00:00:00
okay so uh i wanted to introduce somebody uh this is uh an incredible story of a turnaround
00:00:08
of a business that impacts a lot of us in america if you care about climate change etc uh his name is jim lutinski
00:00:15
and uh here's a guy who had all the success in the world running a hedge fund successfully
00:00:23
a business called mollycorp goes into bankruptcy he basically puts his entire fund in it
00:00:29
brings it out of bankruptcy manages to build one of the first mines that was completely cleared you heard
00:00:35
what elon said about california in california that mines some of these rare earths and
00:00:40
critical metals that we need to make permanent magnets that we use in electric motors
00:00:45
um on the front lines of climate change building factories now in south carolina with gm et cetera et
00:00:51
cetera so jim's just going to walk you through a few things and we're going to talk about some climate change stuff
00:00:59
[Music] and they've just gone crazy [Music] hey everyone so i'm jim uh i used to run
00:01:16
a hedge fund and uh i'm now i'm an accidental industrialist um so i want to take you through that
00:01:22
journey um and then while i do that uh it'll you know we'll go through the problem that i'd like to
00:01:29
solve just to provide some context so i think um if if we think about a lot of the things that just came up with
00:01:35
respect to the economy um it's been about a decade plus since the global financial price uh crisis
00:01:43
and in that decade plus we've been in this environment where there's been essentially
00:01:48
a full-on boom a lot of money printing and essentially a a very low or negative cost of capital
00:01:55
in growth in technology right and and what we've seen now i guess we're we're on the uh the beginning stages of of the
00:02:02
aftermath of experiencing that economic enema as was just discussed but um we we have just been through this
00:02:10
period of of over a decade where there's been you know all this money that has gone gone to growth
00:02:15
and what has happened during that time simultaneously is the real economy has been starved
00:02:22
you haven't seen i doubt many of you have friends that are investing in new steel mills or aluminum mills or nickel
00:02:27
mines maybe nickel mines now right but while the real economy has been starved actually interestingly
00:02:35
we haven't noticed it so much one because we're just starting to scale into electrification
00:02:41
but china's made investments so pretty much all of the incremental steel and aluminum and commodities capacity in
00:02:50
the world over the last decade has come online uh because you know china has led
00:02:55
the way and you know as an aside um interestingly about 80 percent of the aluminum and 80 percent of the
00:03:03
steel production in china has done with coal so not only has this been um you know not only have they sort of
00:03:09
taken over the real stuff and this isn't about uh you know where wherever you are on the on the
00:03:15
spectrum of is you know are they just a really tough competitor or is this you know some kind of economic world war
00:03:22
three it doesn't matter what matters is is that the incremental stuff in the real world has really the
00:03:28
the way has been led by china and uh and and so when we think about what's now happening
00:03:34
in the world as we electrify uh i wanna move on to the next one here um i think one good thing about going
00:03:43
after elon is i don't have to really explain this chart we are electrifying and um as we electrify what a lot of
00:03:53
people might not fully understand is that while all this real stuff has come online
00:03:59
the chinese have actually moved downstream very intelligently and so when we think
00:04:03
about a lot of people may have heard of china 2025 but a lot of people probably haven't
00:04:08
heard of china 2035 which is the current mo which is to move downstream into standardization and so actually when we
00:04:16
look around the world today four of the top 10 oems are chinese by global battery electric
00:04:25
share and so when we think about the single largest private employer in the country
00:04:31
the auto industry we think about all these industries um that are mineral intensive
00:04:37
the chinese are actually have moved downstream and these are these are very mineral
00:04:42
intensive industries so what this slide shows is as we go from a fossil fuel world
00:04:48
to an electrification world which you know we all i think everyone in this room believes is is fake complete
00:04:55
um and this actually excludes steel and aluminum uh just in the the content of copper
00:05:04
nickel lithium and then what i focus on rare earths and some of these other things
00:05:09
there's seven times as much content and so when we think about the the past of the fossil fuel driving
00:05:17
geopolitical uh gamesmanship and power in the world the future is about minerals and
00:05:25
what i focus on are rare earths and so um we and i'm going to get to to my journey as an accidental uh
00:05:33
industrialism in it but but what you can see here is rare earth's um they're kind
00:05:38
of the way to think about it is sort of like a a young cousin of semiconductors uh to to the eevee business so
00:05:46
regardless of of how electrification happens regardless of battery chemistry how that
00:05:52
energy gets to a motor that motor moves via magnets and so this industry is expected to explode
00:06:00
and it's not just it's not just evs it's you know wind turbines drones robots can anyone actually guess
00:06:07
where this robot is from this is uh it's actually from short circuit johnny number five but i'm
00:06:12
hoping elon will uh get us a better robot of the future but when we think about all these industries magnetics um
00:06:19
it's it's really powerful so um that's where i'm focused and and this is just an example of the commodity needs
00:06:27
as we electrify if we take uh those projections of what's going to happen in electrification just in my space so this
00:06:34
is ndpr this is the the stuff that we make the input into magnetics um you can see there's a huge deficit uh
00:06:41
that is looming and here's moving on look at my space here's the challenge so outside of us this entire supply chain
00:06:51
is essentially domiciled in china and it doesn't even have to be nefarious but what happens when
00:06:59
the largest manufacturers in the world are all competing for what i showed you on that prior slide
00:07:04
uh a shortage of supply and we've seen lots of headlines whether it's the semiconductor issue
00:07:08
um or you know just today there was a headline that rivien is fighting with the supplier over seat costs you know
00:07:14
all these things where we're seeing the shortages in the supply chain that are that are flowing through
00:07:20
um if there's an allocation of materials and the materials are controlled by china or another geopolitical rival
00:07:31
which downstream businesses do we think are going to get those materials and this is actually now an existential
00:07:36
issue for all of us um so back to my story um so this is mountain pass this is the mine chamoth
00:07:44
mentioned that um we bought this at a bankruptcy in my fund so uh going back about five years
00:07:50
ago this site went bankrupt uh it was a public company it sort of it rose and then it fell
00:07:58
and nobody believed that we could compete against china and in fact i had to we we showed up i showed up in the
00:08:04
delaware courthouse steps um i mean it was literally like out of a movie there were other creditors pushing
00:08:09
to send this thing into bankruptcy and you know you look at this thing you're like wait this is the
00:08:14
one of the most valuable rarest materials mines in the world and um and this is the future this is a
00:08:21
material for electrification and no one wants it not only does no one want it but people think that actually we can't
00:08:27
even produce here economically because the chinese have taken over the industry and so we actually kicked in a couple
00:08:33
million dollars just to keep it in care maintenance just to keep the eight employees on site going so that this
00:08:39
thing could actually keep its permit through the bankruptcy because otherwise they were just going to raise it to the
00:08:43
ground so we we uh went through that journey and uh we ended up buying it and so
00:08:49
these assets this is about 2 billion of replacement cost not to mention the fact
00:08:54
that um you know this is one of the marquee sites in the world and and um you know it's in a stable jurisdiction
00:09:00
all these assets up over here to the left these are what make it environmentally friendly so we don't put
00:09:06
anything back into the water supply we have dry tailings which essentially means that um
00:09:12
for sure we're the cleanest rare operation in the world if you go onto youtube you can kind of see how
00:09:16
historically some of that mining and processing is done but no one wanted it um and everyone thought that that this
00:09:23
couldn't be done but we we bought it out of bankruptcy we we took on it was sort
00:09:26
of a a distressed turnaround uh uh and startup at the same time we had we had no accounting software um we literally
00:09:34
had eight people in a mine and i show up i'm a hedge fund manager um and uh you know people thought i was
00:09:40
pretty insane um and probably if i knew what i was getting into like i said it was an accident no but i
00:09:47
couldn't believe that no one else wanted to do this and i frankly i felt as an american
00:09:51
somebody had to do this and you know there i was on the courthouse steps and so i went for it um
00:09:57
and you know fast forward to today and we're now you know we're now public we went as jamal mentioned we went public a
00:10:03
couple years ago or six and a half billion dollar market cap um it's been you know obviously a
00:10:08
massive thank you um so this has been a massive home run for for myself and my investors but more
00:10:16
importantly i i um and i don't belittle that ultimately we're capitalists here we want to do a
00:10:21
great job for our for our clients and ourselves um but i hope that we can kind of contextualize this for what needs to
00:10:27
happen throughout our economy because i do think that um as painful as the adjustment may be that we're now in this
00:10:34
period that we're about to be in um with with what you know some of the the as the capital comes out of the growth
00:10:41
space there is going to be a big beautiful bull market in real stuff and it is just beginning and i can i'll
00:10:50
give some statistics with the besties i don't want to ruin my besties time so i'm going to finish up real quick but
00:10:55
there there's a lot of stuff that needs to get built and this supply chain stuff
00:10:59
is existential and so what we're doing at mp you can see our stage one we're doing we just reported our quarter a
00:11:05
couple weeks ago we're now from a site four years ago that i had to beg on the courthouse steps just to keep it alive
00:11:11
we're now doing approximately 450 million of run rate ebitda today um so you know this and then
00:11:20
uh we announced the deal we announced the deal with gm where after actually have already broken ground in a magnetic
00:11:26
facility in fort worth texas and this is a scale deal it's not exclusive we expect to bring in other oems
00:11:32
where we'll be making magnets so we'll be shipping material that will be environmentally produced from mountain
00:11:38
pass california over to our site in fort worth and make magnetics and our goal is
00:11:41
to build a western magnetics champion um and so i guess with all that i would say
00:11:47
um hopefully this kind of thing can inspire you we need the the good news is there needs to be a lot more stuff like
00:11:53
this so maybe i'll share some stats on you know some of the other space because i don't want to make this just about
00:11:57
rare earth but when we think about all the materials that we need for this electrification boom uh and the
00:12:03
supply chain that needs to be built this is like this is the era of it's as if it's you know the 19s and ford is
00:12:12
just out i mean there is an entire supply chain and it's not just evs it's wind turbines it's drones it's robots
00:12:18
and it needs to be a bunch of real stuff that we all create and so um i don't think some percentage of us
00:12:26
don't need to necessarily debate whether crypto is going to go up or down you know now is a time to pivot i think
00:12:32
because this is something that we need to do um to to get uh competitive again so i
00:12:37
guess with that i'll i'll flip the mic and uh feel the fire from the besties thank you
00:12:42
[Applause] tesla in their quarterly earnings said something to the effect of um you know
00:12:52
we're going to consider becoming a mining company as well right and then i think elon said
00:12:57
something on the earnings call which i thought was really interesting he's like i encourage every entrepreneur out there
00:13:02
to get into lithium please you know become a lithium miner right so maybe if you can just quantify for us
00:13:10
and i you showed the the the gap for your for ndpr but broadly speaking lithium and all the
00:13:18
other things that we need to actually electrify and get to a reasonable place in climate change
00:13:24
how behind the curve are we really so it's a great question and the data is tough because a lot of it is reliant on
00:13:30
battery chemistry and so we don't know exactly how much nickel it'll be how much you know but we do know certainly
00:13:37
lithium nickel copper all of these things it's multiples we need here's actually maybe this is a great stat
00:13:44
uh some some good source that i utilize estimated that we probably need on the order of
00:13:50
40 to 50 copper and nickel projects over the next couple decades so call it roughly 200
00:13:57
billion dollars of capex to satisfy the demand for electrification that we have over the
00:14:02
next couple decades and what's so interesting you mentioned and obviously i assume elon sees this is if you look
00:14:10
at the multiples you know just think about it from a strict investor point of view from a financial arbitrage
00:14:15
standpoint look at the multiples of where auto auto oems trade right or you know certainly tesla and then look at
00:14:21
what's happening in the mining industry today so so actually the nickel industry
00:14:24
is dominated by essentially glencorn valley those two businesses and i'm not you
00:14:29
know i'm not pitching stocks but as an investor you know we'll see what the next penalty those two businesses right
00:14:34
now at today's uh uh commodities prices are essentially going to free cash flow themselves out in three years time to
00:14:40
buy and they're buying back stock right and so this is how how stark the arbitrage is that in the real economy
00:14:46
mining and materials companies steel companies are trading at double-digit free cash flow yields they're buying
00:14:51
back stock they have no leverage in their businesses and then downstream everyone's reliant on them and upstream
00:14:56
these guys they don't want to spend to build out new capacity because the cost of capital is too high so what's going
00:15:01
to happen is i think you're going to see maybe an aol time warner moment and i don't mean it the negative way but i
00:15:07
think you could see a tesla or someone like that buy upstream into these industries because ultimately downstream
00:15:12
wow they all realize that the real stuff is in shortage and you can't have the enterprise value downstream because it's
00:15:19
like musical chairs how much of your night when you're sleeping do you think there's an x percent chance i'm gonna
00:15:26
have some huge environmental catastrophe like part of i think why a lot of folks
00:15:31
you know folks like this who could probably go into that business don't is in the back of their mind they
00:15:37
think man this is like this is a lot of gnarly stuff if something goes wrong how
00:15:42
do you manage that risk and how and how big is that risk if we try to do this in
00:15:46
america so the single most important thing we do at mp is safety and we actually on our last service call
00:15:52
said you know last two years we've had two years without a lost time injury and we gave everybody every single employee
00:15:57
in the company a cash bonus to celebrate that milestone which is really critical
00:16:03
the reality is this isn't software right it's real stuff all we can do is our best i just think i think frankly as as
00:16:09
a human being as an american i would rather have mines being done in america in the state of california over
00:16:16
elsewhere in the world where i certainly know that i assure you that nickel mining in russia is not as
00:16:21
environmentally friendly as it is in canada well i think most people may or may not know this but for example all of
00:16:26
the you know cobalt that goes into a lot of these evs a lot of it comes from drc
00:16:32
and if you go and see the state of governance in drc women's rights and drc child rights in drc they're not existent
00:16:40
and so it is a very very complicated um dirty supply chain that feeds the beast and even though you may think
00:16:48
you're doing the right thing by you know driving this plug-in hybrid or you know
00:16:51
your toyota prius if you trace that stuff back it's a really complicated place i think we've all gotten a big education
00:16:59
um on supply chain over the last two years with kovid and the value may be of redundancy and what happens if you
00:17:08
give a dictator a little too much power the germans are learning a hard lesson about what happens when you shut down
00:17:13
nuclear reactors and decide hey let's buy our let's buy our energy from putin yeah uh well that's a great point you
00:17:19
raised about the germans because i think it's a fair analogy to say that germany
00:17:24
is to not gas as we are to china supply chain and so we see we see this coming right
00:17:30
we see and again this is this speaks to geopolitical leverage yes this is a national security it's a national
00:17:36
security issue is it not it's a national security is it is it it's it's a democracy it's a it's a democracy issue
00:17:41
is it a war issue is it something that gets to the point where we would have to go to war if for example we didn't get
00:17:49
the natural resources and critical elements we need not that you said that it could not it would happen but could
00:17:53
it happen where it's so important that all these other countries can electrify and and well how about this i'll make a
00:18:00
prediction i'll bet that in the next five years we will see a major household name oem
00:18:07
fail or need a bailout due to not you know prices went up on them but lack of access to
00:18:12
a material some kind of critical material like you're talking a gm a ford assembly somebody probably not gm i mean
00:18:18
think about it do we if you think about it do we need to even predict this we went
00:18:23
to a number of wars in the middle east over oil so if this is the new oil and that is
00:18:29
the analogy it's clearly gonna cause you know uh conflicts and the question is you know are we gonna build a strategic
00:18:37
reserve of these materials do we have a strategic reserve we talked about the food supply problem and freeburg
00:18:43
educated us on hey we've got like 30 days of food this country has 90 days of food do we need to have a strategic
00:18:49
reserve of these rare earth minerals in the united states jason i just don't think there'll be enough because when
00:18:54
you think about this is we're talking about a multi trillions of dollars a year to electrify across so great the
00:19:00
demand is so great we're talking about build up supply we can't build up supply or if we can't we need to put the
00:19:05
capital in and right now and that's why you know again we'll let the the investor panel maybe they can can bleed
00:19:12
into this but that's why i think the whole spaces are screaming by because if you look across all these
00:19:18
companies the cost of capital is just so high and so one of two things has to happen or both which is prices just have
00:19:23
to go vertical or someone starts taking them out or we're just not going to have the stuff
00:19:27
to electrify i i understand that there's now been demonstrated significantly more lithium tell me if
00:19:35
i'm off on this in the oceans than there is in the crust and there may be systems for extracting
00:19:41
lithium from the oceans that are electrochemical in nature that would allow us to kind of access
00:19:47
that resource and will you know obviously if you can get a system that can scale you can get it all out very
00:19:52
quickly so i mean have you looked into these systems you have a sense for the opportunity let me step back and then
00:19:57
step down to that so investment styles are cyclical just like industries you know i believe in cycles right price the
00:20:04
cure for high prices is high prices there's no question in my mind whether it's that or there will be someone or
00:20:09
frankly maybe someone in this audience will have some breakthrough right and so we will solve this problem
00:20:15
but the challenge is is that i don't even think that we've ignited the proper focus and resources to
00:20:21
actually solve this problem and so there may be that may be an example of a solution but that'll take five to ten
00:20:26
years but in the meantime there's you know there's a lot of resources that need to be applied to adam jonas who is
00:20:31
the auto analyst at morgan stanley calls this the mother of all cat-back cycles i think
00:20:40
right and i think his estimate was like you know something like three trillion dollars of capex needs to get spent over
00:20:46
the next decade even to have a fighting chance on all of this stuff and so if you're looking at new areas so
00:20:54
take your ndpr mp materials hat off but if you're in the same position you were back then now
00:21:03
not not really you don't need to go to the courthouse steps but where would you be looking
00:21:08
you know would you look at lithium would you look at nickel would you look at trying to do what you know china's doing
00:21:14
and create better and simpler and cheaper chemistries for batteries like where would you spend your time right
00:21:20
now if you weren't doing mp so i i think you actually said it perfectly well in the lead in which is just
00:21:25
anything that is real stuff and so yeah all of it lithium copper nickel steel aluminum all these areas
00:21:35
that have been starved the cost of capital is just so high across the board that if you can come up
00:21:41
with solutions to deliver the shortages and again i'm not saying the next three months maybe we could have a brutal
00:21:46
recession for six months but we see the long-term five ten-year trend i think anywhere you look in this space you're
00:21:52
looking in the right direction it's a it's it's a wind at your back as opposed to and again i'm not you know taking a
00:21:57
view but to come up with a new cryptocurrency right now it's it's it's a huge wind at your back relative to
00:22:02
can you could you get your mind operational in today's political environment do you think like if you had to start
00:22:10
from scratch or if you found a new thing in nevada or you know wherever it is that's a great question and that's the
00:22:17
challenges that it takes to to get any of these things it takes a decade right it takes if you
00:22:22
have all the capital in place all the human capital all that just the you know going through that process to build it
00:22:28
the materials cost and so uh could i do it i think the world needs it and i think that what we do
00:22:35
environmentally is so unique that i think we could get it done but this is a big challenge and i think
00:22:40
frankly it's a it's a you know you guys were talking in the last session about um we need to come together this is a
00:22:46
big time area where we need to come together there should be a grand bargain right there should be the
00:22:51
environmentalists should say okay i accept that we need this stuff i accept that we don't want it to be only
00:22:57
made in russia and china and they should loosen up on some of the permitting stuff and i think the people
00:23:03
who are just like you know drill drill mind mind mind don't care need to accept that we need to have really tough
00:23:08
standards um and i think we should have some kind of grand bargain and it could be you know tax policy focused on it but
00:23:14
there needs to be some kind of coming together in our country to recognize that we need this stuff i mean
00:23:20
let's be intellectually honest people are hypocrites the the people in the eu people the united states they want the
00:23:28
energy they want to cheat they're complaining about the expense of you know even a modest increase in energy
00:23:34
across 10 20 which they could withstand they will complain about it and they they will not
00:23:40
allow fracking in their country but they're more than willing to let russia frack for it they don't want the cobalt
00:23:46
coming out of the ground in california they're more than willing to let 15 year olds dig it out of the ground without a
00:23:52
mess eight-year-olds as horrific as it is and there is intellectually dishonest it's hypocrisy
00:23:58
and i think we have to own the fact that we want to live in large houses and we want to blow the air conditioner on
00:24:05
some ridiculous setting america's homes are three times bigger than other homes so to build on this two two very quick
00:24:11
stories there's a massive deposit of lithium in nevada which would be enough to basically feed tesla and another oem
00:24:19
okay so this would get probably somewhere between one and one and a half million cars pure uh electric on the
00:24:26
road by 2030 and they're they were completely permitted by the blm the bureau of land management
00:24:34
and there was a lawsuit that was filed and it's still wrangling its way through the federal court system and what it is
00:24:40
is a claim that the there is an upper wood grouse that could be endangered um through this mining they have yet to
00:24:49
find an actual upper wood grouse in the area right but nothing can happen theoretically and
00:24:54
so the problem is that we've now delayed two years you know it could get resolved
00:24:58
this year but it could be another two or three years which means the lithium isn't actually available until 20.
00:25:04
global warming continues to happen that's one story second story is that just yesterday the california
00:25:10
uh the city of costa mesa rejected a bid to build an electrolysis facility to create a hundred million liters of
00:25:18
clean water every single day um just a desal plant the d cell plant because they didn't want it
00:25:27
because they're going to lose some jellyfish or something no they just didn't want it they thought ah it's
00:25:31
unsightly i don't want this in costa mesa meanwhile you know pretty it's a coaster it's a
00:25:35
mesa so you know uh and and so to your point when the rubber meets the road these unfortunate
00:25:41
decisions get made and there's no way to you know sort of come together these people want to take 30-minute showers i
00:25:48
mean that's the hypocrisy of it if americans really want to talk about conservation first of all 30 minutes
00:25:52
there's nothing wrong with a 30-minute shower listen i wasn't calling you out specifically
00:25:56
but since you uncloaked yourself it's it's gratuitous in fact it's completely christian
00:26:01
and it's such a great point and my my entire argument is that we're gonna we will answer this question as a country
00:26:07
either now or later and the point about four of the ten largest auto oems in the
00:26:12
world are now chinese companies and so this is now a competitive issue and so we can we can
00:26:17
keep kicking the can or we'll face the crisis are you are you well lost by the government are you beloved by like can
00:26:22
you kind of like be line and just cut through the nonsense because of nevada government looks like you well i think i
00:26:28
i think that it's fair to say that the the local officials are very happy with what we've done with what we've achieved
00:26:34
in south carolina right uh the in fort worth texas the the magnetic facility you know the we we have some
00:26:40
partnerships with dod the president announced that the gm facility uh the gm things in texas in texas and texas um so
00:26:46
i think that there is frankly support from both sides of the aisle for what we're doing uh you know there were
00:26:51
executive orders on the rare earth magnetic industry specifically both in the trump administration and in the
00:26:56
biden administration so i think what we're doing is hopefully nonpartisan um and and frankly i think
00:27:02
all this should be and that that's you know the point about the grand bargain but even
00:27:06
you raised a great point about just all this stuff it's you know there's so much pushback and we
00:27:12
need to we need to figure out a way to get past that because this stuff has to has to get made i think it's incredible
00:27:17
i mean i'm a huge fan disclaimer i was also an investor wow i am not an investment company but
00:27:22
uh we do appreciate you giving us the education and and we do need to be independent from communist countries uh
00:27:29
and really have the supply chain situation dialed in so we appreciate the hard work
00:27:34
for america and for freedom and i'm a huge fan of you guys so thank you thank you
00:27:39
we're all done we'll let your winners ride rain man david sacks [Music] we need to get
00:28:26
back [Music] i'm going on [Music]