 Today I have the pleasure of speaking with Konstantin Karinopoulos from Neopreformance. Materials, how are you today Konstantin? Hello Tracy, I'm very well, and how are you? Konstantin, as always, I've been enjoying watching your milestones since you came out of retirement, become the CEO again for Neopreformance Materials. But at the beginning of the onset of this interview, I'd like to bring up the recent news in the industry about a passing of one of your friends, John Landrath. I wondered if you wanted to say something to our audience about his unfortunate passing. Sure. Tracy, John was a friend and he was one of the really, really good people, great professionals in the rareth industry. He spent virtually his entire career as a geologist for MaliCorp. He's done tremendous work around the mountain pass deposit. He's been to pretty well every rareth deposit around the world and he's had views on those deposits. I remember during my involvement with him, I sent him to Africa on a couple of expeditions of deposits and he was always a really nice, rational, calm man who believed in facts and rational analysis and it's a great loss for the industry. He didn't grab the headlines, he never made a lot of noise but he was a consummate professional and for those of us who knew him and worked with him, we will miss him terribly. I thank you so much for your commentary on John Constantine. Now, with regards to near performance, every time I turn around I see some really large numbers. Let's see. You recently announced a 70.9 million bot deal secondary offering of common shares and in December we saw a similar headline for 47.6 million in bot deal secondary offerings of common shares. Can you talk to our audience about what this really means? Sure. When I joined again the company as CEO in the summer, one of the problems that I recognized immediately and I had been talking to the board about it when I was chairman of the company and incidentally for governance purposes I stepped down from the chair of NIO when I took over the CEO seat. The new chairman at NIO is Claire Kennedy, a great professional, tremendous board skills and a great chair. One of the fundamental problems I saw with the company is the fact that we had very limited liquidity as a public company and that stemmed from the fact, a few other reasons as well. The main fact was that 70% of the equity of NIO was owned by one large fund in California called Oak Tree and those in the financial industry would be very familiar with Oak Tree, very successful fund over the years. So I've had a number of conversations with Oak Tree about the wisdom of reducing Oak Tree's share in the company and allowing more shares to circulate in the market and therefore improving the liquidity and so far that thesis has held correct. We following our third quarter results release in November, we put together a road show, we built a book for about rum numbers $50 million, $12.10 a share, Oak Tree sold just under $4 million shares and immediately the liquidity improved and the share values continued to increase. Now I won't claim full credit for that. The markets have been pretty frothy, I have to admit over the last few weeks. So as that continued, we did following another road show, virtual road show of course, we put together another secondary this time closer to $80 million at $15.75 a share. So it's not normal that you can have successive secondaries at higher, successively higher prices but I think this talks to the fact that the basic thesis was correct that improved liquidity is helping the stock but also the frothiness in the market, the attention that's being paid to rare earths again is refreshing because the industry when it comes to investor attention, there's a definite cyclicality and now of course with mountain pass with a hugely successful listing in New York through the SPAC deal they did in the summer, they're trading over $5 billion market cap. I think there's a lot of folks that are paying attention and they realize that rare earths are a very interesting area to invest in. The fundamentals are very much in the favor of the entire industry and companies especially like ours that continue to execute and put money to the bottom line I think should and deserve the attention that they're getting. So our analysts did a top five rare earth companies to watch globally and listed neopreformance as number three pointing out of course that you have the only processing facility outside of China. Now I have a number of questions of course to ask you about this can you just talk to us a little bit about the frothy market and the rare earths market landscape that we currently have out there. Sure let me correct one observation that we have one of the two rare earth processing facilities outside of China, Linus of course in Malaysia is the biggest, our plant in Estonia is significantly smaller but it's big enough for the purposes that it serves and it is the only facility in Europe which in my mind at least it's a very very strategic asset. The industry fundamentals we went through a really tough time in earlier quarters especially affected by COVID and it wasn't really a direct effect I mean it was the supply chains being affected by COVID and as consumer demand dropped the inventory corrections especially through the second quarter by the time they got back to suppliers like us in the earlier parts of supply chains you know they became a tsunami and hence our second quarter was probably the only worst quarters that I could remember would be fourth quarter of 08 first quarter of 09 when the world was falling apart for completely different reasons and back then we came back with a vengeance and it looks like the business is coming back pretty strongly and overall I think you have some massive wind on our back and that's clearly the EV demand or demand by the EV industry especially in China and Europe where the industry is growing at very impressive rates both in terms of consumers voting with their feet and buying more and more EVs but also manufacturers and supply chains responding to that demand and setting up supply chains in Europe now because China has had those supply chains for five to ten years we see significant demand growing growth in Europe and of course you know North America is a little slower to respond but North America will get there but there's no question that the EV industry has been the biggest demand trend in the rare earth sector at the same time there was an unintended positive consequence from the lockdown and as all of us work from home demand for laptops smart devices and so on has gone through the roof so the plans that we own that supply either electronic materials or electronic rare earths or magnetic materials for micro motors inside electronic devices and the like we're they're running flat out and that's simply because consumers are buying smart devices and electronic devices at an unprecedented rate of course one of the many catalysts that we've credited or some have speculated have been driving the rare earth markets have been the EV market as you said the smart devices but where are we really in the supply chain development Constantine there's a lot of hype out there in the media there's a lot of misinformation we still don't have a supply chain for rare earths outside of China that's functioning in North America can you comment on that yeah i'll i'll say the same thing that i've been saying for for years it took supply chains at least two decades to pack up and leave North America especially supply chain specific to our industry it's going to take the better part of a decade if we start putting it together now and unfortunately we you know i i'm very impressed by what the europeans are doing and i've said this before the efforts in north america are a little spotier in europe and then the europeans had a fabulous experiment with their battery alliance the european battery alliance where they committed an awful lot of money in north of two billion euros to attract global manufacturers throughout that battery supply chain and now you know every big name in the EV battery sector has either built or is building a plant somewhere in europe to supply EV demand well i think that's what it takes um you know friends have called it a Manhattan style project as necessary i mean if we're serious about it and if we really believe what we say that the future supply chains specific to electric vehicles and advanced manufacturing advanced electronics depend on on our ability to produce rare earths and perhaps more important sophisticated materials from rare earths um we we should have started a decade ago to be ready now but you know it's never too late i think it will take a concerted effort you you see some efforts here and there but they're specific to parts of the supply chain like for example uh the department of defense in the united states uh giving a contract to or giving a financial incentive to line us to build a separation plant in texas still the the rest of the supply chain is empty in other words the the rare it's it's good to start with the rare earth production but then those rare earths have to be converted into metals alloys magnetic materials magnets motors and so on before they end up in a in a tesla or a byd or a volts wagon uh ev so there's an awful lot of effort that that needs to continue to be um expended in order to end up at some point with a fully integrated fully functional supply chain in north america and of course i have there's no question that investor intel caters to the capital markets and we have a lot of competing public markets right now they're uh talking about the technology for the extraction of rare earths we hear about the recycling to pull out the rare earths or the magnetic materials we also hear about processing pilot plants and of course the exploration as a sophisticated member of our community can you tell us where you think investors should invest their time in getting to know this sector and where they might actually see their greatest uh appreciation for their investment dollar and this is where you can add that you are now offering your the dividend process that you have at neo performance well um yeah we neo has always been making more money that we know what to do with it so we we've been paying a dividend to our shareholders and we've been over the last couple years we we have been buying back uh our stock um and in the meantime now we're looking at a series of um meaningful m&a transactions that fit in together with what we do uh in our uh strategy throughout the supply chain that's a different conversation for a different time uh in the meantime that's a your question is pretty loaded Tracy um you know i have my own views that i i would be very hesitant to make public um i've been doing this for about 30 years i've seen a lot of failures i've seen a few successes um and and all i would say is that um you know there is as you you talked about information and misinformation don't forget that we spent the last four years politically talking about facts and alternative facts news and fake news information and misinformation i mean the same thing goes um to information with regards to what companies do in our sector so people who are interested in investing in the sector they need to to cut through the noise and and get to the bottom of of what companies are offering um i'm a bit old-fashioned i believe in cash flow and i believe in in balance sheet strength and and that is clearly reflected in the way uh nio is operated and in fact uh our balance sheet saved us during the covid turned down um you know we didn't lay off a single person um we slowed down some of our plans but we didn't shut them down and the result is we could afford to do it and in our business uh one of our greater greatest resources is human capital and if you let people go it's very expensive and it's short termism to just let people go if this quarter or next quarter don't look great because it's taken us decades to make sure that you know the people that work for us are the best anywhere so you know letting them go would would create a serious problem when things come back and we need them back so we we rarely let people go for external reasons uh other than you know performance related reasons uh in in in terms of what other companies are doing that there are some exploration companies that i really like they have unique deposits and those deposits tend to have excellent either either excellent mineralogy or an excellent distribution of the desirable magnetic type rare earths that today command the higher values um then when it comes to technology in terms of separation um you know separation is a relatively in my view and I might sound heretic in this um or heretical it's it's not a very high value proposition if at the end of the day what you do has to compete with the large commodity manufacturers in in asia then you know there isn't a lot of margin to to command just because you have a better separation technology um you know solvent extraction works really well it's dirt cheap and as long as you know what you're doing it can be a fairly clean operation um so when it comes to you know further downstream in in the business clearly um magnet anything related to magnets um has a great volume demand but again at the same time people who get into it they need to compete against the large commodity magnet producers in asia so be very careful uh when you're investing in a company you need to look at their business plan and see how defensible it is against massive dislocations uh like we've seen in the past and I remember when molly corp uh when molly corp uh filed for bankruptcy when neodymium prices almost over a span of a couple weeks went from 40 a kilo to 15 a kilo uh back in 2015 and you know molly corp couldn't keep the lights on on the other hand um if you have a defensible proposition with um strong barriers to entry then those companies are um are worth investing in you know I apologize for the generalities but I'm going to get into a lot of trouble if I if I said anything specific about I think the conclusion for your last comments are quite clear for most of us which is just you're articulating clearly the value proposition in looking at neo performance and as we've heard you say you've invested properly you're looking at m&a opportunities at this time presently uh continuing as you've been doing and what I would like to ask is just for some highlights of what we as shareholders uh should anticipate in this upcoming year perhaps the next quarter two is there anything you can comment on well again um obviously I cannot share any non-public information you know in the in the last press release we had um announcing the secondary that we did in uh earlier this month we did have there was a paragraph um and a lot of people may have missed it that we saw a strong demand in the fourth quarter and we believe that our fourth quarter our our fiscal quarter and fiscal year is calendar quarter and year but we we expect that our fourth quarter numbers will exceed analyst expectations and this is what I was saying earlier um you know this is this is public information um and it is really supply chains automotive electronics coming back after you know and taking advantage of sort of pent up demand you know when when people lock down they stop buying things so as the lockdown started relaxing people started buying cars and uh and electronic uh devices and I I would be very hesitant to to make any projections for 2021 because it's so deep how things will unfold it's is so dependent on how successful the world will be uh against covid I mean if the vaccines work well and if people get vaccinated and we can start acting like normal humans again then I'm very bullish about our business but if we if we see you know plans shutting down with with cases and people you know and people being locked down in in their homes for the rest of the year I don't know all bets are off you know I all I'm saying is you know we'll continue to have a very conservative balance sheet because you never know how things unfold but you know I at this stage I would say I'm cautiously optimistic that you know things will continue to unfold as planned and as hoped for uh where the covid um uh situation will continue to improve but that's more of a hope than uh than speaking just shirley on the fact well as always Constantine thank you so much for an update on neopreformance materials thank you tracy