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00:00In Exeter, New Hampshire, inside this unassuming building, an international race is taking shape.
00:06Here at Phoenix Tailings, they're processing critical minerals, a key part of the global supply chain.
00:13So Phoenix Tailings produces the final rare earth metal and metal alloys that are needed for magnets,
00:19for aerospace applications, and for many different other types of applications.
00:23But companies like Phoenix Tailings, led by co-founder and CEO Nick Myers, are up against a giant.
00:30There's been a lot of talk about critical minerals, rare earths and otherwise,
00:34and the disparity between China and the United States. How far behind is the United States right now?
00:39That midstream processing stage, they pretty much dominate entirely,
00:42so much so that it's extremely tough for the U.S. to compete in any way, shape, or form.
00:47The U.S. needs critical minerals for a range of military applications.
00:52But even more for many consumer products.
00:56Defense is, functionally speaking, a pretty small market.
00:59It's roughly about 500 tons per year, is the need for metal for the Defense Department.
01:04And that's not that much, whereas the U.S. commercial needs are about 12,000 tons per year.
01:11So pretty much all of our demand comes from automotive.
01:14Many people think that it's actually for electric vehicles.
01:16To be honest with you, not really.
01:18Like, yes, electric vehicles use much more rare earths than other vehicles.
01:22However, internal combustion motor vehicles quite heavily use rare earths.
01:26China's dominance spans the entire supply chain,
01:29from extracting critical minerals to processing them,
01:32and then turning them into magnets used in everything from cars to defense systems.
01:37It all raises the question, with that level of control, what can be done?
01:41And why wasn't more done sooner?
01:45David Abraham has spent years studying these issues, and they're the subject of his book,
01:50The Elements of Power.
01:52We didn't focus on the challenges of the market.
01:57We saw that these minerals were a sector of the economy that was not interesting to us.
02:03We were focusing on building apps back in 2010 and 2011.
02:08It was how do we create a technological country that was built on services,
02:12was built on financial services, and mining was dirty.
02:15And so we outsourced this dirty work to faraway places.
02:21And China was realizing that these ingredients were providing them capital that they needed to grow their economy.
02:27But more importantly, they saw these as seeds to the future,
02:31seeds to their high-tech and green industries that are at the heart of their economy today.
02:37As China quietly built its dominance, the first alarm bells for the U.S. came more than a decade ago.
02:44American manufacturers need to have access to rare earth materials, which China supplies.
02:50We realized that there was a structural risk back in about 2010,
02:54and that's when China and Japan had a territorial dispute.
02:59And within that, China had restricted access to rare earths to Japan.
03:04There was an initial shock, and the price of these materials, especially rare earths, jumped about 20 times.
03:10But what happened afterwards was that the prices themselves dropped.
03:13And they dropped to such low levels that people in the halls of power in Washington and in Europe,
03:18and some within Japan, became less concerned about security of supply.
03:24And so between about 2014 and about 2022,
03:27there wasn't much concern looking at these critical minerals because the market was supplying them.
03:34Fast forward to today.
03:36Critical minerals are dominating the conversation, from the halls of Congress.
03:40The necessity of these minerals literally cannot be overstated.
03:43To boardrooms.
03:45Look, for rare earth, we continue to diversify our supply chain.
03:48And now to the center of President Trump's trade war with China.
03:53My administration has taken extraordinary steps to make sure the United States
03:57has all of the critical minerals and rare earths that we need.
04:01But ensuring the U.S. has what it needs may require a different approach.
04:05In a new report, Heidi Kribo-Redecker, a senior fellow at the Council on Foreign Relations,
04:11says leapfrogging China is possible if the U.S. is strategic in its focus.
04:17If the number one priority for the country were to somehow catch up on critical minerals and rare earths,
04:24how long would it take?
04:25So for like through traditional mining, it actually takes a very long time.
04:30But the context that the report that we wrote at the Council on Foreign Relations was that,
04:34OK, so we have this traditional approach and we're going as fast as we can.
04:39It's going to take years, decades.
04:41It's going to take a very long time.
04:43And we have this timing mismatch.
04:45So we can't out-extract, out-process or out-fund China.
04:51But we can actually have a separate track that looks to innovation.
04:56Because there are a lot of great new companies and innovations rolling out
05:00that can actually leapfrog China's chokehold.
05:02And that innovation has already begun to take shape across labs, startups, and in new technologies.
05:09You have material engineering that has been able to create rare earth-free magnets up in Minnesota.
05:16You have new startups that came out of lab innovations that are able to manipulate proteins
05:24so that they act like protein robots and go into waste and extract rare earths from pools of waste.
05:32And waste is a very ripe area for the U.S. to be able to look to for our own
05:38capacity to generate our resilience.
05:41It's almost like steel is the right way to go.
05:43The way to go.
05:44The way to go.
05:45One of those companies looking to extract critical minerals from mine waste, known as tailings, is Phoenix Tailings.
05:53Take us through the Phoenix approach and why it's so much faster.
05:56So Phoenix, we started this back in 2019.
06:01I met my co-founder at a Bible study and we started talking about the biggest problems in the world.
06:04One is exactly this issue that we talk about here with critical minerals.
06:08So we said, let's find a way to solve it.
06:10And we built the first prototype with $7,000 back then in the backyard in Cambridge, Massachusetts.
06:15Now we've raised $120 million and we're backed by BMW, Sumitomo, and many other players.
06:19But our approach is to really use technology and develop the novel technology to be able to process and produce
06:24the final metals free of emissions, free of discharge, in a safe way right here in that state.
06:29So we solve all three parts of the value chain, which is the extraction.
06:34That's what we think about when we think about normal mining.
06:36That's digging a hole in the ground and digging up the raw material.
06:39And we harvest that material from the ground.
06:41Now, once we have that mixture of rare earth oxides or carbonates, we have to separate that out.
06:46And that's the next stage of the process called separation.
06:49And you take that and you split it into the individual pieces.
06:51Now, they still remain in their oxide form, but they're split out.
06:56And that's generally what historically was the product that would send to China to be processed into the metal.
07:00And at Phoenix, what we do is we take that oxide and convert to metal.
07:03And that's one of our revolutionary key things that we do.
07:06We're one of the best in the world on how to take oxide and convert to metal.
07:09Sage is a huge supply chain gap.
07:10And that's what we do primarily right here in New Hampshire.
07:13And this facility is designed as that one key part of that process.
07:16The materials that you work with in your facility in New Hampshire, where are those mine tailings from?
07:22So the facility in New Hampshire is buying actually normal mined products.
07:26We will vertically integrate to go upstream, meaning going closer to the mine site in the future.
07:31But right now, it's normal mined products coming from the U.S. and Australia.
07:35Can you be competitive with the Chinese?
07:37Yeah, it's a tricky question, honestly.
07:39Because, fundamentally speaking, the Chinese control the market indices that dictate price.
07:43It's extremely challenging.
07:45Now, what I will say is that we are generally cost competitive with the Chinese operations.
07:49That's a very important thing to note.
07:51However, China does subsidize a lot of these operations, and the pricing does not quite indicate how an actual process
07:56would work.
07:57So it's always tricky to answer that question.
07:59David Abraham says it's not enough just to be cost competitive with Chinese alternatives.
08:04You also need to have a complete supply chain that relies on the critical minerals you're producing.
08:10My concern, as crazy as it sounds, is not for the materials themselves.
08:15It's to create supply lines so that we can make the products of the future.
08:19No one sells dysprosium or neodymium in the market.
08:24You can't just go to the store and buy it.
08:27They're critical to our phones, our robots, our vehicles.
08:33And that's where we need to be spending our time, is how are we creating the products that our next
08:39generation needs?
08:40How do we create the economy that our children want?
08:43And how do we ensure that defense systems that we're setting up to protect our countries are invulnerable to supply
08:50chain challenges?
08:52So you really want to start with the end, with the demand, and then use the inputs, these materials, and
08:59then focus on how to get them.
09:01And in many ways, that is exactly what China has done, building not just the supply of these materials, but
09:07the industries that depend on them.
09:09China, for many of these materials, is the market.
09:13They produce, depending on the material, 70, 80, 90% of a particular material.
09:18But they also consume 60, 70, 80, 90% of the material.
09:23Their supply lines are becoming increasingly tight.
09:26I was back in China in 2011, and they were quite clear.
09:29The materials that they were producing in their country are set to be consumed in their country.
09:36They did not see a benefit to export.
09:39China built its playbook around critical minerals long before the U.S., and it's used its entire system of government
09:46to execute on its plan.
09:48Something that former U.S. Ambassador to China Nick Burns says we need to take into account.
09:54How does our system compete on something like critical minerals, given where we are?
09:59Because it may take a long time for our system to come around to the right decision.
10:02In the meantime, China is off to the races.
10:04So when I was educated a long time ago, college and graduate school, I prayed at the altar of free
10:10trade, and I became a free trader in my youth.
10:13And like most people in Washington, as an official, a young official, 80s, 90s, even into this century, free trade
10:20was our gospel.
10:21I now think, to directly answer your question, it's a really important question.
10:26Both President Biden and President Trump have now engaged in a degree of industrial policy, recognizing if you're up against
10:35this authoritarian, colossal economic power, and that's what China is,
10:40We have to isolate certain industries, pick out certain industries in the United States for special support.
10:46The United States government needs to pick out our national champions in rare earths, there are very few of them,
10:52and support them financially.
10:54And President Trump's gone all the way to take a financial stake for the USG in this.
10:59And frankly, I don't think we can compete with China in certain industries without that degree of involvement by the
11:07US executive branch that we really haven't seen in a way since FDR's time,
11:11when we had to have a war production economy in the 1940s during the Second World War.
11:17When it comes to critical minerals, the US has to recognize that it's playing from behind.
11:21It has to get its playbook right, and it needs to see how much the Chinese government is doing to
11:27promote its industry.
11:28But with all that, Ambassador Burns still believes the US can get back in the game.
11:34I will say this, President Xi Jinping has basically become a one-man show.
11:39So there is an advantage in a way that Xi Jinping can order things to be done and have them
11:45implemented.
11:46But, you know, if you compare our system to theirs, I'll take our system every day.
11:50Our democracy is messy.
11:52There's too much partisanship in Washington.
11:55But what's not a problem is that we believe in democracy and human rights and the rule of law and
12:01the balance of power among three branches of the US government.
12:05I'll take that any day over China's system.
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