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Ryan Morfin:

Welcome to Non-Beta Alpha. I’m Ryan Morfin. On today’s episode, we have John Darsie talking to us about SALT and the future of communication in the asset management industry. This is Non-Beta Alpha. John, welcome to the show. Thanks for joining us.

John Darsie:

Thanks so much for having me, Ryan. It’s a pleasure to be here.

Ryan Morfin:

Well, I have to tell you, your organization has done a great job of pivoting. You guys were marketing geniuses prior SALT, SkyBridge Alternative Investment Conferences, The Gold Standard and events, but you guys have gone for two now and SALT Talks has really delivered premium content at a whole nother level. And I wanted to just to chat with you a little bit about your view as a company and how you guys look at marketing and building community and educating and why you do it, because I think it’s very imperative that financial advisors and companies for that matter really think about their digital media brand today and how they’re delivering content. So you guys are the experts it’s an honor to have you on the show.

John Darsie:

It’s a pleasure to be here and thanks so much for having me. Yeah, you talked a little bit about the SALT Conference and I’ve been at SkyBridge for about five years and I took over the SALT brand a few years ago. And one of the big things I wanted to do was stop thinking about it as a conference. The SALT Conference is very well known as being this big gathering every year in Las Vegas. We also do international conferences. We’ve done them in Singapore, Tokyo, and then most recently in Abu Dhabi. What I wanted to do is stop thinking about it as a conference and start thinking about it more as a thought leadership brand and a durable community that live 24/7 and breathe and then we could continue to connect people even outside of those three days in Las Vegas.

John Darsie:

So we had had in the works plans to do something like this and the digital media type space and the COVID pandemic, like I think it did for a lot of people just accelerated our plans to take that SALT brand and move it into a digital format. And so it’s been a trial and error period. Like a lot of people have experienced during COVID where we decided to go ahead and use Zoom as the platform that we’ve posted these on is as just a highly simplified, easy to access tool. We’ve had Rubenstein, we’ve had folks like Mark Cuban and then I think one of the hallmarks of SALT is that we’d like to provide a window into the mind of subject matter experts, across a variety of different topics, whether it be hedge fund managers or politicians, public policy figures, or people in the venture capital space.

John Darsie:

So it’s been fun talking to a variety of different people. We’ve gotten a lot of great engagement. Thank you for tuning in and some of your business partners as well for tuning in. The interactivity of it has been a lot of fun and I think this is just going to be a springboard for us to continue to build that community like I talked about and just add value for everyone who interacts with SALT.

Ryan Morfin:

No I tell our advisors and our employees that it’s a must watch series and so I think the content is always timely and relevant. How do you guys look at creating the content themes or finding out which speakers you want to bring in, and what’s the editorial process like from your perspective?

John Darsie:

Yeah, again, we like to have a very diverse set of guests and we do a lot of listening to our community as well. And at our core we come from an investment perspective. So SkyBridge Capital, which wholly own SALT is a global alternative investment firm that’s primarily a fund of funds. So we have deep access into the hedge fund community and we like to talk to some managers, even ones that don’t often speak in public. We had someone like Dan Loeb on SALT Talks a few weeks ago, giving the ins and outs of the way he’s looking at markets during the COVID period. But yeah, we really like to provide a diverse set of speakers like we do at our conferences and relate it all back to, “Okay, now thinking about this person’s worldview and their areas of expertise, how does that inform my decision making from an investment perspective, from a philanthropic perspective and a variety of different perspectives?”

John Darsie:

So yeah, we like to bring on interesting people across a lot of different realms and and always tie it back a little bit to, “Okay, how does this inform my view of the world and how can it inform my investment decisions and other decisions in my life?”

Ryan Morfin:

And you guys have used, I think YouTube as one of the primary distribution mechanisms. What are the pros and cons and I’m looking more from a practitioner’s perspective of that platform versus using like a LinkedIn or places like that, or do you use all of them?

John Darsie:

We market ourselves on all platforms. So we have a pretty robust presence on Twitter via both Anthony, our founder and managing partner, as well as we’ve built up a decent following on our social accounts for SALT, given that more digital focus as I talked about earlier. But YouTube, it’s one of those things where a lot of people like to use white label proprietary type of platforms. You can do something like Vimeo or other more customizable video sources, but YouTube provides from an SEO perspective search engine optimization. It’s just the optimal platform because people… and we’ve found this with SALT Talks, especially as people start discovering your videos that might not have had any idea what SALT was previously. I think one of the most powerful things about digital marketing and doing SALT in a digital format is that you just never know who’s watching.

John Darsie:

I can’t tell you how many emails, LinkedIn messages, and other unsolicited messages I’ve gotten from random people in the world who’ve watched our videos and said, “Hey, I think what you guys are doing is really interesting. I’d never previously heard of SALT. Now that I’ve stumbled upon it, I’d love to come to your conference. I’d love to be part of your community.” So YouTube, we think provides the broadest reach and it’s the most democratic putting aside some data issues that people sometimes have with things like Google, but we just think it’s the platform that gives you the broadest reach, the most interactivity, and from an SEO perspective, it allows you to get your brand out there more broadly than using other platforms.

Ryan Morfin:

And all your content is educational and it’s with global thought leaders. How do you guys measure ROI? Is it just associated with the brand, or do you guys tend to find new client leads potentially out of the relationships that you guys create out of this community?

John Darsie:

Yeah, we absolutely do get new client leads from it. As I was talking about earlier, SkyBridge is a fund to funds and one thing we’re really known for is democratizing the alternative investment space in the hedge fund space in particular, is that the structure of our funds and I don’t want to get into too much detail about it, but essentially we provide access into some of these leading hedge fund managers for credit investors with smaller minimums than the typical hedge fund or fund of funds did previously. And so SALT was a natural evolution for the business to host these conferences and this type of digital content to educate the masses about what are hedge funds? How do they add value to your portfolio? And so that’s one of our big goals is to really democratize access to this type of information. And so our conferences are invitation only type of events, but we like the idea of broadening out that education to a broader constituency, and that’s what SALT Talks has allowed us to do.

Ryan Morfin:

Yeah. I had the opportunity to talk at the last in person, SALT in Vegas and it was, I mean, a ridiculously widely attended venue. People from all over the world were there. Let’s just go from the last Vegas SALT Conference to the first. How has it grown and what have you learned from the in person conferences?

John Darsie:

Yeah. I think digital communication is great and Zoom is great and SALT Talks have been a lot of fun, but you can’t ever replace really that human interaction that you get at in person events. So in person events will certainly be a big part of what we always do and the history of SALT, I wasn’t around in the early days but Anthony Scaramucci is a very contrarian type of guy. In 2009, the world was in shambles after the financial crisis that hit. And he decided to take a contrarian view on conferences and Las Vegas as a destination. So everyone in the world was canceling conferences, President Obama came out and said that nobody should be traveling to Las Vegas on their company dime.

John Darsie:

Meanwhile, there’s a lot of jobs and a lot of people that depend on the conference business and industries that exist in Las Vegas. So Anthony said, “You know what? Let me go out.” He got a good deal on a hotel, worked very closely with political leaders in Las Vegas and other business figures there and said, “You know what? Let’s bring a very modest three to 400 person conference here the first year, build a critical mass and then build it from there.” The first year, it turned out bit bigger than I think anyone expected yearning for in person interaction and networking. And the next year they got Bill Clinton to speak through some connections that Anthony had and so that elevated the profile of the event to another level.

John Darsie:

And then from there, it was off and running. In the mid 2010s, the SALT Conference was the conference in the industry. I think a lot of the investment conferences that you see today are ones that piggybacked on what SALT was doing in those early years of the event. It’s about 11 years old now. And so now we’re one of many conferences, but I still think we stand out for a variety of different reasons. One, it’s a great laid back type of atmosphere that people have a lot of fun. It’s a great environment to network and two, that diversity of content and thought leadership lends itself to a very diverse audience and a diverse set of people that come together.

John Darsie:

We have leading speakers in the venture capital space, we have leading hedge fund managers and it brings people together in a way that I think a lot of other events don’t. So today we view the next five years of SALT being very heavily emphasizing the digital piece. We’re going to do more international events. So we did SALT Abu Dhabi in December, which was a massive success. We really didn’t have that deep relationships in the Middle East prior to that, but these events allow us to just gain really deep footholds in certain parts of the world. So we’ll do more international events, more digital thought leadership and more digital networking. So we’re working on a few proprietary pieces of technology that are tailored towards the investment management industry that allow people to network in a more customizable type of way.

Ryan Morfin:

Well, and at the conference, you guys utilize, I guess, maybe a turnkey white label package for appointment setting between participants. Is that something you guys built out internally or is that something you guys use and you’re iterating off of that for the future?

John Darsie:

Those tools are always imperfect. They’re good for what they are. They allow you to message with fellow attendees and do a little bit of research on the different types of firms that are there. But really the reason people are paying big money in a lot of cases to sponsor and attend an event like SALT is the networking piece of it. So we bring together a lot of large LPs ranging from large institutions, pensions, endowments, foundations, sovereign wealth funds for our international events. You have RIAs, you have high net worth individuals, family offices. So a lot of the fund managers who are ones that are paying the premium ticket to show up at these events are doing it because they want to network with those LPs that are in attendance. So what we said is rather than using a white label off the shelf type of solution, let’s work on building something proprietary for the space.

John Darsie:

And so we’re partnering with a couple of people that have worked in the industry for many years to help build that piece of technology, just not only to make the networking at our in person events more efficient and richer but also to make that community more durable, like I was mentioning. So year round, providing not just SALT Talks from a thought leadership and content perspective, but year round networking so that Ryan, if you’re running hedge fund and you have a great strategy that’s buying distress credit assets post the global pandemic, that you can target institutions, families, RAIs that might have an interest in that type of strategy.

John Darsie:

It makes everyone’s life easier in terms of finding people that match up with your goals and maybe the products that you’re offering, if you’re a fund. And so that’s what we’re really excited about from a technology perspective is technology is eating everything and driving everything in the world today. We want to bring SALT into being a technology first type of firm.

Ryan Morfin:

And you guys often somehow grab the media cycle during that week. The last memorable one that I enjoyed hearing was I think vice president Biden and I believe it was Mr. Ackerman out in New York. How do you guys look at the media landscape during these events? The who’s there, but how are you grabbing that content, clipping it and pushing it out? I mean, is that something you guys do in house or do you outsource that?

John Darsie:

So I think any organization takes on the DNA of its founder and its leadership, and obviously Anthony has his fingerprints all over SALT. He’s someone that is omnipresent in the media and believes that most press is good press. I wouldn’t say all press is good press, but most press is good press. So it’s something that over the years, it’s been heavily covered by media. And as I mentioned, I took over SALT a little over two years ago now and one of my things was, “Let’s take all this media coverage and let’s take it from seven to 10.” So last year we live streamed a lot of the content for the first time, as opposed to taking a closed door type of approach. We said, “You know what, let’s take this content and make it a little more democratic,” like I mentioned earlier, “and let’s live stream some of it.”

John Darsie:

So that allows media, not just media that has the budget to attend the SALT Conference live, but also media that might want to cover it in a digital format. So it took everything up three notches like I mentioned. The next day after one of our days of SALT, The Washington Post ran above the fold cover story on what was happening at the conference, which was that we were bringing together people of all different stripes. This was in the era of Trump. He’s a little bit of a polarizing type of guy, but Anthony being a former Trump administration official was bringing together Obama administration officials. He was bringing together members of the Trump cabinet, he’s bringing together people in venture capital, he’s bringing together people in the hedge fund community and they were all speaking together in a way that maybe doesn’t happen today for whatever reason, maybe social media contributes to some of those echo chambers.

John Darsie:

But yeah, I think one of the things we do is we like to engage a lot with media. We’re not afraid to comment on a story about us. There’s been some stories written about SkyBridge post the pandemic. We had a large draw down in our portfolio in March, and I think a lot of firms would no comment, all of those inquiries for any story that’s being written about your firm, but for the most part we’ve responded and said, “Yeah, we’d love to talk to you about what’s going on.” We’re very transparent in the way we run our business. We’ve never had any regulatory issues. So we’d like to comment on stories about us and we’d like to be someone who helps drive the narrative.

Ryan Morfin:

Yeah. I think your point about social media echo chambers is critical. I think it’s getting more and more like that as Facebook is starting to maybe pressure conservative topics not let them take the posting, I guess velocity they should. Parlor opening up and becoming a place where conservatives are flocking to get their message out. I mean, it seems quite dangerous, not only from a social standpoint, but also more dangerous from an economic standpoint because if you’re not getting diversity of opinions, you could all correlate your opinions to a bad outcome.

John Darsie:

Yeah. I mean, Mark Zuckerberg has a very hard job. He gets a lot of heat because he’s not censoring certain types of content that go on the platform, but it is very difficult for a platform like Facebook to become arbiters of truth and to go and say, “You know what? I don’t like this message, but I like this message.” And then from a business perspective, Facebook and this is maybe a little bit of a criticism of Facebook, but they are incentivized to want to drive people to engage on the platform. The way you do that is by reinforcing people’s existing viewpoints. And so what they’re doing is if you express certain views through your Facebook profile, they’re going to drive you content that reinforces those views, that you’re going to be enthusiastic about interacting with. So yeah, I think social media creates a lot of dangers.

John Darsie:

I go to the shopping center or something down the street from me sometimes and I look at kids that are 12 to 15, 16 years old and I’m a pretty young guy, I’m in my 30s, but I didn’t grow up in that digital native environment where I spent a lot of time with my face and my phone. And I worry a little bit about those generations and I have three young kids myself and I try to think about as a father, how you communicate with kids that grew up in that environment and get them to open their minds to different viewpoints.

Ryan Morfin:

Yeah, that is going to be a challenge going forward. I think until we figure out a post partisan equilibrium here. I think it’s going to be very important that parents teach kids to weigh and consider not to contradict or believe. But, well one question I had for you is so you guys have been putting on conferences, what are some of the other best venues or conferences or events that you guys look to, to say, “Wow, look at how they did it over here,” at say formula one or what have you to help bring new ideas into the asset management conference sector. Because before you guys came along, it was quite a boring endeavor to host a wealth management or asset management conference.

John Darsie:

Yeah. There’s several that we look at today that are really impressive. I think the one that you have to hold as the gold standard in the event industry is the Milken Global Conference. They’ve done a fantastic job of that event. I think it’s a credit to Mike Milken himself as well as his team. But Mike has a gravitational force that draws people to him. He’s helped make a lot of people a lot of money. He’s a very smart guy and after everything he went through, he pivoted a lot to philanthropic work and has done an amazing job there. And he’s changed so many lives from a medical research perspective that I think he’s been able to attract a very diverse set of guests and speakers and attendees at his conferences as well.

John Darsie:

And that the networking is second to none, both on the court there at The Beverly Hilton, as well as on the sidelines of that event for three or four days. One from a speed dating or a capital introduction perspective, that’s done a really great job is Context Summits which take place in Miami every January. There’s a set of events down there in South Florida in January that do a great job of bringing people together. But Context Summits is one that’s done a great job of matching up emerging hedge funds and other alternative investment funds with LPs. The guy who was the driving force behind Context Summits is a guy named Ron Biscardi, who I think would be an interesting person for you to talk to as well for your series. But he actually recently left Context and is helping us build that proprietary technology that I spoke about that’s tailored to the investment management industry.

John Darsie:

And he helped put on an amazing event that Anthony and I were on the advisory board for called Funds 4 Food that leveraged digital technology to do that matchmaking, that cap intro function the way I had described earlier. So all the proceeds from that event went to benefit charity. So it was a great win-win. Then another one that’s been interesting to us to follow that I’ve been to every year that it’s been held as the future investment initiative conference in Riyadh, Saudi Arabia. So that was one that really turned us onto the idea of wanting to do an event in the middle East. And Richard Altius Associates is a company, a very well known company in the event space.

John Darsie:

Richard Altius helped launch the World Economic Forum and I’d be remiss if I didn’t mention Davos, which I went to for the first time last year with Anthony, but Richard’s done a great job of going from zero to 60 with a conference business with FII that is continuing to grow. I don’t know exactly what’s going to happen with the conference this year in October. It’s in coordination with the G20. But right now they’re planning on still doing it live in person. And they’ve done some really interesting things, both from an entertainment and a content and a networking perspective.

John Darsie:

So those are a few of the events that I think really stand out the world economic forum, like I mentioned, is one that like milk and I think is the creme de LA creme in the event space. And just the quality of the people that gather in Davos every year, both the people that are inside the ropes that go into the convention center and listen to the talks, but just on the outskirts of it as well. There’s tens of thousands of people that come to that area and network every year. And there’s all kinds of interesting people in content that takes place in and around Davos in January.

Ryan Morfin:

No, that’s a good calendar to keep. Quite a lot of airline miles.

John Darsie:

And you’re going to learn a lot and I’ve been fortunate to have a mentor like Anthony who’s brought me along to a lot of these type of events despite me starting my career in a more junior position. And the amount that I’ve learned, both from the content of the speakers and the operation from those events has benefited me tremendously as a person and as a professional.

Ryan Morfin:

Yeah, no. Anthony is a great guy. He’s been very kind to me with his time and mentorship over the years. What makes him so special, you think? Why is he wired differently than other CEOs in the asset management space?

John Darsie:

You know, for one, he was born the way he is. He’s extremely smart. He remembers a lot of things. He could meet you Ryan 15 years ago, and he sees you again, 15 years later and says, “Oh, Ryan, we met on the third floor of 532 Madison Avenue and we talked about this. So how your kid’s doing?” He has that natural gift. And his dad was not as educated as Anthony. He didn’t go to college, but he always had that gift the way Anthony describes it in terms of remembering people and having those interpersonal skills. I think that combined with Anthony’s work ethic that he got from a young age, he worked in a blue collar household that they basically gave him the platform to grow beyond what he and his parents did as professionals.

John Darsie:

I think they provided him a good upbringing, but he was thirsty for a little bit more ambition from an academic and professional perspective in life. So he had just tons of energy that he put towards wanting to grow businesses and to help people and I think ultimately that’s what defines Anthony. He likes to help people. And some people ask me why he got into politics, right? He was this wealthy, successful guy and he decided to go into public service. And I say, why I think the same way he’s helped people in business over the years, and he’s mentored tons of people and has an unrivaled network of people that he can call on for a variety of different things, he said, “You know what? I’m in my early to mid 50s, I want to go and try to help people within public service.”

John Darsie:

So he went and he tried to serve his country. It didn’t maybe go the way that he had mapped it out, but he took a shot at public life. I think he’s happy to be back in private life after experiencing the knives that exist in Washington, D.C. Yeah, he’s got a natural way about him in terms of people. He’s extremely well-read. I think people that don’t know him as well, don’t realize how much he reads and how much of an academia he really is. There’s really not a book that comes out of any substance that he hasn’t read. So then combination of those things has made him a successful entrepreneur and he likes to be entrepreneurial. Some people that work on Wall Street are set in their ways and they’re doing this and that, but he likes to, people come to him with different types of ideas in the technology space, in the event space.

John Darsie:

He likes to take risks. A few years ago, talking about digital marketing, he decided to license the rights to Wall Street Week, which was a show that was on PBS for 30 years with Louis Rukeyser was the host of that show. It was before CNBC and Bloomberg and Fox Business and everything else, that was the appointment television for anybody who wanted to learn about what happened in financial markets. And it had been dormant for a few years. So he decided to license it, host it and bring it back to Friday nights to give people a long form holistic view of what’s going on in financial markets. I think what ended up happening is when he went to serve in the Trump administration, he was unable to continue hosting that show. So it went dormant again but we tried to pick up that mantle with SALT Talks and provide people outside of the soundbites that exist on most financial television. We like the long form type of conversations that we get to have with leading investors and innovators and technology and people in the political world as well.

Ryan Morfin:

Well, you bring up a great point about content forms. And so do you guys, in your content format, SALT Talks is a little bit longer, but it’s very educational and if you have an attention span, not everybody does anymore. You can get a lot out of it and the question for you guys is do you see people watching the whole hour long, or is it better just to get the highlight reels out on social media? I don’t want to call it clickbait, but I guess that’s what it is. Just to get the message out and hopefully try to drive viewership or what are your thoughts around that?

John Darsie:

I mean, we’re definitely a little bit contrarian in that we do like the long form content, as opposed to the shorter form content. We do post some clips on social media that help drive engagement, we think. What people really get out of this is getting to have that thoughtful 45 minute conversation with these people that oftentimes came from humble backgrounds and built themselves up into being really successful entrepreneurs or politicians, and just getting to soak in all that knowledge that people accumulated over the years. I think another podcast that helped inform my view on long form content that I would encourage all of your business partners and your listeners to listen to is Masters in Business by Barry Ritholtz. Barry Ritholtz was one of the earliest big bloggers in the financial blogosphere and he was writing a lot around the financial crisis in 2008.

John Darsie:

And he launched probably five or six years ago, now Masters in Business, it’s hosted by Bloomberg, it’s a podcast, but he does what we do is he brings on titans of finance mainly but other titans in business. And he just gives them a platform to speak at length about how their career developed and the things that drive the success of their organizations. We think we could get a larger audience by doing more short form content, but I think that the more meaningful audience for us as the one that’s going to dial in both for the live interview that we do on Zoom, that typically has a few hundred to a few thousand people, depending on the guests. Then we also post all the episodes On Demand, on our YouTube channel as you mentioned earlier, that allows people to consume it at their own pace if they want to.

John Darsie:

And we’re in the process of taking every episode and putting it in podcast form as well, because we’ve gotten a lot of feedback. I’m a podcast listener, not as much actually, since I don’t commute into the city like I was doing pre-pandemic, but podcasts are a great way. You can multitask and listen to podcasts. So we like a multimedia type of distribution philosophy, but we do like the long form type of content.

Ryan Morfin:

Yeah, no, I agree with your view. I think the short soundbite economy has its limitations. Well, one question I had for you is are there any stories that glean lessons about editorial process or hosting events and producing content. Any stories we haven’t heard about from SALT that you can share that you think are teachable moments or things that people should, if they’re paying attention look at when content is being created that an expert… like hen you watched our show or someone else’s show are like, “Oh, they’re totally screwing that up,” or, “God, they didn’t do that right.” What are some of the insights on content creation that an expert such as yourself looks at when you see something online?

John Darsie:

Well, the thing I would say is that when you’re backstage at an event like a conference or you’re backstage on SALT Talks, we’re like a duck that’s on top of the water, right? Above the water, we’re putting on this great image and we seem very placid and relaxed and everything’s going smoothly, but under the water, those feet are kicking furiously and there’s all kinds of stuff going on. And I think when you’re running an event and something small goes wrong you have a lot of anxiety and stress about the way people are going to perceive it, but for people that are attending conferences or consuming media, I don’t think they really care about little hiccups that take place. So I think the biggest thing I would say is don’t let this the desire or the search for perfection and the way you present something, prevent you from putting yourself out there.

John Darsie:

I think it’s the same way with writing. So I do a lot of writing, both on my own internally at SkyBridge and with SALT and I also help Anthony with his writing. And one of the things that a lot of times, as a writer, you put something down on paper, you don’t feel like it’s perfect. You don’t feel like it fully captures your views, but it’s much better to go ahead and publish that and get your views out there and not spend those extra hours or days trying to make something perfect. And I think the same thing with digital content when you’re talking about from a marketing perspective, applies there as well, is that people aren’t as concerned about polished today. Social media, other things have made it such that things like TikTok exist and Facebook and Instagram and everything else.

John Darsie:

I think people are much more accustomed now to consuming raw content. And so when you’re putting things out there with SALT Talks, my instruction to my team at the beginning of this was, “Okay, guys, let’s try to make this as polished as possible, but let’s not kill ourselves trying to make this look like CNBC.” And it’s funny because we’ve taken that approach, that’s a hyper simplified approach using Zoom, but other people comment to us all the time. “Wow, it’s a very professional production. How do you do it?” And the biggest thing is we just don’t stress ourselves out too much about the whole thing. The first SALT Talk we did with David Rubenstein, Anthony’s at his house on Long Island and his internet clearly was cutting out or he was connected to the wrong network or something. So he’s cutting in and out.

John Darsie:

He’s trying to log in and out, back on Zoom and I’m asking David questions, and one of my colleagues is asking David questions and it was very stressful in the moment, and it was the first one that we did. But David is a very… fortunately for us, he’s the one who went through it. He’s a very patient and relaxed type of guy we got through it and it’s been trial and error in terms of perfecting all the production elements. What I would say is, like I said before, don’t be so caught up on perfection. You don’t have to make everything look perfect. You never know who’s watching and just get on, be your authentic self, talk about things that are interesting to you and you’ll be surprised about who consumes the content and what it leads to from a business perspective.

Ryan Morfin:

Yeah. I think your point about just getting your ideas out there and having an assertive view is critical. And by no means you guys aren’t shy at SkyBridge that’s for sure. Do you have a favorite speaker that you’ve had on either speaker at the conference or a speaker at the SALT Talks?

John Darsie:

Well, the good thing about SALT Talks is that I get to hear all of them. The problem with the conference is that I’m always running around. I’m the feet of the duck that are under the water, putting out fires. Whether it’s a sponsor that… you guys were a sponsor, very graciously of SALT in 2019, and you guys were very low maintenance. I can’t say that for all sponsors. So I’m always putting out fires at the events, but I don’t always get to hear the speakers on stage. One speaker that we had in person at SALT many years ago who I thought was fascinating, this was before I was leading the conference team was Frank Abagnale from the movie, Catch Me If You Can, is how many of you probably know him, but he clearly-

Ryan Morfin:

That’s awesome.

John Darsie:

… was one the type of guy who… In the movie, one of the more interesting parts to me was they asked them, “You did all these things, you impersonated a flight attendant or a pilot, and you pretended to be a doctor, how did you pass the bar exam?” And he said, “Well, I studied for a couple of weeks and I passed it.” He didn’t go to law school, but he gave an incredible talk at SALT, probably 2014, 2013 type of timeframe. That was fascinating. He wasn’t like an expensive paid speaker. We paid him a little bit to show up, but he was one that he’s clearly such a smart guy and now he’s applying his expertise and his intelligence towards both helping snuff out white collar crime, and also to speak to audiences about how he did what he did.

John Darsie:

And he was a fascinating speaker. In terms of SALT Talks, I would say one of the more interesting ones that we did and it’s expressed in the number of views it’s gotten on demand was Chamath Palihapitiya. So Chamath is a venture capitalist. He was one of the early executives at Facebook that I think people probably realize how much of his fingerprints are on the success of that company. But he’s clearly another savant, a brilliant guy who… He was living his life in the typical Silicon Valley type of way, he was making a lot of money, partying and just decided one day that he didn’t like the path that his life was taking. So he turned social capital, his firm into a family office. He decided to investing in a little bit of a different way, less catering to all the needs of LPs and just saying, “You know what? This is what we’re going to do. If you want to invest with us be my guest.”

John Darsie:

But he’s such a brilliant guy and now he’s helped take Virgin Galactic public via a SPAC, which is a special purpose acquisition company that you might have heard about because there’ve been a lot of SPACs recently, but he’s a guy who has brilliant insights into how tech companies build themselves and become successful. He has a great presentation that I would encourage your viewers to look up regarding Amazon and how they look at building new business lines. Essentially what Amazon does is they take any cost center that they have as a company. It started out with things like server costs. They’re doing it now with building their own delivery service, but they take any cost center they have as a company and they turn it into a business.

John Darsie:

So, okay, we’re spending millions and millions of dollars on servers, let’s go start a Amazon web services that does cloud servicing for people. We’re spending tons of money on shipping and logistics, let’s go build a shipping and logistics company. That’s just one example, but he’s done just amazing work helping technology companies grow and Virgin Galactic is just the latest example. They came out with their plans for their new Mach 3 plane that they’re building along with Rolls-Royce is going to supply the engines. And that’s a company that we’re watching closely and we love Chamath and everything that he brings to the table. His SALT talk was fascinating. You want to go to our YouTube channel and watch it.

Ryan Morfin:

Absolutely. I saw it and it’s great. And it was timely too. I mean, he was talking about a lot of the stimulus… some controversial comments that I’m sure a lot of your viewers didn’t really agree with, but maybe they did, but you know what it got eyeballs and it was content that was worth discussing.

John Darsie:

Like we talked about earlier, we view ourselves as an open platform of ideas. We don’t let our own political biases filter into the way we curate content. Like I mentioned, in SALT 2019, we had Ben Carson and we had Valerie Jarrett and those were conversations that we said, “You know what? Let’s stop so much of the polarization. Let’s bring people into the same room, see if we can find some common ground and put information out there and let people consume it, how they want to consume it.” Chamath is an example of that. He has very sharp viewpoints on a few of those social issues and government issues, but it was fascinating to hear his perspectives.

Ryan Morfin:

So what are two or three content arches you think we’re going to talk about in the next six months?

John Darsie:

So I think in general, going forward, there’s going to be a heavy emphasis on technology. So we’ve had a couple speakers on artificial intelligence and things like that. We had [inaudible 00:35:36] expert also a Chinese national who’s helped China become one of the leaders in the AI space. And we had Eric Daimler who was basically the AI Zara under President Obama talking about what we’re doing as a country to stimulate AI growth. But things like that. We like to get speakers from companies that are doing space exploration, AI, as I mentioned other software as a service type companies. So I think there’s going to be a heavy emphasis there. I think for the next three to four months, obviously the election is going to be top of mind and talking about, “Okay, how are things shaping up for the election? How should that inform my investment decisions?”

John Darsie:

There’s been a lot of debate about if Biden wins the presidency, what does that do to the stock market? What does that do to the overall investment landscape? So we’re going to have some conversations, both with handicappers of the election and also people that can interpret for us what they think is going to happen in the case of a Biden presidency or in the case of four more years of a Trump presidency. So I think that’ll definitely be a focus, but I think technology in general, in the most recent two or three SALT Conferences, we’ve tried to do a good job of making it balanced from an alternative investment side between hedge funds, private equity firms and venture capital firms.

John Darsie:

So I think you’ll continue to see that balance. Hedge funds aren’t going to go away, but I think that industry is shrinking as people devote more resources towards. And another thing that I have to touch on is things like ESG and sustainability, I think, and that’s driven a lot by our LP participants in our conferences. Foundations, endowments, pension, sovereign wealth funds, increasingly those investment mandates have an ESG or sustainability element built into them. So we’ve had some great speakers on capitalistic ways to address climate change and global warming and things of that nature. So we’ll continue to focus on ESG themes as well.

Ryan Morfin:

What are some silver linings from your perspective on the US economy today and where we’re going? I mean, I know it’s some rough data out there, right? Q2 data that the lowest GDP print ever at 32.9% reduction in Q2. What are some silver linings though, from your perspective?

John Darsie:

I think the biggest thing the pandemic has done is accelerate some trends that might’ve already been in place towards things like remote work. I think it could have the effect of depressing some wage growth, but I also think it’ll create a little bit more democracy in terms of access to jobs. I think there was some people that were flocking to cities because a lot of the jobs exist in places like New York or Silicon Valley. Steve Case is another one that did an interesting SALT talk with us. He’s the founder of Revolution, a venture capital firm based in Washington, D.C. He was initially a co-founder and chief executive of AOL, but he’s a big believer in this idea of the rise of the rest, which is companies in maybe second tier US cities not to use a pejorative term, but second tier US cities.

John Darsie:

He thinks there’s going to be an explosion of entrepreneurship and growth in places like Birmingham, Alabama and Raleigh, North Carolina and Boise, Idaho, and other places that he’s investing in entrepreneurs in those cities. So I think maybe a good thing, a silver lining about the pandemic is that might distribute both population and entrepreneurship and economic growth throughout the country, as opposed to making it so concentrated in some of the urban centers and some of the business centers. I also think anytime you have a crisis like this, it helps to remove some excess from the system.

John Darsie:

I think there are certain things like the junk bond market, which the federal reserve is supporting and probably creating some artificial resilience in the junk bond market. But I think it does help you empty out some excess in the system. Unfortunately it seems like the stimulus that the government has provided has done a pretty decent job of replacing household incomes, but what it hasn’t done a good job at is helping to save some of these small businesses. So I think that’s going to be challenging. The restaurant industry is one, for example, that I think you’ll see a substantial number of great restaurants that have to shut down permanently.

John Darsie:

So there are some unfortunate casualties, but I think consumers are resilient. I think again, the government response has been good not worrying so much about deficits in the short term and replacing income as much as possible for consumers. And so I think we’ll start to see some consumer elements of the economy come back fairly strongly. But I think when the dust settles, there will be a little bit of pain that still exists there that we’ll have to work through. And hopefully we can retrain our workforce and pivot our country in terms of technology and things of that nature the same way we’re talking on Zoom as we normally would be talking in person in Las Vegas. So I think again, it’s accelerated some of those digital trends, and I think it’s removed some excess from the system that I think hopefully will help us build our economy in a more sustainable, efficient way going forward.

Ryan Morfin:

One macro trend that we’re going to focus on in the next six months is the decoupling if you will, of China in the US from a globalization standpoint, and if it accelerates or pauses, I mean, what are your thoughts? I mean, are we in a new economic war here, cold war 2.0 or are we in a political season where things are going to pass?

John Darsie:

This is a tough one and we’ve had a lot of conversations with people in China about bringing the SALT Conference to the mainland in China, which is still a goal of ours. And we like to be connectors of people and we like to be people that help people find common ground. And one thing that we’re intent on doing as it relates to China, I do think there will definitely be a decoupling of manufacturing, especially of critical infrastructure and things like healthcare, drug companies, and things like that. You’ll see a repatriation of a lot of key manufacturing. I don’t think we’re currently in a cold war, but I think if we’re not careful, we’re going to get there with China. China, one of their mantras to be that sleeping tiger. Don’t show your strength until the need arises for you to project that strength outward.

John Darsie:

I think they’ve gotten to a point now where they’re so powerful, they have so much both military and economic power and strength that we have no choice, but to try to find common ground with them. And I think that we had a great guest again on SALT Talks last week, a guy named Chris Fenton, who is a Hollywood executive, who has done a lot of business taking large Hollywood productions and taking them both to the Chinese market and also helping censor films that the Chinese wanted their people to potentially watch in the United States, but didn’t want certain projections of China to be out there in the mainstream, even in places like the United States in Europe.

John Darsie:

And what he found is that there are certain elements of Chinese society and Chinese value system that we’re not going to be able to be compatible with the United States and the values that we have in terms of things like human rights and democracy and things of that nature. But the place we can really find common ground with the Chinese are exchanges of commerce and exchanges of culture. So it’s very important that we continue to emphasize that common ground and find areas to do business together. Because I think over time, what you’ll find in a place like China is that if there is that exchange of culture and commerce, over time, that closed system will start to open. Deng Xiaoping started that opening process and President Xi has actually started to close China a little bit more, again, both in terms of censorship of ideas and the way it approaches the rest of the world.

John Darsie:

But I do think over time, as young people grow up and they start to have a little bit more thirst for the outside world and Western values and Western culture, I think you’ll start to see a little bit of a dulling of some of that closed system that China’s building. You’ll start to see them open up again and I think it’s going to be all cyclical in China, and hopefully we can get to a point when I’m older, when I’m in my 50s and 60s, that these are two benevolent powers that work together to foster peace around the world.

Ryan Morfin:

That would be a great outcome. I think we’re in this prescient moment here where I do think though some of like the facial recognition and the AI, it could really accelerate also the capabilities of a police state and there may no be no coming back for a democratic China in the future, but yeah, it’s something we’re definitely going to pay attention to, and hopefully it doesn’t lead to conflict. But what are some areas or places that you go to, to get news or books you’re reading right now that are leaving an impact. Any recommendations of, you mentioned that podcast earlier. Any your recommendations of places that you go to, to learn or get ideas.

John Darsie:

Yeah. I like consuming content like SALT Talks. I mentioned Masters in Business by Barry Ritholtz. I like other variety of long form podcasts. I follow some blogs that help curate great podcast episodes that come out on a variety of different platforms. Like I said, there’s two sides of the lack of commuting. I don’t get to consume as many podcasts and do quite as much reading in the mornings and in the afternoons the way I typically would on my commute.

John Darsie:

But I think a big thing and I’ve spoken to some business schools and things like that as well, including my alma mater, which is Emory University in Atlanta, but about reading all the newspapers and things that come out every day. So I like reading books, but also like reading The Wall Street Journal cover to cover. I typically read most of The New York Times. The book I’m reading right now is the Power Broker. I’m a native North Carolinian, but if you’re a New Yorker or you’re interested in New York and how power is distributed and how power is seized and how the world becomes the way it is, it’s a great book to read about power and money and the way things end up the way they are. We have this feeling that things are inevitable and that the world exists the way it is for certain reasons.

John Darsie:

But really our world is shaped a lot by the decisions and the whims of a select few people. And Robert Moses is an example of that how he shaped New York and the freeway system and the parkway system that we have here and some of the issues related to traffic and other things that exist in New York today. But it’s a fascinating book. It’s a long read, but one that I would definitely encourage your audience to read.

Ryan Morfin:

Fantastic. Well, keep on doing what you guys are doing. The educational content is phenomenal. We appreciate you guys putting the energy and the effort to delivering that. And think if anybody who’s watching this, hasn’t been all over SALT Talks you definitely are missing out. And so John, appreciate you, hope to see us soon and thanks for doing the show.

John Darsie:

Yep. Thanks so much for having me. I enjoyed it. Thanks Ryan.

Ryan Morfin:

Bye-bye. Thanks for watching Non-Beta Alpha. Before we go, please remember to like, and subscribe on Apple Podcasts and the YouTube channel. 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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