 Well hello everyone, this is Byron King with Investor Intel coming here from PDAC 2022 in sunny Toronto. This is an all-star panel on the rare earth sector. We have some absolutely spectacular guests today. To my far-right, Boyd Davis from Kingston Process Metallurgy. To my immediate right, John Heikoway, a longtime name in the rare earth field from Strancroft. To my left, Pat Ryan with Eucor and to my far left, Jeff Atkins from Vital. Gentlemen, it is a pleasure to be with you. We, you know, there is so much to talk about. Let's just begin with, you know, people are very, some people are very into the rare earth space. Other people just sort of know, oh, we need those rare earths to make the cars run. Let's have a real quick discussion about these mandates that we see coming from government and these promises that we see coming from industry that by the year 2030, year 2035, what have you, we're going to have just millions and millions of EVs riding the roads and put the oil business, oil companies out of business, all that. You know, is there, is there, is there some sanity that you can bring to this discussion? John, why don't you, why don't you kick off, give us a comment on that place. You're asking me for sanity fire? Well, okay, we'll start somewhere. I would say first point I'd like to make is you question whether there's any sanity to governments saying that we're all going to be driving a battery electric vehicle by 2030, the simple answer to that is no. No. And it's, and it's as simple as taking a look at the amount of oil products, gasoline, diesel that Canadians, for example, use every day and then doing the required conversion to see how much electrical energy you'd require to replace that driving that's being done in gasoline and diesel with electricity. The answer is we don't have a grid that's anywhere close to being able to supply that. Oh, you bring up thermodynamics, you would spoil the party with something like that. Let me ask Boyd, Boyd, you are in the processing business. I mean, in the next 10 and 12 years, is there an industrial plan to process the amount of materials that the world thinks it's going to need to do some of this? Well, I think you'll end up with some domestic production in North America and Europe in the next 10, 12 years for sure. And the amount that that gets put into will just depend on how much we want to be in with China and how much we want to be away from China. And that will be dictated by the cost and supply security and the ability to get raw materials. So you have to combine all those things together. And you'd imagine there's going to be a mix of some domestic production and some offshore. But let's turn, Jeff, you came up here all the way from Australia, which is a long walk. And we're really grateful that you would come up to Toronto for this. We have talked before, you have mentioned that we have to have the end users really buy into all of this. Can you explain to the viewers, what does that mean? Who are the end users and how do they drive the process here? I think fundamentally it comes down to what your supply chains are. And for a number of years and a number of different products, companies have been happy with a single source of supply through just in time, inventory management and things like that. What I think we're coming to is a situation where you've got the end users, so your electric vehicle manufacturers, those type of people, computer manufacturers, who are actually starting to look at changing that and needing a diversified supply chain and assessing their risks on a single point of failure and things like that. And it's not really about a China issue or anything like that. To me, it's actually quite a bit simpler than that. It's purely if you're reliant on products coming from one source, the risk of something going wrong is going to have a massive impact on your business. So the question then comes down to those end users, so those OEMs, those electric vehicle manufacturers, computer manufacturers, what value are they going to put on de-risking their supply chain? As in just in time becomes just not in time and you shut the whole plant down. Well, exactly. And what you're seeing is a fundamental shift, particularly from an electric vehicle perspective where traditionally they've been dealing with commodities. And when you think about the inputs which go into a traditional vehicle, it's all basically commodities. You're talking about metal, you're talking about plastics and things like that. As soon as you move into EVs, you're starting to deal with high technology chemicals and those types of things which are a completely different product. They have a different procurement process, a very different qualification process, and that basically requires a fundamental shift to how procurement will actually work and how those supply chains will work. And that's where I think you'll see that shift for all those end users in terms of how they procure. Thank you. Now let's talk with Pat Ryan of UCOR. Pat, you have a background, a business background in the automobile industry where you supply items to the auto builders and by the tens of thousands and hundreds of thousands. So what is your perspective on supplying literally millions of distinct items that the automotive industry is going to need? What has to happen? Well, that's right, we do, we supply millions of parts to the automotive industry currently and that's the internal combustion engine. And as Jeff just noted, you know, you've got six times more critical minerals in an EV than you do in a conventional internal combustion engine. So six times more and I heard the staff that in 2020.4 million tons of critical minerals were used in the electrification vehicles. But the 2050 goal, which is your net zero decarbonization climate change requires something like 18 million tons. That's a big jump. So who's who's going to roll the dice and win? If you look at the investments currently there announced by automotive companies, they've got about north of $500 billion invested billion with a B. So more than half a trillion dollars currently noted in 2020 that number is about $225 billion. So in a matter of two years, that number has doubled what the intended investments are by the end of it. It's quite simply this, if they don't make that investment, they won't be able to build the EVs they want, they won't be able to build them at the cost they want, they won't have the materials that they want. And so like a domino effect, Biden has announced to build back America 50% of vehicles will be EV by 2030. Well, the 250 million US vehicles right now 1% are EV. So it's a big job to get there. So the other companies are investing, they're all in they, you know, in North America, General Motors, Ford, Tesla, they're in VW in Europe, they're in that's, well, that's, that's a good start point for sort of the next question, boy, I'm going to turn to you on this. For decades now, there have been a certain standard industrial processes, it's called solvent extraction to, to create these, these products that you need. And SX, solvent extraction. So can the future that we see that we're just talking about, can, can the conventional metallurgy, the conventional hydro metallurgy, can it handle that level of new demand? And can it scale up to what needs to be, you've worked in this field. So what's your perspective on that? Well, it depends on what process you're talking about. If you're talking in the rare space, you know, we have we have two examples at our place where we have, we have the same chemistry that's going on in both. So we're working on, you know, with you, we're working on a solvent extraction process. And that has different components to it. And it allows one to bring standard technology into play, but westernize it so that the cost of production is reduced. And it is de-risk, but has novelty to it where you can make the cost lower. In metal production, we have cell designs that have again, westernized metal production so that you don't have people in harm's way, you don't have problems with cell life, you can operate them in a way that makes sense. But the chemistry, again, is the same chemistry. So you just have to bring the technology that exists into a world in the western world where it can be applied and effective. You have people who are doing a job that's safe and responsible and can produce large amounts of material for a smaller capital and smaller opera. I see. John, I'm going to turn to you on this. You have, personally, you have extensive experience dealing with China and the Chinese upstream rare earth business. They are the established player in the world with, you know, 85, 90% depending on how you want to measure it of the rare earth. What can you tell us about? What do the Chinese think about their future and what do they see when they look out and they see all these smaller companies out there in the world saying, we're going to take on those Chinese and whatever. What's their perspective on that? What do they say? First, they're really not paying much attention to what's going on in the West. Would that be significant? Unless you're a significantly sized producer, I'll have an MP materials or something like that or a Linus. Linus or something? I've been over there and been asked to speak at conferences and effectively bring them intelligence about the juniors in a space because they simply don't have the time to pay attention. Now, that having been said, they're actually to a degree curtailing their industry. They've reigned it in a little bit. They want to ensure that they have enough to supply the Chinese new energy vehicle makers. The rest of the world would be nice, but the state owned enterprises in China are not going to concern themselves with supplying enough for everybody in the world unless they benefit state owned enterprises in China through job creation or the like. The technology side would make a very good point. You have to safety proof some of the technology that's deployed in China because let's face it, they were not that concerned about it in terms of ensuring the safety of their workforce and the environment when they started this industry. But I'd add another critical element for the West, which is not only do you have to make it safe enough for Western workers and the like, you also have to make sure that there's going to be enough of a return on the production of this materials and through these new pieces of equipment for Western firms. There has been a period of time, a significant period of time between about 2010 and the present day when it was very difficult for anybody to make a living making rare earths. So when you look at a new technology like the Rapid SX that's being developed by Boyd at KPM and obviously belongs to directly to U-Port, the cost saving, the capital cost saving, as well as the operational cost saving that comes with deploying a technology like that, coupled to the fact that it's related almost directly to the old solvent extraction. So it's failure modes and drifts away from specification are understood. All of that will play very, very well in the West. It's just a more cost effective way to produce the same thing. Very good. That actually gives me an opportunity to turn to Pat. You are a builder. You build plants, you put machines in them and you crank out product. So what do you see as the future for U-Port or the industry in general in the West to meet the new demand that's coming down the line here? Well as Boyd said, you've got to westernize what's happening in China right now. You've got to plug it into the Western world. You've got to have an ESG overlay. And as John just said, you've got to have a lean manufacturing mentality. You've got to have work scale and ramp up ability, which is what vital is doing. And you've got to scale accordingly. But it's all about little touch time automation. Put the right amount of capital in and scale up from there effectively. Get your operational costs under control and you'll do well. Now if you go head-to-head with the economic conditions that are in China, you might run into a problem. So I think any processing you're doing in North America, you've got to take it a step beyond. You've got to get a little bit better. You've got to hedge your bets and make sure you're you're ultra competitive with China. But you're actually taking a step forward and getting better than what China is. That's that's crucially going forward. The success that I've had in the automotive industry has been innovating. You've got to innovate your process. You've got to use lean manufacturing, kaizen, continuous improvement, all the things that are just all in to make sure you're really really on top of your game. Because you will get hunted down and people will look to take your market share. Scale up, use work sales, and you'll be in good shape. Jeff, you are from Australia, we mentioned, and you work with vital metals in North America. You also, in your company, you also have relationships with the European Union. And in terms of what is the EU doing versus what we see in North America, in the US and Canada, what's the relative balance there? Are they ahead, far ahead, a little bit ahead about the same, what would you say? Look, the European market typically has more of a history in the rarest supply chain. So they do have existing manufacturing facilities able to do metals, alloying, magnets, motors, things like that. So, but it still needs to be scaled up. And the question really comes down to the ability to scale that up, making a commercial return. At the end of the day, as Pat said, you're starting a new supply chain. And there's a number of steps in that, which means that companies and countries have to, you have to walk before you can run. So it's all about proving your capabilities. Once you do that, you then have that opportunity to ramp up. And look, at the moment, I think the European market is certainly further ahead than what the US market is. But, you know, the approach from each different, different area is, is different. So, yeah, it's a, everyone has to ramp it up. Everyone has to expand and everyone has to reverse by their supply chain. So there's not really that much difference between it, I don't think. Well, in terms of ramping things up, you know, we talk about the rarest supply chain, but there are many other supply chains that feed that supply chain. I mean, for the chemicals, for the machinery, certainly for the, for the people, just the mental and the intellectual skills. But, Boyd, can you comment on that? What do you see going on in that, in sort of the branches of the supply chain and the branches of that tree or the roots of that tree? Are they out there ready to roll? Oh, yeah, I think the chemicals are all there. These are commodity things. The people need to be trained. When we, when we developed, when we helped Licycle, which is a battery recycling company commercialized, we had 50 people in the pilot plant and at the end of that, they just took them on and started commercialized operation in Kingston. I think they were operational within a couple months of finishing the pilot plant. So, you know, you can use those opportunities to train people up to, you can keep a stage going where they can use that as a training vehicle as well. Licycle is building a training center for their people to develop that. So, the skills, I think we have some smart people in the country. I think this should be okay. I don't see a big block there. I, in the commercialization I see the issues are more about doing the right things at the right time, knowing what you need to do to commercialize and what you don't need to do, doing it at the right scale, understanding where the cost drivers are. These are important things and a lot of people can just end up in too uncertain of a path and it takes a long time and they don't get to where they want to get to. The other thing which people have to recognize when you're looking at setting up these industries are, they are complex and the importance of setting up at the right scale and doing that properly, because you also have to recognize that things will go wrong. So, you have to understand where the risks lie and try to minimize those risks because things will go wrong when you're commercializing it, when you're ramping it up. So, what you need to do is you need to make sure that when that does eventually does happen it's not actually going to be a company killer and that's where I think there's a lot of lessons to be learned in terms of how you actually commercialize that and that's one of the things you walk before you can run because by starting at the right scale you're able to learn, you're able to make changes as you do commission your clients or ramp them up and doing that at the right and the right way will help ensure that you're successful in the long run. Well, since I'm leaning this way, I'll ask Pat. As someone who has built large significant industrial plants and, you know, put big lines of machinery and are these plants of the future are they going to be, you know, manpower intensive, people power intensive? Are they going to be dark factories where they're just, you know, there's a guy and a dog and the dog's job is to bite the guy if he tries to do anything the guy's job is to feed the dog. I mean what are we looking at in terms of these future plants? I think the more automation is always better. If you look at what's happening in America right now with and I'm sure in Australia and elsewhere with your labor rates, labor rates are really escalating for the first time ever the consumer price index is less than the labor rate. The labor rate is just skyrocketed recently and I think in America currently there's a 3.6 percent unemployment rate, you know, with that the labor wage is way up and we still have a very huge inflation. So a manufacturing of the future, you've got to look at it and again back to lean manufacturing which means eliminate waste. You've got to have a little touch time. In order to have a little touch time you've got to automate. In order to automate you've got to have technicians as opposed to just laborers sitting there feeding the dog or, you know, whatever they might be doing. But yeah, you've got to certainly automate and to build on what Jeff and Boyd were saying, in the automotive industry there's a technique known as FMEA, it stands for failure mode effect analysis and it's de-risking and the de-risking is you think of every possible failure that could come up, then you consider what can be done if that failure happens to resolve it and then you test for it to make sure it doesn't happen. And the testing part of it is called a DVP and I won't get too technical but it's design verification plan and reporting. So you're identifying everything that could go wrong, you get all the plans in place to make sure it doesn't happen. If it happens you know what to do. And but full circle back to your question, you've got to automate. Labor rates are going up, you've got to automate. If you're going to be economically hedged against the Chinese who are looking to take all that home for themselves and build all the EVs of the future, automate, be smart with your processing and you'll be super competitive and make it happen. Let's turn to John. Are there, let's get back to where the, how do the Chinese view all of this? They have an established industry, they have ways of doing things, they've got massive, you know, past investments, and they have an entire intellectual process for training people. They have universities that do nothing but turn out chemical engineers who feed into this industry. What's the Chinese view of this or how do the Chinese make it work in a way that we have to be better? Well for one, they're starting to draw on foreign sources of supply within all of these critical materials. They've done it for years in lithium. They've, there are no really amazing lithium deposits in China. So they've been pulling material in from South America, from Australia, you name it. They're constructing additional mines elsewhere. But they're also drawing on tailings. So in the rare earth space, for example, there are some significant programs in China that bring, for example, waste monazite from the heavy mineral sands, operations around the world, whether in Africa or Australia, and they bring them to China for post-processing to create rare earths and some other things as well. They're fully cognizant of the fact that they have a demographic problem. And so they're going to look to automation as a solution for shrinking workforce and also as a way to create a higher paid workforce with time. The idea that the Chinese will continue to try to run their plants with thousands of poorly trained people in a world where we've already solved the automation issue is silly. I mean, they're going to do exactly the same sort of things that we've done. So they're adapting to the new world, but again, they've got a really significant problem in electrifying their own vehicle fleet, whether it, as they term them new energy vehicles, whether those are battery electric vehicles, plug-in hybrids or just hybrids alone. And they've got some fairly unique solutions in that space that fit the Chinese and perhaps the emerging markets better than some of the things that we're doing in the West. So it's a little bit of horses for horses. I mean, they're a protein a little different. Yeah, well, it gets back to the point that you made earlier that with an internal combustion engine, you burn the energy in the unit and your CO2 goes out the tailpipe. Whereas on an electric vehicle, you're burning coal in a power plant and the CO2 goes up the stack. So you've shifted the energy load. Boyd, let me ask you a question here in terms of, you know, you work in Canada, you work in North America. Is the regulatory environment that we live in, our regulatory ecosphere, is it ready to accept the things that are going to have to happen to build a, to build a, to build a, the rare earth, the whole supply chain that we've been talking about. Are we ready to really see that development or they're just going to be roadblocks along the way that, intentional or unintentional? I don't see much in the downstream side. These are chemical plants. People build chemical plants all the time. There are permits and things you have to get. But it's on the mine side, I would say this is where it's, it's a tougher goal in the permits. And, but you know, we're permitted. We have permits for our work and you've never had difficulties in scale up and building chemical plants. Licycle had no problem starting up their plant. So I would say, I'd say in, you know, in, in Canada, we know chemistry fairly well. And we're, you know, we kind of don't realize this, but we're a pretty good chemist. And, and there's like, there's a chemical mindset that's across the country. And so I don't see that, that side is going to, is going to stall us. I see that supply, internal supply, mine side is going to, that's what you mean. Okay, well then, then on that note, I'm going to bounce back over to our, to our miner with vital metals. Jeff, same question, although we'll spin the, spin the angle towards, you know, mining permits. I mean, we're at the mining conference in Toronto. Yesterday, there were about 50 people outside protesting mining. But then there were about 20,000 people who walked in. So do the math. But, but tell us, tell us your experience or tell us your perspective on the mining side permits, you know, will, will North America permit, you know, permit both legally and just in a general sense, these, these kind of developments to occur, but need to happen. Oh, look, I can't really comment on will they or won't they, or predict the future. But I think the reality is that in terms of developing a supply chain for downstream processing, it's almost a bit of a one, call it a one off challenge. It's about getting an operation up and running and established. Once that's established, the expansion of that becomes far simpler. The challenge for mining is that firstly, from a permitting perspective, it does take a lot longer. There is a lot more that you need to deal with. And this isn't just a North American thing. One of the, you know, asked before about a difference between European market and US market. The European market at the moment is very focused on life cycle costings, responsible mining initiatives, traceability, things like that. And those types of questions will be asked far more. And that's not whether or not, and that's not just if, you know, mining in North America or Africa is the same. There's a far greater shift towards responsible mining. And the bottom line is that the old days of mining are gone. So now it's more around, okay, mining will have an impact. You have to accept mining will have an impact. So you have to do it as responsibly as possible with as little impact as possible. And you have to treat the local communities with the greatest level of respect and ensure that there's a net positive outcome for local communities. If you start to, I would hope that if you start to make that transition, make those changes, then you can start to actually get more support in those communities, which actually makes the permitting process easier. As well, but at the end of the day, it's a long process. And one of the challenges for mining companies is that every time you look at expanding, you have to basically go through that same process all over again. So it's not like a manufacturing plant where once you have the approvals, expansion is a lot easier. Mining will always be more challenging. And that is why, you know, once the supply chains are up and running, the natural bottleneck is going to be the raw material. ESG becomes a bigger and more important metric in mining investment. We're likely to not see a shortening of the chain of development of mines, a lowering of the time that's required to bring a new mine into production. Frankly, we're probably going to see it remain the same or even lengthen out even further. And that creates a significant problem within the industries of critical materials because we're talking about materials that are produced in small quantity. They have relatively small markets. But there are dynamics that are changing very rapidly in the background. I mean, as we look at the United States talking about making a significant fraction of all vehicles, either hybrids, plug-in hybrids, or battery-electric vehicles by 2030, we have massively increased consumption numbers for a lot of these critical materials. If you're in a 10-year cycle to develop, and you're fighting these other people who are in a 10-year mining cycle to develop a new mine, but you've got dynamics that are changing dramatically in one or two years, you can see booms and busts and pricing that are going to result in some of these projects being thrown off the rails along the way. That's not good for any of these plans that are trying to address climate change, trying to change the energy makeup of transportation or other things. I would love to see the government in Canada, hey, I'd love to see the government in the United States do it, but they can't agree on anything. I would love to see the government in Canada be in a position to start some kind of a critical material stockpile or a critical materials buffer that I was asked a question on a panel a while back that said, what would you change in the mining industry to make the whole thing easier? Some other people on the panel who had gone through the wars in mining and we raised a few ideas about regulation and environmental permissions and that sort of thing. But the thing that came to me afterwards was wouldn't it be great if there was a government organization or at least a government supported organization that said we believe rarets are going to be essential to our new vehicle production in 2030 we're going to put standing purchase orders in place for these materials between price ranges and we're going to buy everything that's being produced. In fact, we've come to UCOR and give UCOR an offtake. That means UCOR can go out and raise debt financing more easily. It can go out and get everything it needs to put in place. Jeff could go out and do the same thing for vital. And we'd have a buffer if demand rose too quickly this same organization not looking to make a profit but could sell that material back into the marketplace I mean to try and stabilize the market which I think Pat would agree above all things the automotive market would like stabilize pricing on a lot of these commodities rather than seeing them do this over time. I mean one angle on that in the United States is there's one central organization yeah it's called the Department of Defense and there's another agency the Defense Logistics Agency and you know the idea is perhaps DLA would they would buy quantities of this and lock it up in warehouses out in Utah or Nevada or something and you know when there was spikes or troughs or whatever they would you know somehow balance it but that gets into sort of an industrial management thing that the American political psyche is not they're not but in Canada perhaps we could and in Canada perhaps given the size of these markets we could actually make a difference in that regard. Well that brings me to Pat and the automotive industry where you know we are 2022 we are a hundred years into sort of the mass production of automobiles you know sure they were invented in the 1880s or 1890s but but by the 1920s they started to become a thing and in the olden days long before you or me Henry Ford for example and believed in vertical integration to the point where he had iron mines in Minnesota and he had coal mines and rubber plants in plantations in Brazil and he built the Rouge River steel facility and do do you see perhaps on something like rare earth do you see the automotive industry perhaps you know buying their way upstream all the way to the face of the mine? Yeah absolutely you know Henry Ford yeah he was all about vertical integration Jim Farley announced recently we're going back to the days of Henry Ford he said we've got to vertically integrate we've got to have a sustainable diversified supply chain we have to keep ESG in our sights as we do that look at investments that are being made by automotive companies today you have BMW who invested in lithium and cobalt General Motors is investing in rare earth you've got VW who's invested in lithium I mean they're going all the way back to the mine they have to in order to secure their way forward so yeah that vertical integration is very important you know it's different than the internal combustion engine because they learned 20 30 40 years ago let's just cut it off here call it a tier one and let the people in the supply chain downstream deal with it but now they've got to change all that thinking just like Henry Ford carried the rubber plants in Brazil and the steel factories on their books they've got to carry mining quite possibly mining on their books now they've got to make that happen in order to again supply the demand going forward supply it at the price they want going forward so and that goes against everything that people have learned in business schools for the last 40 and 50 years too right if it's not a profit center you have to you know sell it off or something but Byron there was there was a long period in the automotive industry where you were working with nothing but readily available commodities right you need steel maybe once in a while you needed to special steel but there were multiple suppliers that could give you that you needed aluminum you needed you know certain things that were readily available copper zinc what have you now you're talking about for lack of a few kilos of rare earth and an electric motor you're not going to be able to push cars out of a plant so all of a sudden in that very tight very small market you've got to be able to access the critical materials that you need or shut down a plant yeah it's a different world yeah well they're called critical materials because I guess they're critical yeah we're actually you know I think I'm sorry go ahead with rare earth is a little bit different to lithium and cobalt though because for something like lithium where you get to take a spodumene product you go into the lithium hydroxide which goes into the battery it's a couple of steps and it's a fairly well understood process challenge you have with rare earths is to go before it goes into a car you've got to have your drive unit from there you need your magnet to get your magnet you need your license to produce a magnet to go into the magnet you need to have an alloying plant and then you need a metal plant and then you need your separation plant then you need your extraction plant then you need it before you get to the mine so from a you know a car manufacturer saying okay we need to go and lock up the basic like the raw material okay that's fine but there's a huge gap between it it'd be like saying we need high you know specialized plastics so we're going to go and invest in an oil or a ring fund them fundamentally so that's where the challenge comes in and I think the fact that rare earths are such a small market exactly is what John said it makes rare earths a little bit more difficult for the car manufacturer so I can see certainly going more into the lithium cobalt space first see what they can learn from that perspective but personally I would see it being a number of years I might be wrong but I'd see it a number of years before anybody really fights the bullet to go into rare earths because that would be a hell of a conversation to have the risk well and on that note I regret to say that we have come to the end of our time and much as we would love to continue this and we could continue this we are we are at the mercy of the clock and I certainly thank our distinguished panel this has just been a fabulous and fascinating Dr. Stacy, thank you so much for your time and for your openness audience out there thank you for watching Byron King with Investor Intel and as the saying goes make them beg for more sorry but that's all folks