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Speaker 1: M hey everyone. So July two seven, Hawthorne, Nevada. It's

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Speaker 1: a tiny town in Mineral County in Nevada, bordering the Sierras,

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Speaker 1: kind of halfway down the state. I was a young

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Speaker 1: energy analyst on a solo road trip of the western US,

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Speaker 1: visiting different geothermal sites to get a field for that sector,

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Speaker 1: so operating power plants, plants under construction, drilling sites, and

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Speaker 1: on that particular day, a very early stage exploration. I

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Speaker 1: was sent out on this trip under the notion that

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Speaker 1: there's no substitute for experience. It reminds me of that

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Speaker 1: Bruce Springsteen song. Bobby Jean Rees says, we learned more

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Speaker 1: from a three minute record baby than we ever did

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Speaker 1: in school when it comes to understanding what's actually going on,

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Speaker 1: for getting a feel for something, it's so true. You've

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Speaker 1: got to be there, you have to do the thing.

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Speaker 1: So back in Hawthorne, six am at the El Capitan Casino.

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Speaker 1: Look it up. It's as glamorous as it sounds. I

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Speaker 1: met up with a freelance geologist, really nice guy, known

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Speaker 1: to take off into the desert on his own for

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Speaker 1: weeks at a time and come back to his client

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Speaker 1: with beautiful accurate hand drawn maps. From there, we drove

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Speaker 1: in his truck north and east deep into the U.

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Speaker 1: S Grade basin. After three or so hours on a

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Speaker 1: dirt road, we came to a sort of dingo fence.

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Speaker 1: Then we had to get out and open up, and

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Speaker 1: then we kept going more to crawl. Now, given the

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Speaker 1: rocks we had to cross over, we kept bouncing along

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Speaker 1: for another hour or so until we got to our destination,

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Speaker 1: the middle of absolute nowhere. He said, in all likelihood

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Speaker 1: we were the first people to visit this patch of

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Speaker 1: land in at least fifty years. There was a rusted

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Speaker 1: out nineteen twenties Ish trucks standing next to a fallen shack.

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Speaker 1: But all this was right next to a bunch of

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Speaker 1: hot springs. He was there to map them in relation

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Speaker 1: to fault lines in the surrounding area, to get an

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Speaker 1: initial sense of the reservoir down below. Very cool. About

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Speaker 1: two hours into our drive back to Hawthorne, he looks

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Speaker 1: over at me and he says, hey, you want to

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Speaker 1: see my claim? You mean, like old timey prospector claim. Um, yeah,

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Speaker 1: I do. So he turned to the next crossing on

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Speaker 1: the dirt road we were on, and we arrived at

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Speaker 1: a big pit. Whatever you find you can keep, he said, Well,

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Speaker 1: turns out it was a turquoise claim. So there I

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Speaker 1: was with a hammer and the Nevada son, banging on

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Speaker 1: rocks and finding more than a handful of really great

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Speaker 1: turquoise that I still have to this day. Turns out

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Speaker 1: that when he found this claim, he immediately quit his

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Speaker 1: job at a commercial copper mine in Utah and focused

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Speaker 1: on this full time. From mining the turquoise to making jewelry.

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Speaker 1: He said he was doing okay at it for a while,

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Speaker 1: but then in the end couldn't compete with the commercial

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Speaker 1: minds and jewelers and had to let the business go.

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Speaker 1: Today on switched on. We're going to talk about how

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Speaker 1: natural resource discoveries can be a boon for those in

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Speaker 1: a position to benefit from them, but for others they

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Speaker 1: can up end lives with some pretty dire consequences. We'll

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Speaker 1: focus specifically on cobalt and a trip. BENF Medals analyst

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Speaker 1: Quasi Mpofo recently took to the Democratic Republic of the Congo.

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Speaker 1: He went to better understand the market and conditions in

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Speaker 1: a country that supplies seventy of the world's cobalt, a

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Speaker 1: key component in the batteries in our bones and increasingly

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Speaker 1: electric cars. The episode is based on a report titled

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Speaker 1: Solving the Blood Cobalt Challenge for EVS. Benof users can

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Speaker 1: access this report on BNF dot com, the BENF mobile app,

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Speaker 1: and the Bloomberg terminal. As a reminder, being If does

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Speaker 1: not provide investment of strategy advice, and you can hear

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Speaker 1: the full disclaimer at the end of the show. I'm

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Speaker 1: Mark Taylor here Withdanna Perkins and you're listening to switch

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Speaker 1: on to being a podcast Quazy, Thank you for joining

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Speaker 1: us here today. Thank you for having me. You recently

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Speaker 1: returned from a trip from the Democratic Republic of the Congo,

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Speaker 1: which we will refer to as the DRC probably for

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Speaker 1: the rest of this podcast and really is going to

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Speaker 1: be the focus of our conversation today. While bienny F

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Speaker 1: analysts over the course of their career do often come

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Speaker 1: in contact with the research topics that they cover, you know,

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Speaker 1: there usually is a reason to go and it explore

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Speaker 1: a little deeper. What were you hoping to achieve on

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Speaker 1: this trip and maybe you could tell us a little

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Speaker 1: bit more about what these minds are actually like. Yeah, sure,

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Speaker 1: so festival to put it in a little bit. In context,

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Speaker 1: cobalt is one of the metals that goes into the

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Speaker 1: lathing my own batteries. It's a key component and the

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Speaker 1: DRC currently produces as of the global cobalt, so it's

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Speaker 1: a very key market for cobalts. And then as part

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Speaker 1: of our coverage, we wanted to understand what is it

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Speaker 1: that is happening on the ground. We wanted to visit

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Speaker 1: some minds to be able to put production that's apply

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Speaker 1: into perspective. And also importantly we wanted to have our

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Speaker 1: own independent view of how it iss No on mind

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Speaker 1: supply is on the ground, what was it like? Can

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Speaker 1: you describe? Well, first what is artisanal mining and what

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Speaker 1: kind of things did you see there? So it iss

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Speaker 1: not minding pretty much has to do with the tools

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Speaker 1: we used to mind, So it's just using normal pickasts,

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Speaker 1: like the kind of tools you use in the backyard

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Speaker 1: garden to mine. And also secondly, it has to do

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Speaker 1: with how much or how deep you can go. I

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Speaker 1: think in the Congo you can't go below fifteen meters

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Speaker 1: somewhere on that. So it's pretty much the tools and

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Speaker 1: the skill that's which you can mind. And it was

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Speaker 1: quite fascinating and interesting because before I went had read

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Speaker 1: a lot about you know, how unsafe it is for people.

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Speaker 1: And I must say it was fun, but at the

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Speaker 1: same time it was sometimes very confusing. I don't know

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Speaker 1: what Charles Dickens says. It was the best of times

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Speaker 1: at the same time it was the West of time.

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Speaker 1: So in some areas you go, people seem to be

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Speaker 1: following the laid down rules, the wing that right, using

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Speaker 1: the right tools, but then in other places not so

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Speaker 1: many people were doing it right and using the right tools.

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Speaker 1: And it was just having to be in both wells.

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Speaker 1: And what's quite interesting, other minds, other kinds of other

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Speaker 1: different commodities are done in a different way. They're not

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Speaker 1: used using these pick axes. It is it's something that

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Speaker 1: is specific to cobalt that requires this type of mining,

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Speaker 1: or is it something that's specific to the country. So

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Speaker 1: I mean it's a it's just not mining. It's a

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Speaker 1: global challenge. You're looking at globally about forty million or

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Speaker 1: more people involved in it all around the world, And yeah,

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Speaker 1: it's pretty huge, and it's specifically. We used to find

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Speaker 1: this happening in the precious method or precious minerals area.

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Speaker 1: And by that I mean gold. You're talking about the diamonds,

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Speaker 1: things that have really high value and it's very easy

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Speaker 1: and less downting to process. But historically what we've seen

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Speaker 1: with the cobal sector is that so the value of

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Speaker 1: cobal is shut up two hundred thousand dollar pet on

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Speaker 1: last year, up from about twenty thousand five years ago.

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Speaker 1: So all of a sudden, you have just this piece

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Speaker 1: of sun in your backyard which is worth hundred thousand

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Speaker 1: that's probably your whole lifetime. And so people just started

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Speaker 1: digging their back yards and decide that. I went to

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Speaker 1: the history of it is in this young man was

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Speaker 1: digging his sea wage at his back yard and he

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Speaker 1: hits what he would later learn his cobalt. So all

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Speaker 1: of the sudden, his neighbors that digging their bedrooms, their bathrooms,

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Speaker 1: their poaches and everywhere. Everyone was just digging. And to

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Speaker 1: put it in perspective, this was in the middle of

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Speaker 1: the city where the local market was. So the government

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Speaker 1: had to step in and that is when they had

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Speaker 1: to do something. How did you figure out it was

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Speaker 1: good question. So these are people that have lived in

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Speaker 1: they've lived in cobalt all their lives, I mean expected

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Speaker 1: to be blue. But I was told in a previous

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Speaker 1: episode by Sophie Lou that a couple of mine is

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Speaker 1: not blue. No, it's not blue. So it's black mixed

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Speaker 1: with up. So it's just the nature of the rock.

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Speaker 1: As a trained geologist, I'm able to tell. We're training

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Speaker 1: it should be able to tell what it looks like

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Speaker 1: from other monros in the soil. There there are a

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Speaker 1: large number of people who have actually become millionaires off

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Speaker 1: of this or is it really people are digging this

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Speaker 1: stuff up, but somewhere centrally there's a company that's really

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Speaker 1: profiting off of this. So it's an interesting value chain.

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Speaker 1: So basically you have the people who do the dig in,

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Speaker 1: so they are at the lower end of the value chain.

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Speaker 1: So from what I'm told to get about, in good

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Speaker 1: times when prices are high, they get about fifty to

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Speaker 1: thirty dollars per day for their efforts and their work.

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Speaker 1: And as you go higher, you get closer to the

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Speaker 1: hundred thousand dollar bounty I talked about. So you find

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Speaker 1: that they gets getting the least, and then that gets

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Speaker 1: transported to the next level of um workers, who are

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Speaker 1: mostly the washers, and that's where you find most women

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Speaker 1: getting involved and in the DFC. According to estimates, we

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Speaker 1: recorded forty percent of people in that art is now

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Speaker 1: mining sector women. So they they do the washing in

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Speaker 1: other ways, trying to increase the concentrates of the cobalts

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Speaker 1: in the matter reals that they have, and that moves

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Speaker 1: out to the value chain to what we call the bias.

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Speaker 1: So these are biased that come all over the world,

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Speaker 1: particularly from China from India who buy these and they

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Speaker 1: send it off to the smeltes who do the further processing.

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Speaker 1: And from these smeltes eight percent of the cobalt that

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Speaker 1: is producing congo and get shipped to China and it's

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Speaker 1: refined into chemicals that we use for batteries. So when

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Speaker 1: I read your note, I thought China, okay, so that

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Speaker 1: means the batteries that I used probably in in my phone.

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Speaker 1: But then I thought, oh no, not my phone. I'm

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Speaker 1: sure my phone is fine, but that's that's wrong, right,

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Speaker 1: The stuff is in my phone is very wrong. It's

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Speaker 1: very hard to trace the value chain. Where does they

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Speaker 1: get marquis So mostly what we noticed it was at

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Speaker 1: the smelter on the refinery level, because they buy and

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Speaker 1: it mix it in this hot cooking pots where it

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Speaker 1: comes from every source. So you have those who are

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Speaker 1: doing it right sending it to the same smelter as

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Speaker 1: those who are mining with children sending it to the

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Speaker 1: same smelter. So that melting pot is where we found

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Speaker 1: the hardest child. Is there a pricing difference between ethical

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Speaker 1: and not ethical cobalt? For now? Not on the market.

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Speaker 1: The London Metals Exchange le MY sets the price for cobalt,

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Speaker 1: and that is what pretty much everyone around the world uses,

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Speaker 1: So why wouldn't everyone buy ethical cobalt? So, like I

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Speaker 1: mentioned earlier, the d r C produces seventy of the

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Speaker 1: current cobalt market. The problem there is that it's a

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Speaker 1: country where it's hard to trace the origin of the

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Speaker 1: cobalts you buy. You don't know. There had been conversations

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Speaker 1: about relying on other markets like Australia, like Canada, like Cuba.

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Speaker 1: But what we found in our research is that if

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Speaker 1: all automakers were to rely on cobord that comes out

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Speaker 1: of the d r C, by one, there will not

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Speaker 1: be enough cobalt for our batteries and that might threatend

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Speaker 1: the whole Evie revolution. So one way or the other

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Speaker 1: you have to deal with the d r C if

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Speaker 1: we want to get sustainable supply of cobalt. But the

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Speaker 1: challenger is that you just don't know where your cobalt

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Speaker 1: is coming from. So literally, in a year from now,

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Speaker 1: if we decided, okay, we're just not going to buy

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Speaker 1: anything from the Democratic Republic of the Congo, we wouldn't

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Speaker 1: have lithium my own batteries, and lithium my own batteries

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Speaker 1: are used in well, my phone, your phone, cars, stationary

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Speaker 1: storage for utilities, so pretty widespread and we've got some

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Speaker 1: pretty aggressive forecasts for there to be more of them.

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Speaker 1: Can you actually, So there's there's this term ethical cobalt

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Speaker 1: which exists and it has a pretty strict definition of

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Speaker 1: what is ethical. Can you explain that? So ethical cobalt

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Speaker 1: is cobalts that first of all, is free from child labor,

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Speaker 1: very important. Secondly, you don't have issues of corruptions around

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Speaker 1: in it, and in the d C on Congo in

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Speaker 1: particular their incidents where minerals sold where used to fund

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Speaker 1: wars and other conflicts within the region, so there's no

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Speaker 1: incident of corruption and human rights is respected. Also in

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Speaker 1: the d r C, d A incidents where people like

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Speaker 1: in regions where they are not assured than guarantee of

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Speaker 1: a good safety wakened environment. So basically, ethical cobortists about

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Speaker 1: three tens eliminate children out of those, MINCE guarantee human

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Speaker 1: rights safety, and thirdly, it should be free from corruption.

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Speaker 1: So further down the line, there are companies that are

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Speaker 1: very aware of this and trying to source ethical cobalt,

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Speaker 1: even if it's very challenging to do. What are some

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Speaker 1: of the companies that are sort of leading the way

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Speaker 1: and trying to improve this particular issue. So in this area,

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Speaker 1: the Kunsumer electronic industry actually had a head stats, so

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Speaker 1: you think and been like Apple. Apple is one of

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Speaker 1: the companies that initiated very strong supply chain principles to

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Speaker 1: ensure that the acborts is eartically sourced. So I would

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Speaker 1: say the EV sector is playing a catch up to that,

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Speaker 1: and we've had BMW, for example, showing really strong leadership

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Speaker 1: by engaging with companies in the DRC and with that

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Speaker 1: Sisenal Mince and the DFC. Currently they've entered a three

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Speaker 1: year partnership with the German government to pilot how best

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Speaker 1: they can ensure transparency in the chain. We've also have

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Speaker 1: incidents where Voxwagon VW also working with blockchain technologies to

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Speaker 1: ensure that the cobalt the source is traceable and they

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Speaker 1: know where it's coming from. There's also the incident like

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Speaker 1: companies like why You that are actively engaging with companies

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Speaker 1: on the ground to ensure that they're able to verify

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Speaker 1: wherever the source their cobalt. So there are companies around

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Speaker 1: doing quite great stuff in the process, but as I

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Speaker 1: said earlier, it is a very very challenging issue, especially

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Speaker 1: where it gets missed in the hot pot. In other ways,

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Speaker 1: the smelter does the regulatory oversight for other minerals, would

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Speaker 1: it work for cobalt as well the same frameworks that

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Speaker 1: are used for other minerals. It should. So in terms

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Speaker 1: of framework particularly what is this that before the whole

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Speaker 1: cobalt type was what we call the dot frank, which

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Speaker 1: is a United States Act, and part of that was

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Speaker 1: to ensure that confluce minerals produced in the origion of

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Speaker 1: the d r C do not end up in the

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Speaker 1: global supply chain to fund conflict in the DRC. And

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Speaker 1: with these ones it will focus on gold it's in

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Speaker 1: and other metals, So yes, it that's weak. But then

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Speaker 1: the limitation of the dot Frank is the fact that

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Speaker 1: it already focused on finance and conflicts, and this is

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Speaker 1: a different issue. And then dot frank what the framework

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Speaker 1: did was you just have to do a due diligence

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Speaker 1: on your upstream and just put it in the United

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Speaker 1: States SEG document that you've done it due diligence and

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Speaker 1: to the best of your knowledge, ABC requirements has been satisfied.

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Speaker 1: But when you're talking about these ethical stuff I mentioned,

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Speaker 1: you need to take it a step further when it

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Speaker 1: comes to trying to improve that. You can do diligence,

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Speaker 1: but only the information has to be good enough to

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Speaker 1: do diligence on. You mentioned in this note that maybe

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Speaker 1: blockchain could be part of the solution. What are some

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Speaker 1: of the ways to improve the transparency for those that

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Speaker 1: do care a lot about improving this for the miners,

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Speaker 1: So first of all, you have to go to the

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Speaker 1: DFC and work with the producers. It's very important because

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Speaker 1: I say, you're developing a blockchain technology in the corner

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Speaker 1: streets in London and hoping that people in the d

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Speaker 1: r C or elsewhere mining cobal to do the writing.

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Speaker 1: By feeding you with the right information can be a

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Speaker 1: disaster at the end of the day. And like basic

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Speaker 1: computer knowledge, we are no garbage in garbage out. You

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Speaker 1: don't put in the right data, you wouldn't get the

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Speaker 1: right output. So one of the companies I got to

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Speaker 1: engage with when I was in La Laba, which is

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Speaker 1: where most of the cob artists produced, had actually got

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Speaker 1: a third party to monitor four seven some of these

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Speaker 1: mind sides and the monitor or the monitoring officer had

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Speaker 1: a mobile phone connected to the internet. He is on

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Speaker 1: the app. They've developed a special app for him and

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Speaker 1: he's able to report everything or any inconsistency that he

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Speaker 1: witnesses according to a framework he's been given. So as

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Speaker 1: soon as he imputed that data, there's a whole group

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Speaker 1: and I think France or somewhere in Europe picks it up,

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Speaker 1: action it. They send it back to the an Honor

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Speaker 1: and tell them that hey, these are the issues we flagged.

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Speaker 1: You have twenty eight days to do it right or

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Speaker 1: else we will take you off the supply chain. So

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Speaker 1: there are some quite interesting innovative things being done in

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Speaker 1: the DRC that I witnessed that I believe, if it

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Speaker 1: should be skilled, it can really really help make ethical

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Speaker 1: sourcing of cobalt reality. So back to your question of blockchain, Yes,

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Speaker 1: it would play a role, and like every blockchain technology,

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Speaker 1: it would help democratize the way information is shed. But

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Speaker 1: then the end game is that it has to be

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Speaker 1: in conjunction with what is happening undergone for us to

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Speaker 1: have a full value out of it. Okay, can we start?

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Speaker 1: Can we try to do something like a like a

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Speaker 1: beginner's guide If I'm a strategist, say at a utility

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Speaker 1: who wants to install a bunch of batteries that you

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Speaker 1: need cobalt, It's all a bunch of batteries. Look at

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Speaker 1: my batteries, thank you. Where do I even get started

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Speaker 1: to find? Ethically? So, so currently there are companies that

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Speaker 1: are conducting or they will conduct your monitoring and evaluation

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Speaker 1: for you in the DRC on the ground. So an

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Speaker 1: example of the company's be interacted it was OURCS Global.

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Speaker 1: So they have this system where they send a monitoring

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Speaker 1: officer on site who monitors a side for you twenty

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Speaker 1: four seven. And then what they do is that they

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Speaker 1: have a framework within which every mind that the monitor

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Speaker 1: is supposed to comply. So what the framework is? Do

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Speaker 1: you have children and there are you working safely, So

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Speaker 1: about twenty one or more questions that has to be

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Speaker 1: answered every day by this monitoring officer. So whenever this

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Speaker 1: monitoring officers witnesses what we call red flags, he has

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Speaker 1: too quickly in real time put it in the system.

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Speaker 1: So there are two layers of review. So I think

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Speaker 1: there's the first local review that reviews the red flag, say,

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Speaker 1: for example, someone showed up to work drunk, so that

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Speaker 1: is escalator too. Maybe there's a European team that also

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Speaker 1: looks at it in the second review. And then I'd

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Speaker 1: say after a week, the compiler report to the minor

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Speaker 1: and go like these are the red flags before observed.

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Speaker 1: On your side, these are the remedies. We recommend. You

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Speaker 1: have twenty one days to work on it or else

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Speaker 1: until your supplies. So you the utility company and they

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Speaker 1: will tell you that, look, mine is not reliable, Please

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Speaker 1: don't buy it from mine anymore. Does this monitoring officer

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Speaker 1: work for you, and it is essentially going down the

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Speaker 1: list of things that you've defined are important or did

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Speaker 1: they come with their own framework that you essentially are

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Speaker 1: just collecting information on and have multiple clients that are

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Speaker 1: all collecting that information. I think they're probably working with

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Speaker 1: the standardized framework. And because they have been in the

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Speaker 1: industry for quite a world. Our CS has been doing

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Speaker 1: this for fairly long time. They know the kind of

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Speaker 1: red flags that wouldn't matter for most utility companies or

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Speaker 1: electric vehicle companies. They have the high level framework. Like

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Speaker 1: like said, we don't want human rights ap uses. Those

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Speaker 1: are high level questions. We don't want children. There's are

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Speaker 1: high level questions. But I think what these third party

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Speaker 1: companies that have been in the game for a while

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Speaker 1: understand how to break down these questions into actionable items

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Speaker 1: or frameworks that the Monday turn office I can understand.

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Speaker 1: But then certainly I'm pretty sure there's a way where

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Speaker 1: they can amend it or be flexible whether to ensure

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Speaker 1: that the capture your specific needs. Are there a lot

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Speaker 1: of these businesses, so I think it's an imagined area.

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Speaker 1: I know in terms of blockchain, I know the tracker

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Speaker 1: by Anglo America that that's something similar. But then from

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Speaker 1: the online perspective, I know this mind Spider base out

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Speaker 1: of Germany that is working with Vido w and other companies.

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Speaker 1: It's a pretty cool name mind Spider. They just spread

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Speaker 1: out the web every mind he's saying the note that

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Speaker 1: a lot of cobalt comes from as a byproduct of

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Speaker 1: copper production. Right, that makes me wonder, like, why why

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Speaker 1: does Chile I not have a bunch of cobalt. That's

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Speaker 1: about the moment. About fifty six percent of global production

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Speaker 1: come from copper minds and the remaining come from nickel

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Speaker 1: mind And I must add only one mind in the

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Speaker 1: world commonly produced cobalts as a primary product, and that

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Speaker 1: is in Morocco. So back to your question of why

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Speaker 1: Chile doesn't have so, it's just it's probably a gift

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Speaker 1: of Nata. We have this deposit called the copper belt.

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Speaker 1: And if I'm about to go a little bit geology's

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Speaker 1: hydrothermal deposits that comes with heaps of so it's just

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Speaker 1: the way historic geological processes came about. So the nature

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Speaker 1: of the copper deposits in what we call the Copal

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Speaker 1: copper belts, which stretches from Zambia through the d r

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Speaker 1: C and into a little bit of Uganda, is that

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Speaker 1: it comes with these high pressure commodities like cobalts in

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Speaker 1: this instance. Yeah, but historically there has been a cobalt

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Speaker 1: mine in Chile. Yeah, I think about a hundred fifty

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Speaker 1: years ago, so quite recently they have gone back to

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Speaker 1: these mines. I think there's a company that is currently

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Speaker 1: looking into reviving this particular cobalt mine, and it could

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Speaker 1: be what we call the resource case that we probably

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Speaker 1: have one commodity which is big, you tend to forget

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Speaker 1: or not even think about the fact that you could

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Speaker 1: have other stuff around the corner. So I think Chile

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Speaker 1: is coming to the realization. You'd expect Indonesia as well,

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Speaker 1: maybe with the nickel mining, So Indonesia is also another

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Speaker 1: future market. We expect about four to five thousand metric

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Speaker 1: tones of production to come from Indonesia from by productive

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Speaker 1: the nickel mince over the next five to six years,

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Speaker 1: so it would not necessarily be a market leader, but

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Speaker 1: then I think within the coal market, five thousand metric

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Speaker 1: tones is pretty solid number. Bloomberginny F is a service

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Speaker 1: provided by Bloomberg Finance LP and its affiliates. This recording

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Speaker 1: does not constitute, nor should it be construed as investment advice,

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Speaker 1: investment recommendations, or a recommendation as to an investment or

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Speaker 1: other strategy. BLOOMBERGUNNA should not be considered as information sufficient

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Speaker 1: upon which to base an investment decision. Neither Bloomberg Finance LP,

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Speaker 1: nor any of its affiliates makes any representation or warranty

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