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Ryan Morphin:

Welcome to Non-Beta Alpha. I’m Ryan Morphin. On today’s episode we have Jocko Willink, from the Jocko Podcast and Echelon Front, talking to us about leadership and trends in marketing. This is Non-Beta Alpha

Ryan Morphin:

Jocko, welcome to the show.

Jocko Willink:

Thanks for having me on, Ryan. Appreciate it.

Ryan Morphin:

I wanted to talk to you a little bit about the business of social media marketing. You’ve turned your veteran experience and your service to our country in a very positive way into leadership coaching and into helping corporate America become better leaders. I want to talk a little bit about that as well as how do you think about social media marketing? Because a lot of our advisors and a lot of people in our industry are a little late to the game, to be frank, and are just coming around the corner. And then I’d love to talk to you about your podcast because we have a podcast as well and want to get some insights from you there, but maybe we take a step back. And why does corporate America need leadership training in your opinion?

Jocko Willink:

Well, we started off this conversation by talking about leadership being the most important thing on the battlefield. And unfortunately, in many organizations, people think that leadership is preexisting in human beings. They think you already have that ability, and it’s simply not true. Have you ever heard of Hamburger University? Ever heard of that?

Ryan Morphin:

No.

Jocko Willink:

Hamburger University is the school that McDonald’s managers go to in Illinois, and it’s a six month school. And so when I was in the SEAL teams towards the end of my career, once I realized how important leadership was, and I really started saying to my chain of command, “Hey, we need to teach these young SEALs how to lead. We need to teach them.” And they’d say, “Well, it’s always been on the job training.” And I said, “Listen. McDonald’s sends people to a six month school to learn how to flip hamburgers. And we’ve got guys going on the battlefield with lives at stake, and we’re not giving them any official schooling. Why? We were the first military organization in the world that doesn’t have leadership training for their troops. We need to do that.”

Jocko Willink:

And it’s the same thing in the civilian sector. All the time, there’s companies, they promote people, they hire people, they bring people into positions, they promote them into positions, and they don’t give them any leadership training. And so what they’re doing is they’re doing the best they can. And just like in the SEAL teams, you’d get some guys that were great leaders in the SEAL teams. And when you would pull the string and figure out their lineage, you could figure out that at some point in their career, they had someone that they worked for that was an outstanding leader. And then you’d get someone else that was a bad leader, and you’d pull the string on their career, and you’d find out that they worked for a guy that was a tyrannical leader or an egotistical leader. And you’d realize that’s where they learned from. If you work for a great leader, yeah, it’s great to learn from them, but if you work for a bad leader, you don’t learn from them or you do learn bad habits.

Jocko Willink:

And the other thing is leadership is a skill. It’s a skill. It’s like playing guitar or playing basketball or painting. It’s a skill. And, sure, you’ve got a certain level of talent that is associated with it, but you could take the most talented person in the world athletically and if you don’t teach them how to play basketball, they’re not going to be good at it until you teach them those skills. It’s the same thing with leadership. And that’s the third leadership book I wrote, Leadership Strategy And Tactics, was because I saw a gap. I saw a gap between understanding the principles of leadership and then actually taking them in the field and applying them. There’s different skills. There’s different maneuvers that you can make as a leader. You have to learn them.

Jocko Willink:

And if you think that you’re just going to have them, you might get some of them right, but I guarantee you’re going to get a lot of them wrong. I hate seeing people learn lessons the hard way, the way I learned them. No, pick up a book, listen to the podcast, and you can start to see, “Hey, here’s a tool that I can take and apply.” “Hey, here’s a situation. Jocko talked about this two weeks ago. I know what to do here.” It’s a skill set, and that’s what we’re trying to do, teach people the principles and then the skills to actually bring those principles to life in an organization.

Ryan Morphin:

And you’ve taken Echelon Front, which is your consulting business, and you’ve started to work with Fortune 1000 companies and really help American business execs realize that they’re not born leaders. They’ve got to be formed. They got to learn that leadership skill. How have you used your marketing prowess on your podcast and your social media? How do you look at social media as a marketing asset from your perspective?

Jocko Willink:

This is an interesting question because if you were to ask me how I thought of social media as a marketing tool, I would say, “Hmm, I don’t really see it that way.” But, then if you were to trace down the finances that I have in my life, you’d see that a vast majority of them come from my social media and my podcast. Why is that? Well, just like being a leader, what you want to do is you want to take care of your people. When I look at social media, when I look at my podcast, my goal isn’t to take something from people. My goal is to give them something. That’s my goal. My goal when I make my podcast isn’t to get people to give me something. My goal is to give them something. And if they want to give me something back, that’s great. If they don’t, it’s okay.

Jocko Willink:

I think in the finance world, if you go into your social media and think, “Okay, how can I best advertise and get people to give me something,” if that’s your mindset going in, guess what people see? People see someone that wants something from them. If you go in and say, “Hey, look, I’ve got some experience. I’ve got some knowledge. I’d like to help people out. How can I help people out? What can I do? What can I teach them? What can I share with them? What lessons have I learned?” And if you go into it with that attitude, people will say, “Oh, thank you. Thank you. Thank you for telling me that. I didn’t know that. I’d like to give you something back. Oh, by the way, I see that you have a website here I can click on, and I can take a look at some of your products,” or whatever the case may be. For me, these social media aspects are more about trying to help people and give things away, and then if they feel value in it, maybe they’ll give you something back.

Ryan Morphin:

Well, and I’ll tell you, I’ve been taking a lot off of your podcast. You just started a new podcast called The Thread. I think it’s got about seven episodes. And the other one, you have 246 episodes. What’s about the new podcast? What’s the subject matter? How is it different than the other podcast?

Jocko Willink:

There’s actually a couple new podcasts that I’ve put out recently. One of them is called The Debrief. And The Debrief is shorter, half an hour, 45 minutes. And it is just … it’s basically pure leadership. It’s myself and Dave Burke who works with me at Echelon Front. And what happens is when we work with clients, he and I talk, and I say, “Hey, what’s going on with this client?” And he tells me what’s going on. And we debrief what happened or what a solution will be. And so a few weeks ago, I said, “Hey, when we do these debriefs, we should actually sterilize them so no one knows who we’re talking about, but then we should share this information with people so that they can learn.” And that’s exactly what we started doing.

Jocko Willink:

The other podcast you mentioned, the new podcast, it’s called … you said it was called The Thread, which is correct, or sorry, it was correct. We had to change the name of The Thread because it was already a podcast. And they sent me a cease and desist letter immediately. And I kind of laughed-

Ryan Morphin:

You know you’re doing something right when that happens.

Jocko Willink:

Yeah. And I never realized it. I just kind of do what I do. And so I realized that there was another podcast called The Thread and that we were beating them in their own category, so they didn’t like that very much, I guess. And unfortunately, they didn’t think through it very well because if their podcast is the same … it’d be like being authorized to bring out a soda and you could call it Coca-Cola, right? If you could call it Coca-Cola, hey, you got a bunch of people that would be going and buying it just because of the name, so people would have listened to their podcast.

Jocko Willink:

Anyways, we changed the name to The Unraveling. And what that podcast is … again, it’s a little bit shorter because if you’ve listened to my podcast, I have a tendency to make them a little bit long. And that one, we are looking at things that are more rooted in what’s happening in today’s world. I don’t quite want to call it a news program because the news, as you know, is headlines and 17 seconds about a subject from two people on the screen that are arguing with each other. You don’t get anything from it. You don’t gain understanding of the world. The Unraveling is to unravel things that are occurring today and see what the roots of those things are. And it’s been awesome to do. Yep.

Ryan Morphin:

You’ve built up this social media brand. You’ve created an educational platform on leadership. And now, you start to link the website assets and you started creating products. And I can tell you COLDWAR is at our offices. Our employees who are back in the office are taking it every day, or at least they’re supposed to. I take it every day. I take your D3. You guys make boots. You’ve got an energy drink. How have you started to productize this from that standpoint? And from our corollary in our industry, it may not be consumer business to consumer products, but business to business. How do you think about how do you start to vertically integrate all these different offerings?

Jocko Willink:

Yeah. This, again, goes back to a military analogy. In the military, if you’re looking at an enemy position, right, you see the enemy. What you want to do is you want to attack the enemy, but you don’t want to attack the enemies strong points, right? You want to attack where the enemy is weak. What you do is you start to send out reconnaissance elements that start to probe and look and see where the enemy is strong and where the enemy is weak. And then once you find a weak point, you put your resources on that weak point and you attack. And you get through the enemy lines, and then you flood more resources in there. And then eventually you take over even the strong points.

Jocko Willink:

So, I find myself having that same attitude when it comes to the business world, which is there’s a bunch of places that you can go. There’s a bunch of areas to attack. And what I do is basically send out little reconnaissance elements to see, “Oh, it seems like there’s a demand for that. Why don’t I put some resources against it?” “Okay. It seems like people like that, and they want more, why don’t I give them more?” And sometimes I put out some reconnaissance elements and say, “Hey, what do people think of this?” And what do I get back from it? It doesn’t seem like that’s real popular. Okay. I won’t put any more resources in that direction.

Jocko Willink:

I think keeping an open mind is the other piece of this is you might put your resources over here in this product, and you think it’s the best product ever, but the market says no. And you might say to yourself, “Well, they just don’t understand.” Okay. Well, if you take ownership in that and say, “Maybe I’m not explaining it to them well enough, that’s my fault. I need to explain it better.” Okay. But if you say, “They just don’t understand, and I’m just going to keep doing what I’m doing,” well, eventually you throw away all your resources.

Jocko Willink:

That’s what I’ve done. I look at things in my own life. I mean, COLDWAR, it’s a great example. Before COVID, I traveled all the time. I was shaking people’s hands, thousands of people. I’m on airplanes in airports, in planes, trains, and automobiles. I’m in meetings with people all day. And so you’re getting constantly … your immune system is constantly under attack. And so I wanted to take something that had all the ingredients in it that I knew would keep my immune system strong. We put that product together. And we put that product together before COVID. Same thing with the vitamin D. Why do I take vitamin D? Because when I’m on all those traveling trips, don’t always get the amount of sun I need, so I made vitamin D. Then COVID hits, and we’ve got two products that couldn’t be any more well-suited for boosting the immune system for something like COVID. There’s some luck involved there, too. And I have no problem being lucky sometimes.

Ryan Morphin:

Well, with hard work luck tends to accelerate, but I’d ask you, looking at the podcast industry, I mean, your buddy, Joe Rogan, just took a nice payday from Spotify, do you think that’s the future of communications? Do you think it’s going to start to compete with TV and radio? And what are your thoughts on that?

Jocko Willink:

Yeah, I mean, I don’t even … I don’t think it’s competing with radio anymore. I’m not sure anyone listens to the radio anymore. I think it’s already crushed radio. I think TV is pretty close behind. I personally know I listened to way more podcasts than I watch TV. When I started my podcast in 2015, 17% of America was listening to podcasts. It was a pretty small number. The last time I checked, it was 78%. And that was over a year ago. I haven’t checked lately. The convenience of a podcast, the fact that it gives you time, you could never … if you’re going to read a book or you’re going to watch a TV show, you got to sit down and watch a TV show. You can’t watch a TV show while you’re driving. You can listen to a podcast while you’re driving.

Jocko Willink:

You can’t watch a TV show while you’re mowing the lawn. You can listen to a podcast while you’re mowing the lawn, do the dishes, whatever. It gives you more time, and it gives you an ability to get more done. I think podcasts are … I think they’re … I’m sure you’ve heard some of these comparisons. I know one of my other friends, Jordan Peterson, has said that the podcast revolution is more important than the Gutenberg press, which is when they started being able to print books. And they have some pretty good evidence to back that up, which is when they made the … when Gutenberg made the press, the printing machine, they could print. They could print books. They couldn’t print that many because it was hard. It was arduous. You had to lay out a page at a time and then print 20 copies. And guess what? They were printing in one language. The language was Latin. Not that many people could actually speak Latin.

Jocko Willink:

And then if you happen to speak Latin and you happen to have a ton of money to go and buy one of these things that you could then attempt to read, then that could be considered a revolution. When you look at a podcast, you don’t have to know how to read at all. It’s completely free to get as long as you have a phone, which almost everyone has a phone. It costs nothing to produce. I mean, it’s funny, I do my podcast in a converted closet in my gym with a thousand dollars worth of equipment. And we get the same numbers listening to it as actual prime time television, where they spend millions of dollars per episode. It’s a crazy low barrier to entry. And the other thing about it is it sorts itself out and good podcasts rise up and ones that aren’t that great fall down. And I think it’s a powerful medium.

Ryan Morphin:

No, I couldn’t agree with you more. No, I couldn’t agree with you more. I think the podcast revolution is real. And a lot of our advisors and people in our industry are starting to broaden their reach into the podcast space. We have as well. And I know how much work it is to create a show and produce a show because we do it on Saturdays here. And it’s like what you said, it’s giving people content that you think is valuable and it comes back around. This last piece I was going to ask you, we call the human factor. I was going to ask you six quick questions, just whatever comes to top of mind. First one is if a vaccine was created today, would you take it, yes or no, for COVID?

Jocko Willink:

Oh, for COVID. I have no idea. Probably. Hey, I’ll tell you what, if it would help move the country forward, I’d take it right now. Yes. There’s my answer. I’m tired of being stuck in the house. I know everyone else’s, too. Let’s get it done.

Ryan Morphin:

Absolutely. And anybody who wants to hear more of his thoughts on that, The Joe Rogan podcast about two months ago is phenomenal. Second question: who wins the election in November? What are your thoughts?

Jocko Willink:

I don’t think there’s any human being in the world that could predict what’s going to happen tomorrow, much less in November. I have no idea. And I [crosstalk 00:17:34] going either way.

Ryan Morphin:

Do you think we’re in an economic recovery? And if so, what shape is it going to be?

Jocko Willink:

I think if we don’t start turning things on for real in the very near future, we are going to face a significant problem. I think that if we turn things on in the next couple of months, then I think we’ll be okay. And I think the shape will be … I think if we turn things back on and we opened the economy back up, I think we’re going to take off pretty rapidly. I think if we don’t turn the economy back on, we’re going to go down in the other direction. I think both of those angles of either increased or decreased look pretty similar. And it depends. You got to let America go back to work at some point. And the sooner, the better

Ryan Morphin:

It’s interesting. We’re nerds about metrics. We ran a regression model. And the schools that are open, the cities that have opening schools, had the highest job creation in the last few jobs reports. And so I think you’ll see that positive correlation, so your comment about getting back to work is critical. I think we need to understand what the real risks are and the data has been so bad, but. This summer, is there anything that you achieved or did you do with the quarantine that you were proud of?

Jocko Willink:

Oh, I wrote two books. Does that count?

Ryan Morphin:

That definitely counts. Overachiever. There you go. I love it. Any silver linings you see in the economy right now in 2021?

Jocko Willink:

I think there’s going to be opportunity. The way I look at everything is, hey, there’s opportunities. There’s opportunity to do things a little bit different. Here we are on this call right now, right? Before COVID hit, Echelon Front, my company, 99% of the interaction that we had with clients was face-to-face. March, whatever, 14th or 15th, my trip … I had a trip to the East Coast, going to New York, doing my thing, that got canceled. And then for my team, just in those last two weeks of March, 37 live events got canceled. And I got on the phone, got on a Zoom call with the team and said, “Okay, we could just hold our breaths until this is over, right? Look, we have money in the bank. We all make good money. We could just hold our breaths for the next month until this thing is over. But, I don’t know how long it’s going to last. And so what we’re going to do is we’re going to …”

Jocko Willink:

We had a little tiny platform of virtual training, and I said, “We’re going to expand that. We’re going to go. We’re going to go hard.” And the first thing we did was set up a bunch of calls with people that had canceled on Zoom so that they were forced to see, hey, you want me to come all the way to see you in New York city or in San Francisco? I’m right here. I’m right here. I can come into your office. I can talk to your people. They realized that. They started booking, and that’s what’s happened for our company. What does that mean? It means we can actually talk to more people. We can get the word out to more people. We can do it cheaper for our clients. And it turns out to be an opportunity. Yeah, I look at any tough situation that I’m in, how am I going to win?

Ryan Morphin:

I love that mentality. As a content creator, this is a hard question to ask you, but what are you watching or listening to or reading today to help you improve as a leader, as an individual?

Jocko Willink:

Yeah. As you know from listening to my podcast, I have to read about a book a week or maybe a little bit more of books that I’m going to cover on my podcast, so that consumes all my free time. Before I started my podcast, I had what you might call free time, like, “Oh, I don’t really have anything to do right now.” Once I started my podcast, that doesn’t exist. When I get on a plane, when my kids are watching something on TV, no matter what’s going on, I have work to do.

Jocko Willink:

And so what am I reading? I’m reading book after book after book after book. What am I listening to? When I run or workout, I listen to podcasts. Like I said, I listen to Rogan. I listened to Tim Ferris. I listened to Martyrmade, who is on that podcast with me. The guy that created the podcast Martyrmade is a great guy named Daryl Cooper. He’s on The Unraveling with me. I listened to his podcasts, and I listened to a bunch of other podcasts, but most of my time is spent reading.

Ryan Morphin:

Well, Jocko Willink. I appreciate you coming on today, sir. Thank you for your service to the country. Thank you for your continued service and waking corporate America up about the leadership issues we’re facing and how to address them tactically, not just a pie in the sky. And we really appreciate your time spending some time with us in your busy schedule. We appreciate you and thank you so much.

Jocko Willink:

Yeah. Thanks for having me. And look, I talk a lot about what the military does, but the military doesn’t exist without the strength of the economy, so what you all are doing out there trying to rebuild the economy and make the right decisions and helping people make the right decisions, it’s outstanding. I appreciate what you’re all doing every day. Keep doing it. Keep getting after it.

Ryan Morphin:

Thank you, sir. Have a great day.

Ryan Morphin:

Thanks for watching Non-Beta Alpha. And before we go, please remember to like and subscribe on YouTube, Apple Podcasts, and Spotify. This is Non-Beta Alpha, and now you know.

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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:

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.

 

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