This Is How The US Can Become a Player in Rare Earth Metals

China's dominance of the rare earths market is well known. This not only creates potential vulnerabilities for companies, should access to those rare earths ever get cut off, it also gives China significant leverage in trade negotiations right now. Of course, the issue is not that China is naturally endowed with more of these materials, but rather that, over the decades, it's built up an industrial ecosystem to mine and process them. So, is there any prospect of the US entering the arena in a way that's actually competitive? Our guest says yes. Heidi Crebo-Rediker is a senior fellow in the Center for Geoeconomics Studies at the Council on Foreign Relations. Earlier in her career, she was the US State Department's first chief economist. For the CFR, Heidi has undertaken an extensive study of the US position with respect to rare earths and developed a broad set of suggestions for how the US can actually compete. She discusses the resources we have right now, and the technologies and policies that could make the US competitive in this arena. Read the report here: https://www.cfr.org/report/leapfrogging-chinas-critical-minerals-dominance/ Read more:Why China’s Grip on Critical Minerals Is So Hard to BreakEU to Offer US Critical Minerals Partnership to Check China Only Bloomberg - Business News, Stock Markets, Finance, Breaking & World News subscribers can get the Odd Lots newsletter in their inbox each week, plus unlimited access to the site and app. Subscribe at bloomberg.com/subscriptions/oddlots Subscribe to the Odd Lots NewsletterJoin the conversation: discord.gg/oddlotsSee omnystudio.com/listener for privacy information.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief Podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused, and brief. Search Barclays Brief wherever you get your podcasts.

• 0:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees, with the company looking for people with raw, innate intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting

• 1:08Speaker 01

  and hiring practices, but according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company, and Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates, quote, "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute brought to you by ChatGPT. Get started at chatgpt.com.

• 1:52Speaker 01

  Bloomberg Audio Studios. Podcasts, radio, news.

• 2:07Joe Weisenthal?

  Hello and welcome to another episode of the Odd Lots Podcast. I'm Joe Weisenthal.

• 2:11Tracy Alloway?

  And I'm Tracy Alloway.

• 2:13Joe Weisenthal?

  Tracy, you know, we do these episodes on various areas of technology in which China is perceived to be ahead of the US.

• 2:20Tracy Alloway?

  Mm hmm.

• 2:21Joe Weisenthal?

  They're very interesting and I learn a lot. It's not obvious to me like what lessons there are or anything. Some of these things is like, we're really far behind. I don't think we're ever going to catch up. This is very interesting and academic, but what exactly is the point of talking about all this? I don't know if there's anything to do with this information.

• 2:38Tracy Alloway?

  You know what I thought you were going to say is that we are sometimes accused of identifying strategic choke points or areas of difficulty on the podcast and then coming up with absolutely no solutions for how to fix them.

• 2:52Joe Weisenthal?

  I will be the first to admit I have no solutions. If someone accuses me of saying, you have not offered any solutions, you know what? I just say, that's not my job. I'm just a mere podcaster. I'm just asking questions.

• 3:05Tracy Alloway?

  We enunciate the problem and leave it to others to figure out.

• 3:08Joe Weisenthal?

  We leave the problem to others to figure out, but there are people who are doing more than identifying choke points. There are people who are identifying areas and vulnerabilities, etc. Some people actually are thinking about solutions and they're not all pie in the sky. You know, I've seen people on Twitter. It's like, oh, I know how to be more like Chinese and, you know, why don't we just adopt?

• 3:29Tracy Alloway?

  How to be more, you've seen people on Twitter talking about how to be more Chinese?

• 3:32Joe Weisenthal?

  Yeah.

• 3:32Tracy Alloway?

  Is it Chinese Joe Weisenthal?

• 3:33Joe Weisenthal?

  They just say, why doesn't the US just adopt Marxist Leninism with Chinese characteristics? It's really that simple?

• 3:39Tracy Alloway?

  Well, no.

• 3:39Joe Weisenthal?

  And then we can do that.

• 3:40Tracy Alloway?

  On a serious note, the one you see most often is, well, why doesn't the US just ease up on some of its regulation?

• 3:46Joe Weisenthal?

  Yeah.

• 3:46Tracy Alloway?

  Like China in order to get things done quickly?

• 3:49Joe Weisenthal?

  Or just spend more money or something like that, encourage actors to pursue things that aren't necessarily so short term, etc. Yes, there are in theory solutions. Anyway, let's have a conversation which we actually talk about ideas that may be somewhere in the realm of feasible.

• 4:06Tracy Alloway?

  Excellent. I'm ready. And this is also, this is on an interesting topic that's come up a number of times on Odd Lots. At this point.

• 4:12Joe Weisenthal?

  That's right. So we're going to be talking about a very core topic. And of course, this is the US vulnerability to strategic minerals, rare earths, et cetera, which we know that China dominates, which in theory of China were to completely shut off access, you know, now jet military, high tech, et cetera, all kinds of problems. What could actually be done to alleviate this vulnerability?

• 4:32Tracy Alloway?

  And China's dominance was also a crucial turning point in the trade negotiations

• 4:36Joe Weisenthal?

  Yes.

• 4:36Tracy Alloway?

  with the US. And also, I think you got a sense of, I don't want to say desperation on the US side, but like maybe urgency on the US side, just by looking at the headlines that seem to come out on a nearly daily basis about like, oh, we found a huge critical mineral deposit in Utah. So, you know, we're all saved.

• 4:55Joe Weisenthal?

  It's also worth noting, before we go further, this is an area in which there's probably a decent amount of overlap from the last administration to this one.

• 5:02Tracy Alloway?

  Yep.

• 5:02Joe Weisenthal?

  We did an episode a little while ago with Peter Harrell, who talked about some of these deals that the administration is making with equity stakes and private companies. I think Vulcan came up as one of them. And so, yes, we're going to be talking about what, where further we can go in terms of actually having a healthy, robust, domestic environment for our own strategic commodities, et cetera. Anyway, we really do have the perfect guest. We're going to be speaking with Heidi Kriebel Redeker. She's a senior fellow at the Council on Foreign Relations, a former chief economist at the State Department, and she is the co-author of a brand new report for the CFR, looking at exactly this question, what can the US do in this realm? So Heidi, thank you so much for coming on the Odd Lots Podcast.

• 5:45Speaker 03

  Thanks for having me on.

• 5:47Joe Weisenthal?

  Tell us, what's this new report all about?

• 5:48Speaker 03

  So you're right that everyone's identified the problem and that it's been a long time coming. This is like a slow train coming at us for decades at this point. It's not a surprise that China has dominated this market for a variety of reasons. And it's not a surprise that they've weaponized it. They've done it over the years. We did pay attention, but we forgot about it in many ways. But right now, we have an inflection point where we really need to get this sort of Damocles off of the United States. And actually, our challenge is the same challenge that a lot of other advanced economies have right now with this incredible chokehold, not just on critical minerals, but particularly rare earths, particularly heavy rare earths that are the foundation of magnets, which

• 6:33Speaker 03

  go in everything.

• 6:35Tracy Alloway?

  Can I just back up in history for a second because I think it will help us contextualize where we are right now. But what were the conditions that allowed China to basically gain dominance in this particular area? Did they make a strategic decision at some point saying, you know, we're going to be the world's not manufacturer of rare minerals and rare earths, but we're going to, we're going to make this, you know, a priority for ourselves?

• 6:59Speaker 03

  Yes. Made in 2025 was their big strategic plan. They had invested a lot in rare earths, you know, particularly their domestic rare earths many, many years before that, but they decided they wanted to dominate. And they really, they did a very smart job of creating an entire ecosystem. So both domestic China, extraction, processing, and then they came up with the, all of the products that were, that would be the leading demand, which you really need to have for the creation of a market. And the demand, meaning the, you know, new energy, wind turbines, particularly their, you know, their EVs and also defense. So you have a whole like demand pull. And you also have state companies that don't

• 7:44Speaker 03

  have to be profitable. And that's pretty key if you're competing around the globe to actually mine and process. They also have a lock hold on the technology for processing. And so in traditional mining, you know, they have really, they've made a massive strategic investment and we, for a variety of reasons, did not.

• 8:04Tracy Alloway?

  Jo, this reminds me of the episode we did with Dan Wong, where he made sort of similar points about the tech ecosystem that's developed around Shenzhen and how that allows innovation to really thrive. And then also this idea that, well, if you don't necessarily care about returns on capital

• 8:20Joe Weisenthal?

  Right.

• 8:21Tracy Alloway?

  as much as the US certainly, then you kind of have a leg up when you're developing something like this that might not pay off for a very long time.

• 8:28Joe Weisenthal?

  And this always seems to be an issue when we're talking about matters of national defense. Because right, when it comes to national security, you have this other priority that is not profit related. Everything that we've done, every episode we've talked about, this comes up when we're talking about literally the defense industries and the Defense suppliers or other strategic things. Here is this other goal that you have in which you have at least two bottom lines. One's related to security and one's related to profit. And so you have this tension. Tell us, how did you do this report? What was the process by which you researched this? Who did you talk to, et cetera, so that you could publish this?

• 9:04Speaker 03

  The report itself is on how, while we put all of the emphasis on mining, on the extraction, coming up with the processing and the end products, for example, magnets. The thing is, we can't actually outmine, outprocess and outspend China, certainly not at scale and not in a cost-effective way. So what is another? We have basically a huge timing mismatch. Will we get there eventually with friends, allies, you know, all of the different countries that are working on the same problem together? Eventually, but it's going to take a very long time and we don't really have time. So we looked at how innovation could actually leapfrog

• 9:48Speaker 03

  the China chokehold on critical minerals and particularly rare earths. And so that was really the starting point. How do you solve for national and economic security in a way that really plays to US strength in innovation? And then when we took a look around, we found there were some really exciting companies that had taken research and development from like 15 years ago, and they were ready to scale and starting to scale. And so that was really what the excitement was about.

• 10:17Joe Weisenthal?

  Just real quickly, when you say you took a look around, like who did you talk to and how did you identify the people who pointed you to, look, there's a lot of interesting, genuine science and tech that can be scaled up. How did that process work?

• 10:30Speaker 03

  So I started with the national labs because we don't give enough credit to the fact that a lot of the great innovations that come out and are commercialized that we all know and love actually had their origin in our national lab system. It's sort of a national jewel. And so Ames National Lab has this critical material innovation hub. And a lot of the companies that are doing the various types of breakthrough technology came out of or are working with Ames National Lab. And so I started like poking around from there and then really word of mouth. As soon as we got the word out that we were working on this. It's a very enthusiastic, mission-driven community that wants to all leapfrog this challenge through innovation.

• 11:13Tracy Alloway?

  Plus, people like talking about their problems, right? Describe for us the state of the US, I guess, rare earths industry at the moment, and then also what you would describe as the key choke point in this particular strategic choke point. Like, where is the biggest source of trouble or inability to actually do this at scale?

• 11:33Speaker 03

  So in terms of, there are two different parts. The US used to produce a significant amount of rare earths, primarily light rare earths, MP materials in Mountain Pass Mine had a variety of challenges, including not being commercially viable, but that was not the only reason. But we do actually have rare earths in the United States, and we were a mining powerhouse many years ago. I mean, remember like California 49ers and people going out with picks and shovels?

• 12:02Tracy Alloway?

  Oh, yeah, many, many years.

• 12:03Speaker 03

  Many years ago. So we do have mines and we have resources, but there are always, you know, there are always consequences and trade offs. To mine is often toxic. You have environmental concerns. You have a lot of waste that through traditional mining gets generated. So we were more than happy for the Chinese to take on those set of problems and then sell them to us at a very low cost. That's how we all became dependent on them. And I think where we are right now, we do have a lot of partnerships that are being formed. And with Saudi, with South Korea, Australia, I mean, we're doing what we can to go the traditional mining route.

• 12:48Speaker 03

  But I think the really interesting thing is how we can get there like much faster, much cleaner, and with much more cost effectiveness and even competitiveness, cost competitiveness with China through some of these new technologies, mining in the US.

• 13:03Joe Weisenthal?

  Let's talk about them. When you talk about the technologies that could actually get us to parity or something like that, are they more on the mining side? Are they more on the refining side? Or both? Like, let's talk about these technologies.

• 13:15Speaker 03

  OK, so let me give you, let me give you a couple of examples. So back when China cut off Japan's rare earth access in 2010,

• 13:26Speaker 03

  The Department of Energy, I mean, people don't know ARPA-E generally. They think of DARPA, but Department of Energy has its own research grant facility, and they do big problems and put them out there. So they did this in 2011. They sprinkled around a lot of grant research funding for materials that you could create a magnet with that did not require rare earths. And low and behold, a scientist in Minnesota, University of Minnesota, created a rare earth free magnet. So there's a material design approach to this that either drastically reduces how much rare earths you actually need in magnets. And there's a company called Niron Magnetics that actually is, it's commercialized, it's

• 14:08Speaker 03

  scaling, it actually is scaling up massively a new facility in Minnesota. So that's sort of the material engineering approach to it. And then there's this whole other basket of biotech innovations. And, you know, if you want me to go into this-

• 14:23Tracy Alloway?

  Please, please. Please, yeah.

• 14:25Speaker 03

  Okay, so, you know, there are companies like Alter Research Technology, and they, again, are affiliated with this Ames National Lab. They have programmed proteins. So those proteins are basically like, like robots that go in to waste, and I'll get to the importance of waste in a minute, but they will go into waste or other types of tailings, things that come out of mines, and they will go in and specifically target, the protein will target a specific rare earth and extract it. And so it is clean, it's fast, it relies on a very large resource that we have. We have a lot of waste.

• 15:08Speaker 03

  So, you know, it's a domestically sourced resource. There are a number of other, you know, ways that we are very, in a very clean, fast, and cost competitive way, using technology to actually mine waste. And that's actually one of our, it's like, we shouldn't consider waste at this point to be a liability. It's literally America's next mine.

• 15:28Tracy Alloway?

  So I have a serious question, but first, no, first, I'm so curious about the little protein robots. What does that process actually look like?

• 15:37Speaker 03

  So, I don't know, I'm not a molecular, you know-

• 15:42Speaker 03

  Technologist and

• 15:43Joe Weisenthal?

  Any molecular technologist out there listening, that'll be the follow up episode.

• 15:48Speaker 03

  But this is something that's been, again, long in the making in terms of the tech that's been developed. And so it's basic, you know, that this particular company is commercializing the technology. But it is, it's a protein that is altered so that it can go in and sort of micro target specific rare earth elements. And that is, I think it's kind of revolutionary. It's super disruptive. And the same with all of these companies that were part of this, this study that we did. They are at the cusp of being ready to scale and scale fast.

• 16:24Tracy Alloway?

  All right, this is my next serious question, which is, you know, all of this sounds great. Protein robots sounds amazing. Why aren't we doing this already if the technology exists?

• 16:34Speaker 03

  So we're focused on, and this is, you know, this takes a, a strategy and a strategy that focuses on the innovation side. We're very focused on the how do we compete head on with traditional mining? And that's good and it's important. This is a huge complement to that. We haven't really done it yet. We've done it piecemeal. So you have a lot of, a lot of people in this community that are highly focused on the technology, commercializing at early stage, and then figuring out how to go from there. The, I think we have, again, it's a huge opportunity that's out there. When I think about where we are, I think about the shale revolution and how we had fracking

• 17:20Speaker 03

  technology for like decades. And then we reached a point where that technology unlocked an energy revolution in the United States. And it was like an overnight

• 17:30Joe Weisenthal?

  Yeah.

• 17:30Speaker 03

  switch flipped and suddenly we're an energy giant, an energy producing giant. And so I do feel there's something similar in what we're seeing right now in the technology around critical minerals and rare earths.

• 17:43Joe Weisenthal?

  I think we could really use a big switch flip to suddenly have abundance. Those don't come along very often. We should, people have to appreciate that more. I'm reading this press release from Berkeley. As reported in Nano letters, the researcher genetically engineered a harmless virus to act like a, quote, "smart sponge that grabs rare earth metals from water and with a gentle change in temperature and acidity releases them for collection." Sounds really cool. I'll have to go watch your YouTube later. Talk to us about, one of the themes that comes up in a lot of these conversations is the importance of offtake agreements.

• 18:13Speaker 03

  Yes.

• 18:13Joe Weisenthal?

  So, right, like, right now, American companies, they currently do have access to Chinese rare earths, and so it might be very risky for anyone to invest in these technologies, knowing that, at least for the very, you know, the beginning years, when before the cost curve has come down, the competitors might be cheaper.

• 18:32Speaker 03

  The proverbial valley of death.

• 18:34Joe Weisenthal?

  Yeah. How do you solve that problem of guaranteeing that there is demand when these companies release harmless viruses that act like a smart sponge and grab rare earth metals from water?

• 18:44Speaker 03

  So, first, there has to be, this is not just on government to do. I mean, a lot of people point at the massive, you know, very muscular industrial policy that the Trump administration is using right now, and I think that is a very good thing. But it also takes, it takes companies actually coming together more in a consortia type of arrangement to have collective offtake agreements. You have certain companies that have been very forward-leaning in their offtake agreements with certain, I mean, Niron is a good case, that they have some auto OEMs that have been working with them for years now. You have, I mean, Vulcan, you brought up earlier, but

• 19:24Speaker 03

  Vulcan is kind of the poster child for when you get the technology, the industrial policy, and the commercial all together, working to solve. And they're, and they actually are, I think they're the first innovation-targeted industrial policy scale-up, rapid scale-up. Vulcan's only three years old. They closed their Series A in August. I mean, we're talking about 1.4 billion that they got in a consortium together with A company called Reelement that recycles magnets. They take the rare earths and they actually manufacture magnets. That is incredibly interesting.

• 20:03Speaker 03

  They do it on a, they're doing it on a, like a super fast scaling time, time horizon. I think they are aiming for 2027 to start rolling product out and have been going through the validation process with all of their different types of magnets. So they're doing this on an accelerated basis. They got funded by every branch in the military. So they have a built in supply, you know, a demand from the US military right there. They also have semiconductor and aerospace. They're really looking to target the national security and the top economic security challenges. And they have the partners to do that. So I think that's a good example of how we want to do this moving forward.

• 20:59Tracy Alloway?

  There are some market stories where you want every detail. Joe and I have made quite a few podcasts on that basis. But sometimes you've only got 10 minutes and just want to know what's moving markets fast. That's the Barclays Brief podcast. Every week, experts from Barclays Markets and Research get you up to speed on what's happening and what to watch next. Concise, focused and brief. Search Barclays Brief wherever you get your podcasts.

• 21:26Speaker 01

  This is the Bloomberg Tech Minute brought to you by ChatGPT. I'm Carol Muster. Getting hired at SpaceX requires exceptional ability and may include having Elon Musk review a candidate's resume. So writes Bloomberg Business Week's Lauren Grush. She reports that the company culture is defined by Musk and job candidates must understand that a commitment to SpaceX means adhering to this culture and exhibiting loyalty to Elon Musk. To get hired, candidates must demonstrate their achievements from past jobs and hands-on experience matters more to recruiters than advanced degrees. With the company looking for people with raw, innate Intelligence. A spokesperson for SpaceX didn't respond to a request for comment on its recruiting and hiring practices.

• 22:09Speaker 01

  But according to recruiters, advisors, and those who've interviewed for jobs there, it's the space exploration dream that draws people to the company. And Musk invokes that dream regularly to remind workers why they're there. Prospective hires are told that the job will require stamina, including in job ads that candidates quote "must be willing to work extended hours and weekends as needed." One major perk for all that hard work? Employees' access to equity, either the right to buy shares or payment in the form of restricted stock units that vest over time. That's the Bloomberg Tech Minute, brought to you by ChatGPT. Get started at ChatGPT.com.

• 22:49Tracy Alloway?

  Adjacent to the offtake issue, who actually owns the wastewater that we could potentially be, you know, extracting valuable things from?

• 22:58Speaker 03

  So we have lots of different types of waste. So we have industrial waste that comes from mines, where you have primary metals that are extracted, but you have the piles of tailings that sit there on the side because they're either there's no commercial viability to extract them, or they are, you know, they're just considered, they're considered piles of waste, both in operating mines and in mines that have closed down. You have coal ash that is toxic leftover waste from coal mining. You have e-waste, which is, I think, one of the more promising areas. We actually, if you look at old hard drives and cell phones and batteries and the like,

• 23:42Speaker 03

  there are tons of rare earths that are in there, and actually magnets that are in there from years, you know, when we actually had much greater rare earths, you know, intensity in those magnets before we started to like having to have to scale back. So if you look at The waste ecosystem, we have a lot of domestic opportunity. And that's actually why I think Balkan is a really good example. They pull from domestic recycled e-waste. And then they process and manufacture magnets in a completely domestic cycle.

• 24:16Tracy Alloway?

  Joe, that's interesting about coal ash. I could have been mining my ashes from burning the coal stove in Connecticut that first year, mining them for rare earths. If only I had known.

• 24:25Joe Weisenthal?

  Yet another, yet another missed opportunity to exploit.

• 24:29Tracy Alloway?

  To monetize my natural resources.

• 24:31Joe Weisenthal?

  To monetize the natural resources on your land that you had in Connecticut. Let's talk about, okay, so we understand there's various measures and opportunities and resources and technological opportunities and things that work in a lab, things that are already scaling up, et cetera. Talk to us more like from a policy perspective, what do we need to do to get from what we already have cooking and what's already in the works to where we feel good about where we are? And from this policy, would it need to happen in the form of legislation? Or does the government, the federal government as currently constituted, have the cash and the policy levers to pull without new laws being passed?

• 25:12Speaker 03

  So, policy plays an enormous role. And the first thing we need to do is actually understand that we can't do a fragmented approach to this because you end up losing innovation that might actually change the chessboard entirely with China. You also have to deal with waste from a policy basis because we actually don't track waste. It's very hard to find data on how much e-waste the US produces. We ship some of it to Asia. That is very likely fed back into China's massive recycling machine. We shouldn't be exporting, if you consider this as America's next mine. There are ways to address policy that can.

• 25:55Speaker 03

  Provide the data, maybe restrict the exports till we know exactly what value is hidden inside all of the stuff that we're exporting. And then come up with a whole, like a whole strategy that is a critical minerals innovation strategy that sits alongside our other critical minerals strategy and develop that through not only the policy tools around waste, but also financial tools. Where are the valleys of death? Where do we find them? How can we solve them? How can we use government as a pole to get companies together in consortia to actually have those off-take agreements early on? And also work with the material engineers to design what they're going to need earlier on in the process. They're like, there are a lot of good ways to do this.

• 26:40Speaker 03

  One of the big takeaways is that there is a specific equity valley of death that a venture-like entity could help solve this for because you don't have the venture outside of some really big frontier, you know, risk takers that will invest in difficult technology. So I think having some kind of a counter that we have now in the, you know, in the instruments the DOD has, you know, we have a whole range of different agencies that have all loan-based, they're almost all loan-based instruments. And that's not what it, this is, these are tech companies. Yeah.

• 27:25Speaker 03

  And they really can't sustain debt. They're not, you need to have that VC come in early on and help them through various series of fundraising, partner with others, bring in other, like private VCs throughout the process. And we need to, and we do have one of those right now that is Incutel. It is not technically, I don't know if you've heard of Incutel before. Is the CIA's VC arm? It is. Okay. Very good. They are actually, they, they recognize this gap in the capital structure and the actual ability for these breakthrough technologies to fundraise. And so they actually created a separate fund within Incutel called their Compass Fund. And they're not just the, it's not just the CIA. They're a nonprofit. They work sort of across the intelligence agencies and they've grown over the past

• 28:10Speaker 03

  25 years from what they started out, which was really a very, like a boutique VC for specific, solving specific problems for the intelligence world. So they have invested and actually. Going back to one of your earlier questions, how did I find these companies? Well, it ends up that they have invested, they invested in two companies that I had found through Ames National Lab. And so I think they were extremely helpful in thinking through what the gaps actually were. And we really nailed this early-stage VC, needing to come from government. It's a market failure. Until we have solved for that market failure, these will just lie on the shelf.

• 28:51Tracy Alloway?

  Incutel has one mission, to be the most sophisticated source of strategic technical knowledge and capabilities to the US government and its allies. That's through capital. That's an interesting one.

• 29:01Joe Weisenthal?

  Yeah, we should do an episode on it. Yeah, we should, for sure.

• 29:03Tracy Alloway?

  Um, OK, so since we're talking about the CIA and you brought up the military earlier, this is going to be a natural segue, I promise. You bring up a historical analogy in your paper, a previous choke point that was militarily very, very significant for the US at a very, very historical time, which we actually managed to solve through industrial policy. How much relevance does that particular analogy have to our current situation?

• 29:29Speaker 03

  Well, I love this analogy because as we were contemplating entering World War II, the Japanese cut off the supply chain for natural rubber in Southeast Asia. And we were dependent on this flow for 90% of our rubber.

• 29:48Tracy Alloway?

  Right, and we can't grow rubber trees, right?

• 29:51Speaker 03

  Rubber came from Southeast Asia for a reason. And what we did was we actually, we took technology, synthetic rubber technology, and we scaled it like crazy. So we actually were able to provide for, you know, for trucks and tanks and everything that rubber goes into that we had never even thought about, but until it was gone. And we were not able to actually enter World War II without the ability to provide something in replacing that rubber supply. And so we did it both through a rapid warp-speed Manhattan Project. I mean, we think of Manhattan Project for

• 30:32Speaker 03

  The atomic bomb, but at the same time, I think there's a good case to be made that without synthetic rubber, we would not have won World War II. The other side of that was that we did a huge, you know, all of the population should chuck in their extra rubber tires and their raincoats and their garden hoses and whatever you could for the war effort so that we could actually use and recycle rubber that we had already here. So it's a two-pronged, I think, analogy that works.

• 31:04Tracy Alloway?

  There are some great like posters from World War II about recycling your tires and things like that. Nice graphic design.

• 31:11Joe Weisenthal?

  I have boxes of like old iPhones and stuff that randomly.

• 31:16Tracy Alloway?

  Recycle them for the rare earth effort.

• 31:18Joe Weisenthal?

  I bet I have 10 lap- 10 old laptops and ringing them stuff.

• 31:22Speaker 03

  And, and the way that, I mean, the way that the cycles of like upgrades happen, I mean, everybody has tons of like old laptops where the software doesn't work anymore. And so this is actually a huge opportunity. So we, if we could actually make it a national priority, and there are ways to do that through government incentives, you know, you can, there are ways that companies can do that through paying for old, you know, old unused, unusable technologies and then have, maybe get the, a government credit. There are like a lot of ways you can be creative about getting this, this entire system to rev up.

• 31:57Tracy Alloway?

  You mentioned Warp Speed just then, and so, you know, the obvious thing that comes to mind is also the vac- the COVID vaccination efforts. Can these types of programs exist without a coinciding national emergency to galvanize everyone into action? And I totally take it that competing with China is one of those rare areas of bipartisan agreement nowadays, but at the same time, shortages, potential choke points in rare earths has been a long-running issue. We've been aware of it for a while. So far, we haven't really done that much. What's going to galvanize people now and really lend this whole effort a sense of urgency?

• 32:36Speaker 03

  So I think we actually do have a national emergency and certainly policymakers and companies understand that when China shut off access.

• 32:45Tracy Alloway?

  So that was the moment.

• 32:47Speaker 03

  I think that was the moment where it really hit that not only over reliance, but up to 100% reliance. That's like that, I mean, the Chinese cut off access to the technology that they had developed for refining, for extracting. They actually, when we had that one year pause, one of the things that the Council on Foreign Relations partner, Silverado Policy Accelerator, they had done a lot of work on what China was actually exporting after that October lifting of the export controls. They're exporting magnets, but they're not exporting those rare earths or the technology that we need to actually produce the same for ourselves.

• 33:32Tracy Alloway?

  Yeah, it's interesting that like they won't export the rare earths, but they'll export the finished material, which is.

• 33:39Joe Weisenthal?

  The end components.

• 33:40Tracy Alloway?

  Yeah.

• 33:41Joe Weisenthal?

  Yeah, well, you want to climb the value chain, right?

• 33:44Tracy Alloway?

  They're doing it.

• 33:45Joe Weisenthal?

  And now just give away the low margin sales. You know, I mentioned, it seems like there is some continuity on some of this stuff from the last administration to this one. When you're in DC talking to people, do you send from the, on the policy side or on the government side, do you feel that there is a sort of intensity and focus? Because again, when you, you know, you go back to World War II, one thing I associate with that time is just an incredible amount of like focus on solving specific things and coordination. Do you sense that that exists?

• 34:16Speaker 03

  So just as with World War II, there were, there were a lot of officials flagging the fact that we were over dependent on single sources or the choke point was the shipping lanes. And there's a huge parallel here. During the Biden administration, one of the first things during the first 100 days, the Biden administration did a resilience study and basically looked at where the choke points were. This was after COVID. It was looking at pharmaceuticals. It was looking, but one of the big takeaways was that we were so over dependent on China for rare earths and critical materials, critical minerals, that we had to do something ASAP.

• 34:57Speaker 03

  The Trump administration and Trump One also understood that we had this huge vulnerability in critical minerals and they had, they passed it, you know, a number of executive orders and tried to get the whole process started for mining permitting, you know, reducing permitting times, environmental, you know, restrictions and timelines. But it's again, it's a, it's a complete parallel with what happened in the run up to World War II. We actually have seen this coming for a very long time and it wasn't until China shut off the access that it, that the US and Europe kind of woke up to the fact that this is a big problem.

• 35:53Speaker 01

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• 37:16Joe Weisenthal?

  You know, one thing you mentioned, the national labs, they're under threat, right? I mean, like, you talked about them as being this important crown jewel of the US economy, US industry, all these stories about funding cuts, et cetera. What is the intersection there? And from your perspective, anyway, are we undercutting our own efforts through some of these budgetary choices?

• 37:37Speaker 03

  Absolutely. I mean, this is something that we do really, really well. The whole world looks at the way that DARPA and ARPA-E and the national labs that are associated are actually huge innovation engines. Often, it's a matter of people coming in, entrepreneurs coming in and understanding what the applications of the science can be to commercialize it. But this is exactly the time where we have to double down on the innovation and the investment in R and D that is not only in the national labs, but also universities, because that's where this is coming from as well. Niron's breakthrough came from University of Minnesota. So I think, you know, you want to make sure that right now, in this particular

• 38:21Speaker 03

  moment, the solutions can come from biotech as opposed to mining tech. You don't want to be cutting off any channels of investment in R and D right now.

• 38:32Tracy Alloway?

  How often do you hear people in DC talk about the potential for capital misallocation when it comes to rare earths? Or is the idea of, I guess, cylindrical magnets, is that not as much of a looming concern, given the urgency of the problem?

• 38:47Speaker 03

  I think that the demonization of risk taken on cylindrical has really plagued us for a long time. We have to be much more ready to take risk and be, like, hold hands on a bipartisan basis and realize that this is a big moment where we have to actually take more risk.

• 39:09Tracy Alloway?

  So I do love all the analogies we've used in this conversation. So obviously synthetic rubber, but you mentioned fracking before. And a lot of people will concede that fracking was incredibly crucial to America's, you know, economic wellbeing nowadays, and we've become an energy exporter. But at the same time, there's an externality, a negative externality, associated with fracking, which is environmental damage. And there's a lot of concern and also controversy about how much impact that actually has. What are the trade offs that the US would have to think about as we encourage more of a domestic rare earth industry?

• 39:48Speaker 03

  So again, there are trade offs. And I think one of the, you know, I'm going to pivot back to the innovation because I think one of the ways we can do this in a clean way is through some of these new technologies. You were talking about Berkeley and their, you know, the, so Rio Tinto is using a proprietary new microbe that they have, that they've just started utilizing in some of their old mines in Arizona where they didn't have the ability to economically extract copper. But using microbes, they are able in a clean way to use a biotech solution to actually

• 40:29Speaker 03

  extract copper on a cost competitive basis that they were not able to extract. And they're rolling this out right now. They'll be doing it in the months ahead. And I think it's really noteworthy that, that you have, you know, a large mining company that is taking a plunge into a biotech solution to how to unlock value that they thought the mine was basically, you know, it was closed. So we can do that in a way that is clean. We can do it in a way that's fast and cost competitive. And so I think that there are ways to do that with using innovation. I think we need to be very mindful of that because mining and refining are dirty businesses. That's just, that's life.

• 41:11Speaker 03

  And if we can do them, if we do them in a cleaner way, then that is a much more sustainable way to actually have, you know, have an industry moving forward that actually suits the national interest.

• 41:24Joe Weisenthal?

  We did that biotech VC episode. So much interesting biotech stuff that I never really thought about.

• 41:29Tracy Alloway?

  Yeah, I never thought mining would be.

• 41:32Joe Weisenthal?

  Much more to do on learning about some of the science. Heidi Kreebel Redeker, thank you so much for coming on Odd Lots. Fascinating report. Encourage everyone to go read it and check it out. There are actually some ideas out there, not just people identifying problems. That was great.

• 41:48Speaker 03

  Thank you so much. Great to be with you.

• 42:02Joe Weisenthal?

  Tracy, I really want to learn more about industrial biotech.

• 42:05Tracy Alloway?

  Yeah.

• 42:06Joe Weisenthal?

  I mean, we mentioned it during the conversation, but I feel like there could be tons of interesting episodes on the crossover of that sort of natural science and mining and stuff like that.

• 42:14Tracy Alloway?

  Well, I'm looking at a page on Rio Tinto's website right now, and the title is "Life Finds a Way: Microbes." And then it says, "While dinosaurs vanished, their tiny companions, microbes, adapted and thrived, proving their resilience over time. And now they can be used as some of our most groundbreaking advancements in mining."

• 42:35Joe Weisenthal?

  That's pretty cool.

• 42:36Tracy Alloway?

  So it's exciting.

• 42:37Joe Weisenthal?

  Yeah, let's do, let's get a scientist or something on there to talk about microbe science.

• 42:40Tracy Alloway?

  I kind of want to see how all of this works, but of course, you can't actually see the microbes, so I'll just have to think about it. Just imagine.

• 42:47Joe Weisenthal?

  There's got to be YouTube at least. We could go on the road to some mine, right? I'm sure and like.

• 42:51Tracy Alloway?

  There's just going to be water passing through.

• 42:53Joe Weisenthal?

  Just some water. I know that's what it would just look like some water. No, but I thought that was very interesting. I guess I thought, you know, in my mind, when I think about some of the, when I thought about the rare earths challenge before, I sort of assumed, I suppose, that, okay, the US probably could overcome our industrial reliance at the cost of a lot of money, basically a lot of loss-making investment. Because again, that's the nature of defense. National security is okay. You just have to sometimes spend money, et cetera. So it's interesting, the prospect that there are technologies that not only could solve perhaps the sort of strategic element, but that actually could be cost competitive, perhaps could create export opportunities. Could perhaps also be for profit. That's very interesting, and I hadn't really appreciated

• 43:38Joe Weisenthal?

  that prior to Heidi's report.

• 43:40Tracy Alloway?

  Yeah, I think the overall thrust of the report, this idea of like, okay, you're not going to beat China necessarily on its own territory. You're certainly not going to beat them in the same way that China has developed this industry by, you know, basically ignoring a lot of environmental concerns and things like that. So you have to turn to the US's own competitive advantage, which is research and development, and also like huge amounts of government capital, which, you know, sometimes we have an issue deploying, sometimes we don't. It was super interesting that Heidi described, you know, the recent cutting off of China's rare earths as like the moment where people have really realized this is an issue. And so there is the potential to actually galvanize some action.

• 44:23Joe Weisenthal?

  I have no doubt in my mind that the US has the sort of capacity, the know how, the science, the natural resources, the money, et cetera, to do it. I only question, of course, whether we have the sort of organizational capacity. And of course, you know, the now, the national research labs are sort of the prime example of the concern. Here is the site with which a lot of these innovations come from. There is this widespread acknowledgement that this is a very serious thing. And apparently, you know, they're seeing their budgets impaired at the same time. Can everyone get on the same page? Can we prioritize things? Can we say that we want to like move in concert? Or do you just have these like various like political fights and these various factions, et cetera, that are not coordinated, that

• 45:07Joe Weisenthal?

  are not on the same page, that are working at cross purposes? That remains my main source of concern, but perhaps

• 45:12Tracy Alloway?

  A legitimate concern, I would say.

• 45:14Joe Weisenthal?

  Perhaps to your point, maybe there has been some galvanization, and maybe there are some paths here.

• 45:20Tracy Alloway?

  Wow, I'm still on this Rio Tinto site.

• 45:22Joe Weisenthal?

  Oh, yeah, you're seeing

• 45:22Tracy Alloway?

  It's great. It's, they keep making references to Jurassic Park, which is not something I expected from Rio Tinto. But anyway, shall we leave it there?

• 45:30Joe Weisenthal?

  Let's leave it there.

• 45:31Tracy Alloway?

  All right. This has been another episode of the Odd Lots Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway.

• 45:36Joe Weisenthal?

  And I'm Joe Weisenthal. You can follow me at the Stalwart. Follow our producers, Carmen Rodriguez at Carmen Armin, Dashal Bennett at Dashbot. And Kale Brooks and Kale Brooks. For more Odd Lots content, go to Bloomberg.com/oddlots for the daily newsletter and all of our episodes. And you can chat about all of these topics 24/7 in our Discord, discord.gg/oddlots.

• 45:57Tracy Alloway?

  And if you enjoy Odd Lots, if you want us to go on a micro mining tour, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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