All-In with Chamath, Jason, Sacks & Friedberg - #AIS: MP Materials CEO James Litinsky on rare earths, supply chain, and energy independence

Okay, so I wanted to introduce somebody.

This is an incredible story of a turnaround of a business that impacts a lot of us in

America, if you care about climate change, etc.

His name is Jim Letinsky, and here’s a guy who had all the success in the world, running

a hedge fund successfully.

A business called Molly Corp goes into bankruptcy.

He basically puts his entire fund in it, brings it out of bankruptcy, manages to build

one of the first mines that was completely cleared.

You heard what Elon said about California.

In California, that mines some of these rare earths and critical metals that we need to

make permanent magnets that we use in electric motors.

On the front lines of climate change, building factories now in South Carolina with GM, etc.

So Jim’s just going to walk you through a few things, and we’re going to talk about

some climate change stuff after this.

Hey everyone.

So I’m Jim.

I used to run a hedge fund, and now I’m an accidental industrialist.

I want to take you through that journey, and then while I do that, we’ll go through the

problem that I’d like to solve.

Just to provide some context, if we think about a lot of the things that just came up

with respect to the economy, it’s been about a decade plus since the global financial crisis.

In that decade plus, we’ve been in this environment where there’s been essentially a full-on boom.

A lot of money printing, and essentially a very low or negative cost of capital in

growth in technology.

And what we’ve seen now, I guess, we’re on the beginning stages of the aftermath of experiencing

that economic enema, as was just discussed.

But we have just been through this period of over a decade where there’s been all this

money that has gone to growth.

And what has happened during that time simultaneously is the real economy has been starved.

You haven’t seen, I doubt many of you have friends that are investing in new steel mills

or aluminum mills or nickel mines.

Maybe nickel mines now, right?

But while the real economy has been starved, actually, interestingly, we haven’t noticed

it so much.

One, because we’re just starting to scale into electrification.

But China’s made investments.

So pretty much all of the incremental steel and aluminum and commodities capacity in the

world over the last decade has come online because China has led the way.

And as an aside, interestingly, about 80% of the aluminum and 80% of the steel production

in China is done with coal.

So not only has this been, not only have they sort of taken over the real stuff, and this

isn’t about, you know, wherever you are on the spectrum of, you know, are they just a

really tough competitor or is this, you know, some kind of economic World War III?

It doesn’t matter.

What matters is that the incremental stuff in the real world has really, the way has

been led by China.

And so when we think about what’s now happening in the world as we electrify, I want to move

on to the next one here.

I think one good thing about going after Elon is I don’t have to really explain this chart.

We are electrifying.

And as we electrify, what a lot of people might not fully understand is that while all

this real stuff has come online, the Chinese have actually moved downstream very intelligently.

And so when we think about a lot of people may have heard of China 2025, but a lot of

people probably haven’t heard of China 2035, which is the current MO, which is to move

downstream into standardization.

And so actually when we look around the world today, four of the top 10 OEMs are Chinese

by global battery electric share.

And so when we think about the single largest private employer in the country, the auto

industry, we think about all these industries that are mineral intensive.

The Chinese are actually have moved downstream.

And these are very mineral intensive industries.

So what this slide shows is as we go from a fossil fuel world to an electrification

world, which we all, I think everyone in this room believes is fake complete, and this actually

excludes steel and aluminum.

Just in the content of copper, nickel, lithium, and then what I focus on rare earths and some

of these other things, there’s seven times as much content.

And so when we think about the past of the fossil fuel driving geopolitical gamesmanship

and power in the world, the future is about minerals.

And what I focus on are rare earths.

And so I’m going to get to my journey as an accidental industrialist in a minute.

But what you can see here is rare earths, they’re kind of the way to think about it

is sort of like a young cousin of semiconductors to the EV business.

So regardless of how electrification happens, regardless of battery chemistry, how that

energy gets to a motor, that motor moves via magnets.

And so this industry is expected to explode.

And it’s not just EVs, it’s wind turbines, drones, robots.

Can anyone actually guess where this robot is from?

This is actually from Short Circuit, Johnny No. 5, but I’m hoping Elon will get us a better

robot of the future.

But when we think about all these industries, magnetics, it’s really powerful.

So that’s where I’m focused, and this is just an example of the commodity needs as

we electrify.

If we take those projections of what’s going to happen in electrification, just in my space,

so this is NDPR, this is the stuff that we make, the input into magnetics, you can see

there’s a huge deficit that is looming.

And moving on, look at my space, here’s the challenge.

So outside of us, this entire supply chain is essentially domiciled in China.

And it doesn’t even have to be nefarious, but what happens when the largest manufacturers

in the world are all competing for, what I showed you on that prior slide, a shortage

of supply, and we’ve seen lots of headlines, whether it’s the semiconductor issue, or just

today there was a headline that Rivian is fighting with a supplier over seat costs,

all these things where we’re seeing the shortages in the supply chain that are flowing through.

If there’s an allocation of materials, and the materials are controlled by China or another

geopolitical rival, which downstream businesses do we think are going to get those materials?

And this is actually now an existential issue for all of us.

So back to my story.

So this is Mountain Pass, this is the mine Chamath mentioned that we bought this out

of bankruptcy in my fund, so going back about five years ago, this site went bankrupt.

It was a public company, it rose and then it fell, and nobody believed that we could

compete against China.

And in fact I had to, we showed up, I showed up in the Delaware courthouse steps, I mean

it was literally like out of a movie, there were other creditors pushing to send this

thing into bankruptcy.

And you look at this thing and you’re like, wait, this is one of the most valuable rare

earth materials mines in the world, and this is the future, this is a material for electrification,

and no one wants it.

Not only does no one want it, but people think that actually we can’t even produce here economically

because the Chinese have taken over the industry.

And so we actually kicked in a couple million dollars just to keep it in care maintenance,

just to keep the eight employees on site going, so that this thing could actually keep its

permit through the bankruptcy, because otherwise they were just going to raise it to the ground.

So we went through that journey, and we ended up buying it, and so these assets, this is

about two billion dollars of replacement cost, not to mention the fact that this is one of

the marquee sites in the world, and it’s in a stable jurisdiction.

All these assets up over here to the left, these are what make it environmentally friendly,

so we don’t put anything back into the water supply.

We have dry tailings, which essentially means that for sure we’re the cleanest rare earth

operation in the world.

If you go onto YouTube, you can kind of see how historically some of that mining and processing

is done.

But no one wanted it, and everyone thought that this couldn’t be done, but we bought

it out of bankruptcy, we took on, it was sort of a distressed turnaround and startup at

the same time.

We had no accounting software, we literally had eight people and a mine, and I show up,

I’m a hedge fund manager, and people thought I was pretty insane.

And probably if I knew what I was getting into, like I said, it was an accident.

But I couldn’t believe that no one else wanted to do this, and frankly I felt as an American,

somebody had to do this.

And there I was on the courthouse steps, and so I went for it.

And fast forward to today, and we’re now public, as Chamath mentioned, we went public a couple

years ago, we’re a six and a half billion dollar market cap.

It’s been obviously a massive, thank you.

So this has been a massive home run for myself and my investors, but more importantly, and

I don’t belittle that, ultimately we’re capitalists here, we want to do a great job for our clients

and ourselves.

But I hope that we can kind of contextualize this for what needs to happen throughout our

economy, because I do think that as painful as the adjustment may be that we’re now in

this period that we’re about to be in, as the capital comes out of the growth space,

there is going to be a big, beautiful bull market in real stuff.

And it is just beginning, and I’ll give some statistics with the besties, I don’t want

to ruin my besties time, so I’m going to finish up real quick, but there is a lot of

stuff that needs to get built, and this supply chain stuff is existential.

And so what we’re doing at MP, you can see our stage one, we’re doing, we just reported

our quarter a couple weeks ago, we’re now, from a site four years ago that I had to beg

on the courthouse steps just to keep it alive, we’re now doing approximately 450 million

of run rate EBITDA today.

So, and then we announced a deal with GM, we actually have already broken ground at

a magnetics facility in Fort Worth, Texas, and this is a scale deal, it’s not exclusive,

we expect to bring in other OEMs, where we’ll be making magnets, so we’ll be shipping material

that will be environmentally produced from Mountain Pass, California over to our site

in Fort Worth and make magnetics, and our goal is to build a western magnetics champion.

And so, I guess with all that I would say, hopefully this kind of thing can inspire

you, we need, the good news is there needs to be a lot more stuff like this, maybe I’ll

share some stats on some of the other space, because I don’t want to make this just about

rare earths, but when we think about all the materials that we need for this electrification

boom, and the supply chain that needs to be built, this is like, this is the era of, it’s

as if it’s the 19-teens and Ford is just out, I mean there is an entire supply chain,

and it’s not just EVs, it’s wind turbines, it’s drones, it’s robots, and it needs to

be a bunch of real stuff that we all create, and so I don’t think, some percentage of us

don’t need to necessarily debate whether crypto is going to go up or down, now is a time to

pivot I think, because this is something that we need to do to get competitive again, so

I guess with that I’ll flip the mic and feel the fire from the besties, thank you.

Tesla in their quarterly earnings said something to the effect of, you know, we’re going to

consider becoming a mining company as well, right, and then I think Elon said something

on the earnings call which I thought was really interesting, he’s like, I encourage every

entrepreneur out there to get into lithium, please become a lithium miner, right, so maybe

if you can just quantify for us, and you showed the gap for your, for NDPR, but broadly speaking

lithium and all the other things that we need to actually electrify and get to a reasonable

place in climate change, how behind the curve are we really?

So it’s a great question, and the data is tough because a lot of it is reliant on battery

chemistry, and so we don’t know exactly how much nickel it’ll be, you know, but we do

know certainly lithium, nickel, copper, all of these things, it’s multiple, so we need,

here’s actually, maybe this is a great stat, some good source that I utilize estimated

that we probably need on the order of 40 to 50 copper and nickel projects over the next

couple decades, so call it roughly $200 billion of CapEx to satisfy the demand for electrification

that we have over the next couple decades, and what’s so interesting, you mentioned,

and obviously I assume Elon sees this, is if you look at the multiples, you know, just

think about it from a strict investor point of view, from a financial arbitrage standpoint,

look at the multiples of where auto OEMs trade, or, you know, certainly Tesla, and then look

at what’s happening in the mining industry today, so actually the nickel industry is

dominated by essentially Glencore and Vale, those two businesses, and I’m not, you know,

I’m not pitching stocks, but as an investor, you know, we’ll see with the next panel, those

two businesses right now at today’s commodities prices are essentially going to free cash

flow themselves out in three years, and they’re buying back stock, right, and so this is how

stark the arbitrage is, that in the real economy, mining and materials companies, steel companies

are trading at double digit free cash flow yields, they’re buying back stock, they have

no leverage in their businesses, and then downstream, everyone’s relying on them, and

upstream, these guys, they don’t want to spend to build out new capacity, because the cost

of capital is too high, so what’s going to happen is, I think you’re going to see maybe

an AOL Time Warner moment, and I don’t mean it the negative way, but I think you could

see a Tesla or someone like that buy upstream into these industries, because ultimately

downstream they all realize that the real stuff is in shortage, and you can’t have the

enterprise value downstream, because it’s like musical chairs.

How much of your night, when you’re sleeping, do you think, there’s an X percent chance

I’m going to have some huge environmental catastrophe, like part of I think why a lot

of folks, you know, folks like this, who could probably go into that business, don’t, is

in the back of their mind, they think, man, this is like, this is a lot of gnarly stuff

if something goes wrong.

How do you manage that risk, and how big is that risk if we try to do this in America?

So the single most important thing we do at MP is safety, and we actually in our last

earnest call said, you know, last two years, we’ve had two years without a lost time injury,

and we gave everybody, every single employee in the company a cash bonus to celebrate that

milestone, which is really critical.

The reality is, this isn’t software, right?

It’s real stuff.

All we can do is our best.

I just think, I think frankly as a human being, as an American, I would rather have mines

being done in America, in the state of California, over elsewhere in the world, where I certainly

know that, I assure you that nickel mining in Russia is not as environmentally friendly

as it is in Canada.

Well, I think most people may or may not know this, but for example, all of the, you know,

cobalt that goes into a lot of these EVs, a lot of it comes from DRC, and if you go

and see the state of governance in DRC, women’s rights in DRC, child rights in DRC, they’re


And so, it is a very, very complicated, dirty supply chain that feeds the beast, and even

though you may think you’re doing the right thing by, you know, driving this plug-in hybrid

or, you know, your Toyota Prius, if you trace that stuff back, it’s a really complicated


I think we’ve all gotten a big education on supply chain over the last two years with

COVID, and the value may be of redundancy, and what happens if you give a dictator a

little too much power?

I think the Germans are learning a hard lesson about what happens when you shut down nuclear

reactors and decide, hey, let’s buy our, let’s buy our energy from Putin.

Well, it’s a great point you raise about the Germans, because I think it’s a fair analogy

to say that Germany is to NatGas as we are to China supply chain.

And so, we see, we see this coming, right?

We see, and again, this speaks to geopolitical leverage.

This is a national security issue, is it not?

It’s a national security issue.

It’s a democracy issue.

Is it a war issue?


Is it something that gets to the point where we would have to go to war if, for example,

we didn’t get the natural resources and critical elements we need?

Not that you say that it could, not it would happen, but could it happen where it’s so

important that all these other countries can electrify and—

Well, how about this?

I’ll make a prediction.

I’ll bet that in the next five years, we will see a major household name OEM fail or need

a bailout due to, not, you know, prices went up on them, but lack of access to a material,

some kind of critical material.

Like, you’re talking a GM, a Ford, a somebody.


Probably not GM.

I mean, and Shamath, think about it.

Do we, if you think about it, Shamath, do we need to even predict this?

We went to a number of wars in the Middle East over oil.

So if this is the new oil, and that is the analogy, it’s clearly going to cause, you

know, conflicts, and the question is, you know, are we going to build a strategic reserve

of these materials?

Do we have a strategic reserve?

We talked about the food supply problem, and Freeberg educated us on, hey, we’ve got, like,

30 days of food.

This country has 90 days of food.

Do we need to have a strategic reserve of these rare earth minerals in the United States?

Jason, I just don’t think there’ll be enough, because when you think about, this is, we’re

talking about a multi, trillions of dollars a year to electrify across.

So the demand is so great.

The demand is so great.

We’re talking about.

We can’t build up supply.

We can’t build up supply, or if we can’t, we need to put the capital in, and right now,

and that’s why, you know, again, we’ll let the investor panel, maybe they can bleed into

this, but that’s why I think the whole space is a screaming buy, because if you look across

all these companies, the cost of capital is just so high, and so one of two things has

to happen, or both, which is prices just have to go vertical, or someone starts taking

them out, or we’re just not going to have the stuff to electrify.

I understand that there’s now been demonstrated significantly more lithium, tell me if I’m

off on this, in the oceans than there is in the crust, and there may be systems for extracting

lithium from the oceans that are electrochemical in nature, that would allow us to kind of

access that resource, and obviously, if you can get a system that can scale, you can get

it all out very quickly, so I mean, have you looked into these systems, in a sense, for

the opportunity?

Let me step back and then step down to that.

So investment styles are cyclical, just like industries, you know, I believe in cycles,


The cure for high prices is high prices.

There’s no question in my mind whether it’s that, or there will be someone, or frankly,

maybe someone in this audience will have some breakthrough, right?

And so we will solve this problem, but the challenge is, is that I don’t even think that

we’ve ignited the proper focus and resources to actually solve this problem, and so there

may be, that may be an example of a solution, but that’ll take five to ten years, but in

the meantime, there’s, you know, there’s a lot of resources that need to be applied to


Adam Jonas, who is the auto-analyst at Morgan Stanley, calls this the mother of all cat-back

cycles, I think, right?

And I think his estimate was like, you know, something like three trillion dollars of capex

needs to get spent over the next decade, even to have a fighting chance on all of this stuff.

And so if you’re looking at new areas, so take your NDPR, NP materials hat off, but

if you were in the same position you were back then now, not really, you don’t need

to go to the courthouse steps, but where would you be looking, you know?

Would you look at lithium?

Would you look at nickel?

Would you look at trying to do what, you know, China’s doing and create better and simpler

and cheaper chemistries for batteries?

Like where would you spend your time right now if you weren’t doing NP?

So I think you actually said it perfectly well in the lead-in, which is just anything

that is real stuff, and so yeah, all of it, lithium, copper, nickel, steel, aluminum,

all of these areas that have been starved, the cost of capital is just so high across

the board that if you can come up with solutions to deliver the shortages, and again, I’m not

saying the next three months, we could have a brutal recession for six months, but we

see the long-term five, ten-year trend.

I think anywhere you look in this space, you’re looking in the right direction.

It’s a wind at your back as opposed to, and again, I’m not, you know, taking a view, but

to come up with a new cryptocurrency right now, it’s a huge wind at your back relative

to the headwind.

Could you get your mine operational in today’s political environment, do you think?

Like if you had to start from scratch, or if you found a new thing in Nevada or, you

know, wherever it is?

That’s a great question, and that’s the challenge, is that it takes, to get any of these things,

it takes a decade, right?

It takes, if you have all the capital in place, all the human capital, all the, just the,

you know, going through that process to build it, the materials cost, and so could I do


I think the world needs it, and I think that what we do environmentally is so unique that

I think we could get it done, but this is a big challenge, and I think, frankly, it’s

a, you know, you guys were talking in the last session about we need to come together.

This is a big-time area where we need to come together.

There should be a grand bargain, right?

There should be, the environmentalists should say, okay, I accept that we need this stuff,

I accept that we don’t want it to be only made in Russia and China, and they should

loosen up on some of the permitting stuff, and I think the people who are just like,

you know, drill, drill, drill, mine, mine, mine, don’t care, need to accept that we need

to have really tough standards, and I think we should have some kind of grand bargain,

and it could be, you know, tax policy focused on it, but there needs to be some kind of

coming together in our country to recognize that we need this stuff.

I mean, let’s be intellectually honest.

People are hypocrites.

The people in the EU, people in the United States, they want the energy, they want it

to be cheap, they’re complaining about the expense of, you know, even a modest increase

in energy costs, 10%, 20%, which they could withstand.

They will complain about it, and they will not allow fracking in their country, but they’re

more than willing to let Russia frack for it.

They don’t want the cobalt coming out of the ground in California.

They’re more than willing to let 15-year-olds dig it out of the ground without a mess.



As horrific as it is.

It’s intellectually dishonest, it’s hypocrisy, and I think we have to own the fact that we

want to live in large houses, and we want to blow the air conditioner on some ridiculous


America’s homes are three times bigger than other homes.

So to build on this, two very quick stories.

There’s a massive deposit of lithium in Nevada, which would be enough to basically feed Tesla

and another OEM, okay?

So this would get probably somewhere between one and one and a half million cars pure electric

on the road by 2030.

And they were completely permitted by the BLM, the Bureau of Land Management, and there

was a lawsuit that was filed.

And it’s still wrangling its way through the federal court system, and what it is is a

claim that there is an upper wood grouse that could be endangered through this mining.

They have yet to find an actual upper wood grouse in the area.

But nothing can happen.

It’s theoretical.

And so the problem is that we’ve now delayed two years.

It could get resolved this year, but it could be another two or three years, which means

lithium isn’t actually available until 2030.

Global warming continues to happen.

That’s one story.

Second story is that just yesterday, the city of Costa Mesa rejected a bid to build an electrolysis

facility to create a hundred million liters of clean water every single day.

Just a desal plant.

The desal plant.

Because they didn’t want it.

Because they’re going to lose some jellyfish or something.

No, they just didn’t want it.

They thought, ah, it’s unsightly.

I don’t want this in Costa Mesa.

And meanwhile, we’re in a huge drought.

You know, pretty, it’s a Costa, it’s a Mesa.

So you know.

And so to your point, when the rubber meets the road, these unfortunate decisions get made.

And there’s no way to, you know, sort of calm top down.

These people want to take 30-minute showers.

I mean, that’s the hypocrisy of it.

If Americans really want to talk about conservation.

First of all, 30 minutes, there’s nothing wrong with a 30-minute shower.

I wasn’t calling you out specifically, but since you unclothed yourself, it’s gratuitous,

in fact.

It’s completely gratuitous.

And it’s such a great point.

And my entire argument is that we’re going to, we will answer this question as a country,

either now or later.

In the point about four of the 10 largest auto OEMs in the world are now Chinese companies.

And so this is now a competitive issue.

And so we can, we can keep kicking the can or we’ll face a crisis.

We will lose jobs.

Are you beloved by the government?

Are you beloved by, like, can you kind of like beeline and just cut through the nonsense

because of, Nevada government looks like you.

Well, I think, I think that it’s fair to say that the local officials are very happy with

what we’ve done, with what we’ve achieved.

Your plant is in South Carolina, right?

In Fort Worth, Texas.

Fort Worth, Texas.

Fort Worth, Texas facility.

You know, we have some partnerships with DoD.

The president announced those.

Where’s the GM facility?

Oh, the GM thing’s in Texas.

In Texas.

In Texas.

So I think that there is, frankly, support from both sides of the aisle for what we’re


You know, there were executive orders on the rare earth magnetics industry, specifically

both in the Trump administration and in the Biden administration.

So I think what we’re doing is hopefully nonpartisan.

And frankly, I think all of this should be.

And that’s, you know, the point about the grand bargain.

But even, you raise a great point about just all of this stuff, it’s, you know, there’s

so much pushback and we need to, we need to figure out a way to get past that because

this stuff has to, has to get made.

I think it’s incredible what you’re doing.

I mean, I’m a huge fan.


I was also an investment company.

Well, I am not an investment company, but we do appreciate you giving us the education

and we do need to be independent from communist countries and really have the supply chain

situation dialed in.

So we appreciate the hard work for America and for freedom.

And I’m a huge fan of you guys.

So thank you.

Thank you.

Well done.

Well done.

We let your winners ride.

Brain man, David Sackman.

And it said we open sourced it to the fans and they’ve just gone crazy with it.

Love you, Wesley.

I’m queen of Kinhuat.

Let your winners ride.

Let your winners ride.

Besties are gone.

That’s my dog taking a notice of your dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

It’s a dog.

That’s my dog taking a notice in your driveway.


We’re not at all.

Oh man.

My pastor will meet me at Blazer.

We should all just get a room and just have one thank you, Georgie, because they’re all

just useless.

It’s like sexual tension that we just need to release somehow.

What A Beat.

What A Beat.

What A Beat.

What A Beat.

What A Beat.

We need to get merch.

Besties are back.

I’m going all in.

I’m going all in.

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