Constantine Karayannopoulos on the State of the Critical Minerals Market
[Music] foreign [Music] the next part of our program is an interview by CMI founder and founder also of investor Intel Tracy wisloski who will be speaking with Constantine karanopoulos president CEO director of new performance materials Inc and I understand there may be a couple little surprises for you so Tracy Constantine I'm sure well some of us have been around for a while and it's great to see old friends in this environment where it's you know fashionable to be talking rares and critical materials and minerals now how we all make money it's a different story but we're in the news frequently so yeah it's a good time to be chatting about this speaking of being in the news he's kind of pushing my face and these like Reuters is wants to do an interview with me tomorrow why does Reuters want to do an interview with you about could it be the breaking news you just put out two hours ago but most likely um well we for those who perhaps um are not aware of it we we announced this morning that the government of Estonia and the government the European Union awarded us up to and I'm trying to be very careful here uh up to 18.75 million euros to go towards uh our capex or the new magnet facility in Estonia which will be next door very close to our existing Rare Earth processing facility in Estonia um and we're very thankful about it so I think this will be um a very meaningful addition to the Western world's magnet capacity so if you don't mind kind of explaining to some people who are new to the industry what this actually means about your position in the supply chain in the rare earth you know in the rare supply chain sure the Neil excuse me we've been around for 30 years we started with two rare separation facilities in China fast forward we have a third rare separation facility in Estonia so we are part of the rare earth industry in the rarest supply chain but in addition our Magna quench division takes those rare Earths converts them into Metals Alloys magnetic powders and magnets in two well in a in a magnetic materials facility in China another one in Thailand and two magnet plants uh one in Tianjin and one in chujo in Inuit Province in China so this is our first foray into making magnets outside of China where we do these are different magnets mind you but it we already do about 90 percent of what a flow sheet looks like for a magnet facility so we'll transplant that to Estonia and um we're doing that because that's where we're under tremendous pressure by our customers in the European EV Supply chains to to be making these magnets by 2025. so what it does is it stretches our presence in the supply chain uh a little further Downstream and together with an investment that we're very modest investment we made in Greenland on a rare earth deposit eventually in the fullness of time perhaps Neil will be a fully integrated magnet producer all the way back to the mine so not to be too cute about it but the narrative is all about mind to magnets again 10 years later Jack if you remember the original mind to magnets narrative from 2010 I I prefer to use magnets to mine I mean whatever we do is driven by our expansion into magnets and the demand that that creates and we need to backfill that with uh with mining but we currently have separate rare and separation metal making and all the way to magnet production so it makes us still a bit more unique if you want than than what we were up to recently okay so you tap you touched on Greenland and of course Jeff Bezos a number of large billionaires all of a sudden are interested in critical minerals in Greenland and then you announced it you know tell me why Greenland today I never thought it would be mentioned in the same sentence well no I'm going to mention this because you know five years ago you know everyone was telling me you can't develop anything in Greenland the they won't allow you to the environmentalist will not allow you to and now it sounds like everybody's looking at Greenland what's changed well I don't think that's an accurate uh description of what goes on in Greenland I mean they have a very uh responsible government that has made very clear rules and at least in terms of resource extraction they will not allow any oil and gas uh extraction and it will not allow any uranium extraction and the definition of uranium extraction is any deposit of any metal that contains more than 100 parts per million of uranium in the ground they will not approve well this deposit and there's a couple of folks in this room that are very familiar with this deposit is less than 10 parts per million uranium so there's no issues you know like every other jurisdiction you really need to understand what the lay of the land is to and to make sure that you do all the right things locally I mean if you walk into a new geography and expect to do business just like you do in downtown Toronto and that doesn't exist so you need to to take the time and spend the money and talk to the right people and eventually things workout I mean we did this in China for 30 years right so we're kind of used to challenging uh geographies one of the themes we've been going over is the attraction of capital that is happening in the sector right now would you say that's correct we kind of put Energy Fuels on the uh you know we ask them what are you going to do with all the money that you have right now um and I know you have a very tight relationship with Energy Fuels what are you going to do I mean you just raised another 65 million yeah Canadian thank you yeah we're we have you know and I guess I I don't want to preempt our earnings release Friday morning but yeah we're sitting on round numbers 100 million dollars U.S and we all of it is earmarked for growth projects um I think in this industry you really need to keep growing simply because not because of you know ideological or uh sort of uh other consideration but you gotta grow because the demand is exploding for especially for for magnets I mean this decarbonization transition is one of those forces that come across Our Lives once in a lifetime and I think there will be huge fortunes created because of it decarbonization energy transition electrification and in order you know beyond our own grade because we all want to make fortunes but at the same time decarbonizing and becoming more energy efficient is good for the planet in fact it's impair the imperative is really urgent to do that and you can't decarbonize without rares I mean you can but you you won't be very efficient and very good at it so you know herreras are back in sort of the category of becoming almost indispensable just like they were 15 years ago until 2011 drove very smart people with very Deep Pockets the design rarest out of their systems and created a three to four year Gap in in development so we're back in the Forefront and in this time it's a lot more um the the debate and the narrative is has become a lot more intense because you have geopolitics superimposed on top of the industry in a way that is almost as perhaps it's a little great it's a little bigger than what it was in 2011 when the the Japanese uh Coast Guard uh you know messed around with the Chinese fishing boat near the Chicago islands and then the Chinese cut off the Japanese from rares for seven weeks that's all it lasted so but today the the geopolitical environment is much more I guess serious than it was in 2011 you know we're in the middle of a war in Ukraine we have an energy crisis and I think the the world the world's balance is being remade and part of that equation I think is unavoidably uh so you in in discussing the Ukrainian Invasion how is that impacting you and your shareholders you mean Estonia I have received more than a few emails about what's happening with Neo performance and how you're managing those political issues well from a share price perspective it has been a disaster because investors have run for the exits the moment uh Russia invaded Ukraine around for the exits in our name because we have a plant very close to Russia it's in Estonia in fact when you when you be you can walk to along the beach and use it to the narva river which is the northern border between Russia and Estonia and other Estonian border and you can see the uh the Russian guard stations on the other side of the river and they still wear these big hats and they still have AK-47s and they're still there in fact the when Estonia built a bridge over the narber river to connect narva the city of Estonia to the Russian side of the town the Russians uh objected to the bridge and they made sure that the bridge cannot sustain large tanks going over it which is now not a bad thing to to have as they they've made other geographies so the moment that happened it was a disaster for our stock we've lost you know 56 to 70 percent of our market cap because of it and to me it really doesn't make sense because it's business as usual we've given up maybe a couple of customers in Russia uh but we still continue to receive you know a good portion of our raw materials uh from from Russia uh the balance of course being Energy Fuels thankfully which is getting bigger quickly um so I I was at a seminar with Prem Watson recently and he said when he was a a young guy sort of learning his learning the ropes in the financial industry he had a mentor who told them that when the Canon starts that's when you buy and then you sell when before the peace dividend you know in our case it was the exact opposite when the cannon fire started everybody was selling I've been buying myself uh as soon as I'm out of you know whenever I'm out of blackout I I have been buying uh Neo stock so I'll continue to do that because the fundamentals you know everybody knows what the fundamentals are and the specifics I have enough confidence in our ability to execute a growth strategy that you know I I think I have a lot of faith in the company of the children so let's just jump to this one Jack was talking earlier uh you know obviously Jack is one of my most esteemed colleagues in the industry and he says that the EV demand that is currently out there is not realistic with the scarcity of many of the critical minerals listed in the battery materials for instance well do you have any thoughts on that that you would like to add do you agree with Jack absolutely I that that's about as I mean if there is one truism about about critical materials that's it today we're not extracting and processing enough to sus to achieve the targets that governments and oems have sent around the world which means that over the next year we will need to increase by order zip plural of magnitude and the investment I mean I was reading a an article in the South China Morning Post one of the big Banks came up with a 50 trillion dollar capital investment necessary for China alone to achieve its decarbonization electrification clean energy targets and so on that's a mind-boggling amount and if that's only for China again I may be off by a factor of 10 or something but even you know the the level of investment that the world needs is in the trillions it's not in the billions so there's a massive task ahead of ahead of us and I don't think governments around the world really appreciate how complex this the solution to the decarbonization problem is you will need an extraordinary level of investment you will need an extraordinary extraordinary level of capacity expansion for all the critical minerals and you know I'm listen I I consider myself an environmentalist but you know you can't have your cake and eat it too if you want to decarbonize and if you want a clean energy transition we need more mining we need more factories that will take whatever comes out of the mine and make it into the products that will allow us to decarbonize maybe there's a magic way to to do it that I I don't know about but the the level of investment and the level of activity of capacity increase for all of these materials is immense and I don't think we're ready for it not yet and what about the talent what about the professionals where are we supposed to get these Constantine well it reminds me of I think the first time we met was at a conference in DC and I spoke at that conference and I said that it has taken two decades for the supply chains to migrate from North America to Asia it'll take at least as long for them to come back and it starts with education um I also remember another presentation I gave where I said that China graduates more engineers that in North America we're graduating graduates so we're not graduating enough science technology engineering mathematics grads and this world that we are trying to get to will need an awful lot of skills and they started the university that were way behind the eight ball and we can and will continue through uh through the industrial in the industrial world so no right now they're not enough skills to do it now what we're doing is we're training our people in Estonia from our tech center in Singapore there's exchanges with our plants in China so the the technology transfer has started to go the other way for the last 30 years it's been from the West into China it's now coming the other way one last example and I'll shut up Tracy today if you look at all you know the only meaningful magnet manufacturing jurisdiction outside of China is Japan look at what the latest expansion of the Japanese manufacturer of magnets was into Vietnam high-end high quality high price the whole Japanese every single piece of equipment that went into Vietnam by she netsu was bought in China the metal furnaces the alloy furnaces the strip gas furnaces the sintering furnaces the slicing and dicing setups the coating facilities they were all made in China because no one makes these types of engineered systems in Japan or anywhere else in the world so and in our plant in Estonia well guess what the critical pieces of equipment are all coming from China which is absolutely kosher by the way though don't freak out I promise Constantine we would keep a strict structure and he has to run but we're not going to let him loose yet until I put you on the spot we know you own a lot of your own shares we know you must own some shares of Energy Fuels because you have a deal with them what other critical Mineral Company are you currently following well that's a loaded question um listen I I you can speak in bakeries if you like a tech company cathode a known technology application well I I was big in lithium and I'm not big anymore um I was invested in lithium because of virtue of my virtue the company was chairman of Constantine is Chairman of neolithium yeah um and Diving being what it is it I guess worked out for a shareholder really well the you know there's a few companies around the world that I follow because I like the project you know I I learned about rares in China so I I and Aleister Neil in the back was part of that experience when the heavy riverth industry was completely revolutionized by ionic Clays in the south so we spend a lot of work trying to train Folks at the department of chemical engineering and University of Toronto how to recognize ionic character and how to evaluate it so there's there's a bunch of projects right now that are being developed I like the hog child project in Chile the aclara project I've lost my shirt on that but you'll come back it's a good project but you know there you know they are mental there's a new government in Chile as you may know and it's not very friendly towards resource extraction but I'm told things are changing again actually I like that project because of its characteristics I like Sarah verde in Brazil it's run by a friend who's also my board Eric Norris and they will be in production uh reasonably soon I like ionic virus in Africa but it's a challenge jurisdictions see you know what are you going to do I like uh uh AR3 Dudley Kings North company which I visited recently in uh in Adelaide of course another selling point of that project is that it's in the kunawara district so you can get a decent bottle of wine when you visit the you know at lunch when you visit the the deposit I like things that can I I like exploration companies that are dealing with deposits that have a chance to be competitive against China not at today's prices or last year's prices but even at prices during the dog days of the industry so you know Molly again perhaps I'm too jaundice by my mollycorp experience but mollycorp filed for bankruptcy when uh neodymium hit 35 bucks so you need to be able to survive at prices that the Chinese can survive because guess what you may have to live in that sort of a world so these prices I I like ionic as I said I like ionic materials and I like projects that have a very simple mineralogy that allow you to produce the mineral concentrate and the mixer Earth carbonate very very competitively I mean I you know we invested in one in Greenland from that that exact reason and I also like things that are very high in the magnetic uh rarest in the distribution Hastings are in that respect takes that box very high in DPR ratios 40 or more so these are the things that that I'm looking for and you know there's a few there's a few around like I didn't want to say anything for a lot of the projects in this room that we're probably talking to most of the people in the room about and and what I say usually is if you get to the point where you have a product that we can buy would love to buy it it's sort of uh like that that line in the movie you know if you build it they will guide you build it will come absolutely where net buyer of ndpr when the buyer of cerium and lanthanum raise your hand if you know anybody else will buy a certain laptop these days and we're an ad buyer of uh we're a big buyer of mixer out Cardinals so we'll continue to be and that buyer regardless of what else we do so if your project looks like it'll get there we'll we'll buy from you there's no question about it thank you so much for joining us today we've run a little bit over but I think you can you got six minutes right to run thank you
2022-12-15 03:48
