Name: The Battle of Why Rare Earths Are So Important
Uploaded: 2019-11-18
Duration: 14 min
Description: A conversation with Amanda Lecaze, CEO of Lynas Corporation.

Thanks club. We're going to have a fun geology lesson that has big implications for the global economy. Talking about 17 different metals with funny names like Syria and scandium and Europium, can you name all 17 don't have to but Syria and lengthen them made me and pricey DMEM gadolinium Europium, Sumerium, Latisium, yes I- [ CROSSTALK ] I'm taking your word for it that you can go all the way- [ LAUGH ] That was pretty good, pretty good, I didn't even prep her for that. So, now that we've heard some of those funny names, tell us what rare Earth metals are and why they're so important. Okay, so This may seem like a somewhat opaque topic for many of you in the audience. However, with all of you, I guarantee that every single one of you has at least one device, either on the table or in your handbag. An electronic device so each of you today is carrying a rare earth around with you. Most of you probably came here in a car or a bus or something else. Every single one of those vehicles actually has rare earths in it. And indeed, you may have used electricity which came from a renewable source which no doubt used rare earths as well. So, just explaining that [ UNKNOWN ] are a series of 17 elements, you find them on the second bottom row of the periodic table. They are valuable because they are reactive metals. In all of the things that I have talked about, they're used in very small quantities. So if you are for example, the CEO, Of an automotive company, you will rarely think about rare earths, because if you're looking at your build of materials and $ 25, 000 for a car, rare earths may only be $ 200 in that. However, you will sit up and take attention Pay attention if you are unable to source those because your production line stops. And in the last decade, they because they won't run without the rare earth metal. Well you cannot even have an internal combustion engine vehicle without rarest because syrium is in a. Autocare system in your vehicle that converts carbon monoxide to carbon dioxide. So twice in the last decade see as sit up and tight notice and that is 2010 China threatened to stop the export of rare earth materials to Japan And again in the trade was a trade tensions between the US and China over the last 18 months. One of the threats from China has been to stop the export of rare materials. That means that one journalist, not this one, not Fortune, I surely said that the trade tensions meant that Linus was the prettiest girl at the dance. I'm very happy to wear that badge. Okay, let's give some context for why You're the prettiest girl to dance other than your lovely green. But so, China has the largest reserves of rare earth metals and they but they produce even beyond, you know the scope of their reserves. They dominate the market, the vast majority of. Production globally is from China. And then there's your company. Essentially, you're the only producer really outside of China. How did it get to be that China dominated production that is not being produced anywhere else in the world until your company came along? And why does your company exist is that lone competitor. So China has a dominant market position because 30 years ago, they decided that they would. And so at that time, there was a flourishing outside China rarest industry. Deng Xiaoping famously said the Middle East has oil, China has rarest. And at that time, and bearing in mind that China thinks generationally. Here in the West, we tend to think in three or four year electoral terms. So China said, we are not only going to be strong in the resource, but we're gonna build the downstream supply capability. Cuz that's where the value to our economy and the jobs are. And so over 30 years, that's what they've done. So they started with the resource. And they've leveraged that, they've attracted firms to actually come in and invest in China. And they've leverage that. And then China 2025 strategy is no rare earth exported except in value added form. So So I'm sorry, the second part of your question is why us Well in 2010, China and Japan were having a bit of a spat over some islands. And so China threatened to stop export. And that caused the rarest crisis. It's called in the industry. There were two firms that came out of that Lynas and molecule up in the US. As alternate suppliers, the Japanese government provided the last tranche of funding for Linus which got us up and going and they have proven to be a wonderful partner. [ UNKNOWN ] started but the Chinese kept the price very low for a very long time and it filed for chapter 11 in 2016 So the Chinese have effectively created an almost monopoly situation by, through market forces by providing by far the lowest cost product over time. And, in fact the US is heavily dependent on their their product. They did cut off supply to Japan. They haven't exactly done that in the trade negotiations that have been going on. How real do you think it's a threat that they might pull what they did with Japan again and play that card in a trade war with the US? I think it's less likely and the reason why is because [ UNKNOWN ] exists today. So whereas processing plan in Malaysia And are mine at Mount world which is recognized as being the richest deposit in the world. A sufficient to supply outside China markets today although as it grows over the next decade with new 21st century technologies that weren't so much be the case. So I think it is less likely. However, your governments particularly the US government, Australian government and the Japanese government are talking about building new rarest supply chains, potentially developing new resources. And I think that we will see about dynamics play out in the market. To ensure that that doesn't happen. I wanna remind everybody, if you have a question get ready we'll open it up in a second. So you mentioned your facility in Malaysia, but your company started in Australia, you're Australian, your mind is in Australia, but you've moved the headquarters to Malaysia. Explain why that is and then where you might be expanding in the future. So we're an ASX listed company. And yes our mine is in mount world in Western Australia. Some people say where's that? It's 865 kilometers North East of Perth. And others will say well what's 865 kilometers North East They'll say not very much. So certainly all of our workforces fly in fly out the processing of rigorous requires significant other inputs. And Malaysia requires foreign direct investment. So we were in before my time with the company invited to Put the processing plant in Malaysia. And typically this has worked very well for us, except for a very small group of activists in Malaysia but it's a Commonwealth country that may mean less to the Americans here, but it means that its laws and its political processes are based upon English laws and processes. So astray, we feel very comfortable with that. We're in a purpose built a heavy industrial environment, we have access to a skilled English speaking workforce and we're close to our markets. So it's a very good place for us to operate. When I came in and as the CEO, we had many offices and we also were broke So I sort of said, Well, what are people will either be where we make things or where we sell things. We couldn't put our head office in that world. Frankly, it's very long way from any way. Too remote. So therefore, we moved our head office to quantum. So if there's any questions, just raise your hand will get you a mic. You have taught you just talked about the circumstances that led us to China dominating the this market for rare metals and you've spoken a lot about how the Chinese government, you know, supported policies that led us to this point and that you'd like to see other governments Take some action you know to make the market more dynamic. What would you like to see happen? If you're speaking to the US Government, the European Governments, CEOs of big potential customers around the world, what are the policies that would make it a more open competitive market? Who do you think would benefit? Everybody. So I think the first thing to recognize is it's a small market. And I think the Chinese- Billion dollars right? Eactly, globally has given us an excellent case study in developing renderers. They did not let 1000 flowers bloom Right and it's heavy capital at business 1. 4 billion in capex to actually stand up the facilities. So they created a hub northern railroads in China is 60 % of the Chinese rarest industry. Is fully integrated from mine to magnet. It's got Industrial Research Institutes, real skill and capability. So I think the idea outside of China, we are very fragmented. Right? And is she having a more strategic approach to what is indeed a strategic mineral, I think is probably the most important thing. So being more aligned and more planned in our approach, I think is gonna give the west a better outcome. Mm. So you're talking about or you have. We explored opening a new facility in Australia but also potentially one in the United States. So we were talking about this backstage explain why you would be opening this new kind of facility in the US and how that would open in the market because What's interesting to me is that right now even though you're the only supplier outside of China, you basically don't sell any of your products to the US. US is still buying almost completely from China. So actually, there's two categories. So the magnetic material switch to the sexy [ UNKNOWN ] sales does. They are the ones who got into electronics in the car and things like that. The US buys virtually all of those from Chinese suppliers. The catalytic materials which are used particularly inside oil and gas refineries and otherwise We have long term contracts with US producers. But they are lower values then than the other. But there is one category when I reeled off all those names for arrows before. They classified into light, medium and heavy reroutes. Now, we primarily our business is based upon libraries, although our deposit also has significant heavy. [ UNKNOWN ] So those that present come out of the separation process is a compound, which is then sold to a separator in China. Heavy. [ UNKNOWN ] I'm sure the US government, the US can not send its military to war without heavy rare earths. And that present only plays in the world that separates heavy rare earths is China. So, the facility that we're talking about establishing in Texas in the US In the first instance will be a heavy rigorous separation plan. And we will then follow that up with further industry development. Right. So we do have a question will try to sneak it in really fast. Time is running short. If you could just Identify yourself real quick with the mic is coming right there. On any channel, it was just a question of understanding. Is this an economics issue or is it a shortage issue globally and can be recycled? Because you talked about running out of demand continues to grow. Do you see what I mean if if we couldn't get rare earths from China, how big a set of trouble are we in. And cannot be solved through recycling. It can't be solved through recycling because we don't have enough end of life products. For the materials which are required so we have as part of our plan for growth, we have a recycling element to that. But we don't have enough end of life products yet to feed that. In terms of running out. We're not running out. Rarest are actually quite plentiful. It's a triumph for branding. It is simply Being able to identify sources that are economic to develop. Rare earths are not rare but they are crucial to the global economy. Thanks so much Amanda for joining us. Thank you. Thanks very much. [ BLANK_AUDIO ]

The Battle of Why Rare Earths Are So Important

Leadership

A conversation with Amanda Lecaze, CEO of Lynas Corporation. 