The Nevada Real Estate Market & Distressed Opportunities with Chris Beavor

Chris Beavor, CEO of CAI investments, discusses the differing impact of COVID-19 between Las Vegas and Reno and the rest of the country.
Chris Beavor, CEO of CAI investments, discusses the differing impact of COVID-19 between Las Vegas and Reno and the rest of the country. As observed in other parts of the world, trends experienced prior to the pandemic accelerated; technology advanced quicker and firms who were projected to shut down closed their doors sooner than anticipated. However, what sets these Nevadan enclaves apart from the rest of the nation is the fact that they are island economies much like Manhattan and Breckenridge.

Eighty-eight percent of the Nevada’s land area is government owned, leaving these cities as isolated pockets of public economies spread across the Nevadan landmass. In addition, Las Vegas is a business essential market despite the common belief that their economic prosperity is reliant primarily on casino gaming. Due to these factors and more, Beavor has found himself busier than ever in the weeks following the COVID-19 outbreak.

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Ryan Morfin:                    Welcome to Non-Beta Alpha. I’m Ryan Morfin. On today’s episode, we have Chris Beavor, from CAI Investments out of Las Vegas, Nevada, talking a little bit about the Nevada real estate market and where he sees opportunities in this distressed landscape. This is Non-Beta Alpha.

Ryan Morfin:                    Chris, welcome to the show. Thanks for coming on.

Chris Beavor:                   Appreciate it. A pleasure and thankful that you have me.

Ryan Morfin:                    I assume you’re calling in from somewhere in Nevada?

Chris Beavor:                   Hotel capital of the world. Las Vegas, Nevada.

Ryan Morfin:                    I know many Americans are really longing for the day that Vegas opens back up again. That’s going to be a wild party. I wanted to have you come on, talk tonight a little bit about what’s been going on in the real estate market. You’ve done some really interesting real estate deals over the last few years. We’ve been able to participate in those, and want to hear your views about commercial real estate, what’s changing, and where it’s going from here.

Chris Beavor:                   Okay, great. Just a little bit of background for your viewers, I have been practicing real estate in Las Vegas, Nevada as a principle and as a broker since 1993. I hold several licenses. I have an auctioneer permit, which is a privilege license. Two commercial brokerage licenses, one corporate. One individual.

Chris Beavor:                   I also hold a specialized property management permit here in Nevada. I’m considered by our local news media, and some others here, to be, quote/unquote, an expert in our local market. I grew up in northern Nevada, up in the Reno-Tahoe market. I’ve been here my entire adult life here in southern Nevada. I am a true Nevadian.

Chris Beavor:                   The macro on what’s happening right now is unprecedented, if we talk about today. But we have to look and have to zoom out of the 30,000, 60,000 foot level sometime, and we have to go back, and we might not have the exact data or data points that we’re looking for, for this COVID experience or epidemic, or pandemic. We can look back to some similar events.

Chris Beavor:                   Today, of course, the immediate preserve cash, preserve your business, the entire world and the economy has closed as we know it. If you still have Reynold’s wrap or Hefty garbage bags, there’s still a viable product and a viable business in the marketplace, whether that’s product, business, or service, when the economy … And not if, but when, moves on, it’s still going to be a viable product.

Chris Beavor:                   There will be some winners and losers. Of course, without vision, as a developer, myself and a sponsor, we need vision. We can’t put our heads in the sand and deny what’s happening today. It will … I think some of the trends that were already happening and had been happening, whether you were a retailer that was on a slower death, in a closure trajectory, if technology that was … And services were going to be by way of that technology was already en route, it might have sped up certain either closures or sped up certain advances in certain medical fields, technology fields.

Chris Beavor:                   What does that mean for the macro? You and I talked a few weeks ago. Here, we are based here in Las Vegas. We’re based here. It is the hotel capital of the world. I have black and white photos of pictures of Las Vegas, going back to the turn of the century, up to 1908, 1918, when we had the Spanish Flu pandemic, which Las Vegas had about 8000 people.

Chris Beavor:                   I have a black and white photo on our walls on our conference rooms of downtown Las Vegas, with a welcome to fabulous Las Vegas archway over a dirt road, 1930. I actually have some photos of atomic mushroom clouds in the background of Las Vegas, when they used to light off actual bombs, nuclear and atomic bombs. People used to come to Las Vegas in the 1950s to, actually to the Atomic Lounge. There was a bar called The Atomic Lounge. People would watch these atomic explosions going off. Just imagine coming to Las Vegas to watch these mushroom clouds being launched.

Chris Beavor:                   We’ve gone through world wars, we’ve gone through atomic, nuclear clouds. We have gone through Vietnam. We’ve gone through the Gulf War. We’ve experienced 9/11-type terrorist events. Starting there, it’s some of the most recent similar data of what’s happened.

Chris Beavor:                   New York was hard hit, obviously, 9/11. Crippled New York. It was sudden and fast, although the 9/11 event was significantly more sudden. This was pretty sudden. It happened over a three to four month period. When we look back to some of the data, somehow Las Vegas … Not somehow, but we have become the ninth densest MSA in the United States. We are the largest hotel market in the world, despite the last 100 years of some of the aforementioned events that have taken place, with less information, less technology, less … When we say technology, that goes all the way into healthcare service providers or Zoom meetings.

Chris Beavor:                   What I like to everybody when they ask me, as an expert wearing my Las Vegas expert hat, when I’m in my conference room, I point to that individual, looking down at a dirt road, in my black and white picture in 1930, and say, “That person, at that moment, probably thought the 10 acres that he purchased was the worst 10 acre investment he’d ever made in his life.”

Chris Beavor:                   But the show does go on. We’ve grown to over two million people here. Hundreds of thousands of hotel rooms, over 55 million visitors. That trend … And again, I’m talking macro, the show will go on across all spectrums. There will be winners and losers, like I had mentioned.

Chris Beavor:                   That’s a little bit of back road. You’ve got to keep me on point.

Ryan Morfin:                    No, no. I think Vegas is a growth market. I’ve been to your office before. You really said something that left an impression, was that you’re kind of an island economy. Not a lot of people think about that, but maybe you can talk a little bit about why you are in Nevada, and in Vegas, in particular.

Chris Beavor:                   Well, Nevada’s the smallest state in the United States. 88% of our entire state is owned by the federal government, in some fashion or form. I call the Nevada the Sea of Nevada, surrounded by millions of acres of water and millions of acres of undeedable land.

Chris Beavor:                   That leaves two islands in the Sea of Nevada, and that’s the island of Reno, the base core … Basics of real estate, of course, is location, location, location, and supply and demand. When you have great locations and significant limited supply and high demand, you have a recipe for valuation.

Chris Beavor:                   We see these islands, the island of Manhattan in New York, we see this in Oahu, we see this in the small islands of Vale and Breckenridge, Colorado that are surrounded by millions of acres of forest land.

Chris Beavor:                   When you’d mentioned, are we in an island? Absolutely. Nevada Forward, and I’m also a board member of the economic development authority here in northern Nevada. I was just speaking with Tesla on Saturday, when they announced potentially moving to Texas or Nevada. They actually asked me, probably around 11:00 on Saturday, if … How far along my projects were, because they actually needed my buildings, my multi-units, my office, my class A office.

Chris Beavor:                   I’ve actually … Here, in Nevada, we’ve never been busier in the last eight weeks. We had our target, just for Reno alone, in these two cities of our state, which is Reno and Las Vegas, location intake calls, our targeted goal per year is 16, which we’ve achieved.

Chris Beavor:                   Just in the last eight weeks alone, we had over 45 corporate relo headquarters. There’s lots of trillions of dollars being handed out, although some citizens in America might think those are free, somebody’s going to have to pay for those trillions and trillions of dollars.

Chris Beavor:                   If you’re a company now that is taking a step back, these are CEOs that have looked at Nevada, have looked at coming here for our taxes, our no state tax, our great weather, the no storms, the no floods, the no tsunamis, the no oceans rising. The United States does have the most significant natural disaster cost of doing business in downtime.

Chris Beavor:                   Companies, what we found just in the last eight weeks, have CEOs that are taking the time in their busy schedules and saying now is the time to rethink, retool, and remove. I’ve actually been inking 65,000 square foot office projects in downtown Reno. We’re looking at filling 1.3 million square feet and actually running out of space. We are next to the sixth largest economy in the world.

Chris Beavor:                   California, whether that’s Reno’s going to get the benefit from the San Francisco bay area or Las Vegas gets a global boost, but from Los Angeles. When cities like Los Angeles elect to keep their cities shut down for another 90 days, those business people are looking harder at moving out of there.

Chris Beavor:                   Last October, when the fires hit and there was rolling power outages in the sixth largest economy in the world, people start to look to Nevada. We’re going to be one of the benefiting states, in two of our cities where myself, as a sponsor, have multiple offerings in both of those cities. That’s a turn that we’d be talking about.

Chris Beavor:                   If you have any feedback, sometimes … You’ve got to keep me on point here.

Ryan Morfin:                    No, no, no. People are dialing in to hear you talk. I think you brought up a great point, though. You’re next to California. California’s taking a certain response to the crisis. Nevada stands to benefit tremendously from these company relos. What does that do the local market? You’re going to have to build more apartments, more houses? More healthcare is going to increase the demand.

Ryan Morfin:                    States like Nevada could bounce back from just the migration of people.

Chris Beavor:                   Yeah. I think the growing trend, right? Low tax environment. We’re also … Whether it’s Phoenix, as you know, we have a Westin hotel we’re building in Tempe. Our demand generators in that market are waste management, intel, State Farm insurance. We have technology forces, because we’re next to Silicon Valley and Seattle out west.

Chris Beavor:                   There are markets here, that are our feeder markets, that are doing quite well. Stocks of Amazon in Seattle, and the Bay Area, technology-based economies are doing quite well. Their stocks are holding up. A lot of our investors that are in those markets are calling … For us, as a sponsor, March was our largest [inaudible 00:13:01] project. We’ve been very fortunate to be here in the West Coast.

Chris Beavor:                   But Nevada, and just talking about … Nevada is a state that is in the midst … Some people will go by a neighborhood and see a blighted home or a blighted office, and look at repositioning that asset. Some people will take a little step back and look at a neighborhood or a block of a community, and reposition a block.

Chris Beavor:                   Nevada, as a state, is actually repositioning itself and gaming. Let me talk about … A lot of people viewed Las Vegas and Reno, 10, 15 years ago, from the 2008 crisis, as a gaming leisure market. That’s just not the case. Gaming today is a global technology, global industry, that already now is half the size of the complete global auto industry, in terms of revenue and projective growth.

Chris Beavor:                   From 2000 to now 2020, you might have perceived … When I say you might have, the general populous might have perceived New Jersey, Atlantic City, and Las Vegas as a gaming market. Today, Las Vegas is what Detroit is to the auto industry, to a global gaming technology industry that spans over 40 countries, is on every cruise ship, is on every smart phone, six billion smart phones around the world.

Chris Beavor:                   Technology companies like Scientific Games, Boston Scientific, Ainsworth, Kenobi, all here in Las Vegas. We have Tesla growing here in Las Vegas. They’re one of the largest manufacturing plants up in northern Nevada. All of our growth … We have not built or delivered, or opened a large hotel casino in over a decade in Nevada.

Chris Beavor:                   And so, it’s quite different. A lot of our growth … I can tell you too, as a sponsor of BSTs, we have a couple projects, like Boston Scientific. We have some stuff … We’re purchasing global headquarters of Reynold’s Wrap. I’ve been flying around over the last 12 months, as you do, and versus 2008 versus today, when I fly to Reno, I don’t see … The big growth in 2006, 7, and 8 were casinos.

Chris Beavor:                   There was a casino in Missouri, a casino in Mississippi, a casino in New Orleans, a casino being built in San Diego, Phoenix. Most of our growth as a country, when you looked at those last few years, was this gaming growth.

Chris Beavor:                   Today, I got up the Tesla … I was just at the factory with Chris Reilly, walking and touring the factory with Chris. I actually was just in Bloomington, Indiana first week of March with Boston Scientific, looking at a 200,000 square foot medical facility expansion that they pulled out of Vietnam for supply chain.

Chris Beavor:                   I was in South Carolina at the Mercedes-Benz and Boeing factories. When I go around as a sponsor and as an American, ’08 versus today, I’m seeing factories, and growth, and high-tech facilities across our country. I think that, not only … That’s what was driving true growth. We weren’t hanging our hats on gaming growth, and building buildings for gambling. This is a true, solid recovery that will pick back up.

Chris Beavor:                   I think the supply chains … Going back to the story of Nevada, coming back into my lane here, those 45 companies up in Reno and in Las Vegas, we have significant supply chain and logistic companies, manufacturing companies, in the medical fields that are all looking to relocate. Or not all looking, they’re mandated and coming back to our countries, and they’re going to be looking for environmentally disaster-proof economies that … You can’t be responding to a disaster and be stuck in a snow storm or an ice storm, or tornadoes, or you can’t be somewhere where there’s hurricanes. Although there might not be a direct hit of a hurricane, when they shut down the coastline 10 miles in for two to three days, and people are evacuating.

Chris Beavor:                   That’s one of the advantages Arizona and Nevada has and why companies are flocking here. In both of my markets that we’ve placed ourself with our offerings, whether that’s Phoenix, whether that’s Intel, Microsoft, building some of the largest facilities in the world for their respected spaces here, like Tesla.

Chris Beavor:                   That’s the growth we’re seeing here in Nevada. When that button flips back on, that’s going to continue. I also want to let your viewers know, Las Vegas is a business essential market that literally has zero competition, on a global scale. Nevada, Las Vegas, in 2002, which was right after the 9/11, our airports were shut down. The airlines went into bankruptcy. Global travel had stopped in its tracks the last quarter, very similar to this quarter.

Chris Beavor:                   I was on the strip in October of 2001, and you could hear a pin drop on the strip. It was very similar as today. Everybody froze up. Everybody thought it was the end of the world. People didn’t know what to expect. Right? The fear of the unknown.

Chris Beavor:                   What had happened was, the builders and the developers, the visionaries, everybody paused and just stopped. That was a mistake. What had happened was, the home buyers that were in Las Vegas and across country, builders weren’t putting in their thousand permits in this market per month, which was required just on big berth alone.

Chris Beavor:                   Seven, eight months later, when we got into the second quarter of 2002, when people realized it wasn’t the end of the world, when we realized the show must go on, there was about 8000 penned up buyers that all hit the market with low interest rates, government easement, and we all know what happened. By 2003 and 4, we had rapid appreciation. We had … Whether that’s housing, office, all markets in real estate, we saw that.

Chris Beavor:                   I think we’re going to see a little bit of that today. But I’m jumping around there. All I can do is … We can look at data, but one thing I wanted to point out with Las Vegas and the hospitality sector, there is no other market that can host the … There’s only 52 weeks out of the year.

Chris Beavor:                   We’re a convention market that still is the best value in the world in conducting business. Some of the biggest, largest business deals happen in Las Vegas. Relationships are made here. I love this Zoom meeting. I think this is much needed. But I’m going to talk about some points here, just for some discussion purposes. We’re never as bad as we think we are and we’re never as good as we think we’re at.

Chris Beavor:                   Las Vegas, in 2000 … Right now, Chicago might be able to have some large conventions, but the other 150 businesses that are set up in downtown Chicago have business interruption when larger conventions come into a market. We’re the only market in the world that literally can do a 200,000 person group, roll up an entire industry, put it into one city, and have no impact. That’s what we’re designed to do. There’s no other city in the world that’s like that.

Chris Beavor:                   What you’re going to find, our occupancies in 2002 dropped to 88% occupancy. In 2010, when the economies had stopped the Great Recession, our city-wide was at 83 and a half, which took in limited select services, neighborhoods, neighborhood communities.

Chris Beavor:                   If you actually went to the touristic zones, the strip, the convention areas, in 2010, we were still close to 90% occupancy. That’s amazing. I’m not talking this month, or last month, or the next 90 days, or the forward looking three to four, five months. I’m talking about when there’s a vaccine here and people get back to living. You have to look at we’ve grown to two million people here in the last 80 years. We’ve weathered significant world wars and pandemics.

Chris Beavor:                   There is, for cost, as we know in the broker/dealer space, one of the efficiencies is Zoom. But if I get onto your platform, I still need to build a relationship and I still need to be able to go … If you have 2000, 3000 advisors in 50 states, it could take me two to three years to go out and build those relationships.

Chris Beavor:                   Zoom, or this platform here, has been here. This was here last year, it was here five years ago, it was here 10 years ago. I also like to point out that … And being able to come to Las Vegas and have 100,000 people, whether it’s lawyers to an industry, if you’re an aircraft, or CES, and you’re a lawyer to technology, or a marketing company to technology, or you’re technology-based, from a global perspective, to bring an entire industry into one market, where if I’m here for two or three days and I have appointments hour for hour, not just at one hotel, but going from the Aria, to our convention centers, to numerous hotels and dinner events, there’s no other market like this.

Chris Beavor:                   When I go to Palm Springs or I go to an event, or San Diego, and I do the smaller groups … Seattle, name a market. It’s typically hosted at one hotel. You go there, you check in. Here, in Las Vegas, you’re rolling up hundreds of thousands of people. You’re rolling up an entire industry. The efficiencies here, you just can’t beat the efficiencies.

Chris Beavor:                   What would take me, as a business owner, to go meet 2000 reps, to have a dinner meeting, to have breakfast, to get that feel, that one on one communication, and touch and feel the product. People still need to … We have the construction world of concrete convention, 150,000 people.

Chris Beavor:                   I still need to touch the product. CES, men’s apparel. We only have 52 weeks in a year. That means we only need to fill our city with 52 events, whether that’s NASCAR at 120,000, whether that will be Super Bowls, all of the large group and conventions. Nobody else can do that. Nobody else can do that at the efficiencies and the cost.

Chris Beavor:                   I’m very bullish now. And now, looking at a macro spectrum, down turns like this limit competition, limit growth, and we have the infrastructure 20, 30 years, and billions and billions of dollars, of gaming dollars. Before the entire world received those gaming revenues, those billions and billions of dollars were flowing into one city and creating some of the … You know, number one international airport, in terms of surveys.

Chris Beavor:                   We’re not going anywhere. We’re going to be … The short-term, we have a short-term pause. It could take 24 to 36 months to get back to pre-COVID levels, but the show will go on and we’ll continue a trajectory upwards.

Ryan Morfin:                    Well, that’s a long time, 24 to 36 months. You’ve invested and run hotels. Does the outlook for the hotel industry just seem terminal to you? Will a lot of these hotels change hands, given that a lot of them are operating businesses? Either they have to mothball or they need to … Operating at 20% occupancy is going to put a lot of them permanently out of business. What are your thoughts on the recovery curve of the hospitality industry?

Chris Beavor:                   Again, I can speak to where we’re at. CAI, we have a Delta Hotel by Marriott, here in Las Vegas, that we are starting to construction. We have this on your space.

Ryan Morfin:                    Mm-hmm (affirmative).

Chris Beavor:                   Again, CAI, we identify voids in the marketplace. In any market or any market you go into, you can create efficiencies and identify voids. Las Vegas, it’s 95% strategy, who you’re in business with, your long-term strategy.

Chris Beavor:                   CAI, what we do, is we partner … We create revenue and make our revenue off of publicly traded companies, publicly traded brands, or very strong national or regional brands in tier one growth markets, for the purposes of taxes, disaster-proof, great weather, you name it. Pro-growth communities. That’s a start. Start one.

Chris Beavor:                   And then once we find those markets, we look for voids. The largest void right now in the Las Vegas market is we have evolved … We have UNLV, one of the top hospitality schools in the world. We have the largest convention market, hotel markets, event markets.

Chris Beavor:                   That being said, a lot of the hotels were designed by gaming companies, not hotel business. I just explained to you earlier that we are an essential part of the global business structure, bringing entire industries into one city, to touch, feel the products, demonstrate the products. To have those conversations and build those relationships, one on one, and to do it in an environment …

Chris Beavor:                   But one of the problems that the 55 million visitors that come here, on a global scale, complained about, the void, was that it took us 45 minutes to leave. If we were on the 50th floor of the Bellagio hotel, and we needed to … And again, Las Vegas is unique, that when there’s a group or a convention in place, you’re moving around a different … You have appointments every hour to two hours. You’re not just parking your car or parking your Uber, your Uber left at one hotel. You have to be transient here.

Chris Beavor:                   The biggest void was, if I’m paying $1200 for a fancy [inaudible 00:28:25] lawyer out of Washington DC to come out for a convention, I’m on the billing as soon as they walk out the door, the cross the threshold. If they’re on the 50th floor of the MGM or the Bellagio, and it takes them 40 minutes to get off property … That’s to get down the hallway, that they’re all the way at the end of the hallway, to get down the elevators, to get through the casinos, which were designed as a cruise ship model, to confuse the guests, give the free drink. Remember, these were gaming companies that wanted to capture every dollar. To get into a valet line and to get off property. If there’s a fountain show out front going off, and traffic is backing out, it can take 45 minutes.

Chris Beavor:                   I was actually speaking last year at the ICSC convention. I was giving a ride home to the mayor of Lake Elsinore, California, and a couple of other mayors that had asked our company to help them with the development plan for their cities. I was eating dinner with them at the Las Vegas Country Club, behind the convention center. I offered them to give them a ride to their hotel after delivering the speech on the inefficiencies of Las Vegas as a whole.

Chris Beavor:                   Sure enough, I said what hotel are you staying at, when they got in the car, and they said Bellagio. And sure enough, we hit at the street light and the fountains start to go off. If it was somebody that I knew, I would have said, “Hey, get out of the car. I’ve got to-“

Ryan Morfin:                    Outside of center, if you look at the rest of the country though, and other markets, putting your real estate lens on, I’ve heard some tallies that could be 15% of hotel keys across the countries could get shut, I get that Vegas is a different animal, because it’s got all these different demand drivers.

Ryan Morfin:                    But as a real estate investor, do you think that the hotel industry is going to have some dramatic restructuring?

Chris Beavor:                   That’s real estate across the board. I think if you are an owner ready to retire, if you were not a well-run company or a well-run business, even in a good economy, this is going to expose you. There is a thinning of the herd here, across all spectrums.

Chris Beavor:                   Again, if you’re not running a business and you don’t have your capital reserves, or you were a business that was just hanging on during the good times, there’s a reason for that. That’s why we have a capitalist economy. They’re going to go to the wayside. They’re going to close down.

Chris Beavor:                   If you are a business or a brand, and we’re talking specifically hospitality, and you have a solid business that was there, you’re a great operator, you’ve partnered with the right brands, you’re going to pick … You’re in the right place, in the right market, and the right city, with the right management, you’re going to pick back up and work out with your partners, because they … This is the tides have dropped and the tides will rise.

Chris Beavor:                   Like I said, I’ve never had a bad real estate deal. I’ve only had bad partners and bad lenders. If it’s the right deal, like I mentioned, you’re all going to come together and work something out. But if it’s a product or a hotel that shouldn’t have been in the market, or an operator that shouldn’t have been there anyways, that was taking the benefit of the tide rising, and the tide goes out, they’re going to be left high and dry.

Ryan Morfin:                    Well, it’s interesting, we’re still seeing people allocate capital. We’re still allocating capital to hotel development projects, because it’s counterintuitive, but if the recovery curve’s 24 months out, some … A good portion of hotels could die. You’ll have less keys to compete with in the future, as some of those get reshuttered or become distressed.

Ryan Morfin:                    Switching gears a little bit, you guys did a deal and closed a deal last year in cold storage. Given your view into that industry, in the food supply chain, are you at all concerned about food supply, going forward, in the US economy? What are your thoughts there, given you guys aren’t a huge warehouse that does that?

Chris Beavor:                   You’re talking about our Coatesville facility in Coatesville, Pennsylvania that supplies probably between 500 McDonald’s and close to 100 Chick-Fil-As in the northeast there, in between New York and Philadelphia.

Chris Beavor:                   We’re still receiving our rents before they’re due. It’s a good product. Remember, I’m also … CAI, we partner with publicly-traded brands and we build, and develop, and operate some of those brands as franchise. In the fifth largest metro market, I’m the franchise operator for Del Taco, which is a publicly-traded brand. My stores down there in the QSR business have never made more money than the last two months. The only supply chains that have come down is that we’ve increased our orders.

Chris Beavor:                   One, we just went through one of the largest economic expansions in 10 years. People have credits available. A lot of people are coming in. There’s Food Network restaurants. It’s always been, at this time of the cycle, people come into the restaurant industry. That’s why we stick with brands like Del Tacos and McDonald’s strong brands. We’ve built for Chick-Fil-As.

Chris Beavor:                   These are when companies actually expand, become more profitable, labor comes down. That’s a significant cost in the food chain. Transport cost, oil and gas. You, being from Texas, have seen some of the oil markets and pricing of fuel coming down. Less than mile. Sorry about that. I have my dog barking.

Ryan Morfin:                    No worries.

Chris Beavor:                   Transport cost has come down. Transport, oil, gas, commodity prices have come down. In the short-term, the QSR sector is doing quite well. We’re shutting down our dining rooms that we make no money on. 65% of our revenue comes in through the drive-through anyways. Dining rooms are our loss leader.

Chris Beavor:                   We’ve been drooling and chomping at the bit, as an industry, for Uber, Grub Hub, all the deliveries. We were about 5% pre-COVID with our brand, so now we’re … Whether it’s the seniors, or the people that have not taken that step, now they’re taking that step. Our delivery’s up to 25%. We’re now shrinking the cost. I have new store and building on Scottsdale Road, in Webber, next time you come out to Scottsdale.

Chris Beavor:                   But in the QSR, we just shrunk from a 2500 square foot floor plate to 1800 square feet. I’m going after these older lots now that were just too small for the brand. Now, between an Uber drive up, pick up, to drone delivery now, that will be an ongoing in the QSR business.

Chris Beavor:                   I like companies like McDonald’s. We peel back the onion in any asset, and we say, “Who’s really paying our rent?” When we say who’s paying our rent, it’s always the people. We the people. How does that dollar get to us on our Coatesville facility? They go to McDonald’s, they go to Chick-Fil-A. They order McDonald’s, and a portion of that dollar cheeseburger finds its way into paying our rent.

Chris Beavor:                   And so, we’ve seen little to no impact whatsoever. I know some of the one-off smaller brands, the no drive-through, the lower quality location, food and beverage, they’re suffering and will continue to suffer. But for us in the industry, in the QSR, you named it. We’re eliminating, a lot of competition’s going to go to the wayside. The cost of land is going to go down. It’s been really expensive.

Chris Beavor:                   That’s what CAI, one of our mantras is, is that we make okay money in a good economy, and we make really good money in a bad economy. We do that across all of our brands and development. We buy right. Labor comes down, transport comes down, competition goes to the wayside, and we’re able to grab great pieces of land, in great locations, at great bargains.

Chris Beavor:                   Did I answer your question?

Ryan Morfin:                    Yeah. No, no, you did. I think it’s … No, no, it’s going to be interesting to see, also, how retail changes in the coming months, and maybe years ahead. As we’re coming into this, call it second wave at the end of the summer, most likely, your view, you’re optimistic, it seems. Do you think we’re going to have a U-shape or V-shape recovery, or is this going to be a potential to slip into a depression, on a national scale?

Chris Beavor:                   Yeah. We obviously are in a depression. Right? The true definition, we’re laying off millions of people. It’s how we handle it. Going back to that saying I said earlier, I’ve never had a bad deal, I’ve just had bad lenders and bad partners.

Chris Beavor:                   As the American economy and the American people, our partner is our US government and our municipalities, and of course, our lending force. They’re very strong. In ’01 terrorist attack, into 2002, with low oil prices tumbling, and 2002, a global war, you saw the government that said, “Hey, we’re here. We’re ready to stand by you.” Versus an ’08 collapse, which was driven from greed, fraud, misrepresentation. A political new change that came in, that understood the economy.

Chris Beavor:                   I think the macro … Of course, this is downturn. There’s no default here. There’s no evictions happening in Las Vegas. Banks are on stand-by to modify and adjust. I think macro, I don’t think it’s going to be as bad as everybody thinks, just because I think everyone’s going to be … I think some of the mandates from the government, and you see they say we’re standing by to do whatever it takes to shore up our economy. I think we’re going to take some of these trillions of dollars China’s going to pay, whether this is tariffs, you’re going to see lots of capital flowing.

Chris Beavor:                   You think the United States is bad, it’s going to be such a humanitarian shame when 30 million people globally die of starvation. Some of our supply chains, some of the smaller companies in Central America, Africa, but I’m telling you that there’s global capital that are going to be penned up, looking to find its way into the United States to shore up our capital needs. Our supply chains are going to come back. True manufacturing supply chain jobs by the end of this year.

Chris Beavor:                   Technology jobs, as you saw, whether that’s Instacart … You might be shutting down a JC Penney’s, but you have two more jobs. Amazon’s hiring. Don’t underestimate that when there’s 500 Instacart people that haven’t been able to hire in Las Vegas through technology and there’s 100 layoffs in JC Penney’s, that’s still growth.

Ryan Morfin:                    Yep.

Chris Beavor:                   There’s going to be opportunity. There is short-term pain. It’s going to take some time to adjust. Where are you going to get zero interest rates, a dollar a gallon gas, a government throwing trillions of dollars out, and it’s going to be quite interesting to see, being in an inflationary business like hospitality, that’s one reason why we’re in the hospitality game, to hedge that inflationary upward trend that we’ve predicted.

Ryan Morfin:                    Chris, what books are you reading right now, or what have you been keeping yourself busy with, hobbies-wise, when you’re not watching the news or doing real estate deals?

Chris Beavor:                   Well, I might be a little embarrassed here. I’m reading day trading books. That’s why the stock market’s holding up right now. You’ve got a lot of day traders. Every time I bought a stock … I know real estate and I know business, but just don’t have the time, so I’ve been reading up on the day trading. It looks like the stock market and about 40 million other Americans, that’s what they’re reading. I have about five different books right now on stock strategy trading.

Ryan Morfin:                    Any book stands out that you’re reading right now that you like, on the day trading side?

Chris Beavor:                   I’m just on 101. That’s the name of the book.

Ryan Morfin:                    We’ll send you some reading recs then, for sure. Chris, I appreciate you joining us. What’s that?

Chris Beavor:                   Actually, I need some good referrals. I’m sure you guys have some great advisors. I truly am … I’ve invested all my money and time into my business. If I’m going to get into a strategy into the stock market, this would probably be one of the better times to do so.

Ryan Morfin:                    Well, we’ll get you diversified for sure. That’s a promise. Chris, thanks so much for joining. I appreciate your time. We’d love to have you back in the coming weeks and months ahead, and stay in touch.

Chris Beavor:                   Okay. Thanks.

Ryan Morfin:                    Thank you for watching Non-Beta Alpha. Before we go, please remember to subscribe and leave us a review on Apple Podcast or YouTube channel. This is Non-Beta Alpha. Now you know.

Ryan Morfin:                    (music plays)

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Pini Althaus:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:


Ryan Morfin:

Who do you think is going to win the election?

Pini Althaus:

Which election?

Ryan Morfin:

The US election.

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

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

Pini Althaus:

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

Pini Althaus:

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

Ryan Morfin:

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

Pini Althaus:

Thank you, Ryan. Thanks for having me.

Ryan Morfin:

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


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

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

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

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