#236 Critical Minerals: A Master Class on How to Win w/ Nicholaus Rohleder

We’re doing something a bit different…🤔

We’re exploring the urgent and evolving landscape of critical minerals with Nicholaus Rohleder from Climate Commodities. Nick, an investor and expert in the field, breaks down how the U.S. went from a leader in mineral production to heavy reliance on foreign sources—and why the time is now for entrepreneurs to help rebuild domestic supply chains.

Key Topics Covered:

• The Rise and Fall of U.S. Mineral Production
• Why Critical Minerals Matter More Than Ever
• Opportunities for Entrepreneurs
• The Capital Market Shift
• U.S. Trade Policy and Tariffs
• The Future of Clean Minerals
• Mistakes Founders Make

Nick teaches a class on this at UPenn, so this is serious value ($$$) — if you’re a investor, policymaker, or entrepreneur looking to understand the critical minerals space, this is for you. 

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Links

• Nicholaus Rohleder | Climate Commodities
• Connect with Somil on LinkedIn | Connect with Silas on LinkedIn
• Follow CleanTechies on LinkedIn
• This podcast is NOT investment advice. Do your homework and due diligence before investing in anything discussed on this podcast.

Topics 

• 01:23 Landscape of Critical Minerals
• 05:06 Historical Context of U.S. Mineral Production
• 09:53 Talent and Knowledge Gaps in the Industry
• 12:10 The Need for Domestic Production
• 20:30 The Key Minerals
• 28:51 Opportunities in the Critical Minerals Value Chain
• 34:32 Technological Innovations and Local Production
• 43:05 Cost Dynamics

[Paywall Begins]

• 44:04 Building Successful Companies in Critical Minerals
• 46:52 Common Mistakes in the Critical Minerals Sector
• 51:52 Current Trends in Capital Investment
• 55:42 Investment Opportunities
• 56:00 Advice for Start-ups in the Sector
• 57:06 Government Involvement and Policy Implications

Chapters

• 1:23 Landscape of Critical Minerals
• 5:06 Historical Context of U.S. Mineral Production
• 9:53 Talent and Knowledge Gaps in the Industry
• 12:10 The Need for Domestic Production
• 20:30 The Key Minerals
• 28:51 Opportunities in the Critical Minerals Value Chain
• 34:32 Technological Innovations and Local Production
• 43:05 Cost Dynamics

Transcript

Speaker 1 (00:00)
last six, seven years, the rise of capital expenditures related to power and associated natural resources, artificial intelligence has been staggering. If you have a waste to value commodity converter facility, you've got a pretty good foundation of a business that can scale. We will share this industry not dominated in the future given where we are right now.

Speaker 2 (00:26)
If you're hearing this now, it's because you are a paid subscriber to Clean Techies. Thank you so much for supporting our mission. Enjoy this ad-free listening experience. Hey, everybody. Welcome back to Clean Techies, the number one podcast for climate tech entrepreneurs. Today, we are talking about critical minerals with Nick Rollator from Climate Commodities. Nick has actually been on the podcast in the past. That's episode 61. Check it out. A lot of it is... There's a lot of stuff that's relevant to what he does, but some of the kind of topical issues...

time are going to be a little bit irrelevant because it was, know, something like three years ago. But given his deep knowledge of the critical mineral space as an investor and an entrepreneur in the space, we wanted to unpack kind of the landscape of critical minerals as it's a really big discussion right now with this whole idea of on-shoring mineral production and refinement in the U.S. as we're kind of going into this Cold War with China or, you I guess you could say escalating this Cold War with China. So this is kind of the first half of the discussion is really

What is the landscape of critical minerals? What are the core minerals to be aware of? Where do they come from? Who refines them right now? And what is the U.S. lacking in regard to that whole area? Like, where are the areas of opportunity there? And he also did give us as part of that kind of a little bit of a history of the U.S.'s rise and fall with how it relates to metals and minerals and everything like that. So that's kind of the first half is just the landscape. Where's the demand coming from?

who controls the demand right now and where are the areas that we really need to invest in for the US specifically. He mentions a few other countries, but I would say we largely focused on the US. In the second half of the conversation, that's when we kind of go deep into all of the opportunities for entrepreneurs. Anybody who wants to build a company in this space, whether that's in any part of this value chain, he talks about what needs to be present if you're going to succeed in that space.

I think it's pretty relevant because he does invest in these types of companies. He said, here's the things that we need to see in order to make it make sense for us to make an investment. There's a couple of core components to success in this space. And I would say that's kind of like largely, yeah, largely the second half. I will say that second half of discussion is pretty much all behind the paywall. So if you're not already a paid subscriber, this might be the time to upgrade to paid to be able to get access to that that part of the discussion.

as well as all of our episodes that we put out. get access to all of our content if you're a paid subscriber and access to our, to our group chat. So if you're interested, you know, sign up today to become a paid subscriber. But other than that, thank you so much for tuning in again today and let's get into the episode. All right. Welcome back to show, Nick. How you doing? Yeah, I'm very excited to have you back. For people who have not listened, you've been on the, in the past, actually have to figure out which, which episode is in reference to it. But before we get started, I guess give everybody who's not heard you before a little bit of a TLDR on kind of.

Speaker 1 (03:02)
I'm well, thank you for having me.

Speaker 2 (03:16)
what you do and let's say why people should trust you on the subject.

Speaker 1 (03:19)
Yeah, happy to give my full background here. And thank you again for having me. So my exposure to commodities and natural resources really started at the dinner table as a kid. So I grew up in Tulsa, Oklahoma, in a family that was involved in the oil and gas and metals and mining industry. So specifically the midstream and downstream oil and gas sector and the coal mining sector and some associated other minerals in that same basket as well.

I worked construction jobs across these varying industries, everything you don't want to do when you're a kid growing up in Oklahoma to learn this business, but then caught the bug for alternative energy and climate and went to school for it. So I attended Columbia University, UPenn, and Oxford University focused on finance and project management and really got some good deep experience as to, if you think about natural resources and commodities, how you go from

via cost curve to perhaps volatile jurisdiction to understanding how to style, finance and implement a large scale project across clean power, clean fuels, Michigan metals and mining, and then traditional energy, oil and gas. And so over the last five years or so, I've had Climate Commodities, which is myself and a partner's company. So what we do, we provide early stage capital and infrastructure to

companies addressing the build not technology portion of the sector backing up into the energy transition, artificial intelligence and defense demand for electricity and resources in the form of molecules and in the form of critical minerals and materials. And so that's our model. And really what we believe is that there is a capital market for technology in a lot of these areas. But

If you really look at where we have to go now to meet some of these targets, whether they be net zero related or security related at this juncture, a lot of stuff has to get built. And it has to get built with third party project finance slash institutional capital. And so that's really what, what we focus on is that bridge from inception through project finance. And so that's my day job outside of that. I serve as a fellow at the U S national security Institute focused on critical minerals and materials and other related security issues.

and I teach finance and commodities courses at UPenn as an adjunct professor. So that is myself in a nutshell.

Speaker 2 (05:45)
Yeah, definitely a nice resume there, man. I think it's good to have you on. think you've definitely got some insight in this space. And again, my curiosity could ask you bunch of questions for some of those things, but we're going to stay focused on the topic of critical minerals today. So that's what we're here to talk about is just really kind of breaking down a little bit of the critical mineral space because it's become a pretty hot topic with Trump taking office and people kind of putting some focus on the national security angle of this. So before we get into things here.

Give us a bit of a history, like a brief history of the US mineral production kind of space in general. How we, you know, we were leader on point and not so much anymore.

Speaker 1 (06:21)
It's rather interesting. If you go back 75, 80, 90 years, there's a much different landscape in play. As most people know, the US effectively had a monopoly on heavy manufacturing and the associated supply chain from the turn of the 20th century until about 1960, 1970 when this started to change. Around the Second World War period, in the period we kind

tying that into where we are now, where there's a heightened focus on defense minerals in particular, as you have a renewed instability situation in the Middle East, the situation with Taiwan and China, and then war in Europe with the Russia-Ukraine situation. And so we were acutely aware of how critical minerals and materials

specifically relate to maintaining defense and deterrence capabilities around the second World War period, and then closely thereafter at the onset of the Cold War. And those tensions really being developed fully leading into the Cuban Missile Crisis and so on and so forth until the fall of the Iron Curtain. And so over that period of time, and really in the mid-1960s, you have the peak of this, right? In the 1970s, you have

Iran-Contra, you have the focus on coal and you have a situation where the US starts to regulate these companies on an environmental basis. And so the start of this is really the cost of US labor increasing, the cost of your business in the US increasing, and then environmental regulation and associated regulation coming to this sector for the first time in sophistication and at scale.

that happens in the 1980s, China starts making strategic state backed investments in the metals and mining value chain. And at that period of time, with less automation we have now and a much lower cost workforce available at scale and organized. so these dynamics really led to the start of offshoring and which was subsequently accelerated by, you everyone reads with the 1980s, you

capital markets, Wall Street, that kind of the golden era there. what is not talked about enough in that is that the focus on margin expansion and offshoring and growth at any cost, cost us a lot of our domestic industry. so fast forward to now, we have seeded that industry entirely. And we've also seeded the institutions, whether they be technical schools or universities as well. And so not only do we not do this, we now

are lacking in human capital and most importantly, processed knowledge in these critical areas that are becoming increasingly important with the global situation and security circumstances deteriorating and are now reliant on, if you take China, example, as an adversary, given the rhetoric of the current US administration, foreign and or adversarial

process knowledge to achieve our aims in self-sufficiency. And so this is really kind of how we got here. And a lot of this, if you go from the nineties forward as the last point, you know, at the peak of the global American unipolarity, we got rather complacent in this area specifically. And we're now trying to rapidly figure out how to backtrack, regain relevancy and really focus on self-sufficiency. Cause we've seeded this to a point where

We will share this industry not dominated in the future given where we are right now.

Speaker 2 (09:58)
So would you say that just broadly speaking like all of the talent that knows how to do this stuff not kind of setting aside the difficulties with environmental regulations the talent is not really coming out of the US to do this stuff or if it's if it's here it's like pretty old people who are retired

Speaker 1 (10:12)
You

know, it's interesting because some of the industries that we're active in are utilities, metals and mining, where there tends to be a lot of gray hair. And there's really a dearth of young people. And I think specifically to metals and mining, there's a resurgence occurring, but there is not a lot of process knowledge to draw on from which to accelerate that resurgence. And so you have institutions like the Colorado School of Mines,

that just focus on this. Many of the top universities in the United States are starting to think about, know, we have a climate school, a climate program, where does metals and mining and supply chain fit into that? And starting to build out some of this infrastructure, but they're coming from a point where a lot of this is theoretical and partially application where if you go to China and assemble a program, you know, you could have modules and modules and modules of, you know, go visit an active processing facility or a finding facility and really understand like,

that iterative process knowledge that is required really to drive innovation. Same thing, access to raw materials in abundancy and cheap. We don't have a lot of these things. You look at the foundation of lot of innovation, especially from an academic perspective, is cheap and abundant access to raw materials. And we don't really have that. So we're starting from the ground up. And I would say the vast majority of human capital that is available on a turnkey basis now.

to execute on these initiatives is foreign. Historically, was a large, in the colonial era, a lot of the European universities did build programs and competencies to send people to these jurisdictions to effectuate mining related business activity. that is the client too. so I think that it really is an existential issue because we're talking about, we have to have domestic suppliers, domestic everything.

We don't have the people. It's coming back, but it's a long way to go.

Speaker 2 (12:10)
Yeah, so I'll just try to like re summarize this to the TLDR is basically the US used to used to be a leader in this space of extraction and processing of minerals, broadly speaking, and metals. And then over time, it went overseas, partially because we had this kind of love of like, let's let's bolster China, let's help them come out of poverty to an extent. And then eventually, while she was like, hey, we can make a lot more money if we produce these things cheaply overseas. And now we're getting to a point where after a bit of complacency,

not as many people are interested in the space. don't have that many people going into the schools, at least, you know, they've probably been enamored by technology broadly in the 2000s, et cetera. And now we're at a point where we realize, shit, like we kind of need, we need to produce some of these things locally if we want to be secure from a national security perspective. Is that accurate kind of summary?

Speaker 1 (12:56)
Absolutely. And I think that the last thing to point out there is that there is, it's not all doom and gloom. There is a ton of opportunity for talented young people in this space because it has to be completely rebuilt. The issue there is that it is properly entrepreneurial. on the other side of that too, the capital market for this industry is also going through a lot of changes as well. And so it's not just the human capital.

market for this. It's also the capital market that is changing and evolving and trying to figure out how to serve the West as it seeks self-sufficiency for defense and net zero purposes.

Speaker 2 (13:35)
So one sidebar, we didn't necessarily plan to talk about this, but I think it's important to bring it up right now would be if the capital markets are focused on just kind of like pure efficiency, is there a way that they can be aside from like altruistic methods or ideas? Is there a way that you can get them to still focus on investing in US projects, even if the cost is gonna be higher and hypothetically the rate of return is not gonna be as high?

Speaker 1 (14:01)
Well, I think what I would say with respect to the capital market and metals and mining is that for a long time, China has dominated a lot of these industries, sub industries, so to say, to the tune of 60, 70, 80 plus percent from mining, whether they're doing it domestically or they've made a control investment overseas and then processing and refining. so what I would say there is that at a base level, we're going through the other

formulation of a functioning equity and debt market for metals and mining outside of China and outside of seemingly volatile jurisdictions to where the only investor was China historically. And so you think about some of the areas that are rich in deposits of critical minerals. You look at the Belt and Road Initiative and other things such as that. The Chinese do take a fair amount of jurisdiction.

risk that Western investors have not. And I think that you see, you know, we're in the early days of figuring out how we do that. You know, look at the libido corridor in Africa terminating in Angola, you know, it's US led. There are things such as this, so we're starting to rediscover, okay, how do we really do business at scale with natural resources in some of these markets? Whereas like, if you look at now, and you think about where is the US doing business from an international perspective, you know, it's pretty easy to reference. I mean, look at

Netflix subscriber growth, India is the biggest market, right? And so our emerging markets lens has been how do we get the cost effective subscription to take off in a developing country, the emerging market? And I think we have to reframe it to, know, we're an interconnected world from a natural resource perspective. How do we develop a capital market that is ex China that is compliant with global trading regulations and frameworks that allows us to achieve that while also maintaining

an active private investment community that is making money, is thriving, because that just hasn't been thought in so long.

Speaker 2 (16:03)
Yeah, so okay, this makes sense. So I guess the next thing is where is the current demand for minerals coming from? What sectors are really pushing this?

Speaker 1 (16:13)
There are really three areas. If you think about this space and what's changed, A lot of these minerals that have historically serviced a sleepy industrial value chain that we'll talk about here in a bit are experiencing whole new demand centers that are emerging and then emerging at scale with huge demand pressures behind them. And so you think about that energy transition for a lot of these is the biggest opportunity.

and the largest focus area and given the last five, six years with electric vehicles and ancillary things, the solar panels, wind, so on and so forth, despite the regulatory situation in the US, there's been huge growth. so energy transition being one, thinking about, you know, at a base level, just taking electric vehicles and electric vehicle uses six times more minerals than an equivalent industrial internal combustion engine vehicle. And so that's one. Two is defense. You know, we've just come out of

one of the longest peacetime periods in history in the U.S. and Western Europe broadly. We've had conflict returned to Europe. We've had conflict returned to the Middle East. And we have the largest peacetime military buildup executed by the Chinese over the last 20 years. And now rhetoric of the compromising Taiwan as the independent jurisdiction. And so

What you're really seeing now is the entire world is waking up to there is a security issue that is in play and the circumstances in the regions that I've just mentioned are deteriorating rapidly in the eyes of some in the national security apparatus of the West. And so you see renewed sensitivity to what critical minerals and materials do we need self-sufficiency in to maintain

defense capabilities in the event of a long, long-term conflict and also for deterrence. And so to give you an example, you you look at World War I and the British Empire at the time as the preeminent global power. You know, they had the Boer War in South Africa in the early 1900s and then 12 years later, World War I, and they fired more shells in the first two weeks of World War I than the entire Boer War. And so you look at these

The material demand of a real sustained conflict between superpowers is far different than that of regional proxy wars in which the US has been engaged in along with its allies for quite some time versus an all out conflict. So making that distinction and the importance of minerals and materials there. Shifting to the last piece, know, and increasingly important here, the last six, seven years, the rise of

capital expenditures related to power and associated natural resources for artificial intelligence has been staggering. You see even in the last few weeks, 50, 60, $70 billion of capital expenditures per each of these major technology companies. so the mineral demand associated with that is significant. And you have really a mega trend that if you just think about

the growth opportunity and think about how much you use things like ChachiBT, how much I use things like ChachiBT. That compute takes the power and mineral resources that will only grow over time as this is adopted. really do believe that this is one of the, apart from the internet, one of the biggest things that's going to change our lives over the next two, even two years, five years, 10, 15 years. You have these three things converging that are creating

a really a return back to back to the future scenario of where we were on the eve of World War II from a mineral security perspective, not only for defense purposes, but for net zero, the planet, and also maintaining domestic industry where I think that looking at back then, was the ultimate, have, you know, talk about steel is the backbone of our American economy, it's the backbone of defense. I think that now

You translate that to mineral security leading to industry security. think AI is the backbone of military and economic capabilities, given the rhetoric that's been out. And also just thinking about how much technology has transformed modern warfare. That intersection there has to be made as AI leadership is defense leadership.

Speaker 2 (20:49)
So they're really closely connected. Got it. Yeah. Okay. So then walk us through, let's say the top, I don't know what, you know, three or four most important minerals that we will need to produce in order to meet this demand. Again, keeping this in the lens of the fact that there's entrepreneurs out there who want to build in this space.

Speaker 1 (20:51)
Absolutely.

Well, I think there's really a few things that they have to think about when you're looking at, whether you're an investor or an entrepreneur, it's important that you focus on what problem we're solving. And then you pick the right sub market that lends itself to the capital and the personnel that you need to reach a successful outcome. Just looking at purely business and investment construct. And so, there's a couple of things in play. Some of these minerals are energy transition pure play minerals.

Some are defense pure play, some are technology pure play, and some are a mix thereof, right? And so just kind of profiling a few, you you look at the, something like nickel taking an energy transition via pure play with some industrial exposure. And really looking at, okay, so like, if I'm going to create a business around something like this, and this is part of the issue with companies in this space, is that you have to set yourself up organizational design day one, knowing you have to build stuff. And so that means that...

you have to think about how do we, and so I think that when you look at it from a business or an investment perspective, you got to think about, okay, so what is, how big is this market? What is demand center that I am really backing up into? And then if I had to explain to someone, think about meticulously downside focus, right? As someone, how does this actual market work? How much data is there available? Taking this commodity in particular, you do have,

that liquid market, right? And that is increasingly important, especially if you need banks, right? Or you need like traditional capital markets players to partner with you. That's a really important piece. And so that's nickel, right? Shifting to something that is more pure play defense like tungsten, right? You know, that's a three and a half billion dollar market. You know, the main defense application there that people cite is ammunition. You know, China is about 80 % of that market. The liquidity in that market.

is very low. These are bilateral contracts, party to party. the issue there is that you're really reliant from an in-market perspective on defense and government related contracts, which, depending upon the jurisdiction that you're working with, can be somewhat challenging. I people in this industry and all the way down through construction, contracting, and then on the investor side, it's plugging into that ecosystem, making sure you're entrenched in it to provide

that de-risking to your investors and help to your founders. Shifting to a technology pure play, looking at Gallium. China is 98 % of this market. This is a good example of a hypercritical pure play commodity used primarily in the semiconductor and computing industries. It's a $200 million market, no transparency on the liquidity side of the end market, direct contracts.

and really a proper esoteric commodity. And so you think about something like this in market. This is largely an unattractive area. It's you building a business or focusing on investment. It's hypercritical, but it's not at scale. And this is really where public policy meets private industry. And this is more of a government related issue given the size. And so the ability to recognize that as a business or an investor.

is really important going to kind of our list here, screening these commodities and trying to think about how do you build a business around it? And when do you recognize something that is a public sector issue where private support will need to be garnered from a process knowledge perspective, right? You know, looking at two, we'll do two others here and we'll stop the lesson on commodities, but having a look at floorSpar, you know, I think is quite interesting. It's used in the semiconductor industry.

in lithium ion battery electrolytes and in traditional industries like steel and aluminum and ceramics. And yes, this is about a $3 billion market. It's 60 % controlled by China. Market liquidity is medium but manageable and it works on direct medium to long-term contracts. And so, you know, this is an area where you kind of have an intersection of you've got some pure plate technology demand.

You've got some pure play energy transition demand, and there are a series of niche applications where this is relevant to defense as well. And so you get kind of that, like what we really try to look for. And I think if I'm a founder, I'm an investor, I'm looking for the intersection of these three mega trends on one of these, on one of these commodities, right? So I can get a handle on, like I understand the macro and then I can back into the contracting structure and the market liquidity lends itself.

pretty well to a project finance type of structure. If I need to scale and build infrastructure over and over again, and my downside risk from an adversarial actor market concentration, such as China in this construct, is manageable, unlike some of the previous commodities I mentioned, where you have 90 % plus concentration. If they decide to reset that price, there's not a functioning global market outside of that.

to suggest an alternate price that can serve the downside there without serious government intervention is very severe. so those are, you know, the last one here really being lithium going into another pure play, industry transition commodity. That's a little bit more straightforward than nickel, you know, between 25 and $30 billion market, depending upon the outlet that you, that you poke that, that you derive your data from, you know, primarily resources.

produce, this is interesting actually, reserves are in Australia, Chile, Argentina, but the processing and refining is largely concentrated in China. So you have a solvable supply chain issue in play. And then you have an end contract that is listed. There is transparency. The depth of liquidity is not where it needs to be, but it's, it's, it's actively improving and you have a very active.

OEM in market and increasing the active trader in market to support bankable contracts. so friendly jurisdictions, increasing liquidity and well developed the downside case scenario in the event that the infrastructure that's built X China for processing refining continues to be built. so I hope this is a helpful kind of framing of different commodities, the various demand centers in this area and kind of how to think about.

building a business because the big thing I think and we can go into this after this and you're building a business like you have to set up day one to assume you're going to have to build stuff and access project clients, which most technology centric entrepreneurs or investors who don't think about that in the level of detail they should.

Speaker 2 (28:03)
Yeah, so let me just kind of recap a couple of these things and I'm going to go into this a little bit deeper. So broadly speaking, the demand is in the energy transition, which you talked about, that's like one of the big trends. The demand is going to be for nickel primarily and other things, but nickel is a big one. In the defense space, it's going to be tungsten and technology broadly, know, AI, et cetera, for chips and everything, gallium. And then there's kind of a multi-demand inside of with needing flush bar for multiple things.

And then obviously lithium again for some of the other other spaces broadly because there's a lot of electrification going on. I've got that correct.

Speaker 1 (28:35)
I think this is broadly a good sampling of a suite of commodities that are in play with this dynamic to varying different degrees and the business realities of investing or building in any of these value chains.

Speaker 2 (28:51)
Okay, so with each of these areas, as kind of an entrepreneur person and investor, where do you see opportunities to build startups in that value chain? Is it actually going and finding ways to extract? Is it finding ways to recycle existing value chains or upcycle existing value chains? Where do you see the big opportunities for startups, both on the more, let's say, technology side of things and the actual, maybe, processing and heavy infrastructure side of things?

Speaker 1 (29:18)
Well, I think that, you know, I like to focus on the waste to value angle here, because I think this is something that is underappreciated, right? You you look, let's just take the oil and gas industry going back here. So if we rewind 25 years pre-shale, we have an oil and gas industry that is going to the depths of the earth to serve modern demand for natural resources. Right. And so you look at what was happening then, less high quality discoveries.

more volatile jurisdictions, more uncertainty as to where we were going to get that commodity over the medium and long term. And so, you know, we were in a rather precarious dynamic up until, you know, the mid to late 2000s when shale entered. You remember during the George B Bush years, you know, we were doing everything we could. And part of the interest in the Middle East by the country was oil. When you look at that too, you know, you had before Obama was president standing up,

in, I believe, as a joint session saying, in reference to the ethanol industry, we have our own food here, we can also make fuel out of it. Why don't we use that for energy security? And boy, how that's changed, right? We had shale, we had the US becomes the global swing producer of oil and gas, and we have abundant natural resources, and this changed dramatically. And so we had one event that really changed the trajectory of the oil and natural gas sector. And I think that translating that to metals and mining,

The same dynamics are at play. have less high quality discoveries, the less frequency of discovery, more volatile jurisdictions. so, you know, we believe, and I believe that the waste to critical mineral value pathways are our shale in this industry, right? And I think that what you're going to see happen over the next three, five, 10 years is people are going to realize, you know, there's an existing consumption ecosystem for

the variety of end products that have these commodities within them. You looking at semiconductor manufacturing and some of the waste streams associated with it, fertilizer, oil and gas refining, the list goes on of where these minerals enter our lives and then are discarded in landfills. And I think that the recycling technology ecosystem is starting to gain enough focus to where this waste to critical resource pathway

is being taken seriously and some of these technologies are being de-risked to a point where they can start to be deployed at scale. And there is a readily available ecosystem for waste to value, say technology, performance insurance and other mechanisms that help you de-risk your business. And the most important thing is that, we talked a lot a second ago around esoteric commodities, right? So you produce something, there's not a ready market for it. It's hard to explain to an investor in 30 seconds the downside.

Whereas, you know, if you enter into a circumstance where you have facility that is taking in waste, you're getting paid to take the waste and you produce a value out of commodity, that smooths out that risk profile quite a bit. And if you're taking waste in the U S or Western Europe, a lot of that industry is regulated. The companies are large, they're credit worthy. And that, that really adds another revenue stream there that de-risks just being thinking about

you you invest in a mine, right? You have 10, 15 years lead time. The price is going to change over that time. If you're in a volatile jurisdiction, you have a whole nother host of issues. have permitting issues, environmental issues, community pushback issues. Like the list of stakeholders goes on and on. Whereas if you have a waste to value commodity converter facility, if you have a good feedstock contract, a good offtake contract, a great construction partner and ground game partner and a

credible, well-researched plan to de-risk the technology and application, you've got a pretty good foundation of a business that can scale. And I think that that as a pathway to get active in the sector is underappreciated, but increasingly getting focused and something that we're particularly focused on.

Speaker 2 (33:25)
So let me try to reiterate this just then is that the extraction pieces tend to be very difficult because you need, like it's just very difficult to build those things, right? So probably the big players will continue working on those because there's still a demand. But for a startup side of things, there's opportunities to come into the value chain where it comes to upcycling and you can play off of the existing infrastructure that's there and your lead time to like get things going is actually going to be lower. But you're also working with partners who have enough credibility that you can

you know, through off-tech agreements, et cetera, and maybe even partnerships, you can get the financing to be able to build these, these, these processing facilities to take care of the, waste streams. Is that, is that accurate?

Speaker 1 (34:04)
Yeah, the point there is that the contracts are relatively straightforward. You have two revenue streams and you're dealing in $50, $100, $200, $300 million increments versus $1, $2, $3 billion increments with a longer, a 10 plus year lead time. We could go from inception to our first facility in three, four years in this kind midstream process technology area versus it might take us 12 years to be in production.

you know, we went the traditional pathway and a billion plus dollars, right?

Speaker 2 (34:36)
One other thing I'm curious about is, is the technology there to start doing a lot of this stuff locally or does there have to be lot of innovation broadly, maybe even on the software side of improving the profitability of mining and processing industries?

Speaker 1 (34:54)
Well, I think there's two things there. I think that if you look on it, there's two dimensions, right? The innovation and outright reshoring, right? Because there's a bit of both occurring right now, right? Where there are new technologies being implemented to serve this initiative, and there's just outright reshoring that's happening right now as well. And I think that a lot of the technologies to extract, process, and refine these critical minerals are proven in places like China. The issue is that in these jurisdictions,

the calculus associated with the environmental externalities that the art ancillary effects of what's being implemented today are treated, it's completely different in the West, right? You can't have this level of environmental degradation associated with the process and still maintain your, your government license to operate or your regional social license to operate looking to the community level, right?

And so that is one particular thing of a lot of these outright, there are technologies that exist to do this at scale in China at present, right? Looking at more kind of the waste to value and the low environmental two buckets, right? Waste to value and then the low environmental negative externality pathways. Those are two separate things, right? Because on the waste to value side,

There's increasingly a focus on the innovative pathways to extract these critical minerals from waste streams. Technology is improving and there are winners that have emerged that have been able to do this successfully and be able to prove that they can access real pools of capital to scale these businesses. On the low environmental externalities side, there's two issues there. The first being

And this is really where the government is starting to focus, is quite interesting. The government's focus for a long time has been supply side intervention. And there's been a lot of calls to shift the demand side intervention. so you're thinking of, obviously in the most basic terms, if you take technology that's outscale in China and you augment it with the equipment, software, whatever it may be, process technology.

that has perhaps an extra step or some kind of the redundancy mechanism that lowers the environmental impact, the cost is going to be higher either from extra equipment, complex process complex or just people. And so some of the issue there has been pathways have been developed, but the cost curve on which they compete relative to China is challenged. Right. And so I think that what we're starting to see is

At the intersection of the demand and return certainty and low environmental externality, demand side intervention being called for and that being taken seriously.

Speaker 2 (37:52)
So, okay, then if people, if we do start producing, let's say, either in the US or through other countries that we partner with, if we start producing cleaner minerals, whether that's through upcycling or kind of managing waste streams or brand new extraction, are we, is it safe to expect that there will be a demand to buy this cleaner, probably more expensive mineral outside of the US? Like, you know, if the DOE or the DOD is gonna purchase from us, yes, but...

Will other countries have an interest in purchasing these minerals or is it just going to be like, got to buy what we make?

Speaker 1 (38:27)
I mean, I think that's it. So I understand. to clarify, the question is, is there a preference for clean minerals inside and outside the US?

Speaker 2 (38:36)
Mainly if in the US, if we're making this stuff and it's costing us more to make it, the output is going to be probably more expensive. so will other countries be willing to buy it versus buying the cheaper stuff from China?

Speaker 1 (38:48)
So it's quite interesting, actually. If you look at the ecosystem ex-US, given the situation with the current administration, there is broadly a consumer preference for cleaner supply chains, obviously with Europe leading the way there. And I think that the challenge here is that in the US, especially with the current situation, the preference for clean is not taking

priority over the preference for cheap, right? And that may change with these tariffs, right? And that may change globally as well. The dynamics in which, the trade dynamics in which people conduct their daily business are changing as we're having this discussion in real time. And so that has a lot of volatility that will be returned to it over the next, was there five, six years ago, and will be returned to it in the coming weeks and months. But I think that to be very clear,

The cost issue is the number one priority of most of these companies because right now, bear in mind, I think it's important to look at it from this lens. Think about, just take steel and auto. Two end markets that we've discussed are pretty critical to this. China is the largest steel producer and they've not cracked down on overcapacity. We're now at a point where 1 % of global steel mills are profitable.

And so you just saw South Africa issued a crisis warning last week on their domestic steel industry. We have a massive issue in the US around that. Europe is doing the same thing here. You've had this happen regionally in Latin America as well with dumping. so there's really a crisis issue in the steel industry more broadly. And so they're cost sensitive for survival. And this is happening as well in the electric vehicle in general.

internal combustion engine vehicle space as well, where you have, you know, Chinese companies, especially on the EV side, producing, producing into a depressed pricing circumstance. And so, you know, these companies are, they're trying to survive right now. And so they're so focused on cost. And so, you know, I think part of what the current administration is trying to do, it's exceptionally challenging, is return these trade dynamics to some level of normalcy. Because, because right now, I think it's important to think, and as long as this persists,

We're not operating in a normal environment where anything other than survival can be prioritized. so I think that, you know, the discussion right now, looking at domestic production, all cost related, right? If we return to normal operating conditions, I think that the return of the cleanliness of the supply chain will be associated with that as well. But right now, especially in some of these industries that we're discussing, they're in survival.

And that's focus number one, two and three.

Speaker 2 (41:43)
For example, take the EV market. Is that a space where you're referring to them being in survival mode where there needs to be substantially more demand in order for prices to probably, prices of the commodities to raise?

Speaker 1 (41:54)
Well, I think that if you look at the EV situation globally right now, you look at, you know, it's interesting because you look from a US perspective, if you, when you think about it, when people think about EVs in the US, they think about Tesla, right? The, maybe like Chevrolet, maybe Ford, but mainly Tesla, right? The, and when they think about, you know, vehicle companies, they think about the traditional American brands, Ford, you know, Hyundai, Lexus. I mean, but they don't, but they don't think about like,

Xpeng, NIO, BYD. if you went around New York City and pulled American substitute, like name the three car brands you think about that those would not be in the elemental spectrum. Whereas, you know, companies such as that have heavily penetrated Latin America, the Middle East, Africa, increasingly discussion in Europe. And so the export India into the export situation here of this very, very, very low cost vehicle production, the

really coming into world markets from China is a very real thing. That has not touched the US given the trade spot there. But I would say that you look at just the EU China situation at present, they've ratcheted the tariffs up to basically the highest point they can. There's still a 10 to 15 plus percent difference in cost. so, China has done this.

very efficiently and they've got to such scale and they've not cracked on overproduction to a point where like their cost curve, their vehicles are coming on to go markets. And so I would say that, you know, some of this is trade policy normalization that will then henceforth normalize the commodity prices because you know, right now the ability for an electric vehicle manufacturer to pay a premium for these commodities, they're increasingly cost sensitive, incredibly cost sensitive.

given the dynamics in markets here. So it's an incredibly complex issue, but that pressure, and then you have the situation here of the US removing potentially the consumer electric vehicle tax credit as a part of the policies. Yeah, compounding it to the downside, right?

Speaker 2 (44:00)
making it even worse.

Yeah.

Okay. So that's helpful. So let's go back to then the, the how to succeed in building in the space. what are you mentioned slightly before, but can you just break down like bullet by bullet? What are the core things real quickly that you need to build a company successfully in the critical mineral space, whether it be new technology processing, what are the core things, core characteristics of successful companies in the space?

Speaker 1 (44:26)
Well, I think that there's really the one specific thing that I want to keep in on here that has some, some, some, some ripple effect to it. And so I think that when you style your organization to begin business, or you look of your investor looking at a company, if the business needs to build things, which almost every company in this area does, like you have to think you have, if you're a company that needs to build things, you have two customers, right? You have who you sell your product to.

the from a physical, make something, you license your technology, whatever it is. But if something needs to get built, you sell a physical product to someone and then you have a project finance capital market that you have to serve that finances all this in a non-deleted structure at scale. And so what I think a lot of people get wrong is like when you start a business, you got to figure out like you have, there's two layers of product market fit, right? The is, I have something that's to say, for example, it's derived from waste.

Like, do I have something that I can sell on a one, two, three, four year contract that assuming I meet this criteria will qualify and will work, right? So customer product market fit. And then is that structure of how I execute that transaction, something I can finance off balance sheet. And I think a lot of, you know, within any business, like you got to spend enough time on the idea and the market to understand if you need to build something, if you can actually serve.

both of those in customers. Cause that's the reality of a business that's involved or engaged in the building things ecosystem for lack of better characterization. And I think that the people that we like to partner with and how we think about our business, it's just, being meticulously downside focused with the idea that you have to serve your end market on a reasonable cost and certainty basis and meet the quality and spec and build that.

that trust, right? The in that preference, whether you're selling lithium, nickel, gallium, whatever it may be, that has to be present with that in market. And then subsequently, you have to you have to marry that with a project finance universe that is comfortable with how you conduct your business from a development and building perspective, and also a contracting perspective will support you as you go on on your journey. And so I think that the where we see people that are successful in this space,

That is ingrained into the DNA of the organization from the first day they start spending money.

Speaker 2 (46:52)
Yeah. in other words, you have to have a little bit of sophistication around the financing thing. It's not just a pure tech play where you just raise VC equity money and then you go from there. So that's helpful. Let's talk about the mistakes. So what are the core things that founders get wrong when they're building in this space and what can they do to avoid those mistakes?

Speaker 1 (47:09)
Well, I think that to my point on the on the project finance side just like I think that some sometimes like and it takes somebody this if you Look back and say okay, like I need to build something right? Maybe this thing costs a hundred Let's say it costs a hundred million dollars, right? The if I can't go to third party investors and finance that let's say for example Even if you have to do the first one on your balance sheet So let's say first of a kind facility you got a hundred million dollars of equity on your balance sheet You're not gonna own very much of that company as a management team from that point forward

Right? Like that's, that's a lot of money to push into your company. Right? You have to do it once you can structure it, figure it out so on and so forth. There's ways to figure this out. But at some point in time, there has to be the termination date on that as a mechanism to the build things out. Right. And so I think that like what, what, what we see the, is people not spend enough time really understanding the, how that should be envisioned, be structured and work.

right? And then look at, how do I transition from, you know, if you have to build half a billion dollars of infrastructure on your balance sheet, you're not going to own very much of that company. And if you're an early stage investor in that business, there's a lot of forward financing risk that probably makes you uncomfortable, right? And so discerning the termination date at which this changes from on balance sheet finance to approve something to scale project finance is super important. And this valley of death between those two is where most people fail from a capital markets perspective.

from an operational perspective, you you get this in metals and mining, it's not too dissimilar from oil and gas, where you always have the guy who doesn't hedge in oil and gas, right? Like that's like, you know, that dynamic is always present. And I think that, you know, we see a lot of times, you know, people looking, and this is the same thing, like if you and I started a hedge fund, and our returns were coming from taking huge amount of risk, a lot of people would probably say, well, you know, at some point in time, that downside is pretty severe, right? Like,

you know, versus something that's consistent, hit singles, hit singles, hit singles, right? And so applying that logic to this market, a lot of times what you see is someone that said, okay, look, you know, it's easy to discern this from looking at the information. We have, you know, a critical minerals supply crisis in this country from a security perspective. That's going to be an urgent government issue, an urgent OEM issue. And look at this as like, well, you know, this security situation and

deficit supply at some point is going to lead to a big price spike. And then styling their business to benefit from that price spike versus having really a fixed income slash like stable as possible return stream that you can do over and over and over again and benefit from the expansion of that TAM. And so I think like those two baskets, you know, understanding, you know, no one knows how their business is to be capitalized five years from when they started.

But having an idea of the termination date of when you stop being reliant on balance sheet equity and shift to a third party, it's just like a small leasing company, right? Kind of similar deal of equipment leasing, right? That shift that's occurred at some point, if you're a founder, you got to understand how you're going to effectuate that change and make it very clear to the investor in 20, 30 seconds how it's going to work. On the operational side, you know, it's really getting creative and sticking to your plan, right? So if you say, hey, look, like we're going to address this market.

the and we have scale because we contract like this, we access this market like this. This is what we do. Most people do not stick to their plans, right? And I think that, you know, operational style drift is a really, really big issue there. So from an investor perspective, have, you know, investors, 10 portfolio companies, and you every time I talk to you, your strategy is different. Like, you know, iteration is going to be perceived negatively versus positive, right? And so like understanding how the to think about the business and like, your job is to

the extract maximum value out of the addressable market and the situation that you're backing up against. It's hopefully positive, right? Not to have an outlier positive outcome tied to something like a price spike relative to security. If that happens as a tail event that's positive, that's great, but you can't set up your business around that. And natural resources, industry personnel tend to gravitate towards these extreme outcomes, right? When you look at, you always hear the story of the guy or the gal

in oil and gas that benefited from a big price cycle, right? Or benefited from one or two things happening. But like the probability of that happening again and again, again, is so low that's not a suitable cornerstone of a successful business in this sector. And so those are the two areas in which we see mistakes being made that are things that you can mitigate.

from a day one organizational design perspective and then from an investor transparency and kind of an active working process.

Speaker 2 (51:59)
Okay, so where are you seeing the capital and investment go currently in this sector?

Speaker 1 (52:05)
Well, I think it's variety of things here. I think that what we see across both the, and this goes back to my point about the corporate versus project finance component here. I think that, you know, on the technology side, we see it going to companies that are extracting the value added minerals from waste streams. We've seen a big trend in uptake and focus on that. On the outright, on-shoring side, we see it going to management teams who very

astutely understand the termination date in which the corporate capital ends and the project capital begins and are targeting commodities that perhaps the cost parity or cost advantage circumstance is logistics related in the US, for example. And so it's located closer to the demand center, so on and so forth. But really, people understand that delineation and understand their end markets really well. And then the last bucket being well structured.

projects that fit that project finance bucket. And so I think that the three buckets there, technology, waste of value, teams, sophisticated teams that understand their market and understand their competitive edge with China. And then on projects, well-structured projects with an easily understandable, the downside, absolute downside case scenario that's articulated to the investor base.

Speaker 2 (53:24)
Okay. And then if you today would make three early stage investments, I guess, in the critical motor space, where would you put that money? You, yourself?

Speaker 1 (53:34)
man. the, I took a couple, a couple of things here. The, would pick a waste of value technology that was addressing. I'll do three technology team and project. would pick a waste of value technology company that first and foremost had the feedstock arrangements that were in the seven to 10 year area and were provided by the big waste companies, which, which really discerns that they're probably not going to be.

waste streams that you have to pay for, you always get paid to take them. So I would find a company has that characteristics on the feed side. On the take side, I would look for something that has some level of beneficiary of each end markets, the energy transition, defense, and then AI. On the team side, I would make an investment in a team that was a specialist in one of these critical mineral markets and had a very astute value proposition as to how they envisioned.

competing with a comparable Chinese supply, whether it be locating close to the facility, a logistics advantage, or something of that nature, and really understood the downside case scenario associated with if the situation with the US and China worsens. And on the project side, as a last piece there, kind of similar to my first point on the waste to value side, I would pick a program with a team.

The, that's focused on waste to value that, that the team is really like the DNA of the business is de-risking the feedstock down. that, that's what I would really, really focus on. So I want to string a projects with the maximum focus on de-risking of the feedstock availability, quality, and then the revenue stream. Cause I think if you have that as a backbone, even for dealing with more esoteric commodities, there's a lot of flexibility that.

you can garner in accessing those in markets because your downside is easier to understand if you approach it from that kind of bottom up or left to right if you look at feedstock to offtake. There's a couple ways to think about it. But that's generally how I think about the world and where we think there's interesting investment opportunities broadly and also interesting opportunities to start businesses in this space.

Speaker 2 (55:49)
Okay, and then do you have any requests to two startups in the sectors that we've we've discussed today or you already mentioned kind of request for startups in the space by any request to the different startups in this sector.

Speaker 1 (56:00)
I think the biggest thing that you can do, and there's increasingly a lot of resources provided by companies active in this sector, also philanthropic organizations that will educate you on project development, project risk, project styling, the whole nine yards. think that if you're a startup in this space, there's never enough you can do to educate yourself thoroughly on how project development and finance works.

vast majority of these companies have to end up building something. And the more competent that you can become in that, think the higher your chances of success are going to be.

Speaker 2 (56:36)
One, we've got a little bit of time left, so I'm going to ask you, I'm going throw in another question here that we didn't plan for, but given the current kind of trajectory of the Trump administration, do you foresee in the next four years that we'll actually see the U.S. promoting demand of some of these things, like actually, you say, hey, we're going to invest from an LPO perspective in helping fund loans in this side of things, or do you see more government involvement given that the current trajectory feels like it's all about cutting everything, like we want as little government as possible right now?

Speaker 1 (57:06)
Well, I think that there's three things in play there, right? And you got to really look at, yes, obviously there is a focus right now on the thinning out the budget that's been made crystal clear, I think, to our citizens and to the world. But that being said, you have a look at when we had crisis-related circumstances in the oil industry, we created the strategic petroleum reserve. So, you know, we stocked up, right? And then World War II.

Speaker 2 (57:06)
I

Speaker 1 (57:35)
stockpile critical minerals. During the Cold War, we stockpiled critical minerals. And so I think that some of the policy, even when there is big changes like this that happen, people tend to revert to successful historical precedent when making decisions. And I think that one of the decisions that will likely be made if we intend to build a large domestic self-sufficiency ecosystem around this is properly creating a stockpile and contracting with private

production groups, just like the strategic petroleum reserve does in the oil and gas industry. And so that's one area, right? I think that to kind of think about your question in a multifaceted fashion, so that's demand side intervention, specifically for the benefit of the government. We've had supply side intervention in the form of tax credits, loans, as you mentioned with the LPO. But what we've had recently, which is a shift in rhetoric with the Trump administration that

we'll see how this plays out, is implemented at scale is we've had rhetoric suggesting that in lieu of supply side intervention or demand side interventions, I just mentioned that the intervention, which the could be construed in multiple ways, depending upon your view on this in the form of tariffs on specific countries will force companies to locate.

in the US to access that regional market. so what I think that you see with that, and we'll really kind of test over the coming months is, you we had tensions with Japan in the late 80s, early 90s, around that period of time. We pressured a lot of these companies. Now you have Japanese car companies all over the US, right? So they invested here, right? And so the question

is, you know, do tariffs like force European car companies become partially American, right? Just like what happened to Japanese. And so I think that that is an area that is being explored. That is really an alternative intervention that I'm not sure where that will go. I think that the first two things I've outlined here are the most probable pathways. I don't see further supply site intervention at this juncture, given the pause and the complexity of some of these organizations.

apart from stripping down regulatory thresholds and condensing permitting times through cutting organizations that focus on this, which in my mind is the supply side intervention. But I hope that's kind of a help.

Speaker 2 (1:00:08)
Yeah, no, I think it makes sense. mean, we did see already, I think there was an announcement that Porsche is going to be moving a production facility. They're going to build in the US. So that's one kind of point that there's another, I think, dilemma there, which is that Germany has terrible energy issues, like cost of energy is just terrible there. But I'm kind of curious, I guess, how do I phrase this? Like, it feels like some of the first things that have been done in the first few weeks of the of the administration are really just like a negative reaction to.

the, you know, generally people could say, you know, it's like, it's a left, left leaning issue around climate, et cetera. And it seems like we're pushing back on like, like for example, the, EV demand side, right. getting rid of the tax credits, but at the end of the day, the whole world is moving towards kind of a battery powered future, especially if you look at the defense side, right. I have not heard anybody in defense who's not said, you know, drones are going to be super important for, for warfare in the future. So if that is true, shouldn't we be promoting the production of batteries in the United States?

Do you foresee any change in perspective from, don't know how Trump will be influenced by any change in perspective where he would start to actually put an emphasis on some of these, know, what we would talk about as clean technologies, but he might view it from like a national security perspective that he would be willing to kind of promote investing in those areas.

Speaker 1 (1:01:23)
See, this is the swing vote here, right? For lack of better, the characterization where I think that your overview of that is absolutely spot on in the sense of, you just take the energy sector, for example, if we're gonna maintain AI leadership as a corollary to this, we need all forms of energy that we can get to keep expanding that supply base, right? I think similarly, if we foresee getting into a global conflict, anything that relates to domestic self,

sufficient production of something that's critical of modern warfare, we need to be doing that here, right? Because we will lose access to it if we're relying on adversarial parties. so I think it's an excellent way to frame that. think the issue is just, you know, how is the public going to envision that a lot of this is a public education issue, you know? I mean, how do people perceive some of this, right? I think that because if you look at just taking this from a pure, you know, not non-political situation, right? Like, I think that

The historical on the campaign trail, he's associated the battery value chain with China, with the high risk and low human rights consciousness mining in the developing world. And really, with the electric vehicle sector more broadly that there's been opposition to. And so I think that that rhetoric shifts to defense and that resonates with the public. I think you'll see a big change there.

The catalyst that creates that educational uptick is something that I don't know where that's gonna come from.

Speaker 2 (1:02:54)
Yeah, that's exactly what I've been wondering. It's like, how can you get these people? Maybe they'll just forget about the, you know, the rhetoric for after a while and they'll be like, yeah, you know, like, we'll get on top of this. Because if you look at it, like, like with a very centrist mindset, a lot of the things that even Biden did were kind of in line with some of the policies that Trump had previously. And in many ways, I can, I think there's already some things where Trump's doing things and taking credit for them. But it's like, okay, well, they were actually doing that still under the Biden administration. So it's mostly like a marketing thing and they're just trying to take credit. And it's like,

It's really getting annoying. like, just guys focus on like doing good things for Americans and stop having your, your, your, your competition's back and forth. But I think, I think this is a good place to end it. I don't have any other like burning questions. I think you've done a good job of walking us through the value chain, some of the challenges, what you need to do to win, where the demand is going to come from, any final thoughts that you would want to offer us.

Speaker 1 (1:03:45)
I think I actually covered everything. I think this has been a fantastic discussion. I appreciate you having me again.

Speaker 2 (1:03:50)
Yeah, no, that's been, this has been a pleasure. I'm definitely going to enjoy listening back to this and creating some additional notes to follow up. So I appreciate it, Nick.

Speaker 1 (1:03:58)
Thank you.