00:00:02 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 00:00:18 Speaker 2: Hello and welcome to another episode of The Odd Lots podcast. 00:00:21 Speaker 3: I'm Jill Wisenthal and I'm Tracy Alloway. 00:00:24 Speaker 2: Tracy, I'm in a mood of a little bit of heartbreak this morning. 00:00:28 Speaker 4: Oh mood of a little bit of heartbreak. That sounds like a country single, doesn't it. 00:00:32 Speaker 2: That's right. 00:00:33 Speaker 4: No, you're singing. I don't know what you're sad about. You're singing the Tungsten Cube. 00:00:38 Speaker 2: The Tungsten Blues. I'm actually a little shook. In twenty twenty two, remember the tungsten cube hype. 00:00:43 Speaker 3: Unfortunately I bought. 00:00:46 Speaker 2: One and it was the only and it feels so good, like a nice big block of tungsten your hand. It feels so good. It's so unexpectedly heavy, probably like a little like wild autism, like I like related like sort of like heavy things like weighted blankives, some heavy objects. And I was going to bring it to this episode because I know you love props. Sometimes I do like a good and I was like, I'll bring a prop. I couldn't find it on my desk, so we did a desk move recently and either somehow, I hope I shall find it. Either it got misplaced in the move, or because the value of tungsten has gone up so much, maybe someone stolen. 00:01:22 Speaker 3: I think I know which one it is, Joe, I think I know. 00:01:25 Speaker 2: Let me just have a messy desk too. 00:01:27 Speaker 4: For listeners who were lucky enough to have missed out on the tungsten cube craze, there was a moment where, for some reason it was mostly crypto bros Onto it all seemed to go nuts for buying tungsten cubes and then showing pictures of them on social media and then promptly, like Joe, forgot about them. And actually, this is a really good analogy for what we're about to talk about, because we're going to. 00:01:52 Speaker 3: Talk about tungsten. 00:01:53 Speaker 4: The metal and tungsten, it turns out, has gone through these cycles where for a few years it's an absolutely a cent show strategic asset that you need in order to declare war, and then as soon as the war is over, you kind of forget about it. You still need it for some industrial applications or for novelty dusk, yes, but then you find out that you need it again. And so there's this like long running kind of boom. 00:02:16 Speaker 2: Bus cycle I'm really sad. 00:02:18 Speaker 4: There's a demonstrative example of how everyone seems to forget about tungsten except China. 00:02:23 Speaker 2: I'mctually I'm actually really said about this. This is by the way, when I say one thing, please please. 00:02:28 Speaker 3: I know where you can find some tungsten. 00:02:30 Speaker 2: In the West, in Western Australia, in the bahamash. 00:02:34 Speaker 3: Really FTX famous, that's right, that's right. 00:02:38 Speaker 2: Yes, this is. 00:02:38 Speaker 4: Gonna install a giant tungsten cube at their headquarters in the Bahamas. And everyone seems to have forgotten this bit of the Michael Lewis book. At the very very end of Michael Lewis's book on Sam Bateman Freed, he says he found the giant tungsten cube in a storage unit in the jungle, and it's probably still there because no one would wind of move. 00:02:59 Speaker 2: Yeah, so would be so heavy. I have this. It's actually depressed me. 00:03:03 Speaker 5: You know. 00:03:03 Speaker 2: One of the reasons, like I didn't buy the cube is a quote investment unquote. But I think I've always said, you know, one of the things that people don't talk about with hard asset investing is that you actually pay a negative interest rate because a you have to either pay for storage constant storage like a safe or something like that, or if you haven't or eventually security guards. Right, if you really had a lot of gold or silver or whatever. But then if you don't have that, if you don't do that, then and every year there is like a non zero percent chance that you lose your asset you misplace it. Yeah, maybe you have like some keys to a crypto wallet that you lose or whatever. So that is a way of replicating except sort of stochastically a negative interest rate. I think I'm gonna find it. I didn't totally forget about it. I had it on my desk even as recently as a few months ago, and I have some very messy drawers, so I think I actually I'm not a I haven't actually given up hope. 00:03:55 Speaker 4: I'll create a bet on a prediction mark right about whether you'll find your tonguesten cube. 00:03:59 Speaker 2: But anyway, setting as a desk toys, it turns out tungsten is actually, as you said, important sometimes. You know, it's not like copper or oil where it's important all the times. It seems to be a commodity that's important sometimes and that creates as you said, interesting diameters. 00:04:16 Speaker 4: Yeah, and it seems to be growing more important because going back to the military applications of tungsten, we've had a lot of wars recently, and tungsten apparently is in a lot of cruise missiles and drone shrapnel and. 00:04:29 Speaker 3: Things like that. 00:04:29 Speaker 4: And at the same time, like a lot of other I guess, rare earth metals, it's also becoming more important to our vision of the future, to the AI build out things like that, So it's getting more attention. And of course, again like a lot of rare earths, there's a limited supply and it seems to be dominated by one particular country. 00:04:48 Speaker 2: Yeah, it's right, this is the thing. There's a lot of it, but it's expensive and low margin and typical times and so you're just like, yeah, it's like distributed. There's some countries that are friendly to the US that are like more seen as geostrategic rivals. But in normal times, it's just not worth the squeeze to actually spend to spend the time and environmental costs of minding it. So we should talk about the current state of tungsten in a state of heightened geopolitical tension. Let's yeah, anyway, I'm very excited to say, we really do have the perfect guest, someone who we probably should have had on odd lots a long time ago. One of our colleagues coming to us from Sydney. We're gonna be speaking, of course, to Bloomberg Opinion calumnist David Fickling, who's just done a big reported piece about a tungsten mine in Australia, and what this tells us about all the things that we're talking about. David, Thank you so much for joining us. How are you doing, great to see you. Thank you so much for staying up late to chat with us. Why would we talk about war, geo political uncertainty, all this stuff? What is it about tungsten that suddenly becomes important? 00:05:52 Speaker 5: Yeah, I mean tungsten. 00:05:54 Speaker 6: You can look at it as a bit like a sort of century old missing prediction market for war basically, and I didn't realize this until I started looking at tungsten, but actually, if you go back right to the turn of the twentieth century, it has operated like a prediction market in the sense that people making real investments, once they get a sense that war is a real possibility, they put real money behind tungsten. And you can see the sort of process with that if you're operating a tungsten mine, then you're in touch with tungsten traders, and the tungsten traders are in touch with military materiel companies who get the first big orders when there's a real prospect of war. And this mine I visited has this extraordinary history where it first opened in nineteen seventeen during World War One. It closed at the end of the war because then the war ended, no one needed the tungsten anymore, and the European government sold it for all their tungsten stockpiles. Opens up again nineteen thirty eight before World War II starts. It goes through a bit of a struggle after World War Two, but then it's more or less rescued by the Korean War. It closes down almost altogether round about when Sputnick is launched and people start rethinking what wars are going to be like. But then it sort of keeps going through the Vietnam War and finally closes down the Cold War, and it's been closed. This mine it's on a beach in an island just off the coast of Tasmane. It's a pretty isolated wind sweat spot in the Roaring forties. In nineteen ninety it closed down, the mine flooded, and it was basically been ignored for most of the last three decades, and it's now finally starting up again at this very moment when war is looking more likely. 00:07:32 Speaker 2: So this is a story. But just to be clear, what is it about the properties of tungsten such that it is important for material. 00:07:41 Speaker 6: I mean, it's the same thing with the tungsten cube on your desk. It's incredibly dense. I think one of the things that attracts the crypto roose to tungsten is it's not just incredibly dense, it's about the same density as bold, but it also has this ridiculously high melting point but more than three thousand degrees celsius, so sort of three times hotter than lava, Tungsten will still be solid. And that means that if you're trying to make projectiles with it. For instance, if you're trying to make an armor piercing projectile to get through the armor plating of a tank, it's going to hold its shape. Most materials are going to sort of turn into a mushroom and dissipate their force. This is going to go straight through to the inside of the tank, so that'll be very effective. Or also a thing that's more current at the moment, say you're having a sort of cluster munition, a sort of a warhead that explodes into a sort of distributed charge so that you can take out a command post or a drone. With tungsten, you can have a bunch of very tiny tungsten pellets and they will make a sort of metal rain that will smash anything in the vicinity. And because it's so dense, it's going to be much more effective than steel. So for all these reasons, it's just very useful for military purposes. 00:08:45 Speaker 5: And of course if. 00:08:45 Speaker 6: War is pending, people pay any price for those sorts of physical properties. 00:08:49 Speaker 4: Getting hit in the head by a tungsten cube would certainly be painful and damaging. Talk to us about the non military applications, because it's possible, you know, you wrote about this new mind that's restarting. Maybe what we should get into what the investors actually say the reasons behind them opening up this mine. Maybe it's because they're predicting more tungsten demand because of additional military conflict. Maybe they just think there's going to be more demand for, like, I don't know, carbide tooling or something like that. What else is tungsten used for? And then also what does we should also talk about how colorful some of these characters are. What is your merry band of tungsten investors say about their reasons for opening it. 00:09:31 Speaker 6: You've done your research, Tracy, I mean this carbide tooling, I could tell that was the I mean, the key reason you will use tungsten is again because it's very hard. 00:09:41 Speaker 5: It's basically drill bits. If you're in an. 00:09:43 Speaker 6: Auto shop, then you'll use the drill bit for working metal. If you're in a mine, it will be on the end of a drill bit there, or in an oil well, anywhere where you need to drill something very hard. Tungsten carbide is a mixture of tungsten and carbon, as the name suggests, and it's the best value way to get incredibly incredibly sort of powerful sort of drilling power. And that's actually essentially in all sorts of ways. But I think we don't often anticipate. I was in the course of working on this article, I was reading something about during World War two when Nazi Germany, when we can talk about this later was very concerned about its supplies of tungsten, and they were running short of supplies of tungsten, and one of the things they did is to conserve. 00:10:25 Speaker 5: It for the weapons industry. 00:10:26 Speaker 6: They stopped using it in tooling, and you hear these reports of Allied soldiers capturing German tanks late in World War Two and just going this equipment's terrible because they didn't have the tungsten car vibe for the tooling. 00:10:39 Speaker 5: So the machinery wasn't working very well. 00:10:41 Speaker 6: The gears were all out of whack, and nothing was working very well. And so most tungsten, now eighty percent of it is just tungsten carvide its tools, and you can buy it in your local toolshop. You'll find it everywhere, and it's a fairly fairly boring hum drum element. 00:10:56 Speaker 5: The other things, there are a few other uses for it. 00:10:58 Speaker 6: Like almost every critical mineral, it gets used in some weird processes in oil refineries. If you're as integritical mineral design, there's always like five percent there's always used as some weird catalysts in oil refinery. And that's the case here. Another one that's actually quite interesting again because of these sort of high temperature, high strength properties. If you're making turbine blades, it's very important for turbine blades a lot of you know in a jet turbine, but also in a gas turbine which gets used a lot of powering data centers and things in LNG compressors. About up to ten percent of that ally might be tungsten as well, So there's a certain amount of demand for that, and there is even supposedly a use in some AI chips for tungsten as well, but the quantities there will be absolutely tiny, because of course anything involved in chip making the raw materials is just infinitesimal because the chips themselves are so small. 00:11:49 Speaker 4: So the investors in this mind that's reopening the Dolphin mine, you know, I call them a colorful bunch earlier, and it really does. I think you make this point in your piece, but it really does sound like a cast characters from like a heist movie. It's like a red Bull air and like some distressed debt guys and then some retired miners doing last one, last job. But when they talk to you about their reasons for reopening this mine, what. 00:12:14 Speaker 3: Did they say? 00:12:15 Speaker 6: Well, the main one I was speaking to is actually the chief executive or the executive chairman of the mine himself. He was actually he was brought in by one of these investors. As I said that, if you look at the shareholder reds of this company, it's like nothing I've ever seen of a shelled regis certainly of a company of sort of global importance. Like you say that, I think the reason Red Bull are involved is that there's a sort of long central European Germanic interest in tungsten, and Red Bull are based in Austria, a couple of them. 00:12:45 Speaker 2: Are they urged. 00:12:46 Speaker 3: To acquire tungsten? I'm well aware, yes, absolutely. 00:12:51 Speaker 6: The Peabody Energy that the American coal mining company bought a coal mine off a couple of Australian investors about twenty years ago and they used the payout from that to invest in this mind they were some of the first people who were involved. There's a Caterpillar dealer who actually worked at the mine in the nineteen sixties. 00:13:08 Speaker 5: He's one of the shareholders. 00:13:09 Speaker 6: That the state government of Tasmania is one of the shareholders because they were bailing it out. And even that some of the companies that were leasing cranes and mining equipment. They basically took equity in lieu of unpaid bills. There's really hardly anything in the way of bank finance in this company at all. It's equity is about seven million Australian dollars and the total CASHTUN invested since it started up has really tried to get back into operations twenty years ago. There's been a lot of reports and environmental studies and things over that period. Total is about seventy seven million dollars. You know what Amazon spends in about four hours, so it's really very little money. I would say their ambition, they weren't betting for twenty years on war, but their ambition was that China produces eighty percent of the world's tungsten, and by twenty you were seeing China threatening Japan for instance, over its rare earth supplies, and you could see this was a potential risk even back then and people around the world. There was one tiny tungsten mine that the US is last tungsten mine was actually just east of Los Angeles. It was a sort of retired Vietnam veterman who would go up to the mountains and dig out a few tons of tungsten every summer, and that went on until he went on mining until about twenty thirteen. I think he was talking back then. In the process of writing this article, I dug out at a letter that he'd sent to Congress complaining about reducing tariffs on Chinese tungsten because he was concerned back in twenty twelve that China controlled too much of this and was a strategic competitor. 00:14:48 Speaker 5: Back then, people weren't worried. 00:14:50 Speaker 6: About it very much, and now it's everything everyone worries about. 00:15:09 Speaker 2: So I definitely want to talk more about the sort of economics and significance of this, mind, but can you just talk a little bit more. You mentioned China producing eighty percent of the world's tungsten. Can you just give us a little bit more color on what the peace time tungsten market looks like in terms of how big we're talking about, the sort of the I guess I would say, why there hasn't been so much investment, Like, what are the economics such that generally during peacetime it does not make sense to do a new project given either the size of the market and maybe assuming presumably the cost, competitiveness and the efficiency of the Chinese miners. 00:15:50 Speaker 6: I mean, I think the biggest thing, and I think this gets underestimated a bit because China does try to lock down a lot of a supply chain and a lot of critical resources. But in the case of tungst, and I think is actually similar in the case of rare earth. It has just happened to get the best geological resource of this by far. And that's a thing that happens in mining. South Africa and Botswana have the best geological resources of diamonds, and Russia and South Africa have the best resources for platinum group metals, and Australian and Brazil have the best iron. 00:16:18 Speaker 5: Or that just happens. 00:16:19 Speaker 6: These resources are unevenly distributed around the world, and it's hard if you don't have resources as good as that to get a look in China, going back to the turn of the twentieth century, dominated global tungsten supply, and the only time that that's really changed was during a period in the Cold War when Tungstan was basically closed off from the rest of the world. As soon as Chinese tungsten was able to get into the world market. Their minds are the highest grade minds and there is justly more of it. There now some investors outside China and tungsten. Alongside the geofelisical argument, they would probably say, look, these mines have been mined for a century. One of the reasons China at this moment has export controls on tungsten. I think it's probably mostly geopolitics. But the defense of that that the Chinese government might have is that these mines are very old and we need to reorganize the industry because it's an underperforming industry. 00:17:11 Speaker 5: So there is a fairly scarce resource of this. 00:17:14 Speaker 6: It's about eighty five thousand metric tons a year is all the tungsten that's used. It's not a super exciting market because it's very expensive, and because it's mainly used in places like tool shops and mines. Most of that stuff gets recycled. If you're in an auto tooling shop, once your drill bit gets worn out, it might get reground, or you might just send it and it'll be recycled. So there's not a sort of huge ongoing demand surge for tungsten. It really sort of grows at the pace of tooling capacity worldwide. 00:17:46 Speaker 3: Can you talk to us. 00:17:47 Speaker 4: About the market structure of tungsten as well, because I know Joe said he didn't buy the tungsten cube as an investment, but if you had, I mean, you would have a hard time actually looking up the price of tungsten right now because it doesn't seem to have a forward curve in the way of a traditional commodity like oil or something like that. So if you're an investor trying to make a bet on a tungsten mine, it seems really hard to predict what your current returns are going to be, much less your future returns. 00:18:15 Speaker 6: I think that's absolutely right, and I think it's one of the biggest problems with critical minerals generally, because there's not a futures market. Because there's no way of hedging your cost with any mine, you are making capital investments right now for something that might only pay off in years five to ten. Now, if I'm doing that with copper, I can go to the London Metal Exchange or Comics and I can have as many contricts as I want setting the price of copper five years hence, and then I can take that to the bank and say, look, here's my operating costs, here's the value of cover, here's how much I'm going to produce. This is a bankable project, very simple, totally different with tungsten, they're just there. Simply is no futures market in this because it's such a tiny market most of time. One investor I spoke to, I think he's been on the podcast before, actually Alex Turnbull, you know. He said, sometimes it could be three he said, like tungsten, it could be three hundred dollars adrimetric ton unit, which is the unit the is, It could be three thousand, three hundred, three thousand each is a reasonable price for it. Because depending on the state of supply and demand of the market, the fact that China may suddenly close off supply and China has eighty percent of supply and then you have most of the world fighting over the remaining twenty percent, any of these prices is viable. And that means that if you're stuck in the middle, and most tunkster minds outside China are above that a ton level, then you find it very hard to finance your mind. No, no banker will really lend money to you on that basis because they don't know what your revenues are going to be next year, let alone five years from there. 00:19:50 Speaker 2: There's no forward curve at tunction, but we do have one ticker on the terminal, which is tungsten held in warehouses in Rotterdam. And I saw, Oh my god, this charge just makes me want to cry. It was literally it was three It's probably about three hundred dollars for a ton when I bought it sometime in twenty twenty two, and it is over three thousand dollars right now. So if I wanted to. 00:20:13 Speaker 6: Yeah, I should say that's three thousand dollars for this thing, this weird thing, which is a dry metric tonunit, it's actually about four hundred thousand dollars for a ton of tunkstont. 00:20:22 Speaker 2: Wait wait, wait, actually this is helpful. 00:20:23 Speaker 5: Great. 00:20:24 Speaker 2: So when I actually so, when I see that three thousand, what are what is this? I like learning stuff like this, What are these prices even? Men? 00:20:33 Speaker 6: So I had to spend like half a day trying to work out what this even means. So the price you're seeing is I think called ammonium para tunks date, which is a compound of tungsten, and it's a it's a nice, easily tradable form of tungsten. You can just put it in sacks and ship it around the world. And then I think you heat it and the ammonia comes off and you've got tunksknotside, and then you can quite easily turn it into a lot of other things. And that is priced quoted in dry metric ton units. Yeah, which a few critical mineral quest in these these these units, A dry metric ton unit contains about I think seven point nine to three kilograms of tungsten. Okay, so if it's three thousand dollars a griometric ton unit, it's about four hundred thousand dollars for a ton of tungsten. 00:21:18 Speaker 5: So so that's why someone still your cube. It's good money. 00:21:23 Speaker 2: I really, I'm really depressed about this. I gotta find it. 00:21:27 Speaker 5: I gotta find it. 00:21:29 Speaker 2: So this is this is really bothering me. All right, talk to us about okay, this particular mind, walk us through a little bit more of the sort of the economics or the best case economics. Let's say it works out. What are we talking about in terms of how much investment, what a sort of flow, how much it could shift in terms of Australia's ability to exp Where would it change in terms of market share and so forth, and like what would it represent if it were successful. 00:22:00 Speaker 6: The thing that fascinates me about critical minerals is that the numbers involved are often absolutely tiny. Like I said, the total cash some invested in this in twenty years is seventy seven million dollars. 00:22:12 Speaker 5: It's nothing. 00:22:13 Speaker 6: I mean, I wrote a piece about critical minerals a few months ago. So you know, think of the price of a white house ballroom, which I think are we talking like eight hundred million a billion dollars? 00:22:24 Speaker 5: Now? 00:22:25 Speaker 6: I can't remember what the latest, but I mean you could solve the entire rare earth problem for the price of that. And actually some of the investors who've been putting serious money into solving the rare Earth's problem with China though that's the order of money that they're spending. It's in the sort of hundreds of millions of dollars. And this is a time when we're spending brillions of dollars on AI or a single FAD missile, one of these missiles that uses a bit of tungsten, a single SAD missile use it costs about ten million dollars. So the sums that we're talking about are absolutely infinitesnal and the amount that it can move the market. Of course, it's a very small market this mine. I visited them in Tasmania. If it gets up and running, it should be able to supply about two and a half percent of the global market. Now it doesn't stand a lot, but remember China supplies eighty percent of the global market, so you're actually talking two and a half percent of the remaining twenty percent, and actually North Korean Russia supply another five percent, so it's two and a half percent of many fifteen percent. It's it's quite a significant percentage. If you go back to sort of old commodities reports from the Cold War, people would talk about the free world market. So that two and a half percent is that's roughly one six of the three of the free world market. So for a very small sum, that's the sort of thing that you can acquire in critical minerals, and yet no one is prepared to invest in it most. 00:23:47 Speaker 5: Of the time. 00:23:48 Speaker 2: It's very similar to the selling down of the helium reserve. Yeah, which is just like which is like the numbers are it's so pennywise or whatever, you know, it's so like, here's this thing that Okay, could be strue to in the future and we're going to sell it for like half a billion or whatever. 00:24:03 Speaker 3: Yeah, I was thinking the same thing. 00:24:04 Speaker 5: Well. 00:24:05 Speaker 4: Also, just going back to China, so I take the point that, I mean, China geographically does have an advantage when it comes to a lot of rare earths and including tungsten. But it also feels like China is more willing to tolerate lower returns for some of these industries. And I guess treat the market like a little bit more like a chessboard rather than just a sort of short term spreadsheet. Does that mean if anyone in the West tries to start up a new tungsten mind, can China just come in and flood the market very easily and suppressed prices given that they're still the dominant producer and literally anyone else is as you just outlined a fraction of total production. 00:24:48 Speaker 6: Yeah, I mean that's and that is one of the main reasons that investors stay well away from this. It's one of the main investors they've the reasons that they've stayed well away from rare earth. 00:24:57 Speaker 5: At the moment. 00:24:58 Speaker 6: One of the reasons tungsten price is a high is precisely because China imposed export controls just ran about the time President Trump came to office last year. That doesn't mean that exports stop altogether, but it means that if you're dependent on Chinese tungksen exports, which every tungsten consumer is dependent on, you want to get your supplies early before those export controls result in the Chinese government saying no, you can't sell it to them. So as soon as those export controls are taken off, then that sort of speculative action that's going on in the market, that's one of the main things that's driving up prices at the moment that speculative action goes away, and so that would certainly bring down prices and then in turn bankrupt a lot of miners who were dependent on those higher prices. So that's absolutely something that has happened in the past, and not just the Chinese government. As I said the first time this mind that I went to shut down in nineteen twenty after World War One, it was because the Allies in World War One sold off all their toungs supplies and flood at the market a bit like you know, the Bank of England with gold in the nineteen nineties or any other mistake in sort of government sale of the commodity. 00:26:08 Speaker 2: You know, obviously anything that is geostrategic or used in warfare will have a spike in investment in spending during a war, and then it will come down, obviously, But you know, we have the defense industrial complex, and there is an extraordinary amount of spending on munitions and so forth. It goes on in peace and wartime, et cetera, producing new missiles, and there's a fortune to be made in that. At any point during again what we would call relatively peaceful periods, maybe the nineteen nineties or maybe like early twenty tens or something like that, were there any voices that said, look, as part of this strategic expenditure in the West, in Allied countries, we should just maintain constant loss making production and investment into some of these resources. Because again, the numbers compared to other defense or strategic spending just do not seem very high. 00:27:10 Speaker 6: I think there was a real lack of that, and I think one of the interesting things that I sort of realized as I was working on this piece is that part of Tungsten's time in the wilderness was about a rethinking of the nature what wars would be because. 00:27:24 Speaker 5: In nineteen ninety you have two things. 00:27:25 Speaker 6: You have the end of the Cold War, but then the also crucial military thing that happens is the First Gulf War, and the First Gulf War causes a lot of people in the West, particularly in the US, to really rethink what wars are going to be like in future. Back then, people thought it would be a Vietnam type situation potentially before the war actually started, that this was a million strong Saddam's Army. We're going to be something that looks a little bit like Ukraine essentially. And then of course it was this incredibly quick technological war. Art was very quickly devastated. You saw the sort of technological superiority of the US military, and that made people go, okay, hang on, the Cold Wars finished, so we don't need to be building up these huge anti Soviet military arsenals. 00:28:09 Speaker 5: But also we are going to be vastly. 00:28:11 Speaker 6: Technological superior to every foe that we're going to fight in war, so we need to have different types of weapons. 00:28:18 Speaker 5: And did you have Chris Miller on the War author? Yeah, I mean, I think he describes that really well. 00:28:26 Speaker 6: That dynamic how basically chips won the Cold War, and that caused a complete rethinking of military strategy, and so at that point tungsten doesn't matter so much because if you are so technologically sophisticated that you can take our enemy command posts very quickly, you can paralyze their electronic infrastructure and their entire sort of military command, and then you don't really need to be. 00:28:52 Speaker 5: Fighting this sort of war of attrition, which is where tungsten really comes into its own. 00:28:57 Speaker 6: Now we've of course had another revolution and military affairs, we've had another sort of rethinking of what wars are going to be like, because we're four years now into the war in Ukraine and we've seen in Ukraine a battlefield that looks like the big battlefield of the twentieth century and it's still grinding on, and so that makes you rethink our future. 00:29:18 Speaker 5: War is going to look like that or not. 00:29:19 Speaker 6: And of course the other thing that's looming in the future is Taiwan, a conflict with Taiwan where you're going to be up against the. 00:29:28 Speaker 5: Biggest manufacturing power on the planet. 00:29:31 Speaker 6: Are you going to be able to technologically over master China in the way that the US in nineteen ninety over master. I don't think people expect that to be nearly so easy. So tungsten again comes into its own. 00:29:43 Speaker 1: Yeah. 00:29:44 Speaker 4: So I'm looking at a headline right now saying the US is inviting proposals to boost supply of tungsten and twelve other critical minerals. So if you were going to encourage or make suggestions for encouraging tungsten production in the US or elsewhere, what would you be suggesting at the moment, Because there does seem to be this real tension between a potentially strategically critical resource and then I guess the limits of private capital and people actually wanting to fund something that will pay off with a real return. 00:30:18 Speaker 5: I mean, ultimately you need to have some sort of a flow price. 00:30:22 Speaker 6: There is a huge debate that has sparked in the critical mineral space about whether floor prices are a good thing or not. Yeah, a lot of people will argue that if you have a floor price for something, then it operates as a giveaway to minors and it's going to encourage sort of uneconomic supply. But I think in the context of what we're talking about here, that's actually the point. The only economic supply of tungsten is in China. So if that is a problem for you, you actually need a you need a structure that's going to encourage the supply outside chair, and it's going to encourage it for a set period. Now there is a huge philosophical problem with this because you can't do that with every single material that could be deemed critical. I saw an article the other day talking about fears that China was going to lock down a supply of citric acid. You know, there's metallurgical coal has been put on the US Critical Minerals List. Copper is on the US Critical Minerals List. You can justify almost anything on this basis, And that's a real problem because the US, for instance, has set up this Project Vault, this twelve billion plan for some sort of a reserve of critical minerals, something similar to the Strategic Petroleum Reserve. But it's not very clear what the criteria will be for inclusion in Project Vault. And I think the risk is that Project Vault becomes a way of hedging price risk for fairly common commodities like copper, like nickel, like aluminum, like metallurgical coal. 00:31:47 Speaker 5: If the government is not very forceful. You don't actually end up getting. 00:31:52 Speaker 6: The minerals you want in that, you just end up with the minerals where industry wants government backed price security. What you actually want is a fairly small group of minerals where there's a real strategic issue. And I think tungsten's one, I think rare to another, things like gallium, germanium. These are some of the crucial ones. It'll be much cheaper, but you need to offer a medium term price security, long enough that miners can actually borrow against that price security. 00:32:20 Speaker 5: So three to five years. 00:32:37 Speaker 2: Evidently China controls sixty five to seventy of the world citric acid supply, and citric acid has certain niche applications. 00:32:48 Speaker 4: Secure your sour flavored fruit candies. 00:32:51 Speaker 7: Now, yeah, here's some pharmaceutical applications. Citric acid excels genderizer. I know that excels at chelating metal ions and removing mineral deposits, scale and corrosion from industrial equipment. 00:33:05 Speaker 2: To not know that, yeah, I didn't know that either. So if there's a citric acid expert out there, maybe that'll be an episode we want to do. You know, David, there was a piece you wrote, a very long time ago that is stuck with my head, maybe like coming on ten years now, I think, and I think it was in the context of some of the fantasies that tech people have had about asteroid mining, and I believe you made the point that Okay, yes, there may be asteroids out there that have extraordinary deposits of various minerals and metals of all sorts, but we also have a place here on Earth that also has extraordinary deposits of minerals and metals, and that is your country of Australia. And though there's a lot of stuff just sitting out there, but it's and it's a lot closer than space, but it's still too far to be worthwhile to mine, which I thought was really interesting. It's like it's right there, and yeah, it's just there's the infrastructure does existing. It's just not worth going out there. It's too much of a trek to get out to those parts of Australia. Can you talk a little bit broader about like the sort of Okay, we could say this is in the ground, but like we need, we want this, this is industrially used for it's in the ground. We know it is, we know it's rich, but it's just not worth making the long twelve hour flight or whatever it is to get out there. I know it's more than a flight, but yeah, to get out there. 00:34:29 Speaker 6: Yeah, I mean, I think that the world of mineral explanation is full of this, and here in Australia there's plenty of very small cap mining companies which are essentially like some of them are almost like a holiday program for a geologist if it funds a geologist's expedition around the world with his hammers and his reagents, because because some of them are really just they're just sort of wild exploration programs hoping to find something. 00:34:56 Speaker 5: We see this with Tongusten. 00:34:57 Speaker 6: This mine is an unw one that have been operating for about a century already, so there's an established resource there. But I mean to give another example, A crucial group of rare earths depends on these things called ionic absorption clothes, which when you get a very heavily weathered granite mountain, you end up with a lot of these clays which will capture some of the rare earth that we're most concerned about, things like thissprobium and urbium. And if you go back about five years people would say these can only be found in southern China. And one of the problems in the world is that there is no way that you will ever find ionic absorption clays anywhere except southern China. 00:35:36 Speaker 5: But of course, now we're in a world where China is putting controls on these things. 00:35:42 Speaker 6: It is stopping exports of a lot of these particular elements, and it's at the heart of the sort of rare Earth, sort of magnet supply chain concern. And believe it or not, all these ionic absorption clays are starting to turn up in other places. They're starting to find them in Brazil, They're starting to find them in Malaysia. Peple are starting to find them here in Australia and across parts of tropical Africa as well. People are suddenly realizing, okay, there are deposits there. They might not be as good as the Chinese deposits. There's a reason that Chinese deposits were the first to be explored. But if China becomes an unreliable resource, people are going to find them somewhere else. 00:36:20 Speaker 5: And I think that's I. 00:36:21 Speaker 6: Mean, there's two twin activities that happen in commodities and mining. One is the sort of substitution effect. Sometimes you're just going to say, we can't use this, it's become too scarce, we need an alternative. 00:36:35 Speaker 5: I mean. 00:36:35 Speaker 6: A good example of that, I think is if you look at electric vehicle batteries. Go back five seven, eight years, people were talking about the importance of having batteries dependent on cobalt. Cobalts very heavily exposed to one country, Democratic Republic of Congo. There's a lot of child labor in the mining industry there, and also it's in some ways not quite as good. So a lot of the Chinese battery producers started us using a different chemistry that doesn't use cobalt, lift them iron phosphate, and so so you've substituted away from that product and you don't need it anymore. And to go back to the analogy with asteroid mining, if a commodity is so scarce that you need to go to space to get it, you're probably going to substitute it for something else instead. However, if it's not quite as scarce as that, you're probably going to be able to send that geologists around the world and they're going to find it somewhere else, and if the established supply is insecure enough, then the alternative location is going to get more and more attractive. 00:37:33 Speaker 2: Yeah, I think we should just substitute for gold. 00:37:36 Speaker 3: I mean it's going to say, if it's the same density. 00:37:41 Speaker 2: You just buy, you just start having gold based munitions. Those are sliced right through that tank as well. David Fickling is great chatting with you. I'm so glad we've made this happen. There's such a fascinating journey and great reporting that you did, so thank you so much for coming out of us. 00:37:56 Speaker 5: Thanks very much. 00:38:09 Speaker 2: It does seem so crazy to me that we have this huge the military industrial complex, et cetera, and then there's these few things that are like rounding errors. 00:38:20 Speaker 4: Right, the capital outlays for a tongusten mind, seems pretty small in the ground scheme of the. 00:38:25 Speaker 2: And yet no one was like, let's just yeah, sure it's on economical, but so is all defense spending, because you don't it's loss making because there's no market use for a lot of this stuff. But it's like, I don't know, it seems like you just allocate a few billion here and there and you could alleviate some of these potential stress points. Instead, you sell down the helium reserve over twenty years for a billion dollars or. 00:38:47 Speaker 5: Whatever I mean. 00:38:48 Speaker 4: To some extent, it does seem like a failure to predict the future, which is difficult. Right, people thought that war was going to evolve in different ways. We didn't think that we would be shooting this many cruise missiles, or that we would be shooting shrapnel at drones, or having drones shooting as much shrapnel, and so like, here we are with to some extent an unexpected need for tungsten, and the same for helium in some sense because we didn't know that we were going to have the semiconductor m and things like that. So hindsight is twenty twenty. But I don't know, it does seem like maybe we should restart that tungsten mind in California. Should we go check it out when we're we're in Yeah. 00:39:28 Speaker 2: We're gonna be in a listeners, We're going to be in LA in early September. 00:39:31 Speaker 3: Maybe we can find the guy who used to run it. 00:39:33 Speaker 2: We could go find Yeah, let's go check out that. I also, you know, I just think that what again, one of the things I always think about with respect to China specific league, is the fact that there's not really a business cycle there and they've never had They don't have these like they have secular busts like obviously real estate, et cetera. But you know, there's been this sort of like refusal to accept the premise that overall recessions are an inevitability and therefore you don't get these periods where it's like big industries that were once important hollow out and then it's like, oh, it's so costly to restart them. 00:40:08 Speaker 4: I mean, you do get some of that, and China's pig pork industry is a pretty good example of that, where there was a shortage and prices went up, and so the government provided a bunch of support. It over expanded, prices collapsed, and then a bunch of private operators went out of business. So there is some of that, But I do think in general China is more willing to accept just lower returns in general for some of these for some of these long. 00:40:31 Speaker 3: Term which also begs the question. 00:40:33 Speaker 4: If one of the big themes of our current period in time, as we've discussed on the podcast repeatedly now, is that everyone seems to be trying to build up their own supplies, their own responses to like certain choke holds in the global economy. And so one of the concerns that you see now and David talked about it, is, well, if everyone's trying to create their own supply of tungsten, even if it's a relative small supply, even if it doesn't actually take that much capital to create a new tongsten. Mind, if everyone's doing it all at once and then you don't have a definitive buyer of last store at the end, then like people are going to think that we're going to become oversupplied. 00:41:15 Speaker 2: But in the meantime, all of this expenditure is at the margins inflation area. Yeah, so you have the double whammy of more spending on non productive things because they're strategic, and the diminishment because of anxiety about security of free trade. So you get the double lots and lots of spending and replication of spending across multiple geographies in countries. 00:41:38 Speaker 4: The one other thing I would say is whenever we do these commodities episodes, and especially lately, given what happened with oil supply in Iran, I kind of I always marvel at the markets. I guess creativity or ingenuity when it comes to responding to some of these shocks. So Japan had its supply of a bunch of rare earths, including tungsten, cut off by China, which I'm sure at the time was thought to be an absolutely dire thing for a lot of Japanese industry, including car makers, but in the end it ended up dealing with it reasonably well by sourcing recycled supply and scrap tungsten and things like that. 00:42:16 Speaker 3: Now, again, if China. 00:42:18 Speaker 4: Stopped exporting tungsten to everyone in the world, would would there be enough scrap tungsten to replace that supply? Probably not, But for some of these supply shops it does seem like you can get pretty good response. 00:42:30 Speaker 2: As we talked about with Javier Bloss last year, we might have to go into a bunch of vacuum cleaners and pull out some of the magnets and stuff. 00:42:37 Speaker 4: Why don't you get into the scrap tungsten business, Joe, I can get you started with some like metal toolbits. I had one that split the other day, which was really weird an unusual. 00:42:49 Speaker 2: I'm done investing in tungsten, especially if I can't find this thing. I mean, I don't want to ever think about it again. 00:42:55 Speaker 4: All Right, No more tungsten. That's the opposite message of this entire podcast episode. 00:42:59 Speaker 2: Yeah, all right, all right, keep thinking about tungky, keep. 00:43:01 Speaker 3: Thinking about tungsten. 00:43:02 Speaker 6: All right. 00:43:02 Speaker 3: Shall we leave it there? 00:43:03 Speaker 2: Let's leave it there. 00:43:04 Speaker 4: This has been another episode of the Authoughts podcast. I'm Tracy Allaway. You can follow me at Tracy Allaway. 00:43:09 Speaker 2: And I'm Joe Wisenthal. You can follow me at the Stalwart. Follow our producers Kerman Rodriguez at Kerman armand dash Ol Bennett at dashbod Kelbrooks at Keilbrooks, and Kevin Lozano at Kevin Lloyd Lisano. And for more odd Logs content, go to Bloomberg dot com slash odd lots or a be daily newsletter and all of our episodes and you can chat about all of these topics twenty four seven in our discord Discord dot gg slash on lots. 00:43:32 Speaker 4: And if you enjoy auth thoughts, if you want to support a speculative Odd Thoughts mission to the Bahamas to find that giant FTX tungsten cube, 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. 00:43:48 Speaker 3: All you need to do is find your. 00:43:50 Speaker 4: Bloomberg channel on Apple Podcasts and follow the instructions there. 00:43:53 Speaker 3: Thanks for listening 00:44:11 Speaker 5: In it