 Today I have the pleasure of speaking with Jack Lifton. How are you today? I'm pretty good Tracy. Still still a little jet lag. It's a new record for me long long time jet lag Well in lieu of you being jet lagged. I'm gonna start by asking you about the column We just published on investor intel by and bridges. She describes rare earths as both sexy and fun Now Jack, would you like to comment on this? Do you feel that rare earths are sexy and fun? No, but of course, she's about probably about 50 years younger than I might she might have a different perspective than I did Well as I commented I said maybe our stocks would all be moving north if we were indeed marketing it that way So let's go. Yes move from sexy and fun to professor Dudley Kings North because that's an obvious segue here I know You and professor Kings North had several conversations in Singapore and he did a presentation Called the global rare earths industry industry today plagued by illegal production in China So how about you start by telling us what you think this presentation was all about? well Dudley is is pointing out that We have to live with so-called illegal production because in fact It seems to be sort of winked at by the Chinese authorities and it's they have to have it there is not enough official legal production to meet the the demands of the of the Rare earth industry without this so-called illegal production. It's it's really It's not just a matter of language is matter of culture The Chinese are doing everything they can of course to increase employment make make Make Chinese people richer have a better standard of living and anything you do in China to do that is considered to be okay So I think that Dudley pointed out and it's obvious to me that there's a whole lot of little places doing illegal mining even refining and maybe metal making that are sort of Not exactly on the radar, but they provide jobs and Security for people and nobody is just arbitrarily stopping this see I've always looked at this as some More insidious thing like the people evading taxes and destroying the land but in fact Dudley's position and he's probably right is that this is really just the way things go on in China and Even though the Chinese government would like to regulate everything and know everything that's going on They they reached they're more practical than that They know there's a limit to how much they can know and you can't just stop things without consequences So this is going to be a long drawn-out affair this reduction of illegality and it may never happen But we we have to learn to live with it and stop worrying about it because you know what? It's what it's the way it is when you work out how much material the Chinese are producing you have to add this material in there There were no problem here is we really don't know exactly how much is being produced Who's producing it or what it's selling for other than that? We're right on top of this Well speaking of being right on top of this it was a very thorough presentation and I thought one of the The slides that was interesting was on the illegal production of neodymium and Presidium are those the two rare earths that you currently are placing the highest value on Well Not as far as price goes, but certainly his turn revenues There's no question that neodymium and prezodymium bring in the most revenue of all the rare earths together They average about 25 percent of all rare earths production But the revenue from those two materials is probably 60 to 65 percent of all revenue for worse They are far and away the most important rare earths and of course the major use of them is in rare earth permanent magnets. I Also thought it was interesting. There was a slide titled Chinese rare earth companies losing money and cutting back production So in addition to the the illegal numbers, which I believe were 30 to 40 percent It looks like we have Chinese rare earth companies Reducing production. I thought we actually needed them to produce more Jack. Help us understand this It's difficult to understand the Chinese rare earth industry is losing money and yet it and yet they're actually short of various material It's very complicated and you know, we our conspiracy theorists out in the West here They talk about the Chinese government a subsidizing this production In fact, it has more to do with illegal banking in China than ill then subsidies the the Chinese system is not like ours and I don't really understand in our in our part of the world everything but China if you were losing money You would no longer exist, but they have to have these companies So I think things are going on such as the Chinese government buys for inventory God knows what happens to that The Chinese government gives loans to people that they know they'll never get paid back Just like the United States government does all the time and and and I think they're trying to they would like to change Just like to have a healthy rare earth industry Which I mean a profit-making rare earth industry, but they're nowhere near that goal and it's a mess And I want to point out to investors in it out in here an investor Intel's audience if you think that Certain American Companies that have went bankrupt recently were screwed up. You want to see the way the Chinese work this entire industry Is a crapshoot it is not for the faint hearted Well, perhaps the next time you explain what's happening with the Chinese rare earth industry we can have ribbons and Pins on a board and a whiteboard because I'm going to ask you the next question, which doesn't make any sense to me I have that one of the mandates of the Chinese presently that was discussed in Singapore Was that they're establishing stockpiles of critical rare earths? Okay, so they're going to be producing less the demand is increasing But somehow they're creating stockpiles. What's happening with stockpiles and which which items are being stockpiled? Well, that's a good question I'll tell you what stockpiles about they're about the government stepping in to make things work in other words Let's say the Chinese government is stockpiling Syriam well, they would be the only buyer because because Syriam's produced it probably 10 or 20 times It's demand so when they start they say well, we're stockpiling they mean they're buying it They're buying it to smooth out the market Chinese Managers the government they are not sophisticated capitalists. They're just learning how to do this They say well, we're going to buy this stuff and get it off the market. That's called stockpiling. I call it Correction so to speak that's what's going on here When you try to understand it in terms of the logic of profit and loss you get confused You try to understand in terms of government trying to maintain employment and keep the factories running it makes it makes a lot of sense Okay, I hear you and I appreciate that so that would explain why it's Primarily neodymium and prosidium that they are actually stockpiling. Okay, so the policy changes that are taking place as a result of the World Trade Organization, that's something that we've been following very very closely. Yeah, what kind of update did you get? I mean the changing the change in tax legislation, etc To sidestep the WTO ruling or at least that's our conclusion. Well That's a that's a good point actually The WTO ruling doesn't seem to have really helped anything from our point of view because the Chinese are still they have taxes That have to be paid before you can export something they have production quotas and you know Obviously if a Chinese mind is going to produce a thousand tons of Neodymium and they have a buyer for it. It's not in the market So you you can say right then and there well it was for sale But somebody bought it before you did what what's going on here is that the WTO has not made the ruling And it's not made much of a difference. You want to look at something that really in my opinion is going to affect this market It's the the IMF approving the Chinese currency as a reserve currency yesterday I am predicting that the Chinese will start pricing these things in their currency And so in order to buy we're she left and for American dollars or British pounds or euros or yen in order to RMB The Chinese currency this really gives them some kind of control and I've been saying this for your years This market will become a Chinese market because it'll be priced in in our MB and Any other prices will be conversion factors. So this is a let's say a Consequence of the Chinese one becoming a reserve currency and it's very important And in in terms of commodities especially the ones that the Chinese control people are not paying attention to this Like what difference does it make is you might say it makes a lot of difference. You'll see Well, I cannot agree with you more Jack and just I guess on a on a final note Is there anything that was a surprise for you in Singapore that you did not expect to happen? Yeah Yeah, the interest. I did some some work that I do for a brokerage and as some educational work on materials for alternate energy and I was really surprised at the intensity of interest by the Singapore financial community in technology Processes not so much materials now processes. They're very interested in new technologies that are that improve efficiency or Improve lower costs. Okay, so we're just on the edge of that but in the in the excuse me real world That that's become a hot topic. I saw the same I was in Spain after that and I saw the same thing a big interest in technology processes improvements because We've been doing the same old same old thing and chemical processing of these technology materials for a century And and I think changes are underway And this is the big advantage of outside of China The Chinese are not very good at that and they're not very big on it In America and Europe This is where all these advances are happening. These are the things we need to start looking at technology processes Well, Jack, thank you so much for speaking with us today. It's always a pleasure Thanks, Tracy, and I hope to see everybody soon as Before the May 11th clean tech conference of investor intel. I hope thank you