chinese military to help balance the power of the party. He’s used corruption investigations to undermine his adversaries and competitors inside the Communist Party. He has used a lot of other typical authoritarian type maneuvers to sideline people. Part of that is instituting the ambitious goal of the China Dream by 2049, which is to really be equal to or superior to the United States as either a leading superpower or the leading superpower and displace us, which mean pushing us out of the Asian region, out of the Western Pacific, dominating most of the countries there.

Tidal McCoy:

They’re heavily penetrating Australia, South Korea. They’re using Chinese construction companies to build things and put construction loans to work, and so they can have a foothold and have harbors and forts. Bribe politicians. I think they’re in 40 or 50 out of 56 African countries. They are overleaping even Asia in their soft power. Their hard power is with missiles and weapons and troops is becoming extremely strong. They are engaged in a very ambitious empire-building strategy.

Tidal McCoy:

If you look at the 18th century, the British Empire, the sun never set. The British Empire and the industrialization and the growth in their economic military mercantilist economy and attitude spread from there. It went one way to Germany and Russia and down to [inaudible 00:16:28] became to energize those countries to become empire builders. Then it went from to the West from England to the United States. After several years it went to Japan. Then from Japan it went to China. Each time there’s been a great economic burst of activity and energy. It’s also led to politicians taking power who are very ambitious for new territory and holding sway and strutting on the world stage.

Tidal McCoy:

This is really historically a fairly clear pattern. I think the Chinese are just the latest to fall into what may be a bit of a trap of their own making to have such great ambitions and great dreams that they can use those, that ideology and that dream, to force discipline and to maintain power and to motivate everybody to stay in line so that the dream can be achieved. Anyone that steps out of line is not doing their part and is interfering with national security and the national dream.

Tidal McCoy:

It’s used as a tool to energize the military industrial economic system in that country as it has been in other countries at other times including even our country in the 1800s as we sought to expand westward and take over the entire North American continent below Canada. This is not an unknown physical or historical pattern, and it must be managed very carefully by us, as much as we can, without letting the Chinese completely run over everybody’s interests, some of which are our interests out in Asia and elsewhere.

Ryan Morfin:

I think that’s what a lot of people don’t really appreciate is that if someone says they’re coming to take your lunch money, you should pay attention because that’s exactly what they’re saying. I think a lot of Americans say, “Oh, you’re just being xenophobic.” Or, “You’re just not being a good global neighbor.” But I think this coronavirus has opened up people’s minds to the fact that, well, maybe a peaceful trying to rise is not in the cards. I don’t know. What are your thoughts about this current coronavirus pandemic coming out of Wuhan and the lack of transparency? How is this going to slow or isolate China further? Does it catalyze other events that would not have happened otherwise?

Tidal McCoy:

I think it does. It was probably not something that the Chinese planned. It may have been a little bit accidentally on purpose as the old saying goes in the schoolyard. Once it did happen, for whatever reason, maybe some very nationalist crazy lab people in China let it get out. Then it was covered up. Then they saw that, well, it’s pretty bad, but let’s make the best of this crisis. There was a lot of people claiming that there were vast undercounting. They even saw satellite images of huge amounts of sulfur dioxide in space over Wuhan. They potentially was coming from burning hundreds and thousands of bodies in crematorium every day.

Tidal McCoy:

I think they locked down Wuhan or they wouldn’t allow anybody to leave Wuhan except they did allow 40,000 foreigners to fly from Wuhan and spread the pandemic. But they made sure their own people didn’t travel very much. They burned everybody and trapped everybody and put them in stadiums very quickly so they quote or the Chinese are claiming they’re so great for stamping out the virus in their own country. But they stamped it out by stamping on a lot of people and a lot of people, in my view, disappeared.

Tidal McCoy:

Yet, and so they run around talking about how we didn’t do a very good job and probably because we didn’t put a lot of the people in the crematorium. I think they’re trying to … They realize probably, and some of their strategists had previously realized, that this could be a great weapon, a great asymmetric weapon, against a democracy like ours because we’re not going to do what’s necessary to totally stamp it out and wipe it out in the early phases.

Tidal McCoy:

Whereas if you look back at Chinese history, Mao Zedong alone first of all in the Great Leap Forward, I think, in the ’50s, to industrialize the country. Secondly in the ’60s, the Cultural Revolution, I think, there were 50 to 100 million Chinese … It’s pretty well documented … that were killed each time. If the Chinese have to lose a million or two or three million people to stamp out a pandemic while it wrecks everybody else, I would certainly advise everybody to take a look at the historical record because they don’t really worry too much about it morally or spiritually. They got a 1.4 billion people, so if we got to take a hit and it can help us a lot, then we’ll take a hit.

Ryan Morfin:

I guess you can only sleep at night if you don’t have any religion in your country. That, I think, is why the Communist Party is so antagonistic towards religious leaders. Well, I do think it’s a great point. Their economic productivity is back to almost 90% of where they were prior to the pandemic. We’re probably maybe at 25 to 50%, so I think it’s going to be an interesting externality that we have to deal with of finding a next normal.

Ryan Morfin:

With IronGate, and I’m also an investor with you in this, and we’re building a militia of American patriot capitalist trying to figure out a way to galvanize and catalyze innovation. Maybe talk a little bit about some of the areas that you think are going to change the future of the economy and why IronGate’s investment thesis is spot-on right now.

Tidal McCoy:

Well, I’m thinking about over time as we’ve looked at the world and where it’s going to go and the history of nations, which is informing us a lot at various centers of study like the Institute of World Politics that I’m the Vice Chairman of that university. There’s a lot of the people who wrote the Reagan defense plan are there to bring down the Soviet Union. We see the same sort of cycle at work here as I mentioned with the Chinese. We have to manage their Peaceful Rise to make it peaceful. But their version of Peaceful Rise is to take over everything. Our version is to have a happy homeland and be prosperous and don’t try to tell us to move out of the neighborhood or take over our interests or crush the freedoms of other nations that want to be free.

Tidal McCoy:

We see that they have clearly identified the leverage points probably from much of the education in the West and England, United States of the key technologies that are going to be vital to both the military and economic success of companies and, therefore, to support the taxes and the costs of bearing a large military. Things such as cyber, artificial intelligence, machine learning, quantum computing, space intelligence surveillance and recognizance, cyber defense and offense. Even now, they’re probably realizing although they were studying it they also probably realized the use of terrorists of proxy states to make trouble for us like North Korea.

Tidal McCoy:

Their bioweapons, which you’ve seen, that either got out sort of on purpose or but they’re making use of that. There’s chemicals. There’s weaponizing humans and helping Narco Trafficantes and other weak governments to press our boarders with humans that we don’t want to reject. The Chinese are very smart and most of the other nations are. As a democracy, we have a problem dealing with immigrants. We have a problem dealing with older people who are getting sick with a disease. We are open and transparent. We have a problem with some racial aspects in the country. All of these things are tools and areas that others, different countries and different adversaries at different times, sometimes in cooperation with each other, can and will exploit against us to just keep nibbling away at our national strength and our national unity and our national will to oppose aggression and trying to achieve a greater dominance in the world.

Ryan Morfin:

The Chinese have been sending folks over here for a while, and they take a long-term view. How deep or how pervasive is the reach into our institutions and government and academia and corporate America? What does the population, the electorate, need to do to get our leaders to do an introspection to see where there’s conflict of interests that may be skewed by economic incentives for folks in government?

Tidal McCoy:

Yeah, a new group’s been put together called the Committee on the Present Danger: China, which I’m involved in a little bit helping because I was a member of the Committee on Present Danger as it related to Russia in ’79 and ’80 when we brought this to the attention of the Reagan campaign, the Reagan Presidency. Actions were taken. The staff was deployed to come up with policies which eventually worked to bring down the Soviet Union.

Tidal McCoy:

One of those main policies was to stop the hemorrhaging of Western capital to go Western capital and technology and goods to go to Russia. They had been broke and bankrupt for 20 years. It’s just they were living off soft loans and theft of technology. When that was cut off during the ’80s, the Soviet Union basically collapsed. Gorbachev came to power and declared Perestroika and they eventually the wall fell in ’89. All of the Russian satellite countries in the Warsaw Pact became free. Many of the republics in Russia became free.

Tidal McCoy:

There was probably several hundred million people that were freed as a result of Reagan’s policies and the United State’s strength and will during those years along with Pope Francis and Margaret Thatcher, the Prime Minister of the United Kingdom. There was a real alliance and a real effort to roll back this predatory behavior, not just to try to tolerate it or deal with it.

Tidal McCoy:

We’re probably going to have to get to the same point with the Chinese. Trump has recently announced measures which kind of go to that point in dealing with Hong Kong being a sieve and a source for a lot of Western money to get into China. Also for cutting off the flow of technology, to stopping the Chinese from sending students over here and creating so-called Confucius Institutes. Confucius Institutes at many major universities that deploy a lot of cash and hire a lot of American professors are basically a small obvious soft power Chinese armory on our university campuses. It would be like if we had a National Guard armory or a intelligence outpost on every campus, every major university in China and we were deploying American students into their labs to source technology and source ideas.

Tidal McCoy:

We’ve been completely negligent and foolish and shortsighted. We were hoping that this kind of behavior on our part would lead them to a Peaceful Rise and prosperity and good behavior. But, in a fact, they have just basically duped us, and they are now making use of all that they’ve gained through our good nature and our rather foolish optimistic behavior.

Ryan Morfin:

No, I do think there is a bipartisan change coming from this last several months from the trade war to the pandemic transparency or lack thereof. I think it’s a bipartisan view that the old regime or the old way of doing things is not going to work and we need to reevaluate. It’s going to have tremendous economic implications, I think, because the trade routes and the infrastructure, the billions and billions and trillions of dollars that have been built have really changed capital markets and changed capital flows. I think there’s a political will now to reallocate or redirect those trade flows.

Ryan Morfin:

What can you talk to us about with the Chinese, we’ll call it, the propaganda program or the loan program, infrastructure program, called One Belt, One Road? What’s your view on that?

Tidal McCoy:

Well, it’s another great source of money and influence. I call it the One Belt Around Your Neck and the One Road to Perdition Initiative for countries that are foolish enough to participate in it, which is many countries. Pakistan and one they’ve been close to and to get around behind India. Countries in Africa where they are using the money. They’ve put out a tender to some Chinese companies for, say, $5 billion to build a big bunch of dams or airports or whatever. The real cost might be $2 1/2 or $3 billion. They move a bunch of Chinese workers into the country to actually accomplish the construction rather than teach the local populace.

Tidal McCoy:

The other $2 billion that’s part of the loan that the country signs up for goes into the pockets of the local politicians or presidents of those countries, all sorts of Chinese businessmen, also some Chinese political leaders. Basically, the country is left with a $5 billion dept, a $3 billion dollar bit of infrastructure that will probably last five to 10 years instead of 50 years because of not being well made. A lot of bribery and a lot of money being taken along the way and recordings of it and blackmail of it being used.

Tidal McCoy:

Then when the country can’t pay back the $5 billion, the Chinese demand a 99-year lease on one of their main ports or have a major say-so on their votes on the United Nations. Basically, it’s just a form of bribery and corruption and extortion all rolled into one.

Ryan Morfin:

Well, and it’s interesting like parts of Eastern Europe where they have these huge highway projects through the mountains, they also bring their own labor. They put them on one-way visas, which means they’re not expected to come back to China. You’ve got Chinatowns popping up all over the world. These poor laborers didn’t ask to be shipped there, but they’re there and they’re not able to go back home.

Ryan Morfin:

It’s interesting. It’s strategic. They’ve been building a series of deep water navel bases in Africa, Pakistan right by the mouth of the Persian Gulf due politically … I mean, they’re making moves. I think people haven’t either been paying attention or people were hoping that they could get a piece of the market upside, I guess. I think for that reason it’s been a dangerous flow for the last decade or two.

Tidal McCoy:

People were back and forth between Wuhan and Milan because of the textile trade. A lot of the virus hit very hard early in Italy due to the large amount of travel between Wuhan and Northern Italy. That led to the pandemic there. Also, apparently, there’s some two or 300,000 Chinese around Northern Italy somewhere building some kind of project because Italy was one of the few or maybe the only NATO country so far to sign up for a major part of the Belt and Road Initiative, which I’m sure included a lot of corruption.

Tidal McCoy:

The Chinese are also very heavily working to penetrate great South Korea. I’m told that there’s 28 Chinatowns in South Korea that have tens of thousands, 10, 20, 30,000 Chinese, like a giant, like a city, a Chinese city with their own schools and hospitals and roads and stuff in these Chinatowns that are spotted all around South Korea so that without their own knowledge, the government has let this happen, the left wing Moon government in South Korea, and so the Chinese are going to have a fifth column, if you would. They’re going to have a huge number of Chinese that will follow their orders sitting behind the South Korean military and the American military if it ever comes to a conflict between North and South Korea or whatever. They are there and waiting and lurking, and it’s going to be a big problem.

Ryan Morfin:

The one advantage, I guess, is that we still have innovation here for the time being. We have the National Labs and we have the academic institutions that are doing cutting edge research for the time being.

Ryan Morfin:

One of those new domains of warfare first cyber towards the last decade and a half and will continue to be a major domain of warfare for the 21st century. But what about space? I know you’re also the Chairman of the Space Transportation Association. Given your history with the Air Force, you still have a very active involvement in the U.S. Space Program. What could you tell us about where the Space Program is today? Today is actually the relaunch of the Dragon rocket for SpaceX and NASA. What are your thoughts about where we’re going in space and why?

Tidal McCoy:

Well, and we’ve had a real renaissance, first of all, in the last 10 years in the commercial space industry. We had a renaissance, a real start, in the ’80s and then it died down due to some of the Cold War things that took place in the late ’80s and ’90s. NASA also pushed back because they wanted to maintain their dominance in space as it relates to U.S. policy.

Tidal McCoy:

Then the so-called new space began starting companies, investing the money. Companies like Blue Origin. A lot of the internet billionaires, Blue Origin, which is Bezos. Tesla or SpaceX, which is Elon Musk and others decided that they could bring a lot to the space effort. Also, it began to dawn on everybody that the Chinese in particular were taking such huge steps at both launching rockets having stolen a lot of our technology, putting satellites in orbit. Talking about going back to the moon. Talking about having a setup for a Chinese space station that doing anti-satellite tests, doing counter satellite technology efforts that we have become so dependent on space for precision navigation, intelligence, communications, and Earth knowledge that if we were to be hit hard in space on key satellites that we would be blind. We would not be able to communicate, and we would lose command and control of our forces.

Tidal McCoy:

This energized both DOD and NASA, fortunately with the Trump administration providing the funds, to really reboot and double down on trying to figure out how to accomplish this very, very large number of space missions that need to be done, the necessary creation of the United States Space Force as a sixth service in the United States besides the Air Force and the Navy, Marines, Army and so forth.

Tidal McCoy:

In fact, back when I was an Assistant Secretary and Acting Undersecretary and later Acting Secretary of the Air Force, we established a First Space command anywhere in any armed force in any place in the world in September 1, 1982, at Peterson Air Force base Colorado. Because even then we could see that more emphasis needed to be paid and more organization and doctrine and strategy needed to be developed. Space officers needed to be promoted, and so we began the long trek even back then, which is now some 38 years ago, I guess.

Tidal McCoy:

I was part of some of the behind the scenes promotion of the idea of the United States Space Force through certain people in the Congress and certain others at the White House who over time or managed to have some attention paid to it by Vice President Pence and President Trump. They decided to make the bold step where no man had gone before on the establishment of an actual Space Force, and also the reestablishment at the same time of the counterparty to a Space Force rebooting and giving new invigoration to the Space Command.

Tidal McCoy:

The Space Command is the war fighting command that takes operations against the enemy and the Space Force, which is like the other force, is the group or the force that has the mission of the recruit, train, equip and develop space people and space technology to turn over to the Space Command for the war fighting mission.

Ryan Morfin:

Are we the only country that has a military designed command structure for space? Or does the PLA? Do the Russians? Do they also have a similar branch? Or, it seems like we’re the only ones so far.

Tidal McCoy:

Well, we were for a while. Recently, once we announced that we were going to establish or President Trump announced they were going to establish the Space Force, and also reinvigorate the Space Command … give it more authority and more money, have it more separate from the strategic command … the French have announced they are forming a space command or a space force. The Chinese had been moving that way, but they have a funny organization. They have gone into a lot of reorganization within the Chinese military to have more joint force control at the top as opposed to just letting senior commanders in the Army, Navy and Air Force run things.

Tidal McCoy:

President Xi did that, one, as a way to root out corrupt officers. Two, as a ways for him to get more command over the military. But also it had an invigorating effect for the Chinese military in terms of more joint activity and cross pollination and technology sharing in the Chinese military, which has helped them. Within one of the groups of this a new support force dealing with strategic weapons, I believe the Chinese, they have given it a very high priority in terms of the actual command and control and recruitment and development for space. I believe it is the large support command that also is involved in their strategic nuclear missile program. They probably will eventually break it out into a separate force of some sort I suspect, but I don’t believe they’ve done that yet.

Ryan Morfin:

Really, it was the Reagan Administration, Star Wars. You were a part of that. That was the first realistic moment where we started to say, “This is a future domain.” What does it mean to be in the domain of space? Is it cleaning up satellite debris? Is it protecting communications infrastructure? Or, do you foresee in the near future moon bases and mining operations? There’s a lot of wealth on asteroids. Where do you see this going out 50 years from a military standpoint?

Tidal McCoy:

Well, I think that the many times and as in the past in the West people first of all you have the explorers who are out looking for just knowledge, which we have been doing. Then you have the traders come. Then the traders need a little bit of organization and religion. Then you have the missionaries. Then you have to send a military to protect the missionaries from the traders and the adventurers. Then commerce comes behind. Then if you meet another country in a certain area that wants to do the same thing, then you potentially have the clash that occurs either because of the strategic location of the territory or the minerals that are there or just the desire of the leaders to appear dominant.

Tidal McCoy:

Those things will probably apply to space the way they applied to our American West history as well as the history of other places in the world. I foresee as we did a study and formed the Space Travel and Tourism Division inside the Space Transportation Association back in the ’80s, with some objections from NASA. But we persuaded NASA to go along with us. We talked at that time about a very far setting vision where we would have tourism in space, education, mining, sports and also all of the civil missions of navigation, of studying the Earth, studying the planets. Seeking out new life and new solar systems and universes.

Tidal McCoy:

At the same time, bringing along order for moving in space like freedom of navigation as we do in the ocean. Also, therefore, needing military capabilities. But generally only the military capabilities that are necessary to maintain some order unless some other power is making very muscular moves to dominate space. Then we are left in a position of having to match those muscular activities, and so it’s a situation we’re in now, something that was always very much downplayed many years ago is now happening. That there’s a very much of a likely someday to be a war in space. There’s liable to be conflict in space with space assets, space planes, some manned, some unmanned. There’s liable to be people attacking our space assets from Earth or attacking our space assets from in space or even from bodies in space.

Tidal McCoy:

The countries, and particularly our country, are going out and into space to do things. But we’re trying to do it with a bipolar sort of situation where we’re looking out after American interests and American commerce and American technological leadership in space. But at the same time, allowing other countries to come along with us as we have with our many partners in this space station. We’re not blocking anybody from going into space. We’re just trying to move into space and allow our people some opportunities as long the other side, whether it be Chinese, Russian or whoever wants to play and share in the upside of discovery and development and so forth. To the degree they don’t, then we have to be ready to dominate that domain in the event that others try to make use of it for their own purposes including dominating our earthly activities.

Ryan Morfin:

Well, and this is an anthropological question for you. But looking out 50 plus years, many a hundred, who knows, but as these colonies pop up on the moon or Mars, do you think they stay tethered to nation states back here on Earth? Or do we have another chapter of history repeating where there may be an untethering of another set of colonies that are rebellious? Do you see or how do you see that playing out in a hundred years?

Tidal McCoy:

It could be that we have certain mining groups and colonies or camps, discovery camps, that are on the moon or licensed to be on other planets, which I think is a long way off. That are considered to be American or they may be joint. They may be joint like the space station has 20 or 30 countries involved in it in major and minor ways, but not everybody, not 200 countries. People come and go. It could be that there is an international colony established to do research and discovery somewhere like there is in Antarctica, which is a no-nation claims a sovereign right to any part of Antarctica through the Antarctic Treaty.

Tidal McCoy:

The Space Treaty is somewhat the same way although Trump has recently amended the Space Treaty in a bit in an executive order allowing for establishment of zones for travel and commerce, sort of like licenses or sort of like a long-term lease in celestial bodies. Supposedly, there’s still a treaty that calls for that no weapons of mass destruction can be deployed in space. In other words, no nukes can be put into space to be aimed down on somebody else. Whether that’s been adhered to by others, we think so, but we’re not sure. We haven’t done it. But there is no treaty barring the shooting down an American satellite. But, of course, if someone did, it would mean it would have to be considered an act of war, and there would have to be some discussion and potential retaliation. Everybody’s playing a game of who can get somewhere first.

Ryan Morfin:

What happens if you detonate a nuclear bomb in space? Does it just dissipate? Or does an electromagnetic pulse just kill a lot of satellites in a certain range?

Tidal McCoy:

One of the reasons we spent so much on these very big, crazy seven-story tall Milstar satellites, I think each satellite was one or $2 billion. It had the first use of optical fiber in them and it also actually had an Optronic computer so that if a nuke went off or an EMP hit through a detonation in space or near it, that the circuitry would not be fried since it’s photons instead of copper or electrons. This was recognized some years back as a potential threat to the very high level nuclear command and control. That was why that was done, and that’s how early fiber optic got people’s interest and also Optronic computers and led to laying a lot of fiber and dark fiber in the United States. People were still very concerned about electromagnetic pulse being fired off over the United States and burning out a lot of copper circuitry that is out there now and burning out silicon chips.

Tidal McCoy:

There really hasn’t been a lot of adequate testing to know exactly how much stuff would be burned up and hurt and stopped as depending on the size and the altitude of any attack and so forth. Once in a while, about every 13 or 14 years, there is a huge solar cycle from the sun where there’s a giant outburst of radio magnetic, electromagnetic energy that comes firing out in rays of sun type activities, solar flares. That has disrupted the satellite and other ground communications in the past. I believe the next one is either not that far off to happen again. That gives scientists some idea of what the effects of a big electromagnetic pulse will be.

Tidal McCoy:

Various countries are … We started working on this back in the ’80s … working on the weapons that just like we’re working on lasers, we were working on bombs that were electromagnetic pulse bombs that you could potentially drop over the battlefield that would shut down the communications of the enemy. But like most things, if it shuts down the communications of the enemy, unless you’re ready, it may shut down your own communications. If you can get it deep enough in a territory to disrupt them without hurting you, then it’s good to use. It’s like a pandemic. When does your own weapon benefit you more than it hurts you?

Ryan Morfin:

Well, sir, I could talk to you for days. But I had maybe two final questions for you. I guess, what are you optimistic about in the next five years about America, where we are today? It seems like we’re very divided in a partisan dispute. There’s riots going on today. There’s a mistrust of institutions. But do you find silver linings anywhere and what are they?

Tidal McCoy:

Well, I think the silver linings are that there’s a good degree of bipartisan support and knowledge now of the Chinese threat and the technology they’ve theft and the use of all their between newspaper advertising and Confucius Institutes, pressure on students, outright theft and so forth, there’s much more of a wakening to the Chinese threat that’s more bipartisan, and that’s good. Hopefully, that will stand the test of time that they are a predatory and a nation which doesn’t seek to a Peaceful Rise.

Tidal McCoy:

In terms of our internally, I think that it’s going to be very difficult. I find it difficult to see a certain unity forming around the democratic and capitalist system that we have. There has been an effort by the mainstream media to create a tremendous amount of division and belief that the system doesn’t work, and in some cases it doesn’t work. There’s been a severe demolition of the middle class. When countries fall to a coup of the left or a coup of the right, it’s generally because the middle class has been destroyed. Our middle class based on income used to be about 61% of the population and then it down now to around 40 or 38% because a lot of the jobs have been taken by illegal immigrants. They’ve been shipped offshore to China.

Tidal McCoy:

At the same time fentanyl and drugs have been allowed to be sold and perpetrated to all the population in the hard working states around the country. Mayors of certain cities have just grabbed power and pandered to immigrants, the homeless, the druggies presuming that somehow the money’s just going to keep flowing from the heartland. I think it’s going to be difficult to sort that out. Maybe the pandemic is going to wake some people up. Maybe the riots are going to wake some people up, both good and bad. Certainly there needs to be some reform to the citizen police departments and people, a few, that are bad and misbehaving. But we don’t need to have people burn down their city to protest or to demand reform.

Tidal McCoy:

But there’s that group out there that is more interested in power and control over the American people than they are the future of the country. They’re not many, but they’re powerful. They have money. They incite. The mainstream media goes along with them. Hopefully, the American people will recognize and pay attention to that and vote properly. We hope their votes are not stolen, in addition, which is another issue that we’re working on at [inaudible 00:55:18] and we all better be aware of.

Tidal McCoy:

I have a brighter outlook on the foreign policy issues than I do on our domestic situation. There’s a great division that is being perpetrated, I think, by the mainstream media in league with certain politicians to their own advantage, and it’s hurting the rest of us.

Ryan Morfin:

What books, if any, have you been picking up recently? Any new ones or any old ones just to revisit thoughts that you think are important today?

Tidal McCoy:

Yeah. One book that I’ve picked up recently, I hadn’t read it in a long time, even though my name comes from it is the Bible, Genesis 14:1. My name is from an old line of Methodist ministers. There’s a very interesting history about the Bible and culture. In addition, I’ve picked up a copy of several books. The history of World War II as rewritten once all the Soviet archives have been taken into consideration and information from that. It’s a great book about how things may turn and how bad war can be. It’s called No End Save Victory. The third one is a book called, it was written by a number of IWP people that worked for Reagan called the Strategy for the End of the Cold War, which is a very good manual for how to deal with a predatory foreign power. I’ll be glad to send that to you. I think I have it on the computer. It’s an extraordinary, easy to understand discussion about what we need to do right now with our main adversary.

Ryan Morfin:

Well, sir, hopefully one day we get you to write a book or have some people take some notes and write a book about all the stuff that you’ve been up to in service of our country. Thank you so much. Honored to talk to you this morning, and I really appreciate the time together.

Tidal McCoy:

Well, Ryan, thank you. You’re a great friend, a great leader, and patriot. I think your broadcasts, your podcasts, are very, very good with the wonderful people who can speak out. This is the kind of speaking out that we need to do because so much we don’t get from the old major news outlets. They have become fossilized and very twisted just like some of our older major defense industrial contractors. We need new life, new blood, new thoughts, new outlets, new distribution, new ideas, and then bring it all together.

Tidal McCoy:

Thank you for the work you and your team are doing at Wentworth. I think it’s a wonderful opportunity that you’re putting together there for all your team.

Ryan Morfin:

Thank you, sir. Have a great day.

Tidal McCoy:

Okay. Thank you, Ryan.

Ryan Morfin:

Thank you for watching today’s episode. Before we go, please remember to subscribe and leave us a review on Apple Podcast or YouTube Channel. This is Non-Beta Alpha, and now you know.

Speaker 3:

All price references and market forecasts correspond to the date of this recording. This podcast should not be copied, distributed, published, or reproduced in whole or in part. The information contained in this podcast does not constitute research or recommendation from Non-Beta Alpha Inc., Wentworth Management Services LLC or any of their affiliates to the listener. Neither Non-Beta Alpha Inc., Wentworth Management Services LLC nor any of their affiliates make any representation or warranty as to the accuracy or completeness of the statements or any information contained in this podcast. Any liability, therefore, including in respect of direct, indirect or consequential loss or damage is expressly disclaimed. The views expressed in this podcast are not necessarily those of Non-Beta Alpha Inc. or Wentworth Management Services LLC, and Non-Beta Alpha Inc. and Wentworth Management LLC are not providing any financial, economic, legal, accounting, or tax advice or recommendations in this podcast.

Speaker 3:

In addition, the receipt of this podcast by any listener is not to be taken as constituting the giving of investment advice by Non-Beta Alpha Inc. or Wentworth Management Services LLC to that listener nor to constitute such person, a client, of any affiliate of Non-Beta alpha Inc. or Wentworth Management Services LLC. This does not constitute an offer to buy or sell any security. Investments and security may not be suitable for all investors. An investment of any security may involve risk and the potential loss of your initial investment. Investors should review all risk factors before investing. Investors should perform their own due diligence before considering any investment. Past performance is not indicative of future results. Investment products, insurance and annuity products are not FCI-insured, are not bank guaranteed, not insured by a federal government agency may lose value.

 

Download Transcript

Share This Episode

Subscribe To Our Podcast!

COPYRIGHT 2020 ALL RIGHTS RESERVED. THIS DOES NOT CONSTITUTE AN OFFER TO BUY OR SELL ANY SECURITY; INVESTMENTS IN SECURITIES MAY NOT BE SUITABLE FOR ALL INVESTORS. AN INVESTMENT IN ANY SECURITY MAY INVOLVE RISK AND THE POTENTIAL LOSS OF YOUR INITIAL INVESTMENT. INVESTORS SHOULD REVIEW ALL “RISK FACTORS” BEFORE INVESTING. INVESTORS SHOULD PERFORM THEIR OWN DUE DILIGENCE BEFORE CONSIDERING ANY INVESTMENT. PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS. INVESTMENT PRODUCTS, INSURANCE AND ANNUITY PRODUCTS ARE NOT FDIC INSURED/NOT BANK GUARANTEED/NOT INSURED BY A FEDERAL GOVERNMENT AGENCY/MAY LOSE VALUE. SECURITIES OFFERED THROUGH CABOT LODGE SECURITIES, LLC [CLS] MEMBER FINRA / SIPC 200 VESEY STREET, 24TH FLOOR, NEW YORK, NY 10281, 888.992.2268.

Recommended For You

View Transcript

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:

Yes.

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.

 

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

The unique history of a Maryland based distillery and craft secrets on how to make great American Bourbon w/ Admiral Scott Sanders Founder of Tobacco Barn Distillery

read more

Want to join our show?

Would you like to be a guest on the Non-Beta Alpha Podcast? Please click below and let us know that you are interested in being a guest on the podcast and we will get back to you shortly.

Skip to content