91450063 - 1_mtsyp8n2 - PID 1851201 >> Jim, great to have you back on Real Vision. >> Thank you, Jack. It's great to be here. I'm doing well. >> Nice. Well, you were on before with Jim Grant, making macro calls because you come from the hedge fund world. But now you're actually the CEO of the only rare earth's miner and producer of concentrates in the Western hemisphere. I guess one of the questions I want to ask you in this conversation is, how did that happen? >> Sure, yeah. It's one of those things that you never expect in life. It was a big turn so to speak. But as I've traditionally viewed myself to be a contrarian investor, you never know what opportunity will present itself particularly in a regime that we're in now with ubiquitous money printing out there. We came across MP at my investment firm, JHL Capital Group back in, it was actually back in late 2014. We had been short a lot of energy with a view that OPEC was breaking and that we were transitioning from a period where oil in general was cyclically and secularly challenged. We've gone from an OPEC period where there was a price floor to the expectation that with Shell and all of the supply and the reduction of demand that there be a price ceiling. That was a very successful short for us. Of course, we thought we followed up in early '15 with looking through the wreckage and trying to find the babies with the bath water of the energy collapse in early '15. If you recall, there were a lot of distress credits. I had remembered the Molycorp IPO and Lo & Behold, their secured bonds were trading at a substantial discount. We can get into the cast but that's originally how I came across it. I had no expectation of being in this business until literally early '15. Even then, I thought it was going be a passing trade so to speak, but then chaos ensued. >> When chaos ensued, it's end up quite well. You recently went public via Spark. That deal closed in November. I want to get into that. >> Yeah, I'll tell you a Jack. We're still very excited as a team. It's a surreal, amazing and very humbling experience to stand out there. I guess that was on the bucket list to ring the bell- >> Yeah, I saw. >> -and just come there and see your logo and all of that stuff. Anyway we can talk about that but yeah, it's been an exciting year all things considered aside in the world. For MP it's been a great year. >> Yeah, I'm sure. Let's get into the mind because you said, you own of these bonds and the company, Molycorp that owned the Mountain Pass mine, that company went bankrupt and you ended up with the property. Now, sometimes you don't want a company to go bankrupt but in this case, you ended up with the crown jewels. What can you tell us about these crown jewels? >> When we initially built our position, we actually didn't want it to go bankrupt. Apollo was behind us in the convert. We thought that they would cram us and our basis was roughly over a period of time in the $0.40 on the dollar. We thought, oh, Apollo would cram us, we'll get $0.70 or $0.80 and it'll be a no brainer and we'll move on. Obviously, what we learned though as we dug in and obviously Apollo, things deteriorated and got much worse and so their converts ended up getting wiped and our bonds were really in the key position. What we learned, I jokingly say that I made the mistake of doing a significant amount of due diligence and actually visiting the asset during the bankruptcy, and I was just blown away by the scale of the asset. How remarkable it is and this really is, if you see it and you can see some great videos on our website. Obviously, Real Vision did a pretty amazing video out there. I'm sure we'll get into that, but it's a remarkable asset, a lot of invested capital. When we were in there, the way to think about it is really Molycorp, the predecessor entity that went bankrupt, it was essentially a stock promotion. It was a story. It was a story and a stock promotion sitting on top of what is actually a really incredible asset. But at the time they did their IPO, they did their IPO in 2010 to do this state of the art, environmentally friendly processing facility and we can talk about why that's relevant with rare earth. But think about the fact that in 2010 when that IPO happened, the Model S wasn't even on the road. >> Yeah. >> The idea that the world would electrify was a decade ahead of its time and so as you may have heard me say, I like to say it was the Internet 1.0 of this story and so we had the opportunity and to see this asset and I believe we're on the precipice of the 2.0 of the story which is typically very rewarding and sustainable and so I get sustainable pun intended. >> Yeah, absolutely. Molycorp they went public in 2010 just as the commodities boom was ending. It's been a very bad 10 years. I think the consensus view that's is emerging is that the next 10 years are going to be good for commodities generally, but then we have rare earth specifically which has a whole bunch of applications that's used in smart phones, catalytic converters. But I think specifically it's used in electric vehicles and magnets. Can you tell us about specifically what elements you mine and how that oriented towards the magnet business? >> Sure. By the way, Jack, with respect to commodities just because I can't help myself. >> Sure. I did have a hat that I wore for many years as a hedge fund manager. With respect to commodities. I mean, ultimately that's a supply and demand business, no different than real estate or stocks or whatever. We're all about supply and demand in the markets. I'm extraordinarily bullish at certain commodities in the coming decade because I believe that the new bull market. Obviously we have the backdrop of significant monetary easing and if you look at it, that looks like it's here for as far as the eye can see, as far as money printing and low interest rates and you never know, you can wake up to a different reality tomorrow. But if you think about the coming years we're likely going to have a multi-trillion dollar transformation in our global economy as we go from what I would call the analog world, the fossil fuel-based world, to an electrified world where we're going to really electrify the auto, whether it's wind turbines, drones, robots, all of those there are use cases that'll be out there across transportation and HVAC and you name it. I think that the key if you want to position yourself in the commodities landscape is to really think about the materials that'll be most levered to that. There's lots of reports and we can go through some of them if you like. But the key thing is to think about, with respect to NDPR which is our 90 plus percent driver of revenue product, the key thing with NDPR and rare earths in general is that mining is only 10 percent of the core structure. It's really a chemical separation process. Think of it as a big specialty material or big specialty chemical. When you think about that, compared to maybe something like lithium or shale oil where you have a very quick response time to get supply onto the market in rare earths and then less so but importantly in nickel or copper or some of the other EV commodities, you have this longer response time, there's more challenge to get supplied to market, and so I think we're headed into this period where we're going to see just dramatic acceleration of demand and as I always say, debt, taxes and cycles, that's what drives a cycle. Is that people slap a number as to what will bring on new supply and usually it's reflexive both ways. I think that to get the supply that we need, we're going to see substantially higher prices across a number of commodities. >> Yeah, absolutely. There are a lot of compelling reasons as you just said for why we're going to have a good decade for commodities. I think though that even if the, because the commodity thesis is tied up for reflation money printing like. Even if the money printers go on all night and the Fed can't create inflation, I still think electrification is a secular trend that will proceed with or without a reflation narrative. What I was really interested when I was reading your presentation for MP Materials was that, we don't know which car company is going to be dominant. It could be Tesla, it could be Workhorse. Tesla definitely has a little bit about leg up. It could be one of the Legacy Auto automakers, and we don't know what technology. It could be lithium batteries, it could be lithium cobalt, could be all these different commodities, it could be a hydrogen fuel cells. What Nikola is doing with Toyota, I think has dipped their toe in, so we don't know. But all of those different technologies use NDPR and they use those magnets. What can you tell me about that? Also, can you please pronounce NDPR because I was having a hard time with it? >> Sure. Neodymium Praseodymium. There are actually two separate rare earths that are right next to each other. They typically come together, you sell them as one in most cases. But it's actually a great point and it's what you just laid out, which is why I'm so excited about this opportunity. Obviously as an investor historically but now as an operator, I understand that when you're out there in the real world you have to execute. But if I look at our opportunity in front of us, we really do view our company, MP Materials as a real picks and shovels play on this boom. As you said, who knows? I mean, there's so many EV makers out there and maybe we'll talk about SPACs and a lot of them are coming to market and know business successes there will be failures. There's competitive risk there, and then the battery technology is going to evolve. The mix of lithium and some of the other commodities, or will it be solid state or capacitors or hydrogen, all these technologies. But it's pretty well settled that there'll be a magnet. No matter how the power gets there, there'll be a rare of magnet. That'll be what causes the motion. Throughout history, we've seen these opportunities when you're on the precipice of a big boom. It's nice to play very levered company so that boom that are high risk if you get them right. But along with that boom, a very sure fire way to do it. If it was the 19th century gold rush, where the term came from, it was the picks and shovels play, who sold the Levi's, who sold the pecks, who sold the shovels? Or if it was in the 60s and intel through to the 80s intel inside. You see these cases throughout history where there's an opportunity to really build a great platform, a great company. That's what we're about. We think we have this very strategic asset and we want to take advantage of that strategic asset to build a great transformational company over time, it's very aspirational. We make clear that this is a long-term process. We want to make sure that we manage expectations and make sure people know that it will take a long time to build a great company. But we're on our way and we're really excited about it. We feel like we're on the ground floor of a multi-trillion dollar economic transformation, and so with a great platform. As is probably out there known, we're cash-flow positive today, just in the early stages. >> I was about to bring that up because you say, we are this ambitious company, we're looking forward and all of that's true. You're at stage 1 now, I want to talk about stage 2 and stage 3. But I might add to your breadth win, in the spec community, you are essentially a mature company in that you are cash-flow positive, you have revenue, you have a business plan that works. It's not just an idea on paper. You have a mine and you extract that and then you process it. But in terms of the latter stages of turning that rare earth concentrates into NdPr and refining that. That's what China does, right? >> Yeah, of course. I know, you know this, but just as you know we're an NYSE listed company. Our ticker is MP that we have De-SPAC, and so regardless of our lineage, whether we SPAC or IPO and obviously the goal is to execute now and so we're no longer [inaudible]. Of course and it's a great conversation topic and we can have a lot of fun with that. But to answer your question, we're really, if you go back, I'll rewind a bit. We took over, in 2015 that the whole thing went into free fall, as I was mentioning earlier about how we had people behind us in the in the bonds and we recognize that the promotion that was the predecessor entity, Molycorp, that things were a lot worse under the hood when we dug in. We're really not as single strategic or financial buyer showed up to buy this thing in bankruptcy. As we dug in, we came up with a plan. We felt like we could actually rebuild, turnaround this asset, and rebuild it in multiple stages. You can't move a multi-billion dollar supply chain overnight. So we had to have a long-term way of doing this. I was very focused at the time on making sure that I was not throwing any good money after that with my investors. So we were willing to fight through bankruptcy, get control of the asset, but we wanted to make sure that we had a plan that from day one, we understood that we were extremely resource constrained. We were at death's door really as a company throughout the bankruptcy before we existed. So as we took control, we had eight employees. It was in care maintenance. We relaunched it. The first stage of the relaunch was to basically rebuild, when I say rebuild, I don't mean physically, I mean rebuild a company. We had no accounting system because it was a part of Molycorp and another piece of Molycorp went with another entity. We had this asset with eight people that was shut down, no accounting infrastructure, nothing. I mean, we really built. >> Sorry to interrupt did Molycorp have any debt? Obviously it did. Because the debt was you. >> Yeah, the debt was we were the largest creditor in the bankruptcy and so we originally credited for the mineral rights and then bought the rest of the assets out of bankruptcy. The mineral rights, that was actually a key thing, and I'm pretty sure and maybe one day it would be fun to write a case study about this. I'm pretty sure that mineral rights have never before been separated from fee simple real estate in bankruptcy. Obviously mineral rights are in energy or cross minerals around the country. It's pretty well settled law that the mineral rights can trade separately from the real estate and there's lots of transactions around that. But the idea that this was an asset sitting in bankruptcy, we credit bid, so we were the largest creditor, but we were still forming our plan, so I didn't want to take control of a nearly two billion dollar busted chemical plant at the time without a plan. That wouldn't have been a good idea. First we credit bid for the mineral rights. I think it was very unexpected that we're able to do this, but there's really no legal reason why because it is an asset. So the judge approved it. Obviously, the insurance companies at the time weren't very happy. There was a lot of litigation, but but we got those and then we put together a plan and and were able to form a new company with a partner in China that gave us access to the Chinese market. I think there were some that criticized us. How could you take this iconic asset and have a partner over there? But the reality is Tesla, Apple, GM, you name it, they buy their magnets in China, and so if we wanted to sell to Tesla, Apple, GM, we were going to have to have access to that market until we can move the supply chain over here over time. We got the partner. We did our Stage 1, which basically meant create all the ground floor infrastructure of the company. Accounting, engineers, you name it. We started hiring. We built from scratch. We made a lot of changes to the operation. We can talk about some of the changes that we were able to fix, frankly if I may say, the total disaster that was Molycorp operationally, not just capital structure wise. We did that. So in our phase 1, as we take the rarer earths, we turn it into a rare earth concentrates. Think of it as we take rock out of the ground, that's seven or eight percent rare earth on average, it ranges and you mix it up. >> Which by the way is very good, 7-8 percent is world-class. >> Absolutely, that's world-class. We think it's the best rarer earth or body in the world. Many of the Chinese producers are one or two percent. There's a handful of other projects in the US that are sometimes mentioned that our pre feasibility not funded and those are at best one percent, some are under, maybe some approach one point something percent. When you think about the economics of the business, I use this analogy. If we were oil, we would be like Saudi Arabia. We've got a very low cost of production and a lot of scale. So anyway, we take this very high-quality rock, turn it into a very concentrated product. Think of it as like a big bag of sand that is approximately 60 percent rarer earth. We currently sell that to China. Just doing that, and by the way, just doing that is a significant effort. We have notes of 270 employees now. It's a pretty big operation. But doing that and we just put out numbers recently, we're EBITDA cashflow positive. People can look up all those metrics. >> No debt on your balance sheet, which is why I brought up. Did you still have debt when you acquired it? Sounds like you're born a new. >> That's a really important point, is just when you're in a commodity business, I'm a big believer in capital structure matters, it's the Michael Milken school of capital structure. Your capital structure really needs to be appropriate for the business that you're in. So what's great about our company is we have north of $500 million of cash on the balance sheet and no doubt, we've got some forward product sales and that's it. It's a great position to have a profitable cash-flow positive business and a fortress balance sheet. >> You talked about you have this seven point eight percent grade ore, you have 800,000 metric tons in the ground roughly or expected. You're basically sitting on the Saudi Arabia of rare earths. As you said before, you are in California so your mine is up to the highest standard and Molycorp did invest a ton of money in the plant. Basically, you've inherited this great assets. Can you describe how you plan on delivering? Because like I was reading through some of Molycorp financial statements and they too were hopeful. They had this plan about Operation Phoenix was it called? >> Project Phoenix, yes. >> Operation Phoenix did not go well. How is MP going to rise from the ashes to bring the metaphoric close? >> It's a great question. So let's take it by the number. Let's look at the data. Molycorp went public in 2010. By the way, the backdrop here is the world-class nature of the ore body in the site that's known. It had historically been operating for decades and profitably. It was ultimately a subsidiary of Chevron, and then it was sold to private equity, it was shut down due to Chinese competition and some challenges over the years. It was sold to some financial people. They took it public as Molycorp. The goal as Molycorp in 2010 was they were going to build a brand new, very scaled state of the earth facility. I think they said it was going to cost x, it ended costing one point seven billion dollars. But their vision was to do this, and we can talk about all the environmental attributes. Anyway, they stated at the time of their IPO that their goal when they built, and it was going to take them several years to obviously build, it took them five and they never did it right. But they said they were going to build it, I think, in three years, and that they were going to produce, I think, it was 19,050 metric tons of REO. They never achieved to that, they produced 12,000 tons in their best period annualized. Their uptime was in the 50s, so they were having constant shutdowns and operational challenges due to a number of issues on the site related to failure in their operational approach and in their construction process, and they never got the site working well. Their best annualized period was producing 12,000 tons. Today, MPR latest quarter annualized is approximately 38,000, so north of 3.2 times the material. By the way, and just to think about the power of cycles, when the street did their exciting initiations post the Molycorp IPO, what I call 1.0, the street target was 20,000 tons and at one point, it was a prior commodities boom. Molycorp had a $6 billion enterprise value before they even built the site. You just think about that. With a 20,000 target, we're doing 38,000 today. Obviously, we've said we don't think that that's the extent of what we'll be able to do. We're constantly pushing to do better. What I would say is, we believe over the last three years, we've really built the infrastructure of this company from scratch. We've turned around what was a busted chemical plant to be a best of breed operator at low cost and made it profitable even in the early stage. I think we've earned the right to say that we're real operators. We're turner, we turned around a challenged asset and so we have executed. Yeah, I get that. I'm skeptical of any kind of new construction. What I would say to people though is to remember the assets on site are built. Actually, they spared no expense. They built a remarkable facility. They just made some mistakes in the workflow. We can talk about that but there was 1.7 billion invested in this facility, which we now have. When we talk about our next stage, our next stage is taking the concentrated product to making separated rare earths. The NdPr that you've received. Well, maybe, Jack, I should quiz you to see if you can pronounce it. >> I don't know. It's one one of my things. I was going through your reports last night and I'm like, okay, I get this. I'm really interested in this. But when I looked up NdPr, I'm like, I don't know. We'll see at the end. Maybe you can make it easy for me. >> Neodymium Praseodymium say it fast three times. >> Neodymium Praseodymium. There we go. >> Fantastic. >> Yeah, got it. >> But the key thing with our stage 2 is that most of the existing assets on site for the stage 2 piece of it worked very well. The NdPr separation is mass balanced. If you look on our website and you see a picture, we have a great drone shot of our site, and along the right side of the picture you see this building that looks like it's three football fields long. That's our NdPr separation and that worked perfectly well even under Molycorp and so our expectation is that the NdPr separation piece of that will work very well. Obviously, in the real world there are always start-up challenges, but this is not a greenfield. This is really an optimization project. In the backdrop of that, we have a cashflow positive business that obviously is price-wise, very levered to some exciting trends as we've discussed. >> Definitely. You used the word greenfield and I remember seeing that. Greenfield, it basically means it's not ready for the big leagues. You're still investing in it and it's not fully developed, right? >> Yeah, the easiest way for people to understand that would be Molycorp at their IPO in 2010 was a greenfield project. It was basically a dream. Give us some money and we're going to make some plans and build a big thing. Now we have what would be referred to as a brownfield, which is it's already built. It exists. We are operating. We're now doing our second stage and so many of the assets exist, and so it's not like we're starting from scratch. We're operating and we're just making some changes to some pretty extraordinary assets that currently exist. >> Okay. I have a question. You see you now you have the rare earth oxide. How much does that sell per metric ton? >> Yeah, well, it really depends. The rare earth industry. There are a number of rare earths, and so when you think about our concentrated product, that then gets broken down into a number of other products. There's NdPr, lanthanum, cerium, and then we also will make a heavy rare earth concentrate. There are a number of different products. The easiest thing for your viewers is on Bloomberg, there's the SHRAPNOX index and that's priced in renminbi. But if you convert that, you can convert that to dollars and then you can get the price of NdPr. The price of NdPr right now has actually moved quit a bit. >> Can I? 60,000? >> Well, no. Right now, I think it's 430,000. Obviously, this will air a little later, but at SHRAPNOX, it's 430,000 and so you divide that by 1,000, and then you take the renminbi price, which is roughly 6.55. You get somewhere in the mid to high 60s dollar right now price for NdPr. >> Yeah. Okay. Sixties. I know because in your report it said 40, that was written in 2019, but now it's gone up since then. It's interesting, some of your projections, how profitable, how much EBITDA will we have based on the different prices of NdPr. NdPr is obviously is used in electric vehicles, which is a huge growth market. Wind turbines, which, I think, you said is growing seven, eight percent per year. Tell me about what you see going forward about the demand side for NdPr. >> Well, I think that there's just so many exciting growth verticals. But the nearest, most obvious use case, which will also be the largest and frankly, just by itself, will I think lead to some pretty extraordinary growth over the coming years is the electric vehicle, as magnets for the electric vehicle. If you just take that market alone, right now magnets for EVs, for electrification, it's approximately 10 percent of existing global NdPr demand. But that's with EV penetration around two, maybe approaching three percent. Goldman Sachs actually put out a report yesterday that they expected Chinese EV penetration to go to 20 percent within the next five years by 2025. China has actually said that within 15 years, their expectation is that there will be no new sales of internal combustion engine cars. California and New Jersey, obviously we've stated it. Europe has their carbon 2050 goals. When you look around the world, I think we're actually going to see adoption of the electric vehicle a lot quicker than people think. There's a great economist cover story a couple months ago about China as the new electro state. If you think about Saudi Arabia as a petrol state, and this idea, regardless of your political views, that you can debate that all day long and but if you just look at the hundreds of billions of dollars of capital, or actually forget all that, just look at the capital markets. Regardless of whether you think it's a bubble, look at the market cap of Tesla, look at all of the excitement in the SPAC universe for this. Remember that, although there's going to be a number of the SPACs, I would guess that a number of the SPACs will ultimately over time fail. Right now they're equitized and growing, and there's a lot of capital. When you think of the analogy, it's like the Internet in the mid 90s, it's penetration is two or three percent. Of course there's going to be some failures, and of course there's some very young inexperienced people running very large businesses. They'll make mistakes, they'll be some superstars, like with any boom. I'm not opining on the value of those as far as the markets today, but you have to recognize that the capital markets are telling you that this is a boom just getting started. We think that that is just such a powerful thing to say, "Hey, all these guys and girls, whoever, regardless of whether they're successful or not, or will the traditional OEM strike back in a better way? GM, Volkswagen, and whomever." There's hundreds of billions of dollars of capital going into their space. I think that the penetration of electric vehicles is just going to dramatically surprise on the upside. But even if I'm wrong, just take Goldman's numbers or Morgan Stanley, or whomever you want, look at the math, and you're talking about very quickly over this coming decade, the electric vehicle alone will eat up the entire supply of NDPR. That obviously ignores wind turbines, and drones, and many of the other classic use cases. >> Yeah. Electric vehicles are definitely the future, and in some cases, the present. If you look at Norway, I think over half of all vehicles sold are electric vehicles. Your point about, there're going to be winners, there're going to be losers, that's definitely true, but I think what is interesting about rare Earths and NdPr, is that the winners and the losers are going to need NdPr, right? >> Yeah. As I've said, it's a picks and shovels play, or it's like selling levies to the people in the gold rush. >> Yeah. >> We hope they're all successful, we really do, and we hope hydrogen and electric wins. I don't know if Musk is right or wrong about hydrogen, and there's a lot of investment. I don't know, but I do see a boom. It's pretty obvious, it doesn't take a genius to see, to look at what's going on out there. All of that capital is going to be spent, or a lot of it. We think we're in a great position, and that's why I'm focused on the opportunity. I'm very excited. The other thing with that Jack is that, we're in this period of tremendous disruption, to take an old business school case term, there's a lot of Innovator's dilemma going on out there. If you think of the challenges, for example, Ford is facing, and I think GM seems to be navigating this really well. Look at Tesla, look at their market cap, and they have no legacy business, versus the legacy OEMs that make many multiples of the number of cars. But their profitability is going to very quickly collapse in their legacy analog business, and so then the question is, which of those enterprises will be able to navigate that? Anyway, some will, some won't. It's a very hard thing to do. But in all of that as there is a new landscape arising and an old one declining, there's just tremendous disruption. There's bankruptcies, there's challenges, and in that chaos, is a lot of opportunity. It is a new landscape forming, and our vision at MP is just by virtue of having this asset that gets us in the room that is very levered on itself. Not in the capital structure, but in the price of the commodity to participate in the upside of this boom. But also as a platform, how can we utilize the strategic nature to really create a lot of long-term enterprise value to become a Marquee Company in this landscape that's just getting started? >> Absolutely. Could we talk about China a little bit? >> Yeah. >> Because I know that China controls over 80 percent of the rare Earth market. They've been very ahead of the curve on electrification. I think they also have drawn over 80 percent of lithium as well. I know, going on mpmaterials.com, your website, it says that it's critical to your mission statement. It's not just to deliver these ingredients for electric vehicles in the future for the world, but specifically to have an American source of these materials. What can you tell me about that? >> Sure. This is so critical for our country, and our mission we say it right there as you know and all our materials, our mission is to restore the full bear of supply chain for United States of America. Right now, all great companies like the Tesla, GMs, Apples of the world, they have to buy this entire supply chain in China, and we'd like to offer them a choice. We'd like to offer them a great American company that can satisfy some we're hopefully all one day their supply chain needs. Again, regardless of your politics, whether it's Cold War 2.0, or it's just very competitive, what the Chinese have done is very intelligent. They've been long-term, they've taken control of the upstream of the supply chain, and methodically over time, they've moved downstream. In fact, aside from this facts, if you think about electrification, look at some of these Chinese companies listed here in the US, whether it's NIO, or Xiaopeng, or Li Auto. There's a number of them that have already created remarkable enterprise value. There is a lot of competition in the space. They're not after the materials, the Chinese are after the GDP and the jobs. They want to take over, they want to beat Tesla. Their upstream was a strategic imperative 30 years ago. But they've graduated and matured, and now there's a much bigger comparative challenge, which is, they want to be the leading country in the world. They want to have the largest GDP, the largest military budget. They are after Tesla, they are after Apple. We know our place, we're not of the scale of one of those companies. But we do think that we serve a really important role. There need to be hopefully one, but hopefully more scaled American champions upstream in the supply chain so that some of the strategic resources cannot be utilized as a source of advantage. The competition's going to be hard enough. We just want to be a reliable supply chain partner to those companies, and again, they buy it all in China today, that's the current reality. They have no choice. Our mission is to give them a choice, and to do that competitively. We want to do that competitively so we can build a great enterprise and create value for them, the downstream customers. >> Absolutely. Right now you sell to China too because you have no choice, but you want to change that, right? >> Yeah. Exactly, those magnets are made in China. Again, the Tesla, Apples of the world, they'll buy their magnets there. The goal was to be able to sell them the magnets here, and so our vision as a company is to overtime, and this will take us a number of years, but is to overtime, create that option domestically. I think we're probably a microcosm, you're seeing this in a number of industries. This is this idea of, we need to onshore our critical supply chain. We saw at most acutely in March with COVID obviously and PPE. But this is critical across industries and obviously for the rise of that manufacturing spirit in America and regardless of who's in the White House. But in particular with the new Biden administration, because there's going to be such a big push for electrification, everything we're talking about is getting accelerated. If we want to keep those auto jobs here, we need to have that whole supply chain here. By the way, the auto supply chain, its the single largest private employer in the country, 10-14 million jobs. We just want to help enable that and create a lot of value for our shareholders while we do it. >> Absolutely. You mentioned the Biden administration, and obviously the Biden administration is going to be more friendly to electric vehicles than the Trump administration. But you actually recently inked a deal with the Department of Defense under the Trump administration. Think it was $9.4 million for investments agreement. Do you think that the government sees that strategic importance and will be behind your back in the same way that perhaps the Chinese were to their industry which is why they started to dominate? >> Well, I hope so. To be clear, I think we can all say that we clearly have a very divided political environment today in America. But I think if there are one of the few things that we all agree on, national security and the competitive threat of China from an industrial standpoint is something that's non-partisan. We need to have American jobs, we need to have these industries. I think that, the Department of Defense, obviously our work with them is non-partisan. We want to do right by our company and by national security needs. But we actually have two contracts that we've signed with the Department of Defense. One we disclose this summer that's related to heavy rare separation. Other than that disclosure, I can't say more on that. Then the one you just referenced is the $9.6 million grant that's just capital granted to us towards our stage 2, DOD understands. Again, see their own words in their press release, the importance of this supply chain. They reflected that with that award. Hopefully, we'll be able to do a lot of work with the new administration. I think that actually one of the great attributes in recent months, if you will, you've seen an executive order out of President Trump and presidential determination about a rarer of magnet supply chain over the past year or two. There's been a lot of noteworthy pronouncements. But as we kind of think about, particularly with the Biden administration and that push on climate change, we're very proud of the fact that we're in California. Rare Earth production has historically had a lot of environmental challenges. Again, a plug for Real Vision, you guys did a great job. It's a 20-minute video, I encourage people to watch that. It's an outstanding piece talking about some of those challenges. Historically, we recycle most of our water. We have dry talings. I mean, I think we don't even need to go into it. The site was built 5-7 years ago in the state of California so you can imagine the challenges that had to be overcome to get regulators comfortable. We think that the Biden administration will hopefully really recognize that not only are we 'fuel', we are the feedstock to these industries of sustainability, but we're doing it in a sustainable way right in California. That's got to be something that people appreciate, both in DC and hopefully, investors as well. I certainly do just as an American and as a human being, I take a lot of pride in that, our team does too. >> Yeah. That's an in addition to the off-shoring of supply chains to make sure that we can have a source of it in America as well as just the western hemisphere. There is that environmental concern you'd have. I think, you can see the damage from Chinese plants, Chinese rare Earth mines from GPS, I believe. What I understand is that, yeah, they don't have the standards as you do in California, and also your mine has in the same way, it has higher levels of what you want, rare Earth and NdPr, it also has lower levels of uranium and thorium, right? >> The issues with uranium and thorium that you've heard of are mainly associated with a company in Australia, Lynas, which is a public company and they've had some challenges with the Malaysian government and I again reference people to that Real Vision video or to the web and that's of not my place. But suffice to say obviously, a site with environmental challenges in Malaysia, which is really the Chinese sphere of influence, that's Ground Zero of One Belt One Road. That's a unique animal. Then there are some sites in the US that I think are essentially, for lack of a better word, toxic waste dumps where people think there are some errands there and so they want to get special co-ops or privileges out of the government to take over their liabilities and the guys of barracks. What I would say is one of the things that we're really proud of is, we don't need to sacrifice our standards as Americans. I mean, we're Americans, we have principals and we believe in a lot of things and so we're showing this. We're proving we're profitable in Mountain Pass, we're going to build a much larger company and so we're going to do this in an environmentally friendly way, and that's core to our company. What I would say to people who push on this issue to get breaks when it comes to environmental standards. I'd say, "No way." We will do this in an environmentally friendly way and we have to. Obviously, we're beneficiary of that because we're already doing it. But I think that's really important and I don't know, I just can't imagine someone buying an electric vehicle feeling very good that the materials that made up that vehicle were causing cancer in China or toxic waste dumps or any of that kinda stuff. I think we're past that as a society and so we want to shed a light on that. As a total of side Jack, there's been a big push about ESG investing where I think we all see that. >> Was about to bring it up. >> Yeah, you were, so good segue right? >> Yeah. Perfect. >> That's probably one of those points in the video where you have the minute that's the ESG segue. The thing is it has created a lot of the capital. If you look at where a lot of that's gone, it's gone to software companies, just really the big fang, Microsoft, Salesforce, whatever, great iconic companies. We should all look up to them. It's very easy to pay people a little bit more and hand everyone a latte when you have employees that are six-figure employees, very low employee count relative to your revenue and enterprise value. But I think that the real impact that we're going to see over time from this push on ESG should be to historically, more real industries. If we're going to have these materials, let's think about wow, shouldn't we really be allocating our capital to companies like ours. Companies like MP Materials, whose mission it is to restore the supply chain in an environmentally friendly way should have a low cost of capital, relative to the companies that aren't necessarily subscribing to those kinds of standards. That's really the power of ESG Investment is lowering the cost of capital for the businesses that are providing the externalities that you want and raising the cost of capital for the businesses that are not. Again, regardless of where we go from here, look at the evaluation of Tesla versus ExxonMobil and that tells you what you need to know. The capital markets today are pricing in a very large externality, positive in the case of Tesla, very negative in the case of Exxon and then obviously, I'm just using them as examples. But I think as we think about this, that really should extend across industry and so we think we're going to be a big beneficiary of that in the years to come. By the way, we then have to execute, we have to live by those standards and we take that very seriously at MP. >> Yeah, definitely. You talked about how much Tesla has been up, how much these electric vehicle companies, these ESG stocks, the capital markets have really been a believers in their stories, their narratives, and particularly their ability to grow over the future. Now MP Materials, it is definitely of that world in terms of the growth story and yet it is an industrials company that you mine stuff from the ground which is one of the oldest industries in the world. How do you think about that? >> Yeah. Well, and by the way, mining, again is 10 percent of our cost structure, 90 percent is really the chemical and separations process and so. That really is much more of a challenge and I think that'll create a challenge for others trying to bring on supply. There'll be a multi-year lag given that piece of it. But I think we're position really well from the standpoint, as you said, we have an asset that's got, this is a real asset. By the way, come visit us Jack, come visit. We've got an asset that's. >> Is that an official invite James? >> That is an official invite Jack. I'd love to tour you around. >> Okay, I'd love to do that. >> It is rare, pun intended haha, to have that downside protection of a hard asset that cashflows coupled with that upside new boom leverage and so we think we've got that. We think that positions are safe here if you're kind of looking for place in the electrification boom. We think we're strategically in a great spot and structurally, when you have a cash-flow positive business with a fortress balance sheet. Hopefully, by the way, we'll make mistakes, there's no question, but we're very shareholder focus management team. By the way, I should tell you because I do think this is important. I guess I'll put my investor hat back on. There used to be a rule around my firm that we would never buy a stock that had a management team that didn't want the stock to go up. If the management team doesn't want the stock to go up, why am I going to try to fight that? Governance matters, the idea of shareholder value obviously. Again, human beings make mistakes, but just this idea, we're owner-operators. JHL is the largest, sure I'm the largest individual shareholder of the company. I am highly incentivized to create a lot of value. That's also one of the great things that you kind of think about us versus the predecessor. When you have people who maybe have other motives, we really are shareholder focus. By the way, when we set this up, maybe this is a good segue into stack land. >> I was just thinking that. >> Let me do the segue and then we can do this, is that if you think about it, if you look at some of these transactions, there's special governance, special voting shares, or even just some of the tech IPOs where you have these voting rights curved out or special deals. I take no salary and I have no special voting rights. I am a shareholder just like anyone else. >> Yeah. >> My view is, if I do a poor job, the shareholders should vote me out. We serve at the behest of the shareholders and we don't deserve some special privilege. Our privilege is earned every day by creating value. I think over time, that discipline sets up for at least hopefully a more like-minded value creation management team. I'm not a big believer in voting rights bestowed on people just for the sake of the fact that they founded it or were there early or they are the son or grandson or great grandson of somebody who founded it. I think that leads to sub-optimal results. It was really important to us to make sure that every step of the way we've set ourselves up for great shareholder governance. I jokingly say we want to be part of the Sam Zell school corporate governance, not the Albert Neumann one. >> Well, for that, you're speaking the right language of Real Vision, for the people at home and that I think part of that is, you are a Real Vision subscriber. >> Yes. >> Have you on. You said no shareholder, no special voting rights. One thing I also noticed going through, I don't know if there's prospectus or term sheet. You still own the majority of the stake, I say like 90 percent was these extra investors, like the pipe investors which were Chamath Palihapitiya and Lee Cooperman, both Real Vision guests. Then the other chunk was for the public markets. It wasn't like we're just foisting this new company that has zero revenue onto the unloaded masses. No, you have revenue, no debt and you only sold the whole piece. >> By the way, If you think about the spectrum of Chamath and Lee Cooperman, obviously both are extraordinarily talented bright investors, but from completely different spheres. I think Lee as traditional value and Chamath is obviously much more growth oriented. But to have both of them find our asset to be attractive, I think really speaks to the attributes we were talking about earlier of how uniquely positioned our company is. I think hopefully how valuable people see it, hopefully growth people see it. I certainly am a big believer there and I've decided to focus on it. Currently JHL, my historical investment firm, owns approximately 40 percent. This is all obviously public, I encourage people to just look at the holders page on Bloomberg or look at the public filings. JHL owns 40 percent, which we actually have separately carved out so that I own directly, so people can see directly my shareholder. That's another perfect example of the kind of thing that at close, we wanted people to see my holdings. There are a number of governance things, it's not just, "Oh gee, we don't have a special voting rights." but it's our mindset that we really want to be transparent and be clear that this is an owner, operator culture as chairman, of founder, chairman, CEO, I'm also the largest shareholder. Again, I'm going to make mistakes, there's no question. But I'm going to always have the mindset of what is best for shareholders because I'm the largest one. By the way, one last thing, and this I think does connect and I would encourage people if they're thinking about SPACs. We really did set this up at the time and I think this of speaks to intent, to be a great transaction for all stakeholders. We didn't view our pipe investors as sold to you. We set up a deal and we got the promoter fortress in that, in the case of our deal to take all of their compensation and incentive shares. So our deal out of the gate had to be successful for all stakeholders. That I think hopefully speaks to our mindset in general, and I think that that will be a key distinguishing factor over time. You'll see some of these facts and they were able to get a piped on, what may ultimately turn out to be a very high valuation. Like I say, sold to you guys who they may have been trying to trade out of whatever. >> I feel like the interview that we've had. I'd love to ask you a few more questions, but we are running on an hour. It's been so great having you on to talk in detail because I've seen you talk to Jim Cramer, Andrew Ross Sorkin. Those people are brilliant, but they interviewed you for three minutes, so you can just put out the answers that you have to have your talking points. But it's been great talking with you and getting the detail. >> Thank you, it's a lot of fun. It's hard, obviously if you're talking about your company for three minutes, it doesn't do a justice. I really enjoyed having a longer conversation with the [inaudible] , it's been fun. >> Definitely. Well, I do a SPAC versus an IPO, that's a question that takes 15 minutes to answer. Answer in 30 seconds or less. >> I'll do really quickly actually, the key aspect is, it is a form of regulatory arbitrage, time to market and ability to structure creative solutions. If you think about it, a SPAC is a mergers on an IPO. If you have a high-growth company, it gives you the ability to more transparently convey your long-term plans and structure different things around your deal that might not otherwise be done in IPO. Now, if you think about it, people will do just like the Internet or any new invention. People are going to do good and bad with that. SPACs are not a bubble, there may be some silly behavior going on in some and there's going to be some great results and others. It's a new category and people are going to do good and bad with it. Hopefully good in the case of MP, were maniacally set on hopefully making this one of the great examples over time. >> There we go. I think Howard Klein whos in the lithium space, as doing interview with him that comes out tomorrow and he said of SPACs that they are a bull market vehicle. They are a way to raise capital in bull markets if you want to get things done. We are in a time when you can raise capital in a short amount of time and you want to take advantage of that and you did. >> Well, I'm a fan of Howard. But I disagree with that statement for the following. If you think about it, junk bonds before they were junk bonds were in a weird category. This is a new category, there's no question that insane valuations on pre-revenue concept companies, that's a bull market concept. But that happens in IPOs as well. A SPAC is a structure to bring different stakeholders to the table and more creatively provide a solution, a capital solution for a company that wants to get to the public markets. Frankly, I think even if we have a collapse, I think that this will be here with us. I think it's a new category. Again, there's no question that there'll be a lot of promoters that will go by the wayside. But I do not think a SPAC in general on its face is like a bull market vehicle. In bull markets, it can be misused. But I do believe that they're here to stay. SPACs, I think that because you hear people say, "SPAC are in a bubble." there are many frothy things happening in the financial markets. But SPACs as a tool, and again, it's smaller. I'm not making a direct analogy, but I would look much closer to junk bonds as a historical analogy. Then I would like some bubble thing in the sense that it's a new financial tool, it's a new structure. It's going to be utilized very well by some and terribly used by others. There'll be some of the crazy things that are happening that that won't be successful, but I expect over time you're going to see fees come down in the structure, people will continue to engineer out the misaligned incentives and we'll come up with creative structures to utilize the positive attributes and get rid of the negative ones. I think this landscape's here to stay. >> My way of viewing SPAC is essentially, it's a way of bringing venture capital to the public markets. That's really all it is because the public markets can now invest in more early stage companies, in the same way that companies like Uber were delayed because they should have gotten an IPO much earlier than it I did because by the time that they went public, they were massive. >> It's an amazing point. Let's put it this way. 20 years ago when I started my career, there were double the number of public companies. I think a quarter as many hedge funds. So fast forward, now there's half as many public companies, four times as many hedge funds. So if you think about it, it all comes down to supply and demand. When there's demand, Wall Street figures out a way to supply what ultimately the market demands. The market is demanding more public companies. So the challenge with very high growth public companies is that if you have a very long dated cash flow stream and you want to IPO and you make a forward-looking statement, there's no safe harbor. By the way, again, this can be utilized by charlatans. >> Safe harbor from regulators? >> Forward-looking statements. So in other words, if I have battery X, some new battery for electric vehicles. It was invented by great universities and great blue-chip people, whatever. >> Runs NdPr, go ahead. >> Powers a motor that will move any car. If you have a five-year out EBITDA target or five years out, I can do X of EBITDA. If you make that statement as an IPO, you can be sued over that later on because you made a forward-looking statement and there's no safe harbor for that. Now if you do a SPAC and you make that statement to a sophisticated management team in part of a merger, that's the fiduciary judgment of the board, that can be disclosed and you're not necessarily liable for that. So for cases of high growth, from the standpoint of a company, it is much more efficient and effective to go public via SPAC because you can get more value for what you believe to be value that's coming over a longer dated period. Now, obviously the reality is is that charlatans or bad people can utilize that to make up things, that there's some of that that's certainly going on in the SPAC landscape today. But there are also some outstanding future companies that are being able to get to market quicker because, even thoughtful people obviously don't want to mislead people or be sued over a statement that they made in good faith. The SPAC allows a lot of these companies as you said that might be more nervous about going to market, it allows them to get to market more quickly in of a good-faith way. Again, I think that that is a net positive for the capital markets. I think it's a net positive for capital formation and forgetting a lower cost of capital to, frankly electrification and some of these areas where we want a lower cost of capital as a society. Again, I go back to, this is a good mechanism for capital formation. Now again, like any boom, there's going to be fraud. The internet boom had it, the Gold Rush had it there's fraud in any boom [inaudible] There's going to be a lot of it, and there's going to be a lot of sad stories, and that's unfortunate. But I do really believe that there will be some thoughtful people who will utilize this structure well. Again, I think that's the key distinction that people don't fully appreciate. I also think that in good times and in bad, now that this invention is here and this idea that thoughtful people can be more transparent, and forward-looking, and thoughtful institutional investors and/or other sponsors can be on the other side of the table, that mechanism is here with us to stay. The promote, and the structure, and how things happen may change, but I do believe that that mechanism is net very positive for capital markets. We'll probably see more public companies as a result, which is what the market demands. >> Absolutely, that's good. The major problem in the markets has been the declining number of publicly traded stocks. >> Just wait. They're coming. >> We spoke to the 2015 grants [inaudible] conference, which is on all these platform companies that just eat each other up. We'll have to discuss that on the next one. About SPACs, sunlight, it said that sunlight is the best disinfectant even if it's not always effective. By definitely looking at the venture capital space, there's a lot of rotting in the dark, so to speak. If you look at a company like WeWork, as you mentioned, that never was traded publicly, but there were things that are very similar to what the worst companies are doing in SPCAs now. My last question, I don't want to say my last question, but my last question is, what is it like? Fortress, is she this SPAC? >> Fortress value accusation was the SPAC. >> Sorry. Fortress value accusation. >> Now we're MP. Again, we're MP. N-Y-C, just type it in. >> Yeah, MP. They issued at $10, which is standard for SPAC now. Now, MP, which it became on November 17th when you're doing that? >> That was close, yes. >> It now trades. I actually don't know the exact number, but in the in the low 20's, right? >> I've been talking to you for the last hour, so I haven't looked at the stock. But maybe, you can tell me. But anyways, so it's roughly around that. >> What is it like to have a stock appreciate that much? I saw it yesterday, it was down five percent. For a normal CEO, that would be problem. You'll hurt, but stock is still volatile that five percent is nothing because it's probably is up 20 percent a day before. What's it like to have a stock so volatile, not only with your investment firms capitals tied up with that, but the fact that all the people who trusted in you, that's their investments and savings as well. What's that like? >> It's a two-week old experience for me, although I guess within the SPAC days, but I am such a large holder that we have to execute. This doesn't really work for me well unless I create a great company over time or create a lot of value. In the old days in liquid markets, you could be in and out of things. But I'm a very large holder, and I've got to create a lot of value. Look, anyone who tells you they don't notice their stock price would be a liar. Obviously, I noticed it, and we want to make sure that we have a great company that performs well. But I'm trying not to be impacted by it. Markets are going to do what they're going to do. We're going to execute them. But by the way, having a Fortress balance sheet, having the structure that we have just enables us to be to be long-term focused. I'm obviously very pleased that we've had a successful outcome for our stakeholders. I think, if anything, it just shows that when we were considering this earlier this year that it was very important to us to put together a structure that was good for people. I think we delivered that result. I think that the people who entrusted in us got the outcome that they wanted so far. If we can keep doing what we've done in the operational front, and then from a capital market standpoint with lots of standard ups and downs that happen in markets, we'll have happy people. I'll try not to freak out looking at the day-to-day. >> You are a believer in the Warren Buffett's dictum that you should essentially buy a stock and never look at the price. But you know that's very difficult because you own a plurality of shares, and you also are that company's CEO. So it's impossible. >> Sure. >> But you are long-term oriented. >> Yeah, I think that's a little exaggerated to say never look at the price. You have to in today's day and age. >> Yeah, for sure. >> But yeah. We're a very large shareholder, and we're focused on the long-term. That's how we need to be long-term greedy as the saying goes. >> Right. Well, I want to close by asking you about a big macro call that has nothing to do with rare earths or MP. What do you say about that? >> Wow, that's a tough one. Well no, I guess, this may have a little to do, but I believe it. If I look at the market landscape today, I think that we are on the precipice of a new leadership. We had a number of years, over a decade of a bull market in technology. I do think that regardless as the new president comes in, and whether we see infrastructure or not, I think that we're going to see because of actually this electrification transition, I do think that industrials materials, this whole transition will be a key area, a key theme to think about where you have a significant segment of companies that are going to be impacted to the negative and to the positive. There's going to be some disruption of that, and that will create a new bull market in some respects. Then I think that there are just some companies in the last bull market, you have some of these SaaS companies that are outstanding, but they trade at 60, 70 times revenue. Just mathematically, it's impossible to have a great result. You can have an okay result. You might be able to preserve your capital if interest rates stay at zero, and inflation is what it is. But when you have those kinds of values, if you really want to have a great result, that just is mathematically impossible. If you're looking for significant compounding, I would say, focus on this theme. That has nothing to do with MP. If I can call that, can I count? >> Yeah, that does have nothing. Long materials, long industrials. Would that suggests that you maybe, and again, obviously not investment advice, and this is not what you're saying what you're doing, but short Snowflakes of the world. >> I think to some respect, it's a supply and demand thing, right? >> As a shortage? >> It's as a shortage, and ultimately, I believe it's a reach for duration. If you think about it, the ultimate long-duration asset is something that is destroying capital. If you think about something that utilizes capital in very long duration, super high growth, those are the longest duration. When you think about these companies, you said, and I haven't looked closely at Snowflake, but there's a number of them trading at these multiple. If one slight change in the market's expectation around duration, and I just think you get more of that. You get more of that transition. Again, the regime hasn't changed. nd Right now, people feel so safe even every dip is to be bought. But eventually, the regime changes, and that when the cost of capital changes and there's lots of people off sides, that's when you lead to big secular changes. But again, by the way, I've been very surprised this has gone on. Obviously, it goes on because the scale of money printing, but I do believe prices have gotten to such a degree that duration is so high for these assets that I don't get the bull case of owning them. Even if you think rates are going to stay low, and you think these companies are going to grow at really nice rates eventually grow slow and just do the forward math of what you think the enterprise value can be, and then discount that back. It's still hard to justify some of that math. As more supply comes, more and more supply comes to market, and capital will find different homes. But obviously, it's hard to fight central banks. >> I think that's a really interesting case. I think a lot of the investors that were speaking to on Real Vision are flirting with that view and becoming more comfortable with it. Even if they believe, as they sometimes do, that real rates will save negative for a long time. I know I said this is my last question, but someone from Real Vision actually asked me to ask you this which is, "Do you ever think that there will be, and if so, when is a regulated futures market trading for rare earths?" I know on Bloomberg, I forgot what the function is, MLK? >> It's the [inaudible] index. >> It already exists for NDPI? >> No, it doesn't. The index is on Bloomberg. It's actually an outstanding question. I do. I believe it will exist one day. >> That will probably save a few headaches for you I'm sure. >> Yeah. >> Well, James, thank you so much. You've been so generous, not just with your time, but with your knowledge and your insights. Having on a CEO of a rare earth mine that is going to be fueling on electric vehicles. Really, the future of modern technology, that is so powerful. But then also, you did it via a way SPAC, which is hot in the news so that is great to cover. But I think the most important thing is that you, yourself an investor. You approach these issues, and you look at them through the lens of investor whereas most CEOs who recently went public, they may have a certain agenda. They may look at it from a certain view. But it's great to have someone who can put the hat of a former hedge fund manager on and really share that analysis. It's been wonderful having you on. Thanks so much. >> Thank you, Jack. That's very of you. I appreciate it. Obviously, as you've said, I'm a subscriber, and I love watching Real Vision. It's been an honor, and thank you, and talk to you soon. >> Thank you. >> Hey, there. Since you got to the end, I'm guessing you liked the video, and that's probably because we don't just turn on a camera and film. We work really hard on getting the narrative flow just right. That's why many finance companies are actually now hiring real vision to make videos for them. One of our recent client videos just hit 100,000 organic views on YouTube, and there were no kittens in site. If you want to find out how Real Vision can make a video for your company, just e-mail us at customvideo@realvision.com.