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00:00Oscar, thanks for joining us today.
00:03Hopefully we can give a bit of a lively update to this crowd of the wonderful world of critical minerals,
00:09which maybe 10 years ago, if you and I were sitting here, you would have said,
00:13why are you asking me all these questions about scandium?
00:16But I do think it's an interesting one.
00:19So maybe we start there.
00:21You've been in the commodity space, in particular, mining for quite a long time.
00:25How has the critical minerals investment space changed over that time?
00:33I guess the main thing to start out with is that a lot of these critical minerals are not really big volume products.
00:41They were for years called minor metals, because they were exactly that.
00:46But the world has moved their definition from minor to critical,
00:49which is, you know, helpful for people in the space like myself.
00:56I've always thought they were critical, but, you know, who am I to say?
01:01But as the economies have changed and as the concentration of the processing of those minerals
01:08has become that ownership of one country, China particularly,
01:13things that were considered afterthoughts are now central to the thinking of both the governments in the West
01:23and the Chinese government and industrial customers that have found themselves ever since
01:29the Japanese first suffered embargoes, found themselves in short supply of some of these metals.
01:37And as the renewables industry and EV industries have become larger,
01:43the magnets that these use have critical materials in them,
01:47and you can disrupt an entire supply chain by just disallowing the availability of one critical material.
01:56And that's hence the criticality of those.
01:59So you've heard me say critical like four times now in one sentence.
02:02So it's clearly important.
02:04And here we are.
02:07We're in a world where a lot of critical materials is first described by Trump 45 for military criticality,
02:15then expanded on by Biden to include a lot of renewables-based criticality.
02:21And now under Trump 2.0 or Trump 47, the list has gotten even larger.
02:27And there's now both got a renewables component to it
02:30and a military defense component associated with it.
02:33You know, one of the issues for years is getting investor interests in these things.
02:39And a couple of years ago, we wrote a story at Bloomberg talking to former DoD officials
02:44who had talked about the difficulty of getting administrations, not just one,
02:49but multiple over the course of the past, call it 15 years, to actually understand the trouble
02:55that the U.S. was facing in terms of if China suddenly put export controls on, say,
03:01permanent magnets or germanium and gallium, that there would be a problem.
03:05It seems like we are at that point where that has now become not just a narrow focus of folks within the DoD, but mainstream.
03:16The DoW now.
03:17The DoW, excuse me, Department of War.
03:19Pay attention.
03:19But those same DoD officials, DoW officials, always said it can't just be the Pentagon that is the sole consumer.
03:32You need a vibrant private market.
03:36That's right.
03:37The military use, while critical for the military, represents less than 10% of the usage of the U.S. economy for those same metals.
03:47So for every Virginia-class submarine that needs 5,000 tons of this material, there is an entire EV market,
03:54entire wind turbine business that needs multiples of those amounts.
03:59So it's a tail wagging the dog situation when you focus on the DoW's requirements.
04:06The entire U.S. economy, to a greater or lesser extent, for all sorts of things, including computing power,
04:12including quantum computing, including AI, the energy generation for AI, all need critical materials.
04:19And so while you want to and could solve maybe the defense problem fairly simply,
04:25because the quantities are so low, that doesn't help the U.S. economy overall.
04:30And the U.S. economy requires increasing amount of this material.
04:35The idea is that sometime by 2027, 2028, the amount of demand for the U.S. economy for these critical materials is expected to double.
04:45So we're not just behind.
04:48We're also going to be increasingly behind if we don't do something about it.
04:52Which kind of leads us to the question of we have the government starting to get involved, actively involved.
04:59They took a stake in Intel, the chip producer.
05:03They have taken stakes in MP materials, the lone U.S. rare earth producer.
05:08We had an announcement yesterday that Trilogy Metals, which if you've heard of Trilogy Metals, congratulations,
05:13you're probably one of 10 people who have heard of this, was just basically told to build a road that had not been allowed to allow for infrastructure to start building out copper, cobalt and whatnot.
05:24Is there incentive for investors to start to become part of these public-private partnerships?
05:34Absolutely.
05:35I believe that what you're seeing with copper prices, what you're seeing with even with gold prices these days and silver prices is an indication that at least the world is starting to appreciate hard rocks
05:49and the minor metals and critical materials that are embedded in there.
05:53They realize that the opportunity for returns is there and sufficient.
06:00The question will be that the rocks are where they are, right?
06:04They've been there for 350 million years or so.
06:07They're not moving.
06:08And if that country is not the United States, it's an emerging market country.
06:12Whether it's Africa or some parts of South America, there's a geopolitical calculus that has to be considered as well as the just pure mathematical returns that are available.
06:25And that's where the partnership between a private sector and the government becomes really important.
06:33I think you need both people or both government and private partners working together to make the particularly emerging markets system flow.
06:46You don't just need dollars from the government.
06:48You need their sort of support and protection in a way to make sure that the private partnership,
06:56which really brings to the table the expertise in the mining and the processing of the material
07:01and how to make sure that the project actually sticks together and is profitable.
07:05You need both those things to work in emerging markets because of the geopolitical risk
07:12and in the United States and other sort of first world countries because the permitting situation is so complicated.
07:19You just gave a perfect example with Trilogy, right?
07:21This was a permitting blockade that took about eight years or so that it was in permitting.
07:27And with one stroke of the pen, the U.S. government said, enough of that, you know, let's fix it.
07:32And so it's fixed.
07:35You'll see that happening more and more often.
07:38So it's not just dollars from the government.
07:40It's also permitting in certain places and geopolitical support and others that bring that sort of fruition,
07:50that possibility of something that was complicated into reality.
07:53And as I said, the private side is there to sort of act as the subject matter expert, really.
08:01So you, with the perch of Orion, would be interested in these public-private partnership-type deals?
08:09I think on a case-by-case basis, absolutely.
08:15Orion's been in this business now for 12 years.
08:17We've financed and built mines in 29 different countries.
08:22So we have a fair degree of expertise in what works where.
08:27And there are certainly certain countries where working with a government would be super helpful.
08:33And not just money, but also just the fact that you can call on somebody in Washington or in Toronto or, I guess, in Ottawa, really,
08:45to get help that you need to keep things going.
08:50And everybody wins in that scenario.
08:53The governments and the industries domestically get raw material supply that they need.
08:58The emerging market or other country gets jobs, gets tax revenue.
09:05And if done properly, which Orion always seeks to do,
09:10you know, it can be environmentally beneficial in the long term
09:14because you're displacing fossil fuel, which just needs to be burnt and re-burnt
09:18with something that's a one-off environmental charge and then recyclable in most cases.
09:25So Bloomberg News last month reported that Orion was in talks with the government
09:31to create a $5 billion fund that would be able to deploy money in the critical mineral space.
09:37Is that something you can confirm to us here?
09:41I wish I could, but I'm not going to.
09:45So, no, we're definitely in discussions with the U.S. government
09:51and other governments about building a partnership to do exactly what we just said.
09:58And, you know, conversations are progressing and doing it.
10:02We're doing, you know, we're marching forward.
10:05With governments, you get to move at the speed of bureaucracy,
10:08not at the speed of business.
10:10So it's always a little bit more challenging.
10:11But I think the goodwill is there to make something happen.
10:17How do you think these public-private partnerships should be shaped?
10:24I think as long as everybody in the partnership acknowledges this expertise
10:30of what somebody brings to the partnership, that's helpful.
10:35And I also think, and it's probably the most important,
10:39as long as the capital contributions come from both sides
10:43so that the government has the assurity that the private sector has got skin in the game,
10:49that's important.
10:51And as long as the private sector appreciates that the government
10:53is representing taxpayer dollars,
10:55so that there's something associated with that requirement for the government
11:03to look after those dollars,
11:05and in that case they're actually helping you to navigate issues on the ground,
11:11the partnership should work.
11:16The less political it is, the better, I think, as well.
11:20So we'll see how it goes.
11:24But I have faith in it working.
11:28And I guess to help the point there,
11:30when you say less political,
11:32you mean if you're dealing with different agencies within the government, right?
11:35Because the kind of government agencies that can deploy money, so to speak,
11:40would be the DOW, the DOE, the Department of Commerce.
11:44They've all done so thus far.
11:46And you're saying it is useful for investors
11:49to be able to have the conversations
11:50with kind of the career experts within those agencies,
11:55not necessarily having to depend on political appointees
11:58from administration to administration?
12:00I think political appointees are crucial.
12:03And I think they're crucial
12:04because they set the overall strategy and direction
12:08and sort of end goals.
12:11But I think it's also important to make sure
12:13that the staff-level folks are armed with the necessary tools
12:19to move things along.
12:21Because if not, things will get stuck in the machinery.
12:26Orion has, what do we have, 85 people that do nothing but mining.
12:31So we have our own in-house technical team
12:34and we have our global sort of office network and sourcing network.
12:39So we can move at a pace, because for us, this is bread and butter.
12:43But the staffing folks at the U.S. government and other governments,
12:48they need to be sort of empowered, as it were, to do transactions.
12:54We're speaking at a Canadian conference, if you will, here in New York.
12:58Yay.
12:59The question is, for these investments,
13:02should it be domestic only, onshore only,
13:05or should we do the, you know, to use the terminology
13:08from the Biden administration, friend-shoring,
13:10where you include your closest allies, Canada, Australia, and others?
13:15Yeah, look, I think Canada is kind of a core to this whole thing.
13:21As much as the U.S. as a capital market has expertise in oil and gas,
13:29I mean, the U.S. is an energy-dominant sort of economy and capital market,
13:35Canada has that same analogy, along with Australia,
13:38of being sort of the center of the minerals and metals sort of ecosystem.
13:46I think two-thirds of all listed mining companies are listed in Canada.
13:49And so there's a lot of resident expertise in Canada,
13:54both in the Canadian government, on the federal level,
13:57and in the different provinces,
14:01that sort of is sort of helpful to and crucial to developing projects,
14:07both in Canada, but also just in North America writ large.
14:10So Canada has a massive role to play here, in fact.
14:14Yeah.
14:15Well, we'll see.
14:16There's certainly a lot of complicated negotiations coming up on other matters,
14:21but in the critical mineral space,
14:23it does seem like Canada would be pretty central to all of it.
14:26Absolutely.
14:27Absolutely, guys.
14:29It's something that Canada is really good at,
14:31and the U.S. and Canada should absolutely work together on stuff.
14:39I think, again, the supply chain is a complicated animal.
14:42There's the mining, there's the processing,
14:45there's the end stage for forging, shaping.
14:47There's no reason why that can't be done on a cross-border basis,
14:51depending on where the geology forces you to start.
14:54Well, Oscar, our time is up.
14:56We appreciate it.
14:57Thanks, everybody.
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