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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: Hello and welcome to another episode of the Odd Lots Podcast.

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Speaker 3: I'm Joe Wisenthal and I'm Tracy Alloway.

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Speaker 2: Tracy, I feel like a few years ago there was

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Speaker 2: a lot of talk about, Okay, this evy battery boom

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Speaker 2: is coming, and we don't have yet the raw materials,

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Speaker 2: the basic commodities necessary to supply all the demand for that.

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Speaker 3: Yes, I would say even before a few years Yeah,

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Speaker 3: do you remember there was a time I guess it

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Speaker 3: must have been like early twenty tens or maybe even

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Speaker 3: before then, when rare earths were all the rage and

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Speaker 3: everyone was talking about like, oh, put your money in

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Speaker 3: rare earth.

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Speaker 1: The clue is in the name.

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Speaker 3: There aren't that many of them. There won't be enough

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Speaker 3: to go around. And then that kind of came and went.

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Speaker 3: But then you're right, it resurfaced in recent years because,

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Speaker 3: of course, we do have this pressure or desire depending

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Speaker 3: on your viewpoint, of shifting to electric vehicles, which require batteries,

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Speaker 3: which require a whole bunch of materials to actually make them,

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Speaker 3: and there was a lot of hand ringing over whether

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Speaker 3: or not there would be enough of these materials to

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Speaker 3: go around where the materials actually come from. That was

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Speaker 3: a big point of contention and concern. If you're dependent

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Speaker 3: on one source i e. China to get all the

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Speaker 3: stuff you need for battery making, then what happens when

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Speaker 3: China starts to restrict those materials, which is fast forward

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Speaker 3: to twenty twenty three exactly what we saw happen.

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Speaker 2: Yeah, I think that was a great summary. There's a

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Speaker 2: lot here for us. This story touches on a lot

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Speaker 2: of our themes because you know, one of the things

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Speaker 2: we talk about is that, as you mentioned, there's a

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Speaker 2: sort of the replacement of one set of kamades and

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Speaker 2: oil and gas, et cetera, a brand new set of

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Speaker 2: commodities that are also potentially going to be quite scarce.

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Speaker 2: There's also just a question of what catalyzes investment because

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Speaker 2: as we know, when it comes to raw materials, there

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Speaker 2: is a lot of upfront cost and there's also the

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Speaker 2: future is wildly uncertain in terms of like how much

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Speaker 2: we'll need and how much demand there will be. So

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Speaker 2: you know, we've talked with A Jiggershaw, for example, of

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Speaker 2: the Department of Energy's Loan Programs Office multiple times on

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Speaker 2: the podcast about why for example, when it comes to

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Speaker 2: sort of new energy investment, traditional private sector financing vehicles

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Speaker 2: maybe aren't up to the task completely. Why there are

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Speaker 2: other market mechanisms or non market mechanisms that might be necessary.

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Speaker 2: Uncertainty about demand supply, What is even the future of

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Speaker 2: battery technology right? Because there are competing visions of what

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Speaker 2: the batteries that will power evs will look like and

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Speaker 2: whether it's solid state or lithium ion or something totally different.

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Speaker 2: So how do you catalyze investment with so much upfront costs,

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Speaker 2: so much uncertain return at a time of a highly

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Speaker 2: uncertain future?

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Speaker 3: I find that an absolutely fascinating question because again, these

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Speaker 3: are things that a lot of people would argue we

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Speaker 3: actually need. But are they being naturally incentivized by the

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Speaker 3: market to actually have more of them? Or do they

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Speaker 3: come through government initiatives such as the Department of Energy

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Speaker 3: and the Loan Program's office, or do they maybe come

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Speaker 3: from the companies themselves. You know, we've seen Tesla move

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Speaker 3: to build up its own supply of the things it

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Speaker 3: needs for batteries, So there are all these interesting questions

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Speaker 3: of how this stuff actually gets financed. And also, just

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Speaker 3: to take a step back, I have a bunch of

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Speaker 3: questions about what the stuff actually is because I see,

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Speaker 3: you know, I see words like graphite and manganese and

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Speaker 3: things like that thrown around Germanium, and like, okay, I

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Speaker 3: get that they're used for making batteries, but I don't

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Speaker 3: really know the specifics. So I would love to know

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Speaker 3: more about that.

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Speaker 2: One of my worst moments when I was at TV

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Speaker 2: host several years ago is I was interviewing one of

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Speaker 2: our reporters here at Bloomberg and I just like blurted

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Speaker 2: out like she was talking about cobalt prices, and I

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Speaker 2: was like, what is cobalt? And I like felt so

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Speaker 2: bad because like I'm making your reporter anitary, like what

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Speaker 2: is this basic? You know? But she nailed it, but

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Speaker 2: there was like this, yeah, she nailed it, But I

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Speaker 2: felt like so bad because that's it.

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Speaker 4: I didn't mean it.

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Speaker 2: As like a gogic question. I was like, no, what

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Speaker 2: is oil? What is cobalt?

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Speaker 4: Anyway? You know?

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Speaker 2: The other thing to you know, mention, how okay? There

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Speaker 2: was all this talk about do we have enough right now?

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Speaker 2: There's a double whammy. I feel like in this space

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Speaker 2: because a actually a lot of spot prices for some

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Speaker 2: of these alternative commodities have actually plunged the last here. Also,

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Speaker 2: there's a big theme and maybe it's sort of fun,

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Speaker 2: but maybe it's real of like EV sales maybe aren't

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Speaker 2: taking off quite as fast as expected, or at least

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Speaker 2: for the legacy automakers still figuring out their groove. Maybe

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Speaker 2: hybrids are going to be the thing for the moment.

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Speaker 2: And then finally, higher interest rates and the effect that

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Speaker 2: that has on supply, And that's a big theme we

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Speaker 2: talk about, which is okay in theory, we want more

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Speaker 2: supply of all the things to make goods cheap, but

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Speaker 2: of higher interest rates impair investment in capex heavy things.

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Speaker 2: What does that do to supply? So I think, like

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Speaker 2: we said, there is just a lot of meat here

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Speaker 2: for us to chew on, so to speak.

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Speaker 3: Lots of questions, not least among them what is graphied

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Speaker 3: and rare earth minerals?

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Speaker 2: Anyway, All right, well, let's dive right into it. Someone

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Speaker 2: who is a perfect guest right involved in this space

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Speaker 2: and can hopefully answer every one of our questions due

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Speaker 2: to firsthand experience. We're gonna be speaking with doctor Chris Burns.

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Speaker 2: He is the founder and CEO of Novonics, a battery

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Speaker 2: materials and technology company. Previously, he spent two years at

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Speaker 2: Tesla's so someone right in the thick of it. Chris,

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Speaker 2: thank you so much for coming on odd Lots.

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Speaker 5: Yeah, great, thanks for having me. I'm really excited to

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Speaker 5: dive into these topics.

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Speaker 4: Well, what did we start?

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Speaker 2: What is a Novonics?

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Speaker 5: So NOWVONICX is a battery materials and technology company and

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Speaker 5: we've been focused for ten years on longer life battery

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Speaker 5: technologies and now on this movie meant to localize the

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Speaker 5: supply chain, and we're going to talk about graphite and

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Speaker 5: why that was one of these critical materials and minerals

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Speaker 5: that we need to electrify vehicles, energy storage systems, and

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Speaker 5: why we needed to develop the right types of technology

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Speaker 5: to do it here in the US.

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Speaker 3: So I'm going to start with a really basic question, then,

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Speaker 3: which is where does graphite come from? I feel like

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Speaker 3: we're in a high school science class or something. Where

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Speaker 3: does graphite come from? And you also make synthetic graphite,

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Speaker 3: so I understand where that comes from, but what is

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Speaker 3: the process for actually making synthetic graphite and what is

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Speaker 3: the role in the battery supply chain.

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Speaker 5: Sure, so let's back up and say where is graphite used? Right,

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Speaker 5: So in the lithium battery of a positive electrode and

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Speaker 5: a negative electrode, and the positive electrode are these materials

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Speaker 5: like nickel, manganese, cobalt, and MC lithium iron phosphate LFP,

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Speaker 5: these types of terms you may hear, and the negative

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Speaker 5: side of the battery is almost always graphite, so it

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Speaker 5: represents about forty percent of the volume of any battery

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Speaker 5: is actually graphite, and it's where the lithium ions actually

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Speaker 5: go and get stored to store the energy and then

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Speaker 5: get released during discharge. And so it has been a

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Speaker 5: foundational part of lithium ion batteries since the early nineties

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Speaker 5: when they started. And you can use graphite in two

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Speaker 5: forms in lithium batteries, natural graphite and synthetic graphite. And

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Speaker 5: so natural graphite, to answer your question, comes from the Earth.

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Speaker 5: It is carbon that is formed into perfectly layered graphite

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Speaker 5: that has been entered that state because of being under

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Speaker 5: time and pressure in the Earth's crust.

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Speaker 3: It's the same as the stuff that you would get

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Speaker 3: in a pencil, almost like coal. In fact, I think

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Speaker 3: some of it comes from coal, right, or you can

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Speaker 3: harvest it from coal.

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Speaker 5: So on the synthetic side, you can make graphite. Oh,

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Speaker 5: I see different carbon rich precursor materials. So on the

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Speaker 5: natural graphite side, you dig it out of the ground,

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Speaker 5: you change its size, its shape, it's pure, and then

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Speaker 5: you purify it, typically through heavy acids, and you can

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Speaker 5: put a surface coating on it and then it's ready

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Speaker 5: to go into a battery. And on the synthetic graphite side,

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Speaker 5: it's a very similar process, but instead of starting with graphite,

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Speaker 5: we actually start with other carbon rich precursor materials, and

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Speaker 5: one of the most common is petroleum coke. Another is

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Speaker 5: coal coke that's used in China. And so you take

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Speaker 5: these materials, you change their size, their shape, and instead

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Speaker 5: of purifying them, we actually heat them to really high

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Speaker 5: temperatures about three thousand degrees celsius, and it changes the

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Speaker 5: atomic structure into graphite and then it's ready to go

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Speaker 5: into a battery. So we develop technology really focused on

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Speaker 5: that high temperature process.

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Speaker 2: For natural graphite. How is it distributed around the Earth,

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Speaker 2: And I imagine there's a difference between how it's sort

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Speaker 2: of geologically distributed versus in practice where it's actually extracted,

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Speaker 2: because I seem to recall from the old days in

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Speaker 2: rare earths. There's other people like, well, they're not actually rare,

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Speaker 2: they are just only some places where they allow it

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Speaker 2: because or they have much mining due to pollution, et cetera.

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Speaker 2: So where where is the graphite and where do we

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Speaker 2: get our graphite?

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Speaker 5: Sure, So for the battery industry, you know, specifically, a

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Speaker 5: lot of the graphite mining opportunities are in Australia, in Africa,

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Speaker 5: in China, and of course there's a lot of projects

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Speaker 5: looking to be developed in Canada.

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Speaker 1: Right.

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Speaker 5: Canada is going to be a great partner to North

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Speaker 5: American's electrification here because of the resources they have. So

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Speaker 5: there's a lot of active mining of graphite today really

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Speaker 5: all over the world. But I think something you guys

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Speaker 5: talked about in the intro is where are we dependent

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Speaker 5: on getting the materials? But it's equally important to talk

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Speaker 5: about where are we dependent on processing those materials? Because

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Speaker 5: you know, we talked about the word commodity, right, but

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Speaker 5: none of these by the time they're ready to sell

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Speaker 5: to a battery maker an LGE A, Panasonic are commodities anymore.

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Speaker 5: They are specialty materials made to a spec And right now,

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Speaker 5: even if let's say natural graphite can be sourced more globally.

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Speaker 5: All of the processing is in China, and that's our bottleneck,

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Speaker 5: and that's what we need to change, not just where

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Speaker 5: we get the raw materials, but where we upgrade those

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Speaker 5: raw materials.

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Speaker 3: Oh, this is interesting. So this makes a lot of

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Speaker 3: sense because you see these headlines, like you know, billions

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Speaker 3: of metric tons of rare earths or whatever discovered in

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Speaker 3: I think there was one in Turkey recently, and in

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Speaker 3: Sweden and in Wyoming, which feeds into my new get

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Speaker 3: rich very slowly strategy of buying land out west and

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Speaker 3: hoping that it just comes with a bunch of graphite.

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Speaker 3: But anyway, so supply is not the issue here. It's

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Speaker 3: the processing capacity. Because we are making these new discoveries.

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Speaker 3: I don't want to stay on a regular basis, but

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Speaker 3: there have been quite a few.

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Speaker 5: Yeah, I think that's a critical distinction really where we focus.

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Speaker 5: We're going to have an abundance of materials, right, and

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Speaker 5: I think two things about that. We will continue to

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Speaker 5: discover new resources, right, whether it's lithium, whether it's nickel,

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Speaker 5: whether it's graphite. And then we also will have recycling

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Speaker 5: start to play a significant role in bringing some of

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Speaker 5: these materials back into the supply chain, you know, over

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Speaker 5: the coming years. Right, So when you take the long

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Speaker 5: term vision, you know the cyclical economy for lithium ion batteries.

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Speaker 5: When you think about what mining is, you're trying to

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Speaker 5: harvest these minerals from very low concentrations.

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Speaker 1: Right.

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Speaker 5: Graphite might be two to fifteen percent of what you

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Speaker 5: dig out of the ground is graphite in a mining project.

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Speaker 5: Nickel is very much lower than that. But when you

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Speaker 5: harvest them from a battery, you already have the elements

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Speaker 5: you want in concentration, right, So it's very efficient. But

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Speaker 5: until we start having a lot of those batteries reach

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Speaker 5: end of life, it can't feed a huge amount of

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Speaker 5: the supply chain.

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Speaker 3: Why has China seemingly developed the processing capacity before a

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Speaker 3: lot of other countries They seem to have a head

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Speaker 3: start in this. Was this just the nature of their

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Speaker 3: proximity to the actual supply and the fact that they

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Speaker 3: were willing to, at least for a while, dig it

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Speaker 3: out of the ground.

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Speaker 5: Well, I think it's less about the materials and more

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Speaker 5: about the processing because, for example, China on the graphite

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Speaker 5: side has started signing off takes to buy all of

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Speaker 5: this natural graphite from projects that are outside of China.

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Speaker 5: Back to the financing discussion, people need off take, right,

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Speaker 5: and so if China is the only place you can

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Speaker 5: get your off take, then off take Sorry did that

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Speaker 5: just mean say supply agreements?

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Speaker 2: Yeah? Okay, so no, but in other words, like a

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Speaker 2: committed order book. So we're going to build you know

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Speaker 2: that you know that you have an environ.

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Speaker 5: Exactly right, And so especially for large capital mining projects,

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Speaker 5: you need to have these finance to be financiable.

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Speaker 2: Right.

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Speaker 5: And if China is the only market that's buying, then

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Speaker 5: you go to China and you sell your products. Right.

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Speaker 5: But then the question is really not how did they

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Speaker 5: develop the resources, but how did they develop the process technology?

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Speaker 5: And I think this really goes to, you know, kind

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Speaker 5: of unfortunately one of these classic stories of offshoring technology.

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Speaker 4: Right.

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Speaker 5: The key lithium ion battery materials that I just talked

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Speaker 5: about and MC was invented and patented here between you

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Speaker 5: know labs at Delhousie where I did my PhDe and

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Speaker 5: argon national lab. Lithium phosphate developed here, right, But when

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Speaker 5: it came to starting to commercialize and scale batteries, we

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Speaker 5: said it's too expensive to make these materials in the US,

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Speaker 5: Let's make them in China. And then very quickly China

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Speaker 5: started to develop more and more technology, more and more

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Speaker 5: processing around all of those materials.

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Speaker 3: So I take the point about expenses and offshoring, but

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Speaker 3: how much of it, if any, was environmental concerns, Because

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Speaker 3: you know, you mentioned giving materials an acid bath to

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Speaker 3: purify them. I don't necessarily think of that as a

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Speaker 3: particularly environmentally friendly activity, So I just wonder if that

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Speaker 3: played into that calculation at all.

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Speaker 5: So I think, you know, when we started off shoring technology,

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Speaker 5: it was to drive the cost down. And then when

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Speaker 5: you know, the end market continued to put pressure on costs,

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Speaker 5: then you know that allowed for let's say, shortcuts to

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Speaker 5: be taken in jurisdictions like China where environmental controls are

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Speaker 5: not as rigorous. So there are concerns about how they

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Speaker 5: handle acid waste streams in our sector. I talked about

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Speaker 5: this very high temperature process, so there are concerns about

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Speaker 5: how they build their plants to do this today in

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Speaker 5: terms of the emissions that come from those sites, the

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Speaker 5: power intensity of those sites, and so this idea of

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Speaker 5: a clean car and a dirty battery became very topical,

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Speaker 5: you know, kind of five years ago, and this is

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Speaker 5: one of our big challenges as well. We want to

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Speaker 5: reshore supply chain, which means we need to do it

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Speaker 5: with the right technology, but that also comes at a cost,

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Speaker 5: and so back to financeability and back to government incentives

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Speaker 5: and all of these programs. We're trying to balance a

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Speaker 5: lot of pieces of the puzzle here in order to

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Speaker 5: develop not just materials independence, but that process technology independence.

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Speaker 2: I want to ask one more question about China's dominance

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Speaker 2: in the refining or aspect. When you say, like, okay,

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Speaker 2: it was cheaper to do it in China, you know,

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Speaker 2: and I think of being able to do something cheaper

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Speaker 2: in China, like your mind goes first to labor costs,

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Speaker 2: et cetera. How much is it labor and how much

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Speaker 2: at this point is it about lower cost labor, Like

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Speaker 2: when you think about the various cost that goes into refining,

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Speaker 2: how much is labor? But how much is also at

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Speaker 2: this point just scale and expertise and learning by doing,

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Speaker 2: Because it seems like, yes, labor is probably cheaper in

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Speaker 2: many aspects in China, but also like once you've been

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Speaker 2: doing something for a long time. You just get good

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Speaker 2: at it in a way that someone starting from a

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Speaker 2: standing start might not expect to be good at it

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Speaker 2: for years, even if you could somehow hold labor cost constant.

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Speaker 5: I think that's exactly right. You know, I went there

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Speaker 5: to have some benefits and costs that you see in labor,

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Speaker 5: you see in capital intensity things like this that are

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Speaker 5: let's say more obvious. But that was twenty years ago, right,

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Speaker 5: And over those past twenty years now they've developed scale

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Speaker 5: efficiency and I mean they've had subsidies throughout that way

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Speaker 5: to incentivize their industry to become the dominant force here, right.

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Speaker 5: And so that's the balance between why it went but

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Speaker 5: then also now why it's challenging to compete because they

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Speaker 5: didn't just take technology and you know, copy US technology

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Speaker 5: or anything like this. They've now advanced that technology to

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Speaker 5: get the leaders in the world.

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Speaker 2: Okay, let's talk about the efforts to bring more of

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Speaker 2: that capacity to the US. So what is happening? How

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Speaker 2: much has you know, I know, like when the Inflation

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Speaker 2: Reduction Act went through, one of the big things, Senator

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Speaker 2: Joe Manchin was like, I'm very concerned about our dependence

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Speaker 2: on raw materials from China, so that became an incentive.

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Speaker 2: What from your view of the world, what has the

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Speaker 2: Inflation Reduction Act if any, What is the effect in

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Speaker 2: terms of catalyzing domestic capacity.

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Speaker 5: I think it's critical. And you know, we started our

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Speaker 5: Annimateials group in twenty seventeen, so okay, you know a

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Speaker 5: little before all of this way, because I had just

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Speaker 5: left Tesla where this problem statement became pretty obvious, right,

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Speaker 5: this idea of localization, this dependence on China and graphite specifically,

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Speaker 5: was an area that I was focused in, and so

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Speaker 5: we had been saying for a long time the government

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Speaker 5: has to play a role here because we have challenges

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Speaker 5: competing dollar for dollar with China for all of those

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Speaker 5: reasons you just talked about, whether it's their lower cost

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Speaker 5: structure or now advancement in technology. And so the government

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Speaker 5: has now come in and when you look at and

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Speaker 5: we'll take graphite as the specific example, the policies in place.

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Speaker 5: We have the Inflation Reduction Act where we can qualify

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Speaker 5: for things like forty five acts, Advanced Manufacturing Production tax credit.

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Speaker 5: What is its all that out specifically what that means,

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Speaker 5: so that is a ten percent of our cost of

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Speaker 5: goods back to us in tax credits on an ongoing basis,

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Speaker 5: or we can apply and potentially be eligible for forty

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Speaker 5: eight C and forty eight C is thirty percent of

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Speaker 5: your capital investment on a clean energy project back in

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Speaker 5: tax credits. So these are programs that are worth one

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Speaker 5: hundred or hundreds of millions of dollars in tax credits.

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Speaker 5: We were, of course the recipient of one hundred million

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Speaker 5: dollar grant under the Infrastructure Law Package. That's a great thing.

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Speaker 5: We have an application with the Loan Program Office. And

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Speaker 5: Graphite has been identified as a critical mineral in all

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Speaker 5: of the policies, and it also is in the Section

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Speaker 5: three oh one tariffs, the twenty five percent tariff from China.

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Speaker 5: There's an exemption on that tariff right now. But when

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Speaker 5: you say is the government playing their role, look at

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Speaker 5: those policies right They're doing what they can. But we

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Speaker 5: need to make sure that all those policies are harmonized

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Speaker 5: and really going to something you talked about in the

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Speaker 5: intro catalyze, not just the development of technology, but the

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Speaker 5: investment in scale. That's the big challenge that we face

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Speaker 5: right now.

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Speaker 3: So speaking of an investment, I have at least two

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Speaker 3: questions specifically related to Tesla. So number one, when you

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Speaker 3: say you worked at Tesla, how many people ask you

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Speaker 3: if you know Elon Musk. Notice that I did not,

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Speaker 3: in fact ask that question, but I rephrased it slightly.

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Speaker 3: And then secondly, why not just develop this particular business

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Speaker 3: within Tesla? I mean, we have seen Tesla start to

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Speaker 3: go this well, maybe vertical integration is too strong a word,

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Speaker 3: but it is striking deals with specific suppliers for the

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Speaker 3: materials it needs for batteries. So clearly this is of

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Speaker 3: interest and concern for them. Why not just develop the

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Speaker 3: company within the auspices of Tesla? And maybe this gets

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Speaker 3: a little bit to the idea of like natural market

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Speaker 3: forces and investment versus those that are incentivized by the government.

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Speaker 5: Sure, so, no, I don't know Elon, and almost everyone asks.

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Speaker 5: But the but I think when you think about Tesla's strategy,

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Speaker 5: I think there's two things. You know. The first kind

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Speaker 5: of obvious statement is you can't do everything right. And

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Speaker 5: I mean, if they need.

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Speaker 2: I don't know, Elon seems to like be making it

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Speaker 2: pretty good, run spaceships, neulinks, tunnels, satellites. I mean, okay,

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Speaker 2: that flamethrower, the flamethrower, like you'd make a good run

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Speaker 2: of doing Twitter anyway, keep.

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Speaker 5: Going, Well, that's the house of evil, not the house

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Speaker 5: of truths, right. But again, you know, there's so much

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Speaker 5: investment that needs to happen in every vertical of the

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Speaker 5: supply chain, lithium, nickel, graphite, you know, electrolyde development, separator materials,

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Speaker 5: every single piece, and so you you kind of can't

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Speaker 5: fight every war, right, and so when you do look

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Speaker 5: at what Tesla has done, you know they focused and

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Speaker 5: the what the industry is focused on. You know, what

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Speaker 5: was the first metal that everybody got critically focused on? Lithium,

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Speaker 5: Then everybody started talking about nickel. Graphite has forever been

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Speaker 5: kind of the forgotten critical mineral, right, And it's because

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Speaker 5: actually graphite is what prevents in many ways air quotes

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Speaker 5: there the battery from being more energy dense, from holding

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Speaker 5: more energy and lasting longer on a single charge. But

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Speaker 5: it's also the only material that can hold those lithium

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Speaker 5: ions and give them back thousands of times like we

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Speaker 5: need for these long life applications like vehicles and energy storage.

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Speaker 5: So you talked a little bit about solid state batteries, right,

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Speaker 5: and you hear these terms and silicon anodes. So people

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Speaker 5: are always hoping, let's say that new materials are going

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Speaker 5: to displace our reliance on graphite and open up an

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Speaker 5: opportunity to have higher energy density batteries. But that's not

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Speaker 5: really the case. And we certainly see now that energy

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Speaker 5: density isn't necessarily the problem to solve for for vehicles

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Speaker 5: right range. You know, Tesla built foreigner mile cars and

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Speaker 5: Lucid as a five hundred plus mile car. But a

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Speaker 5: lot of people are going to lower energy density batteries.

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Speaker 5: They want the right range and the right cost, and

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Speaker 5: that's why graphite is going to be so important. But

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Speaker 5: that meant it got overlooked for a lot of years.

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Speaker 2: You have a one hundred million dollars grant from the

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Speaker 2: Department of Energy. You mentioned that you currently have a

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Speaker 2: application for the Loan Program's Office. We mentioned in the

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Speaker 2: beginning we've interviewed the head of that office multiple times.

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Speaker 2: We've heard from Jigger Shot at the Loan Program's Office

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Speaker 2: about why public money is important in this area, why

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Speaker 2: it solves a problem or fills a hole that the

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Speaker 2: private sector isn't ideal for. How would you describe it

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Speaker 2: from your perspective? What is the sort of maybe market

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Speaker 2: failure is the term, etc. But what does the public

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Speaker 2: money solve that private money can't In this view.

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Speaker 5: I don't think it's that private money can't solve, but

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Speaker 5: it supports the investment economics. I mean, it's that simple.

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Speaker 5: We have a problem statement where we are trying to

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Speaker 5: compete with China on costs. There will be premiums relative

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Speaker 5: to China costs to localize supply, whether it's because they're

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Speaker 5: more environmentally friendly or the incentive programs available on their ira,

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Speaker 5: but we do have to be competitive on a cost

437
00:22:11,680 --> 00:22:13,280
Speaker 5: basis because people don't want to see the cost of

438
00:22:13,280 --> 00:22:15,680
Speaker 5: electric vehicles go up. They want to see it come down, right,

439
00:22:16,160 --> 00:22:18,040
Speaker 5: But we also want to on shore the supply chain,

440
00:22:18,119 --> 00:22:21,480
Speaker 5: so there's a natural tension in that dynamic. So the

441
00:22:21,520 --> 00:22:25,080
Speaker 5: injection of government capital to lower our cost of capital,

442
00:22:25,119 --> 00:22:28,560
Speaker 5: whether through grants or loans, helps improve the economics when

443
00:22:28,560 --> 00:22:31,400
Speaker 5: we need to bring private sector investment into these projects.

444
00:22:31,720 --> 00:22:34,520
Speaker 5: So it's a critical role that has to be played,

445
00:22:34,880 --> 00:22:37,680
Speaker 5: but it's not the single solution. Right The government can't

446
00:22:37,800 --> 00:22:39,600
Speaker 5: pay for all the plants to be built for all

447
00:22:39,600 --> 00:22:42,880
Speaker 5: the supply chain projects. They have to and I think

448
00:22:42,880 --> 00:22:45,560
Speaker 5: they're doing a great job, frankly, and balancing how to

449
00:22:45,560 --> 00:22:48,280
Speaker 5: get public capital out the door and into the hands

450
00:22:48,280 --> 00:22:51,080
Speaker 5: of companies while doing it in a diligent manner. Of course,

451
00:22:51,080 --> 00:22:53,720
Speaker 5: we've seen a lot of hype and batteries over many cycles,

452
00:22:53,800 --> 00:22:56,080
Speaker 5: right from the early twenty tens where there was a

453
00:22:56,080 --> 00:22:59,840
Speaker 5: big kind of VC hype cycle to the spack market

454
00:23:00,040 --> 00:23:03,320
Speaker 5: and a lot of companies coming public on these growth aspirations.

455
00:23:03,960 --> 00:23:06,439
Speaker 5: So they have to be responsible taxpayer dollars, but they

456
00:23:06,440 --> 00:23:08,840
Speaker 5: also need to get it done and get it working.

457
00:23:08,920 --> 00:23:11,280
Speaker 5: And that's the thing Jigger really focuses on, is you know,

458
00:23:11,320 --> 00:23:14,080
Speaker 5: he wants to see these projects built, right, So.

459
00:23:14,240 --> 00:23:19,000
Speaker 3: One criticism of this sort of government led investment or

460
00:23:19,080 --> 00:23:22,439
Speaker 3: area of concern might be a politer way of putting it,

461
00:23:22,520 --> 00:23:26,320
Speaker 3: but it is the idea that, Okay, you can lend

462
00:23:26,480 --> 00:23:30,119
Speaker 3: money to finance these things. You can pour billions of

463
00:23:30,160 --> 00:23:34,440
Speaker 3: dollars into the creation of this capacity. But if the

464
00:23:34,560 --> 00:23:38,719
Speaker 3: end of that you don't have a dependable customer for

465
00:23:38,800 --> 00:23:43,199
Speaker 3: what's being produced, you haven't really solved your problem at

466
00:23:43,280 --> 00:23:45,919
Speaker 3: least in the long term. What are you saying in

467
00:23:46,000 --> 00:23:49,000
Speaker 3: terms of the government on I guess the demand side, like,

468
00:23:49,160 --> 00:23:51,920
Speaker 3: is there anything they can do there. Can they put

469
00:23:51,960 --> 00:23:55,359
Speaker 3: in place like permanent off take agreements or is that

470
00:23:55,440 --> 00:23:58,280
Speaker 3: going too far? Or how do you balance like that

471
00:23:58,560 --> 00:24:01,400
Speaker 3: actual side of the equation away from the initial investment

472
00:24:01,440 --> 00:24:04,240
Speaker 3: the ongoing consumption demand.

473
00:24:04,960 --> 00:24:07,639
Speaker 5: Yeah, that's a really good question because you know, you

474
00:24:07,720 --> 00:24:10,680
Speaker 5: do see jurisdictions that have governments play role in off

475
00:24:10,720 --> 00:24:13,800
Speaker 5: take right and insini agreements. Right, and so these say

476
00:24:14,200 --> 00:24:16,880
Speaker 5: you will make this product and I promise it will

477
00:24:16,920 --> 00:24:19,000
Speaker 5: be bought, and therefore you can go get investment.

478
00:24:19,160 --> 00:24:19,360
Speaker 2: Right.

479
00:24:19,880 --> 00:24:22,280
Speaker 5: There's a huge challenge with that, of course, because of

480
00:24:22,320 --> 00:24:25,080
Speaker 5: something we talked about earlier and is in that these

481
00:24:25,119 --> 00:24:29,280
Speaker 5: materials are not actually commodities, right. And so for us,

482
00:24:29,280 --> 00:24:32,800
Speaker 5: for example, right, we're developing materials for a lot of

483
00:24:32,840 --> 00:24:35,679
Speaker 5: the leading cell manufacturers. We just signed the supply agreement

484
00:24:35,720 --> 00:24:38,560
Speaker 5: with Panasonic last week, right, but that.

485
00:24:38,840 --> 00:24:41,080
Speaker 3: Goes to Tesla ultimately, Right.

486
00:24:40,880 --> 00:24:43,800
Speaker 5: That's one of their V partners. Yeah, their biggest DV partner.

487
00:24:43,840 --> 00:24:46,360
Speaker 5: And so you know, but the material that we'll make

488
00:24:46,440 --> 00:24:49,359
Speaker 5: for Panasonic will look different than the material that we

489
00:24:49,480 --> 00:24:52,520
Speaker 5: make for let's say LG or Samsung or core Power

490
00:24:52,600 --> 00:24:54,200
Speaker 5: or any of the other people that we work with.

491
00:24:54,240 --> 00:24:55,920
Speaker 5: And so it's really hard for the government to come

492
00:24:55,920 --> 00:24:58,120
Speaker 5: in and just say, hey, we'll buy it because graphite

493
00:24:58,119 --> 00:25:00,000
Speaker 5: is graphite. Because that sentence doesn't hold up.

494
00:25:00,840 --> 00:25:03,840
Speaker 2: You mentioned that, you know, there's numerous like battery hype

495
00:25:03,840 --> 00:25:06,040
Speaker 2: cycles over the years, and I always think this can't

496
00:25:06,040 --> 00:25:08,359
Speaker 2: be real. But in eighteen eighty three there's like a

497
00:25:08,400 --> 00:25:13,120
Speaker 2: famous Thomas Edison quote, the storage battery is, in my opinion,

498
00:25:13,240 --> 00:25:17,159
Speaker 2: a catchpenny, a sensation, a mechanism for swindling the public

499
00:25:17,200 --> 00:25:20,680
Speaker 2: by stock companies. So literally like one hundred and forty

500
00:25:20,880 --> 00:25:23,320
Speaker 2: or one hundred and forty one years ago, Thomas Edison

501
00:25:23,480 --> 00:25:26,159
Speaker 2: was warning the battery companies were all frauds and of

502
00:25:26,240 --> 00:25:28,080
Speaker 2: his hype and I believe you know, over the years

503
00:25:28,119 --> 00:25:30,320
Speaker 2: many people have lost a lot of money on the

504
00:25:30,359 --> 00:25:33,960
Speaker 2: next amazing battery. Okay, so you mentioned, you know, the

505
00:25:34,280 --> 00:25:36,440
Speaker 2: concerns about the end buyers. But right now, and we

506
00:25:36,560 --> 00:25:39,480
Speaker 2: mentioned in the intro, there's a number of near term

507
00:25:39,720 --> 00:25:43,439
Speaker 2: sources of anxiety right the ev Maybe evs aren't going

508
00:25:43,480 --> 00:25:45,760
Speaker 2: to sell as well in twenty twenty four as people

509
00:25:45,800 --> 00:25:47,919
Speaker 2: thought they would in twenty twenty two. There seem to

510
00:25:47,920 --> 00:25:52,040
Speaker 2: be still some concerns, still, some issues with commercialization, concerns

511
00:25:52,080 --> 00:25:54,400
Speaker 2: about charging network. Maybe they're not going to quite take

512
00:25:54,400 --> 00:25:57,639
Speaker 2: off as fast. There is the recent plunge in spot

513
00:25:57,680 --> 00:26:00,600
Speaker 2: prices for a number of important commodities. Although I don't

514
00:26:00,640 --> 00:26:03,199
Speaker 2: know what's happening in graphite, maybe you'll tell me. And

515
00:26:03,240 --> 00:26:05,160
Speaker 2: then you know, there are other sources of concern. There's

516
00:26:05,280 --> 00:26:07,639
Speaker 2: you mentioned some people believe that we'll be able to

517
00:26:07,640 --> 00:26:10,119
Speaker 2: do it without graph fight, and maybe we don't really

518
00:26:10,160 --> 00:26:13,399
Speaker 2: know what the dominant form of technology is going to be.

519
00:26:13,680 --> 00:26:16,240
Speaker 2: And then there's higher interest rates, and higher interest rates

520
00:26:16,280 --> 00:26:20,879
Speaker 2: affect investment decisions, plunging spot, concerns about demand, higher interest rates,

521
00:26:21,080 --> 00:26:24,240
Speaker 2: talk to us about Yeah, maybe long term is all batteries,

522
00:26:24,280 --> 00:26:26,359
Speaker 2: but what is what do these short term things do

523
00:26:26,520 --> 00:26:27,720
Speaker 2: to the investment impulse?

524
00:26:28,000 --> 00:26:29,639
Speaker 5: Sure, I'll try to I'll try to help. I know

525
00:26:29,720 --> 00:26:31,480
Speaker 5: it's all sex of them there, but I know you're

526
00:26:31,480 --> 00:26:34,040
Speaker 5: exactly right, All of those things play off of each other, right,

527
00:26:34,119 --> 00:26:37,520
Speaker 5: And yes, are we potentially going to miss the adoption

528
00:26:37,720 --> 00:26:40,840
Speaker 5: curve numbers for twenty twenty four that were forecasted in

529
00:26:40,880 --> 00:26:44,400
Speaker 5: twenty twenty two, Well, yes, right, we probably are. Does

530
00:26:44,440 --> 00:26:47,000
Speaker 5: it mean that this market isn't growing with double digit

531
00:26:47,080 --> 00:26:49,320
Speaker 5: growth rates for the course of this decade? No, it

532
00:26:49,359 --> 00:26:51,800
Speaker 5: doesn't because it will see that type of growth. And

533
00:26:51,840 --> 00:26:55,000
Speaker 5: so in my mind, all of these come back to

534
00:26:56,160 --> 00:26:58,879
Speaker 5: the customer and the product, right, because in order to

535
00:26:58,880 --> 00:27:02,360
Speaker 5: build the investment strategy, you have to show what we've

536
00:27:02,359 --> 00:27:04,760
Speaker 5: been talking about, these supply agreements, who's going to buy

537
00:27:04,760 --> 00:27:08,280
Speaker 5: these products and on what terms? Right, Because for example,

538
00:27:08,400 --> 00:27:11,440
Speaker 5: we need to rebuild the way some of these materials

539
00:27:11,480 --> 00:27:14,920
Speaker 5: are contracted in North America. So you know you talked

540
00:27:14,960 --> 00:27:17,840
Speaker 5: about lithium and nickel. These spot prices that have come down,

541
00:27:18,280 --> 00:27:20,440
Speaker 5: those only have some impact on the actual long term

542
00:27:20,480 --> 00:27:22,960
Speaker 5: agreements that are in place for these materials because many

543
00:27:23,000 --> 00:27:25,960
Speaker 5: of those have caps and callers that kind of control

544
00:27:26,000 --> 00:27:29,959
Speaker 5: the adjustments. Because these are traded, traded metals, so they

545
00:27:30,000 --> 00:27:32,840
Speaker 5: can have influence from speculation in the market, not actually

546
00:27:32,960 --> 00:27:35,040
Speaker 5: just basic supply demand dynamics.

547
00:27:35,280 --> 00:27:35,480
Speaker 4: Right.

548
00:27:35,840 --> 00:27:39,560
Speaker 5: Graphit's not a traded metal, and therefore it's really contracted

549
00:27:39,600 --> 00:27:42,320
Speaker 5: in China a battery graphight on a quarterly basis or

550
00:27:42,320 --> 00:27:45,360
Speaker 5: an annual basis at longest. So we're having to rethink

551
00:27:45,400 --> 00:27:48,680
Speaker 5: how we do commercial contracts so they're financiable. So as

552
00:27:48,680 --> 00:27:51,920
Speaker 5: an example, and then it's back to customer and longevity

553
00:27:51,920 --> 00:27:55,480
Speaker 5: of technology so LG invested in US last year, OLG

554
00:27:55,640 --> 00:27:59,439
Speaker 5: Energy Solution sign the joint development agreement that essentially marches

555
00:27:59,440 --> 00:28:02,800
Speaker 5: out the qualifycation schedule for their product and then it's

556
00:28:03,040 --> 00:28:06,760
Speaker 5: intended to trigger an off take with a ten year term. Right.

557
00:28:06,840 --> 00:28:09,600
Speaker 5: So you want to talk about is this technology. Here

558
00:28:09,720 --> 00:28:12,919
Speaker 5: are the big companies, the lgs, the panasonics of the world.

559
00:28:13,040 --> 00:28:15,120
Speaker 5: You know, they need these materials for the long haul.

560
00:28:15,359 --> 00:28:19,399
Speaker 5: But if those don't translate to agreements, you know, firm

561
00:28:19,480 --> 00:28:22,000
Speaker 5: off takes for us, then the financing is hard. And

562
00:28:22,040 --> 00:28:24,760
Speaker 5: this is why the government can't just throw money to

563
00:28:24,840 --> 00:28:29,400
Speaker 5: solve building production capacity, because before you can build production capacity,

564
00:28:29,600 --> 00:28:32,359
Speaker 5: you have to develop the tech and the products and

565
00:28:32,440 --> 00:28:35,680
Speaker 5: those Unfortunately, they take a long time to develop and

566
00:28:35,760 --> 00:28:37,960
Speaker 5: qualify in the sector. And you've seen that through these

567
00:28:38,320 --> 00:28:40,960
Speaker 5: these hype cycles. And I love that Edison quote.

568
00:28:41,040 --> 00:28:46,560
Speaker 3: Right, Yeah, how much does price feed into the financing side?

569
00:28:46,640 --> 00:28:49,360
Speaker 3: So the idea that you know, at the moment there

570
00:28:49,440 --> 00:28:53,080
Speaker 3: is a limit on processing capacity, there is some scarcity,

571
00:28:53,240 --> 00:28:57,280
Speaker 3: so we can have prices be relatively high, and that

572
00:28:57,360 --> 00:29:00,400
Speaker 3: might be attractive for private capital. But on the other hand,

573
00:29:00,520 --> 00:29:03,680
Speaker 3: the more you build out processing capacity, the more efficient

574
00:29:03,720 --> 00:29:06,280
Speaker 3: you get at this, you would expect prices to come down,

575
00:29:07,440 --> 00:29:10,120
Speaker 3: although I'm also thinking out loud here, but Joe, do

576
00:29:10,120 --> 00:29:12,760
Speaker 3: you remember the conversation we had with Bob Brackett at

577
00:29:12,800 --> 00:29:13,320
Speaker 3: fur instance.

578
00:29:13,360 --> 00:29:14,640
Speaker 2: Yah, absolutely, one of my favorite.

579
00:29:14,800 --> 00:29:17,680
Speaker 3: Yeah, this conversation is actually reminding me a lot of

580
00:29:17,720 --> 00:29:21,240
Speaker 3: that discussion. But he mentioned this thing called Jevins paradox,

581
00:29:21,280 --> 00:29:24,480
Speaker 3: which is that the more efficient you get at producing

582
00:29:24,520 --> 00:29:26,600
Speaker 3: a commodity, the more you end up using it, so

583
00:29:26,640 --> 00:29:30,000
Speaker 3: the market kind of grows along with your capacity. So

584
00:29:30,080 --> 00:29:32,640
Speaker 3: I'm that's a very long winded way of saying I'm

585
00:29:32,680 --> 00:29:37,200
Speaker 3: curious about how price is actually interacting with investment at

586
00:29:37,200 --> 00:29:37,600
Speaker 3: the moment.

587
00:29:38,240 --> 00:29:40,920
Speaker 5: Well, the price has donenderpin the investment, right. You have

588
00:29:41,000 --> 00:29:43,200
Speaker 5: to be able to demonstrate the returns in these projects.

589
00:29:43,240 --> 00:29:48,080
Speaker 5: And that's why it's taking time to build structures that

590
00:29:48,560 --> 00:29:51,400
Speaker 5: allow us price mechanisms for security over the long term.

591
00:29:51,440 --> 00:29:54,040
Speaker 5: Because when you think about this competing dynamic of Okay,

592
00:29:54,080 --> 00:29:56,360
Speaker 5: there's scarcity and materials, so costs can go up. There's

593
00:29:56,360 --> 00:29:59,000
Speaker 5: efficiency in production and scale so costs can come down.

594
00:29:59,480 --> 00:30:01,360
Speaker 5: And you know you just talked about there is certainly

595
00:30:01,400 --> 00:30:03,160
Speaker 5: the case is you use more of a commodity and

596
00:30:03,200 --> 00:30:05,400
Speaker 5: liftimund batteries as a great example. They used to be

597
00:30:05,400 --> 00:30:07,760
Speaker 5: over one thousand dollars to kill a what hour. Now

598
00:30:07,800 --> 00:30:10,160
Speaker 5: they're one hundred dollars on the order of per kill

599
00:30:10,200 --> 00:30:12,440
Speaker 5: a what hour because we've gotten more and more adoption,

600
00:30:13,160 --> 00:30:15,440
Speaker 5: and now that's opened up new markets like vehicles and

601
00:30:15,560 --> 00:30:17,560
Speaker 5: energy storage systems, which is going to drive more and

602
00:30:17,560 --> 00:30:20,640
Speaker 5: more adoption. Right, But I think it goes back to

603
00:30:21,200 --> 00:30:25,280
Speaker 5: how to balance that paradox with the customers. Because let's take,

604
00:30:25,320 --> 00:30:29,240
Speaker 5: for example, this proposed ten year term with LG. Neither

605
00:30:29,240 --> 00:30:31,840
Speaker 5: of us want to be out of market right in

606
00:30:31,920 --> 00:30:35,880
Speaker 5: twenty thirty five where we're pricing graphite, but what's the

607
00:30:35,920 --> 00:30:38,120
Speaker 5: market price and graphit going to be in twenty thirty five.

608
00:30:38,440 --> 00:30:40,800
Speaker 5: So the way we think about this is when you

609
00:30:40,840 --> 00:30:44,840
Speaker 5: can develop, improve your process, technology and your products. These

610
00:30:44,880 --> 00:30:48,360
Speaker 5: are not simple customer transactions. These are long term partnerships.

611
00:30:48,360 --> 00:30:51,080
Speaker 5: We need to work with these companies. If their goal

612
00:30:51,160 --> 00:30:54,560
Speaker 5: is to have localized supply, they know they need to

613
00:30:54,840 --> 00:30:57,800
Speaker 5: be in partnership with us, not simply look at us

614
00:30:57,840 --> 00:31:00,360
Speaker 5: like an auto supply chain where there's ten companies and

615
00:31:00,400 --> 00:31:02,080
Speaker 5: you can drive eight of them bankrupt as long as

616
00:31:02,080 --> 00:31:02,880
Speaker 5: you keep too alive.

617
00:31:03,320 --> 00:31:23,160
Speaker 2: Right, let me ask you about another source of uncertainty.

618
00:31:23,200 --> 00:31:25,520
Speaker 2: You know, I was listing all these things about near

619
00:31:25,680 --> 00:31:28,320
Speaker 2: term ev takeoff and rates and all this stuff.

620
00:31:28,720 --> 00:31:29,840
Speaker 4: In China, you.

621
00:31:29,800 --> 00:31:33,280
Speaker 2: Could have the government announce a five year plan and

622
00:31:33,320 --> 00:31:35,880
Speaker 2: then five years later it's still Sesson paying in office,

623
00:31:35,880 --> 00:31:38,760
Speaker 2: and he can announce continuation the five year plan, and

624
00:31:38,760 --> 00:31:41,320
Speaker 2: probably five years later he'll still be in office, and

625
00:31:41,320 --> 00:31:43,640
Speaker 2: it can you know, it can continue. This is not

626
00:31:43,680 --> 00:31:47,080
Speaker 2: a political question, but the US obviously political system does

627
00:31:47,080 --> 00:31:49,760
Speaker 2: not work with that sort of consistency, and it is

628
00:31:49,800 --> 00:31:53,120
Speaker 2: not entirely implausible that a year from now we have

629
00:31:53,160 --> 00:31:55,400
Speaker 2: a different president who is a different view at different

630
00:31:55,760 --> 00:31:59,640
Speaker 2: energy goals. The loan program itself has expanded like a

631
00:31:59,640 --> 00:32:02,240
Speaker 2: puffer fish under Biden, who was sort of this backwater

632
00:32:02,320 --> 00:32:05,960
Speaker 2: for many years because of the cylindra problems, and then

633
00:32:06,000 --> 00:32:09,360
Speaker 2: now it's gigantic, but it's certainly conceivable that its own

634
00:32:09,480 --> 00:32:14,400
Speaker 2: lending capacity could be curtailed dramatically. Again, how does some

635
00:32:14,760 --> 00:32:19,920
Speaker 2: policy uncertainty over the medium term affect investment decisions in

636
00:32:19,960 --> 00:32:20,640
Speaker 2: the short term.

637
00:32:21,320 --> 00:32:24,320
Speaker 5: Yeah, uncertainty is the enemy of investment, right, and so

638
00:32:24,440 --> 00:32:28,600
Speaker 5: it does put questions on the table of how reliant

639
00:32:28,720 --> 00:32:32,080
Speaker 5: are you on these potential government programs. Right, So for example,

640
00:32:32,120 --> 00:32:33,880
Speaker 5: we talked a little bit earlier about some of the

641
00:32:33,920 --> 00:32:37,560
Speaker 5: tax credit opportunities like forty five X. If the ability

642
00:32:37,560 --> 00:32:39,840
Speaker 5: to get ten percent of your cost back is the

643
00:32:39,840 --> 00:32:42,240
Speaker 5: difference between you being an investable project and a not

644
00:32:42,360 --> 00:32:45,880
Speaker 5: investable project, then an investor may sit on the sidelines

645
00:32:45,880 --> 00:32:48,640
Speaker 5: and wait to make sure that that program is not

646
00:32:48,720 --> 00:32:51,840
Speaker 5: going to be altered, let's say. But I think, you know,

647
00:32:51,880 --> 00:32:54,040
Speaker 5: when you take a step back from kind of that

648
00:32:54,200 --> 00:32:57,960
Speaker 5: level of detail, I think regardless of you know, the

649
00:32:58,040 --> 00:33:03,640
Speaker 5: upcoming election, the long term goal has much similarity between

650
00:33:03,680 --> 00:33:06,920
Speaker 5: the parties, Right, we want to reduce our reliance on China.

651
00:33:06,960 --> 00:33:10,640
Speaker 5: Maybe there'll be a difference on whether the electric vehicles

652
00:33:10,680 --> 00:33:14,080
Speaker 5: get the incentives that they do now specifically, but when

653
00:33:14,120 --> 00:33:17,040
Speaker 5: you think about the things that have happened in this sector,

654
00:33:17,240 --> 00:33:20,920
Speaker 5: the Section three oh one tariffs were put in to

655
00:33:21,040 --> 00:33:23,920
Speaker 5: price the Chinese products coming to the US differently to

656
00:33:23,960 --> 00:33:27,600
Speaker 5: incentivize US production. Under Biden, you know, we went into

657
00:33:27,600 --> 00:33:31,000
Speaker 5: a capital investment cycle of stimulus spending. So I think

658
00:33:31,040 --> 00:33:33,280
Speaker 5: we you know, unfortunately, we do need to take a

659
00:33:33,520 --> 00:33:36,120
Speaker 5: view on this industry that's outside of the political cycle.

660
00:33:36,200 --> 00:33:38,760
Speaker 5: But that's challenging, but I think there's a lot of

661
00:33:38,840 --> 00:33:42,320
Speaker 5: synergy in the mission between the parties. There's just a

662
00:33:42,320 --> 00:33:44,440
Speaker 5: difference in the tools and the toolbox that they choose

663
00:33:44,480 --> 00:33:46,760
Speaker 5: to use to get the work done.

664
00:33:47,200 --> 00:33:50,280
Speaker 3: I want to, I guess, fact check one thing or

665
00:33:50,480 --> 00:33:52,520
Speaker 3: get your view on this. But whenever we talk to

666
00:33:52,880 --> 00:33:57,200
Speaker 3: Jiggershaw over at the DOE, he always talks about how

667
00:33:57,840 --> 00:34:02,440
Speaker 3: when it comes to private investment of you know, new

668
00:34:02,600 --> 00:34:07,040
Speaker 3: and wacky technology, in some respects, there is a reluctance

669
00:34:07,120 --> 00:34:11,279
Speaker 3: on the part of banks, for instance, to gamble on

670
00:34:11,360 --> 00:34:13,640
Speaker 3: this or to take a big risk on technology that

671
00:34:13,640 --> 00:34:17,879
Speaker 3: they're probably not experts in, whereas something like the Loan

672
00:34:17,920 --> 00:34:21,560
Speaker 3: Program's Office they have a bunch of people with a

673
00:34:21,600 --> 00:34:24,840
Speaker 3: lot of scientific background, a lot of experience, who I

674
00:34:24,840 --> 00:34:28,400
Speaker 3: guess have the expertise to be evaluating whether or not

675
00:34:28,480 --> 00:34:32,160
Speaker 3: these things are realistic or promising. Has that been your

676
00:34:32,719 --> 00:34:37,760
Speaker 3: experience or what is the difference between working with something

677
00:34:37,840 --> 00:34:41,480
Speaker 3: like the DOE, the Loan Program's Office versus working with

678
00:34:41,600 --> 00:34:44,640
Speaker 3: private investors, Like do you get different types of questions?

679
00:34:45,120 --> 00:34:48,879
Speaker 3: Do they show different types of concerns or interests when

680
00:34:48,880 --> 00:34:49,440
Speaker 3: they talk to you.

681
00:34:50,640 --> 00:34:52,800
Speaker 5: I think, at the end of the day, the LPO

682
00:34:52,960 --> 00:34:55,960
Speaker 5: is still a commercial financing vehicle, right, and so the

683
00:34:56,000 --> 00:34:58,799
Speaker 5: diligence process looks similar to that of the banks, but

684
00:34:58,840 --> 00:35:01,000
Speaker 5: they do bring in a lot of great experts to

685
00:35:01,040 --> 00:35:04,799
Speaker 5: make sure they are comfortable with the technology, the customers,

686
00:35:04,920 --> 00:35:08,919
Speaker 5: the engineering reports, the site plans, all of those level

687
00:35:08,920 --> 00:35:13,239
Speaker 5: of details. I think the fundamental difference is kind of simplistic.

688
00:35:14,000 --> 00:35:16,640
Speaker 5: They are not in it simply for the return profiles

689
00:35:16,760 --> 00:35:19,799
Speaker 5: right that the banks or private capital are looking for,

690
00:35:19,840 --> 00:35:22,359
Speaker 5: which are much higher. They're in it because they have

691
00:35:22,880 --> 00:35:26,320
Speaker 5: let's say, kind of mandates and strategies around certain sectors

692
00:35:26,320 --> 00:35:29,880
Speaker 5: that they want to see be successful. Doesn't mean that

693
00:35:29,920 --> 00:35:32,200
Speaker 5: they can go put a loan behind any project, because

694
00:35:32,239 --> 00:35:35,160
Speaker 5: they have to go through that commercial diligence, But their

695
00:35:35,200 --> 00:35:37,840
Speaker 5: goal is to bring that let's say first slug of

696
00:35:37,880 --> 00:35:40,520
Speaker 5: capital in at a lower cost of capital and de

697
00:35:40,719 --> 00:35:43,640
Speaker 5: risk it for the other private forms of capital to

698
00:35:43,680 --> 00:35:45,600
Speaker 5: come in alongside of it in the project.

699
00:35:45,800 --> 00:35:48,279
Speaker 2: Out of curiosity, what does the application look like? I

700
00:35:48,280 --> 00:35:50,840
Speaker 2: don't know. In my mind, I imagine like a cology application.

701
00:35:51,760 --> 00:35:55,239
Speaker 3: Get to write a personal essay what GRAPHI means to me?

702
00:35:55,440 --> 00:35:57,719
Speaker 2: Yeah? But what is that like? The actual what is

703
00:35:57,800 --> 00:35:59,440
Speaker 2: in practice? What does it look like applying for all

704
00:35:59,480 --> 00:35:59,960
Speaker 2: these loans.

705
00:36:00,600 --> 00:36:03,799
Speaker 5: It's really just an enormous process. It's an undertaking from

706
00:36:03,840 --> 00:36:07,000
Speaker 5: the pre application phase, working with the team to understand

707
00:36:07,000 --> 00:36:10,440
Speaker 5: the project, the site, the engineering right the pre diligence

708
00:36:10,480 --> 00:36:13,080
Speaker 5: on what the project can bring, and then really where

709
00:36:13,080 --> 00:36:16,320
Speaker 5: things ramp up is in the diligence phase, right before

710
00:36:16,360 --> 00:36:19,279
Speaker 5: you get to this kind of infamous conditional commitment where

711
00:36:19,320 --> 00:36:21,399
Speaker 5: they put terms in front of you. This is when

712
00:36:21,400 --> 00:36:24,200
Speaker 5: they start bringing in all the external advisors and going

713
00:36:24,280 --> 00:36:27,799
Speaker 5: through all of the engineering reports, customer off take and

714
00:36:27,840 --> 00:36:30,920
Speaker 5: so you know, yes, there's the personal essay component of course,

715
00:36:31,040 --> 00:36:37,400
Speaker 5: but it's more commercial. But it's more commercial diligence of

716
00:36:37,880 --> 00:36:40,799
Speaker 5: let's see the data room and let's understand every inch

717
00:36:40,880 --> 00:36:43,080
Speaker 5: and every corner of this project so we know what

718
00:36:43,080 --> 00:36:44,799
Speaker 5: we're getting involved, and then the team does a great

719
00:36:44,880 --> 00:36:45,400
Speaker 5: job to do that.

720
00:36:46,440 --> 00:36:49,279
Speaker 3: So we've been very focused on the US market for

721
00:36:49,400 --> 00:36:52,759
Speaker 3: obvious reasons. I know we talked about China initially, but

722
00:36:53,200 --> 00:36:57,480
Speaker 3: what are we seeing from other countries in terms of response.

723
00:36:57,560 --> 00:37:00,840
Speaker 3: Are other countries trying to build out the capacity or

724
00:37:00,880 --> 00:37:03,200
Speaker 3: similar capacities that the US seems to be doing.

725
00:37:04,680 --> 00:37:07,799
Speaker 5: I think you're seeing this idea of shifting all of

726
00:37:07,840 --> 00:37:11,080
Speaker 5: our let's talk at the cell manufacturing level first, Right,

727
00:37:11,080 --> 00:37:12,839
Speaker 5: you're seeing the idea that we need to move our

728
00:37:12,880 --> 00:37:16,239
Speaker 5: cell manufacturing globally outside of just China, right, and whether

729
00:37:16,280 --> 00:37:19,280
Speaker 5: that's expansion in countries like Korea and Japan or also

730
00:37:19,360 --> 00:37:22,759
Speaker 5: into Europe for example, similar to the US. But I

731
00:37:22,800 --> 00:37:25,919
Speaker 5: think the reality is right now, we're in a time where, again,

732
00:37:25,960 --> 00:37:29,560
Speaker 5: these are all capital heavy investment programs, so people have

733
00:37:29,600 --> 00:37:32,000
Speaker 5: to go where the incentives are strong, right, And so

734
00:37:32,080 --> 00:37:36,399
Speaker 5: for cell manufacturing specifically, the forty five X credits offer

735
00:37:36,440 --> 00:37:39,360
Speaker 5: a huge amount of money per kilowatt hour relative to

736
00:37:39,400 --> 00:37:42,120
Speaker 5: the cost structure of the battery if you're building in

737
00:37:42,200 --> 00:37:44,239
Speaker 5: the United States. So if you had to make a

738
00:37:44,280 --> 00:37:47,799
Speaker 5: decision to build your next multi billion dollar plant in

739
00:37:47,840 --> 00:37:51,560
Speaker 5: the US or in Germany, let's say, or somewhere in Europe,

740
00:37:51,760 --> 00:37:54,680
Speaker 5: that incentive is a big difference between the economics of

741
00:37:54,719 --> 00:37:58,120
Speaker 5: those plants. And so the policies under Biden and the

742
00:37:58,200 --> 00:38:02,319
Speaker 5: investment and the incentive of opportunities are pulling a lot

743
00:38:02,360 --> 00:38:05,719
Speaker 5: of that investment to focus on the US first. But

744
00:38:05,800 --> 00:38:08,360
Speaker 5: I think we need to see this trend continue in

745
00:38:08,840 --> 00:38:12,560
Speaker 5: other jurisdictions because everyone faces the same simple problem statement

746
00:38:12,640 --> 00:38:16,440
Speaker 5: of this energy transition, and the battery manufacturing and supply

747
00:38:16,520 --> 00:38:19,120
Speaker 5: chain still has this huge reliance on China, and that

748
00:38:19,680 --> 00:38:22,279
Speaker 5: has concerns. You know, no matter what jurisdiction you are

749
00:38:22,360 --> 00:38:25,000
Speaker 5: simply because you don't want to be so reliant on

750
00:38:25,000 --> 00:38:27,239
Speaker 5: a single source, and people are so sensitive to it

751
00:38:27,520 --> 00:38:29,160
Speaker 5: after watching what happened with chips.

752
00:38:29,480 --> 00:38:33,520
Speaker 2: Right, So, actually I realized we haven't actually asked this question,

753
00:38:33,760 --> 00:38:37,319
Speaker 2: but what are you building right now specifically? And can

754
00:38:37,360 --> 00:38:39,960
Speaker 2: you sort of give an overview or sort of like

755
00:38:40,000 --> 00:38:42,480
Speaker 2: a simple penciled out version of like what are the

756
00:38:42,560 --> 00:38:47,160
Speaker 2: costs of your investment? What kind of manu refining plants

757
00:38:47,480 --> 00:38:49,719
Speaker 2: do you have or planning to build? And I don't know,

758
00:38:50,000 --> 00:38:51,600
Speaker 2: do this sort of like we're at a bar and

759
00:38:51,640 --> 00:38:53,279
Speaker 2: you're explaining it to me on a napkin? What are

760
00:38:53,320 --> 00:38:54,320
Speaker 2: you building right now? Sure?

761
00:38:54,400 --> 00:38:56,480
Speaker 5: So, we have a four hundred thousand square foot mass

762
00:38:56,480 --> 00:38:58,960
Speaker 5: production site in Chattanooga, Tennessee. We bought it. It was

763
00:38:59,000 --> 00:39:02,719
Speaker 5: a former geit where they were building nuclear turbines. So

764
00:39:02,920 --> 00:39:07,279
Speaker 5: in that facility, we will bring in petroleum coke by

765
00:39:07,360 --> 00:39:10,040
Speaker 5: rail or by barge or by truck, and we'll go

766
00:39:10,040 --> 00:39:12,080
Speaker 5: through what we talked about earlier. We'll change its size,

767
00:39:12,080 --> 00:39:15,280
Speaker 5: its shape, we'll grind it up, we'll change its structure,

768
00:39:15,320 --> 00:39:18,880
Speaker 5: will heat it up in our proprietary high temperature furnace systems,

769
00:39:19,320 --> 00:39:21,080
Speaker 5: and then we'll bag it and ship it off to

770
00:39:21,320 --> 00:39:24,239
Speaker 5: you folks like Panasonic. And so it is. You know,

771
00:39:24,640 --> 00:39:28,920
Speaker 5: a manufacturing plant with heavy equipment inside to process these powders, right,

772
00:39:29,040 --> 00:39:32,200
Speaker 5: and so graphite is a fine powder, like a twenty

773
00:39:32,360 --> 00:39:37,319
Speaker 5: micron particle size, so very small. And at the end

774
00:39:37,360 --> 00:39:41,080
Speaker 5: of the day, we're selling these materials, let's say, in

775
00:39:41,080 --> 00:39:44,359
Speaker 5: the price range of seven to ten thousand dollars per ton.

776
00:39:44,520 --> 00:39:46,279
Speaker 5: So you hear about some of the spot prices in

777
00:39:46,480 --> 00:39:49,160
Speaker 5: lithium and nickel and tens of thousands of dollars per ton.

778
00:39:49,239 --> 00:39:51,759
Speaker 5: So these materials sell on the order of seven to

779
00:39:51,760 --> 00:39:54,440
Speaker 5: ten thousand per ton. We can make them on the

780
00:39:54,520 --> 00:39:58,040
Speaker 5: order of six to eight depending on the cost and

781
00:39:58,080 --> 00:40:01,840
Speaker 5: the specification targets. Like I said, everybody wants a different material.

782
00:40:02,360 --> 00:40:05,000
Speaker 5: But this first plant is going to cost us another

783
00:40:05,000 --> 00:40:07,680
Speaker 5: three or four hundred million dollars to build out, right,

784
00:40:07,960 --> 00:40:10,520
Speaker 5: And that's plant number one for twenty thousand tons. And

785
00:40:10,600 --> 00:40:13,360
Speaker 5: to put things in perspective about a thousand tons of

786
00:40:13,400 --> 00:40:17,120
Speaker 5: graphite produces about a gigawot hour of batteries, So you

787
00:40:17,120 --> 00:40:20,840
Speaker 5: start hearing forty gigawatt hour plants. If those use all graphite,

788
00:40:20,840 --> 00:40:24,800
Speaker 5: they need about forty thousand tons. So LG has announced

789
00:40:24,840 --> 00:40:27,160
Speaker 5: two hundred gig awot hours to build in the US.

790
00:40:27,200 --> 00:40:29,520
Speaker 5: Panasonic has announced two hundred gig a lot hours to

791
00:40:29,520 --> 00:40:31,440
Speaker 5: build in the US. Tesla has talked about going to

792
00:40:31,840 --> 00:40:35,800
Speaker 5: Taro a lot hours of scale. So these are million

793
00:40:36,200 --> 00:40:40,720
Speaker 5: plus tons of demand and it's taking us this amount

794
00:40:40,719 --> 00:40:43,360
Speaker 5: of time, this amount of capital to get the first

795
00:40:43,400 --> 00:40:46,120
Speaker 5: twenty thousand tons out of the gate. And that's the

796
00:40:46,320 --> 00:40:49,719
Speaker 5: scale challenge. It's one of the reasons you do see

797
00:40:49,760 --> 00:40:52,719
Speaker 5: so many former Tesla people kind of at the helm

798
00:40:52,719 --> 00:40:55,879
Speaker 5: of different companies in the supply chain now because back

799
00:40:55,920 --> 00:40:58,640
Speaker 5: in let's say the twenty twelve to twenty fifteen, sixteen

800
00:40:58,719 --> 00:41:03,080
Speaker 5: seventeen hour, as Reno was coming online, Tesla was one

801
00:41:03,080 --> 00:41:04,919
Speaker 5: of the only places you could be in the US

802
00:41:04,960 --> 00:41:09,200
Speaker 5: that really understood that scale issue, right, and therefore everybody

803
00:41:09,239 --> 00:41:11,840
Speaker 5: got to look at some little problem statement quote unquote

804
00:41:11,880 --> 00:41:16,359
Speaker 5: little problem statement like graphite, and it's a huge business opportunity,

805
00:41:16,520 --> 00:41:18,160
Speaker 5: and so people went out and chased all of these

806
00:41:18,160 --> 00:41:21,640
Speaker 5: different problems because kind of to your question earlier, Tesla

807
00:41:21,719 --> 00:41:24,000
Speaker 5: couldn't play whack a role with that many.

808
00:41:25,600 --> 00:41:28,560
Speaker 3: Just in terms of scale and capacity. I'm kind of

809
00:41:28,600 --> 00:41:31,640
Speaker 3: curious hearing you lay out the description of the plant,

810
00:41:32,320 --> 00:41:36,680
Speaker 3: is labor a constricting factor for you at all or

811
00:41:36,719 --> 00:41:40,279
Speaker 3: for other processors? Because I take the point about this

812
00:41:40,360 --> 00:41:43,480
Speaker 3: isn't necessarily a commodity in the traditional sense. But when

813
00:41:43,520 --> 00:41:46,120
Speaker 3: we're talking about using you know, coke to heat it

814
00:41:46,239 --> 00:41:49,200
Speaker 3: up and process it and do things like that, it

815
00:41:49,320 --> 00:41:53,040
Speaker 3: sounds a lot like a sort of heavy, difficult industry.

816
00:41:53,400 --> 00:41:55,680
Speaker 3: But on the other hand, we are talking about making

817
00:41:55,719 --> 00:41:59,640
Speaker 3: something that is quite sophisticated and is intended to help

818
00:41:59,680 --> 00:42:03,560
Speaker 3: with the clean energy transition and is obviously very closely

819
00:42:03,600 --> 00:42:07,040
Speaker 3: linked to battery technology and things like that. What's the

820
00:42:07,440 --> 00:42:10,880
Speaker 3: recruitment process like for you right now? And what's the

821
00:42:10,880 --> 00:42:14,239
Speaker 3: pitch to people for working in this particular industry.

822
00:42:15,480 --> 00:42:18,120
Speaker 5: So I think there's phases of the recruitment challenge, right.

823
00:42:18,160 --> 00:42:20,759
Speaker 5: The first is in the technology development, and then in

824
00:42:20,800 --> 00:42:23,200
Speaker 5: the scale and then in the ops. Right, Because again,

825
00:42:23,239 --> 00:42:25,839
Speaker 5: when you think about this idea of on shoring not

826
00:42:25,920 --> 00:42:30,040
Speaker 5: just production capacity but technology development. There are not people

827
00:42:30,080 --> 00:42:32,920
Speaker 5: in this country who have run battery graphite plants. Yeah,

828
00:42:33,000 --> 00:42:35,640
Speaker 5: they only really exist in China. So you can't just

829
00:42:35,680 --> 00:42:38,480
Speaker 5: go out and hire people who have done this before, right,

830
00:42:38,560 --> 00:42:41,160
Speaker 5: So you have to home grow a lot of that IP,

831
00:42:41,440 --> 00:42:44,399
Speaker 5: a lot of that knowledge, and that takes time, right,

832
00:42:44,440 --> 00:42:47,480
Speaker 5: And that's why again people chasing the idea that the

833
00:42:47,480 --> 00:42:49,279
Speaker 5: government's going to give me one hundred million dollars and

834
00:42:49,320 --> 00:42:52,000
Speaker 5: I can go build a plant. That's only a solution

835
00:42:52,080 --> 00:42:54,640
Speaker 5: the one tiny little sliver of the problem statement of

836
00:42:54,680 --> 00:42:57,840
Speaker 5: technology development. But then now we're into kind of that

837
00:42:58,000 --> 00:43:00,920
Speaker 5: scale out phase where we need more engineer resources and

838
00:43:00,960 --> 00:43:02,840
Speaker 5: we can tap on a lot of great industries that

839
00:43:02,880 --> 00:43:05,640
Speaker 5: we have built in this country and kind of redeploy

840
00:43:05,719 --> 00:43:08,880
Speaker 5: assets and then in operations, you know, we do see,

841
00:43:09,480 --> 00:43:12,120
Speaker 5: you know, labor restrictions if you look across the market,

842
00:43:12,160 --> 00:43:14,520
Speaker 5: and it all comes back to what these growth curves are.

843
00:43:14,560 --> 00:43:17,160
Speaker 5: But I think there's a lot of opportunity to rescale

844
00:43:17,239 --> 00:43:20,400
Speaker 5: labor from other industries into these because at the end

845
00:43:20,440 --> 00:43:22,920
Speaker 5: of the day, there is you know, a huge operating

846
00:43:23,200 --> 00:43:26,640
Speaker 5: and strong labor based in places like Tennessee where we operate.

847
00:43:27,080 --> 00:43:30,759
Speaker 3: What industries do you draw on in Yeah, we had

848
00:43:30,760 --> 00:43:33,279
Speaker 3: the same question, but in terms of engineering and then

849
00:43:33,320 --> 00:43:35,279
Speaker 3: also like production, where are the overlaps?

850
00:43:35,320 --> 00:43:35,520
Speaker 2: Yeah?

851
00:43:35,880 --> 00:43:38,600
Speaker 5: Sure, so you know, specialty chemicals is a big one,

852
00:43:38,719 --> 00:43:40,840
Speaker 5: right because we are talking about how are we going

853
00:43:40,920 --> 00:43:45,120
Speaker 5: to optimize large scale processing of specialized material with very

854
00:43:45,200 --> 00:43:49,080
Speaker 5: exact parameters. Right, So it's really incredible when you think

855
00:43:49,120 --> 00:43:51,360
Speaker 5: about it. We start with, you know, let's say, chunks

856
00:43:51,400 --> 00:43:53,880
Speaker 5: of petroleum coke that could be on the order of

857
00:43:53,920 --> 00:43:56,960
Speaker 5: sizes of marbles, right, and we have to at the

858
00:43:57,040 --> 00:43:59,799
Speaker 5: end of the day know how to exactly control them

859
00:43:59,800 --> 00:44:02,480
Speaker 5: down to the micron scale and their size and their

860
00:44:02,520 --> 00:44:05,000
Speaker 5: shape and their structure and how they stick together and

861
00:44:05,000 --> 00:44:07,879
Speaker 5: their perfect surface coding and all of these things. Right.

862
00:44:08,400 --> 00:44:11,600
Speaker 5: But these types of material science problems have been solved

863
00:44:11,600 --> 00:44:15,400
Speaker 5: in other industries for other applications, right, So specialty chemicals

864
00:44:15,719 --> 00:44:19,440
Speaker 5: certainly automotive and automotive when we talk about the manufacturing side,

865
00:44:19,440 --> 00:44:23,319
Speaker 5: retooling and reskilling our workforce to these clean energy projects,

866
00:44:23,840 --> 00:44:25,680
Speaker 5: and of course you know we do look at oil

867
00:44:25,680 --> 00:44:28,360
Speaker 5: and gas and the refining industry as well from running

868
00:44:28,440 --> 00:44:31,160
Speaker 5: large scale operations. So Philip sixty six is one of

869
00:44:31,160 --> 00:44:34,200
Speaker 5: our is our largest shareholder, and you know, we look

870
00:44:34,239 --> 00:44:37,480
Speaker 5: at opportunities to say, are there, you know, any displaced

871
00:44:37,480 --> 00:44:39,759
Speaker 5: workers in the future of those industries that we need

872
00:44:39,800 --> 00:44:40,360
Speaker 5: to reskale.

873
00:44:40,560 --> 00:44:42,440
Speaker 2: Yeah, I was actually going to ask about that Phillip

874
00:44:42,520 --> 00:44:46,280
Speaker 2: sixty six relationship. Are there like either internal know how

875
00:44:46,400 --> 00:44:50,319
Speaker 2: from the legacy sort of oil and gas industry that

876
00:44:50,360 --> 00:44:53,640
Speaker 2: can that does get or can sort of with somewhork

877
00:44:53,719 --> 00:44:55,480
Speaker 2: be reapplied to some of these areas.

878
00:44:55,680 --> 00:44:58,400
Speaker 5: Yeah. Absolutely, And I mean their expertise has kind of

879
00:44:58,400 --> 00:45:00,680
Speaker 5: been built to a certain level. They make these very

880
00:45:00,840 --> 00:45:04,680
Speaker 5: premium quality coke products from in the UK and here

881
00:45:04,719 --> 00:45:07,440
Speaker 5: in the US, and they support they supply some of

882
00:45:07,440 --> 00:45:10,399
Speaker 5: those into China for the battery market, right. But then

883
00:45:10,440 --> 00:45:13,879
Speaker 5: again they want to work with specialized partners to help

884
00:45:13,920 --> 00:45:15,000
Speaker 5: take those further.

885
00:45:15,480 --> 00:45:17,800
Speaker 2: One last thing for me, I kind of mentioned it before,

886
00:45:17,840 --> 00:45:21,400
Speaker 2: but I maybe got lost in one of my rambling questions.

887
00:45:21,680 --> 00:45:24,319
Speaker 2: The interest rate environment. Does it affect you? Do you

888
00:45:24,480 --> 00:45:28,200
Speaker 2: feel it? Does it change how things pencil out, et cetera?

889
00:45:28,880 --> 00:45:31,840
Speaker 5: Yeah, it just changes the math, right, and it changes

890
00:45:31,880 --> 00:45:34,280
Speaker 5: the calculus that investors are looking for in the private

891
00:45:34,280 --> 00:45:37,040
Speaker 5: capital and the returns. And so again it comes back

892
00:45:37,080 --> 00:45:40,200
Speaker 5: to we need to be able to have our customers

893
00:45:40,239 --> 00:45:43,440
Speaker 5: and our partners understand that we need off takes that

894
00:45:43,840 --> 00:45:46,960
Speaker 5: are going to generate the return profile that investors need,

895
00:45:47,120 --> 00:45:50,839
Speaker 5: given still the risk, supply chain risk, government incentive risk,

896
00:45:50,960 --> 00:45:54,319
Speaker 5: scale out risk ops risk that these projects still have.

897
00:45:54,560 --> 00:45:56,919
Speaker 5: And so that just means that we need to ensure

898
00:45:56,920 --> 00:46:00,800
Speaker 5: that contracting structures meet the expectations of investor's not in

899
00:46:00,800 --> 00:46:02,879
Speaker 5: a zero percent interest rate, but in our current interest

900
00:46:02,960 --> 00:46:03,560
Speaker 5: rate environment.

901
00:46:04,440 --> 00:46:06,879
Speaker 3: I have just one more question, and I'm thinking how

902
00:46:06,880 --> 00:46:10,279
Speaker 3: to phrase it, because maybe it's not that applicable to

903
00:46:10,760 --> 00:46:14,920
Speaker 3: graphite per se, the forgotten commodity, as you put it earlier,

904
00:46:14,960 --> 00:46:19,800
Speaker 3: But people talk a lot about technology being superseded, especially

905
00:46:19,920 --> 00:46:22,960
Speaker 3: in battery production. So the idea of solid state batteries

906
00:46:23,000 --> 00:46:26,480
Speaker 3: and things like that. Is there a world in which

907
00:46:26,960 --> 00:46:30,600
Speaker 3: we no longer need graphite to the extent that we

908
00:46:30,680 --> 00:46:34,440
Speaker 3: currently need it, And if so, is that something that

909
00:46:34,600 --> 00:46:38,560
Speaker 3: factors into your business plans currently? I guess what I'm

910
00:46:38,560 --> 00:46:41,200
Speaker 3: trying to ask is everyone who's in the battery making

911
00:46:41,280 --> 00:46:43,640
Speaker 3: business in one way or another, are they all trying

912
00:46:43,680 --> 00:46:47,640
Speaker 3: to prep for the next big technological development or is

913
00:46:47,680 --> 00:46:51,560
Speaker 3: everyone trying to develop expertise in what is needed right now?

914
00:46:52,640 --> 00:46:55,560
Speaker 5: Well, the kind of cheating, answer is both, right. You know,

915
00:46:55,640 --> 00:46:57,760
Speaker 5: they need to make the materials that we need today

916
00:46:57,880 --> 00:46:59,840
Speaker 5: and they also need to have a roadmap so that

917
00:47:00,040 --> 00:47:03,240
Speaker 5: over ten twenty years that the leaders in this industry

918
00:47:03,280 --> 00:47:05,759
Speaker 5: is the panasonics, the LG's of the world, you know,

919
00:47:06,000 --> 00:47:08,239
Speaker 5: are still the leaders in this industry, right, and they

920
00:47:08,280 --> 00:47:10,960
Speaker 5: don't get passed by new technology. But to go back

921
00:47:10,960 --> 00:47:12,919
Speaker 5: to the question of you know, will we never need

922
00:47:12,960 --> 00:47:16,600
Speaker 5: graph fight, No, right, we will always need graphite because

923
00:47:16,680 --> 00:47:19,440
Speaker 5: it is the only anode chemistry that can last thousands

924
00:47:19,440 --> 00:47:21,960
Speaker 5: of cycles. And I think a key concept that we

925
00:47:22,040 --> 00:47:24,920
Speaker 5: started focusing on, and it's relevant for vehicles, but it

926
00:47:24,920 --> 00:47:28,120
Speaker 5: becomes even more relevant for grid energy storage is the

927
00:47:28,160 --> 00:47:31,120
Speaker 5: idea of not just dollars per kill awat hour, right,

928
00:47:31,160 --> 00:47:33,880
Speaker 5: how expensive is my battery to buy, but dollars per

929
00:47:33,960 --> 00:47:37,120
Speaker 5: kill wat hour per life for per cycle, right? Because

930
00:47:37,160 --> 00:47:39,680
Speaker 5: why would I pay ten percent less for a battery

931
00:47:39,680 --> 00:47:41,759
Speaker 5: that only lasts half as long if I need it

932
00:47:41,800 --> 00:47:42,680
Speaker 5: to last longer?

933
00:47:42,920 --> 00:47:43,120
Speaker 2: Right?

934
00:47:43,560 --> 00:47:47,839
Speaker 5: And so that differentiation in anode chemistry to be to

935
00:47:47,920 --> 00:47:50,480
Speaker 5: have the long cycle life is why there will always

936
00:47:50,480 --> 00:47:53,879
Speaker 5: be applications that require graphite. And I think what we're

937
00:47:53,880 --> 00:47:55,920
Speaker 5: going to see is new technologies are going to open

938
00:47:56,040 --> 00:47:58,880
Speaker 5: new doors, right, So you're going to see things like

939
00:47:58,960 --> 00:48:03,600
Speaker 5: solid state batteries go into military, go into aviation, go

940
00:48:03,640 --> 00:48:07,280
Speaker 5: into fields that because graphite is a little bulky relative

941
00:48:07,360 --> 00:48:10,879
Speaker 5: to these other materials and these other chemistries, they are

942
00:48:10,880 --> 00:48:12,799
Speaker 5: not as well suited for. So you're going to see

943
00:48:12,840 --> 00:48:16,040
Speaker 5: new doors opened by new technology more than you're going

944
00:48:16,080 --> 00:48:18,680
Speaker 5: to see it replace old technology. And I think again,

945
00:48:19,200 --> 00:48:22,040
Speaker 5: when you look at the first sony cell commercialized in

946
00:48:22,120 --> 00:48:26,359
Speaker 5: ninety one, it was a lithium cobalt oxide cathode and

947
00:48:26,400 --> 00:48:29,960
Speaker 5: a carbon based graph anode, right, and today most of

948
00:48:29,960 --> 00:48:32,279
Speaker 5: the batteries are a nickel, manganese cobalt, so just a

949
00:48:32,280 --> 00:48:36,120
Speaker 5: little variant on that and graphite. So it's been thirty

950
00:48:36,239 --> 00:48:39,000
Speaker 5: years and we haven't seen really a substantial change. We've

951
00:48:39,040 --> 00:48:41,040
Speaker 5: just made all of those materials that much better, so

952
00:48:41,080 --> 00:48:43,839
Speaker 5: they're cheaper, they last longer, they store a little more,

953
00:48:44,160 --> 00:48:46,600
Speaker 5: and we've gotten it to now support these new industries.

954
00:48:47,719 --> 00:48:50,520
Speaker 2: Doctor Chris Burns, CEO of Novonix, thank you so much

955
00:48:50,560 --> 00:48:51,759
Speaker 2: for coming on odlocks.

956
00:48:51,800 --> 00:48:53,480
Speaker 5: Great, No, thank you so much for having me.

957
00:48:53,640 --> 00:48:55,040
Speaker 2: Yeah, that was great. That was a lot of fun.

958
00:48:55,120 --> 00:48:55,640
Speaker 4: That was great.

959
00:48:55,680 --> 00:48:59,800
Speaker 3: You made graphite interesting but on a serious note, actually,

960
00:48:59,800 --> 00:49:02,239
Speaker 3: I think I understand how batteries work now, so that's

961
00:49:02,239 --> 00:49:06,160
Speaker 3: a plus. Yeah, that was great end of minus boom.

962
00:49:06,160 --> 00:49:19,800
Speaker 4: Sorry, Tracy.

963
00:49:19,880 --> 00:49:21,920
Speaker 2: I thought that was very helpful. And you know, we

964
00:49:21,960 --> 00:49:24,880
Speaker 2: talk a lot about these topics and sort of the abstract,

965
00:49:25,000 --> 00:49:29,680
Speaker 2: and to hear someone in the space literally having to

966
00:49:29,719 --> 00:49:32,560
Speaker 2: you know, build this big facility of you know, hundreds

967
00:49:32,560 --> 00:49:35,560
Speaker 2: of millions of dollars in Tennessee and look for off

968
00:49:35,640 --> 00:49:37,719
Speaker 2: take agreements, look for sales, and think about how they're

969
00:49:37,760 --> 00:49:41,040
Speaker 2: gonna get the core commodities in was extremely helpful for

970
00:49:41,120 --> 00:49:43,400
Speaker 2: I think, certainly Mine, I guess suspect both of our

971
00:49:43,520 --> 00:49:44,400
Speaker 2: understanding of the space.

972
00:49:44,480 --> 00:49:47,279
Speaker 3: Absolutely, it's sort of solidified a lot of stuff that

973
00:49:47,320 --> 00:49:50,560
Speaker 3: I guess we've spoken about kind of theoretically, Yeah, in

974
00:49:50,800 --> 00:49:54,600
Speaker 3: conversations with people like Chick or Shaw, and I don't

975
00:49:54,600 --> 00:49:57,439
Speaker 3: mean to suggest he only speaks theoretically, like he gives

976
00:49:57,480 --> 00:50:00,799
Speaker 3: some really great examples, but it's interesting to hear it

977
00:50:00,880 --> 00:50:04,120
Speaker 3: from the other perspective from a company that is, in fact,

978
00:50:04,200 --> 00:50:06,520
Speaker 3: you know, on the receiving end of some of this

979
00:50:06,600 --> 00:50:10,040
Speaker 3: public support and what it actually does for them and

980
00:50:10,080 --> 00:50:14,359
Speaker 3: how it gets deployed, deployed being you know very much

981
00:50:14,400 --> 00:50:16,440
Speaker 3: the trademark of the DOEA.

982
00:50:16,640 --> 00:50:19,759
Speaker 2: Yeah, no, totally exactly. And you know, there are many

983
00:50:19,800 --> 00:50:21,640
Speaker 2: interesting things in there too.

984
00:50:22,520 --> 00:50:22,719
Speaker 5: You know.

985
00:50:22,840 --> 00:50:25,560
Speaker 2: It's interesting as you noted that, you know, ten years

986
00:50:25,600 --> 00:50:28,759
Speaker 2: ago or seven or eight years ago, it probably was

987
00:50:28,920 --> 00:50:32,000
Speaker 2: only people at Tesla and a few other places. Yeah,

988
00:50:32,040 --> 00:50:35,040
Speaker 2: it sort of appreciated the sort of raw math that

989
00:50:35,080 --> 00:50:37,080
Speaker 2: we're all talking about these days of like, okay, like

990
00:50:37,200 --> 00:50:39,640
Speaker 2: if we want to have a domestic battery industry, how

991
00:50:39,719 --> 00:50:42,240
Speaker 2: much scale are we going to need, et cetera. Probably

992
00:50:42,239 --> 00:50:44,759
Speaker 2: a lot of people haven't been thinking about it that long.

993
00:50:44,840 --> 00:50:47,799
Speaker 2: Sin's interesting that or just the idea that like, look,

994
00:50:47,800 --> 00:50:50,520
Speaker 2: at some point people are going to start getting anxious

995
00:50:50,520 --> 00:50:52,600
Speaker 2: about how much we rely on China for some of

996
00:50:52,600 --> 00:50:55,800
Speaker 2: this stuff. And so that wasn't codified into law until

997
00:50:55,800 --> 00:50:58,920
Speaker 2: twenty twenty two, but obviously people were talking about it

998
00:50:59,000 --> 00:51:01,200
Speaker 2: and betting that there would be sort of you know,

999
00:51:01,280 --> 00:51:04,359
Speaker 2: near shoring or in a domestic reshoring of batteries for

1000
00:51:04,400 --> 00:51:05,279
Speaker 2: several years before that.

1001
00:51:05,520 --> 00:51:08,040
Speaker 3: Well, this is the other thing I was thinking about,

1002
00:51:08,120 --> 00:51:10,880
Speaker 3: which is that we're very used to talking about the

1003
00:51:11,120 --> 00:51:16,319
Speaker 3: US cutting off strategically important technology for China. But of

1004
00:51:16,360 --> 00:51:19,879
Speaker 3: course part of the China response to that happening has

1005
00:51:19,960 --> 00:51:23,920
Speaker 3: been to cut off exports of rare earth, and in

1006
00:51:23,960 --> 00:51:26,400
Speaker 3: the context of China, we're always talking about like the

1007
00:51:26,400 --> 00:51:30,160
Speaker 3: potential for that to backfire, you know, like, Okay, China

1008
00:51:30,200 --> 00:51:34,040
Speaker 3: doesn't have access to advanced semiconductor technology anymore, or it

1009
00:51:34,040 --> 00:51:36,560
Speaker 3: has less of it than it used to, but maybe

1010
00:51:36,600 --> 00:51:40,279
Speaker 3: they'll just develop their own capacity faster. And I kind

1011
00:51:40,320 --> 00:51:42,719
Speaker 3: of think this is almost the opposite side of it,

1012
00:51:42,800 --> 00:51:46,040
Speaker 3: where Okay, China has cut off the US more or

1013
00:51:46,080 --> 00:51:50,880
Speaker 3: less or diminished their exports from these vital materials that

1014
00:51:50,920 --> 00:51:54,320
Speaker 3: are needed for the clean energy transition for batteries and evs,

1015
00:51:54,840 --> 00:51:59,279
Speaker 3: does it end up speeding up the US project to

1016
00:51:59,320 --> 00:52:02,720
Speaker 3: build out It feels like that's kind of the direction

1017
00:52:02,800 --> 00:52:05,480
Speaker 3: that it's heading. And especially if supply isn't actually the

1018
00:52:05,520 --> 00:52:08,640
Speaker 3: limiting factory, as Chris was pointing out, but if it's

1019
00:52:08,640 --> 00:52:10,799
Speaker 3: actually the processing capacity.

1020
00:52:10,880 --> 00:52:12,719
Speaker 2: Yeah, no, it raises a lot of interesting There was

1021
00:52:12,760 --> 00:52:15,480
Speaker 2: also a lot of interesting questions. Also, your question about

1022
00:52:15,520 --> 00:52:19,000
Speaker 2: you know, hiring talent was very interesting because again, you know,

1023
00:52:19,040 --> 00:52:20,600
Speaker 2: if you don't have the industry, you don't have the

1024
00:52:20,640 --> 00:52:23,359
Speaker 2: people that know how to build these places. And it's

1025
00:52:23,360 --> 00:52:28,160
Speaker 2: a good reminder that manufacturing. Maybe the initial impulse to

1026
00:52:28,480 --> 00:52:32,680
Speaker 2: offshore manufacturing was sort of cheap manpower, Right, how much

1027
00:52:32,719 --> 00:52:34,319
Speaker 2: does this person get paid per hour?

1028
00:52:34,680 --> 00:52:37,360
Speaker 3: But it regulatory shortcuts.

1029
00:52:36,840 --> 00:52:40,240
Speaker 2: And regulatory shortcuts, environmental probably a big one, but then another.

1030
00:52:40,320 --> 00:52:44,040
Speaker 2: You know, over time that just turns into a larger

1031
00:52:44,080 --> 00:52:46,120
Speaker 2: stock of people who know how to build something well,

1032
00:52:46,120 --> 00:52:47,360
Speaker 2: which is really hard to overcome.

1033
00:52:48,040 --> 00:52:50,480
Speaker 3: I suddenly had a vision of what was that conversation

1034
00:52:50,600 --> 00:52:53,840
Speaker 3: with like monkeys jumping from tree to tree?

1035
00:52:54,000 --> 00:52:59,960
Speaker 2: Right, the complexity Ricardo Houseman, Yeah, exactly, adjacency, the adjacent industries.

1036
00:53:00,040 --> 00:53:02,040
Speaker 2: That's all your question, so good, Like what are the

1037
00:53:02,080 --> 00:53:05,600
Speaker 2: adjacent industries that can now where these skills can now

1038
00:53:05,719 --> 00:53:08,520
Speaker 2: be transferred to something more higher value, add et CETERA.

1039
00:53:09,200 --> 00:53:10,000
Speaker 2: Great conversation.

1040
00:53:10,200 --> 00:53:15,000
Speaker 3: Yeah, that was surprisingly fun. I'm I'm graphite pilled. Now,

1041
00:53:15,480 --> 00:53:16,600
Speaker 3: all right, shall we leave it there?

1042
00:53:16,680 --> 00:53:17,399
Speaker 2: Let's leave it there.

1043
00:53:17,760 --> 00:53:20,520
Speaker 3: This has been another episode of the Odd Lots podcast.

1044
00:53:20,600 --> 00:53:23,319
Speaker 3: I'm Tracy Alloway. You can follow me at Tracy.

1045
00:53:23,040 --> 00:53:25,759
Speaker 2: Alloway and I'm Joe Wisenthal. You can follow me at

1046
00:53:25,760 --> 00:53:29,640
Speaker 2: the Stalwart. Follow our producers Carmen Rodriguez at Carman Arman,

1047
00:53:29,840 --> 00:53:33,840
Speaker 2: Dashel Bennett at dashbot and Kelbrooks at Kelbrooks. Thank you

1048
00:53:33,880 --> 00:53:36,880
Speaker 2: to our producer Moses Ondam. For more odd Lots content,

1049
00:53:36,920 --> 00:53:39,319
Speaker 2: go to Bloomberg dot com slash odd Lots, where we

1050
00:53:39,320 --> 00:53:42,239
Speaker 2: have transcripts, a blog and a newsletter and you could

1051
00:53:42,239 --> 00:53:44,719
Speaker 2: talk about all these topics twenty four to seven in

1052
00:53:44,800 --> 00:53:45,440
Speaker 2: the discord.

1053
00:53:45,560 --> 00:53:46,440
Speaker 4: In fact, it was.

1054
00:53:46,800 --> 00:53:49,840
Speaker 2: One of our discord members that first suggested no Vomics

1055
00:53:49,880 --> 00:53:53,239
Speaker 2: episode Discord dot gg slash odline.

1056
00:53:53,400 --> 00:53:56,640
Speaker 3: And if you enjoy odd Lots, if you find these

1057
00:53:56,880 --> 00:54:01,160
Speaker 3: dives into what actually goes into batteries, then please leave

1058
00:54:01,280 --> 00:54:04,840
Speaker 3: us a positive review on your favorite podcast platform. And

1059
00:54:05,080 --> 00:54:07,920
Speaker 3: don't forget if you are a Bloomberg subscriber, you can

1060
00:54:07,960 --> 00:54:11,439
Speaker 3: listen to all of our episodes absolutely ad free. All

1061
00:54:11,480 --> 00:54:14,000
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1062
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