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  I'm Georgia Williams with the Investing News Network. Joining me today is Howard Klein, co-founder and partner at RK Equity, a research and capital markets advisory firm focused on the lithium ion battery material supply chain. Thank you for joining me today, Howard. >> Thanks for having me. >> It's a pleasure. Um, last time we spoke in December, you had just released your white paper calling for the creation of a strategic lithium reserve that would essentially establish a price floor,

preventing price volatility and incentivizing new production. Then in early February, the Trump administration announced its Project Vault plans. What were your initial thoughts of the announcement? Project Vault got a lot of press uh when it was announced last week, but there were a few other announcements and and you know the uh Marco Rubio organized a ministerial with 55 countries. So there was project forge and pacilica etc. But the uh the project vault uh was interesting. But that also followed uh

on the legislative side the um introduction of a bill called the secure minerals act uh which was bipartisan um Democrats and Republican and biccameal, right? Both the House and the Senate. Uh and that was calling for a strategic resiliency reserve. So, um, yes, I called for a strategic lithium reserve in December and then you had this, uh, secure legislation come out and then like a week later, project vault came out. So, uh, project vault got a lot more press than secure, uh, minerals act did, but I think they're complimentary.

Um, and they're different. And the project vault firstly is they call it a stockpile, but it's for civilian uses. So, it's a private sector, not a defense stockpile because last year the administration um you know enacted or or um you know announced I think $2 billion of stockpiling for defense. So, this is very much project vault. There's not a lot of details on project vault. So, I'm just uh you know parsing through what I know and observe and what the administration has said. So it is for

civilian use and it is backed by the private sector and combined with the export import bank um in the US which is essentially an export credit agency and so project vault is the named uh participants so far were companies like GM, Stalantis, Boeing um I think Google uh there was a battery company that for traditional car batteries, not um electric vehicle batteries. Um and they uh um you know the the export import bank is going to facilitate you know project finance for certain materials and there

are three trading companies that were named that are going to help them source that material. So, Partry, uh, Traxxas and Mercuria. Uh, so here you have private sector putting in $1.7 billion and as as far as I understand, they are going to submit their shopping list, right? That um what are their needs? And rather than buying those themselves, they're going to use the traders to help source that material for them. and they're going to use the uh project finance you know so for working capital

you know the export import bank is going to you know I guess purchase the material um you know for them and then stockpile it uh so in some vault somewhere will be that's GM's material you know that's Boeing's material that's you know Google's material uh doesn't we don't know which materials that they're going to use als also as far what they're going to buy, you know, there still to be determined. So many details, you know, still to be determined. Uh, but the

other reporting that I saw about it is that this is kind of like a working capital a a I'm sorry, a um a you know, ensuring availability with let's say a you know a 30 to 60 day time frame. So, in the event that, let's say, Ford last year uh panicked for their Ford Explorer because they weren't getting magnets, uh you know, within 7 days they were going to shut down, you know, the Ford Explorer. And that's that that's that's what really, you know, catalyzed this warp speed activity from

the Trump administration was that realization. So in the event of China or some other entity uh enacting an export control or some other policy which would thwart the production line of a given uh you know fortune 100 company which is pretty much the the backers of this uh project vault uh you know they would they would have that availability if they had procured ahead of time you know those magnets into the stockpile. So it is very different from the strategic lithium reserve which is a market

structure idea and and it's different from what the secure minerals act is conceiving which is also a market structure. So project vault seems to be very much focused on Fortune 100 companies um and then the export import bank generally is lending to super high credit quality um customers. So it's a it's a good idea. It's a good step. It's complimentary, but it's not solving um the catastrophic uh lows in let's say lithium or cobalt or graphite which prevents uh the long-term investments in up and mid and

downstream investments across the sector. So it got a lot of press. It shows America is acting combined with you know the forge which is meant to be you know a coordination exercise across a number of countries. Um you know these are these are good steps but the reality is right now a lot of the material that's going to go into project vault is going to be purchased from China because that's where these materials are processed. So it's a nice step. Um and uh a lot more steps are needed. Uh and

yeah, so and that that was all of the news last week catalyzed my writing this note uh over the weekend and I introduced on Monday to just kind of like take stock of what's happening. And it's great. It's wonderful. you know, Robert Freedelland um you know, was in the Oval Office shaking hands with Trump and making the statement and Doug Bur, Doug Bergam, the interior secretary, you know, is saying mine may be mine, you know, on TV all all week. Uh and the XM guy, John Javanovic, I think his name is, uh also,

you know, talking about the importance of these initiatives. and Marco Rubio likewise and JD Vance uh actually in introducing the ministerial um under secretary Rubio talked about uh price volatility as being a a major uh you know the major problem um you know thwarting the development of uh you know up in mid-stream investments and earlier this year actually I'll say another thing you know the white house passed you know executive orders from the White House and the Commerce Department that talked

about processing as the choke point and Trump talked about it as well at Davos, right? He said, you know, there's no such thing as rare earth. There's rare processing. So, there's a lot of talk and understanding about that. Um but the events of last week and project vault don't specifically target the price volatility uh angle too much. That's a market structure thing. It's not a you know company specific thing. And um and they haven't really talked a ton about uh processing in particular you know in

the battery material sector which I think is critically important. >> Absolutely. and you touched on this a little bit. So earlier this week you released um a response which was entitled which critical metals matter most which I think is a very pertinent question um and it touched on some of these um legislations and um processes and programs that are coming out and I was wondering if you could touch a little bit on your findings um that the paper was showcasing. >> Well, thanks for that. Yeah. So there

are 60 critical minerals on the critical minerals list. So how do you prioritize in project vault which minerals are going to be stockpiled right? Uh so I tried to do a first pass categorization of those 60 critical minerals and they range I I put them into three buckets. There are large markets relatively mature like copper, aluminum, um, uh, you know, met, coal, uh, and others. Those have large liquid markets where you can, um, sell forward, use, um, risk management tools, hedge, uh, you know,

five years. And also if you're a project finance banker, you could look at the history, you know, a very long hundred-year history of um copper and feel comfortable, you know, that it'll be volatile, but it won't be like lithium volatility, right? Like you you can you can lend against something because it has a long track record history. It's a big liquid market. So that's one bucket of um critical mineral uh that has its dynamic and then you have on the flip side tiny markets right

like scandium or samarium or germanmanium or gallium and a number of those markets um you know are defense related you know sometimes it's one or two mines right that you have to contract with or or subsidize in some way in order to get that material and um you know so that's another bucket. So those require different tools, different tools for different buckets. And then there was this third bucket where lithium falls and a number of other materials follow. And when I categorize those other

materials, it it it they were battery materials and they were magnet materials, right? So it was NDPR, you know, and and DYTV, you know, on the rare earth side. Um it was lithium. It was also importantly like nickel is a big market but nickel sulfate right is a different market um or and and critical for batteries and and things like phosphate there's fertilizer phosphate but you know battery phosphate you know is a different market. So different markets require different tools and but which

are the most critical and in a in um I did a search right another piece of uh um you know a publication or strategy that was announced earlier this year. So the the US national defense strategy, right? This is the document from the defense department that basically said, you know, the future of war. What do we need to do? What do we need to prepare for? It didn't say anything about critical minerals in that, but it talked about drones and lots of high techch military equipment. And if you look at

all of the types of equipment that they want to uh you know buy, build, um you know, and integrate into the military. I I did a a search on a on an AI, you know, LLM. And I said, what what critical minerals go into those things? And inevitably, it was kind of the mind to magnet chain and it was the mind to battery chain, right? So, uh, uh, there was some reporting I saw last year that basically said the average American soldier is carrying 25 pounds of batteries on his body, right? You know, with night vision equipment and other

materials. So um so military applications are critically important is this is not just the US and you know we'll see if Trump is going to increase from 1 trillion to 1.5 trillion the defense spending but that's a meaningful increase you're also having in Europe and other NATO members uh you know increasing their spend from 2% to 5% of GDP. So there's big military applications across the west um that are battery and magnet intensive and then um and then you know the future of a AI

right the the the age of electricity data centers and the buildout of all of that I mean Elon Musk basically is merging uh SpaceX with XAI and he's saying that we need to uh have data centers close to the sun, right? It's cool up there, but it's also close to the sun because there's not going to be enough energy uh and electricity on land, right? So that's a real I mean he says a lot of things but um the uh the buildout for data centers globally winning the age of electricity

uh requires battery tech you know you know it's highly consumptive of uh raw materials in particular um battery materials and magnet materials. In that third bucket uh you know is lithium and uh my argument or the punchline of the overall paper is just like okay how do we prioritize prioritize the mind to magnet chain we're doing that right there's been a whole of government approach to solve the rare earth's problem and the magnet problem there has not yet been a whole of government approach and

recognition that the mind battery chain needs to be rectified as well and that's not just lithium it's graphite right? It's anodess, it's cathodess. Um so the government needs to do a lot more you know in this regard and um you know my so the punch line is that lithium I is like NDPR right it it's the um stabilizing the battery the entire battery chain right a cathode producer would like to see stable lithium price or or you much less volatile lithium price so in order to catalyze investment

in CAM and PCAM. If you stabilize lithium, it'll go a long way to helping that. So, I came back like lithium, the dynamics of lithium are such again, I don't know all the other markets super well. I don't know manganesees well. I don't know graphite super well, but I do know lithium quite well. And the fact that lithium is reasonably large, very fast growing, but the materials are relatively storeable. They're relatively standardized, especially when talking about lithium carbonate, technical

grade, and battery grade. Not suggesting we store hydroxide because it has a short shelf life. Not suggesting storing spamine because you'd be storing a lot of waste. So but but lithium carbonate equivalent is relatively fungeible not completely but there and there people who know how to process it as well. So and there there's a reasonable divers diversity of supply. China doesn't control 90% of it. They control I don't know 70% or 60% of the conversion of it. And here in America we have Albamaral.

You have Riotinto where they actually do convert to um lithium chemicals in America. You have Tesla converting now chemicals um you know for their own use and you have South American partners in Chile and Argentina you know that are sources of supply. So it's but it's not anywhere near copper you know size and diversity. So I just I think it and there are there are forwards markets in lithium but you can only go out one year right you know one and a half year you can't go out five years like you can in

copper so it's I I view lithium as like a it's a young industry but it's it's like a a teen or a tween right it it's still um immature highly volatile highly reactive uh unpredictable um but is maturing and in a few years you my idea for the strategic lithium reserve is that it could be a tool that lasts you know 10 or 15 years and that's it right so similarly to the way the government uh invested in MP materials and gave him a price flow the price floor was only for 10 years um Doug Bergam at the last

week at a in an event at CSIS kind of commented that the strategic petroleum reserve you know, was put in place 50 years ago for, you know, various reasons due to oil embargos, etc. But now we really don't need the strategic petroleum reserve because we have shale in the US, right? So if if prices of oil go to a hundred bucks, we could just tap into um you know unconventional resources in the US. So my view of lithium is that that's possible. There's so many resources unconventional and conventional in the

US as well as in Canada. If we build out conversion capacity uh but a and if we all we need to do is stabilize long-term investment cycles, right? You know, Albamol, for example, had planned to put in 100,000 ton, you know, megaplex facility and then they canled that because, you know, prices went to 10 bucks. Um they said if prices are 20 to 25 bucks then a kilogram then that that that would incentivize long-term supply but you can't make 10-year investment if you have you know prices go from 10 to 50 to 10 you know what I

mean so the the idea of the strategic lithium reserve is to stabilize prices for you know to enable the industry to mature um and you come in and and be a buyer if prices go super low. At the same time, we don't want prices to go super high. So, if prices are above, let's say, $40 a kilogram, that wouldn't be good for PCAM and CAM uh producers. So in the event that you got those spikes, the strategic lithium reserve could sell into those spikes um or or just their presence uh uh you know would be

known by the market um to be a you know a neutralizing force. So the idea and this is also similar. We did an interview with some people who uh which will come out this week who were behind or helped craft the legislation for the Secure Minerals Act and they were alluding to uh the strategic resiliency reserve as having a similar function to the Fed. So the Fed if the dollar gets too weak or too strong against the yen or the euro um the Fed intervenes right it buys it sells. So the strategic resiliency reserve of which the

strategic lithium reserve I think is the best first test case of that um would have an independent kind of company and board and actor that would be like the Fed. The Fed's independent. They come in, they come out um to uh you know, if the dollar is too strong or weak, if lithium prices are too strong or weak. This is kind of like the Fed for lithium or the Fed for critical minerals. >> And you had sort of mentioned, you know, like rare earths gets all of this attention and lithium has, you know, an

equally um important role but is sort of, you know, forgotten about when it comes to sort of this larger policy. Do you think that that's because China, you know, often in the past has flexed its muscle with rare earths and um the the exports of them and lithium is sort of more, you know, a market where they control the processing capacity, but they aren't as quick to, you know, limit export capacity. >> Absolutely. Um, China has weaponized rare earths. They have weaponized to some extent

graphite. They have not weaponized lithium yet. Um but they could um the one thing they did suggest was that they won't allow the export of DLE technology from China. So that points to you know where they're thinking. But um China in rare earths has their own rare earths. they do control that supply chain more than they control the lithium supply chain. So, China is short highquality lithium resources. They do have conversion capacity. So, I think this plays into um why there's been less attention on

lithium. uh but we shouldn't you know be complacent that we uh won't have a lithium problem uh from China weaponizing it at some point. China. There is some thought that China did if they they didn't weaponize it through export controls, but they they they did help crush the lithium price by uh building a lot of conversion capacity in China, but also turning on some of their lowquality minds, you know, lowgrade, low quality. So um if you're with leitoolyte mines which are lowgrade high

waste relatively high cost uh but they did that by they threw a lot of money at it. They you know maybe you know less regulation environmental or otherwise but they did that because they think of the entire supply chain. They want to dominate electric vehicle and battery uh batteries as industries of the future and they view uh the upstream raw material business as not necessarily needing to be profitable um because they're focused on profits of the downstream and to the extent that they're focused on profits at all which

um there haven't been a lot of profits uh in in across the entire sector like in China you know they're overin investing. So they they have weaponized they have influenced the lithium market but they haven't weaponized it in the way of saying we're going to take away your lithium so you can't actually build your batteries. But um you know they they certainly could do that in the future and they have manipulated rare earth's prices many times over many years to enable their ability today to say okay no more

magnets right so the price manipulation I'm just thinking about this now that the the measures that they took you know against Japan in 2010 and and other measures over the years to prevent rare earth's mines getting up and running over the past 10 or 15 years has put them in the position that they are today to weaponize and lithium is going in that same trajectory um if we don't have policies to address it. >> Right. And you touched on this a little bit. You know, rare earth processing is

like China accounts for 90 plus%. Lithium it's less. But you know, a lot of the legislation initiatives that have been announced over this past month I I feel fail to address that sort of midstream market. How do you feel about um the initiatives and do they do enough to sort of meet that processing refinement middle ground? >> They they don't do enough. um you know the batteries survived the one big beautiful bill you know otherwise you know cuts to you know battery renewable EV um tech

but not for like a long time I mean I think it sunsets in a couple of years so that they're that's batteries right and then in terms of cathode and and and other measures I think I'm not an expert on this but I I I understand this week there was on graphite and graphite anode some um progress which basically said you know they're going to keep high tariffs on graphite you know so protecting I guess graphite um pure graphite and graphite um anode uh producers however if you buy batteries which and and and

battery packs that already have, you know, Chinese um you know, anodes in there. Uh that that's not going to have be super high tariff, right? So it's just it's still incentivizing existing um you know purchasers of graphite anodess to buy the full product from China rather than so it doesn't look like it's done enough to protect graphite uh and graphite anode production in North America. I'm not an expert on graphite and that was just a headline that I read this morning. But

uh so there's still a lot there's more to be done here and and it's not just the fact that China didn't weaponize um lithium yet. There still is a perception that lithium is tied to electric vehicles and lithium is tied to solar and wind and the Trump administration is anti-electric vehicles. >> Is there enough investment and attention on the midstream? Um, and where would you like to see more capital deployed in that area? There's not enough attention being paid to the midstream, but there's also not

enough attention being paid, I think, overall to batteries. And I think that's going to change. But, uh, you know, batteries were preserved a little bit in the one big beautiful bill, whereas the EV tax credit went away. But, um, it sunsets, uh, you know, in in a few years. So it it um there's not a there's some recognition um of what I said earlier that uh all of these applications need batteries, but the administration uh is has been anti-EV. They're like lithium is correlated to or

in their minds it's correlated to electric vehicles and renewable energy. uh that's changing you know because batteries are relevant for infrastructure grid infrastructure and the military etc. But um they they've been much more focused on coal and nuclear and other means um and not yet batteries. So I think that drives it. There needs to be a better understanding that that batteries our critical infrastructure for the military and for um winning the AI race. And um once they see that then they'll

look at all of the components of battery including the midstream that need to be supported. But uh that was not the focus this time last year as they were trying to get their one big beautiful bill passed and you know rip up a fair bit of what you know Biden's IRA had in place. So there um they're not doing enough to focus on the midstream. And as I um I may have mentioned, I'm not a graphite expert, but I did see that there was some uh policy uh approved or not approved with relation to graphite and

graphite anodess um which kept graphite, you know, tariffs high uh but also enabled uh purchasers of batteries that have Chinese-made graphite, you know, anodes in them. Uh you know, those tariffs are low, right? So um it it was a mixed bag as far as I understand it in terms of uh you know policy support for that midstream sector. So a lot more needs to be done and I'm hopeful. I saw Trump tweeting positively about a phone call with Xi Jinping, you know, overnight that uh um you know, some sort of grand

bargain, you know, might be in store and maybe, you know, uh he has talked in the past about welcoming Chinese investment into America. Uh I would hope to you know that certainly on the processing side and on you know the the the midstream side uh there should be far less sensitivity than like on the electric vehicle side um about having Chinese companies come into America and uh and help us scale this business. I mean they have a comparative advantage now because they have built these industries so much. I

mean there's some argument in the US that we need to invest in new technology to leapfrog uh China. There's some argument you know to that but a lot of what China has done has just been very effectively scaling existing technology and we just haven't scaled it sufficiently because you know we haven't prioritized it enough. So uh I I think there's scope to have just like Trump is saying hey come to America you know you have low tariffs if you invest you know 500 billion a trillion dollars into

America why not have more uh of the best Chinese companies in investing into the United States in the midstream in the upstream processing uh so long as the material stays is here, right? It's not then just reexported to China to support their industry, >> right? Yeah. And I think, you know, it's sort of a no-brainer because he he very much wants to reinvigorate manufacturing in America and you know that midstream could sort of serve as that for the mining sector. But you know at Benchmark

last year Joe Lowry was talking about the need for the expertise. So do you like a little bit of what you were talking about this collaboration with China? Do you see sort of that you know shared brain power or you know using Chinese expertise to help build this mainstream as you know a viable option? I think absolutely. I mean that's what kind of uh China did when we had joint ventures in China, right? They took our expertise. Uh I think Doug Bergam again said that we graduate like 250 uh geological engineers or metallurgists

and we graduate 30,000 lawyers, right? There's some disconnect there. we need we don't have enough skills that young people and I think um there's all this talk about AI displacing a lot of um industries but AI will not be able to uh you know grow as fast if you don't have more raw materials and those I mean Elon Musk suggested that his humanoid robots may one day be uh mining rare earths right in the US but I I think that's far away. We do need to mine rare earths. MP materials has employed a lot of new

people and are building new skills in America and those are good highpaying jobs, right? So, um, a lot of white collar work are being displaced by LLMs uh and other uh AI. You know, I read a piece yesterday this week, you know, that uh if most of your work is done in in reading and writing and analyzing is is word based, right? A lot of that is going away. But physical um intelligent moving rock, you know, AI and until humanoid robots are in place, you're going to need you may have electric dump

trucks, right? and and those are being utilized in the mining industry. But you know there are highly sophisticated people um still working in the mining industry and processing industry. These are sophisticated industries. They're high-paying jobs and there's a huge under supply of them. And so it's good to hear the administration recognizing this skills shortage problem as well. And the fact that the government I've just never seen it again Elon sorry um Robert Freedelland in the Oval Office in

I've been doing RK equity you know for 23 years and there's just been a giant headwind in the face of the mining industry the entire time. So to actually see the bully pulpit just in the same way that Biden supported electric vehicles and clean energy and then mining companies ended up you know being uh considered clean energy investments and putting into clean energy ETFs. You're seeing a similar dynamic take place with the bully pulpit being used to promote the mining and the processing sector and that there's a

recognition that we were asleep at the switch for 20 25 years and that it's not solvable in 1 to two years but you know with 5 to 10 year view uh it is solvable and and with the whole of government and the weight you know if the government's promoting then companies will follow. Um it's being reflected in valuations in the stock market. Um you know companies are able to raise more capital now in in part because of it. And but getting to the skills point of view uh I think more people if they see it on TV and they

hear about it and people are promoting it, right? Who wants to go into an industry that's for 20 years basically all you heard was negative, right? Like what what what graduate gonna say I'm gonna go into mining industry? Are you crazy? That's like you're gonna go to Apple, Google, Amazon, the digital economy, right? But if you suddenly see oh wow well you know everyone was told taught to code 5 years ago and now you know coding can be done you know with AI. um you know so I think you will

start seeing us close that gap and with respect to lithium uh we actually were the world leader and we still you know Almar is still the biggest lithium company in the world and they still we do have skills in lithium we do have we know how to mine it we know how to process it and you know um you know whereas in rare earths we're building that from scratch and in many other industries we're building it from scratch. So we have the ability and but if we can import some uh or if we can have Chinese set up joint

ventures like why couldn't Ganfang help uh you know a lithium company build a hydroxide or carbonate facility um and help train you know our workers so that you know with their you know the the the expertise and and the efficiencies that they have scaled held over the last couple of years. >> Absolutely. And you know, I just anecdotally, I'm wondering if like when you're at dinner parties, are you finding that you know, the general public are a little bit more um open to the idea of mining because it does feel

like over the last 5 years especially, mining has sort of taken center stage and not in a negative way, but just in the the things that you need and you want need to be mined. Uh, so I don't go to that many dinner parties. Um, but I did go to uh a black tie wedding of a friend of mine relatively recently and I caught up with some college friends and uh yeah what I've been doing for 23 years you know they're regular lawyers or bankers and live in you know so for much of the time I've

been doing this uh they really didn't have much of an idea uh but for a couple of years when everyone you you know, Biden and team, you know, were promoting electric vehicles, right? It became okay to, you know, oh, lithium to electric vehicles. I get it now. Um, that's waned a bit. You know, there was where I'm I'm from New York, so it's a it's a blue state. And people were supportive of Elon and his um, you know, sustainability vision, you know, years ago. and over time um they've soured on

him you know on a personal basis for a number of reasons. Uh so the um the positive Tesla view has turned to like a negative Tesla view. Uh, but the crit to to answer your question, the critical minerals angle, yes, it's in the press all of the time. It's still I'm absorbing it every day and I reading these tea leaves, but it it's still not well understood um by a lot of people. I say like what is critical? There's still some very basic questions being asked. Uh and yeah, so I I I think

we have a ways to go, but this administration is heavily promoting it and will continue to promote it. And it's not just us. It's, you know, th those rare earths weaponization in October would have impacted all of our allies as well. So that's why you're seeing this coordinated approach, you know, this ministerial of 55 countries that Rubio organized. We'll see how it plays out. I mean, Trump has rubbed a lot of our allies the wrong way on a number of other topics with his policies

and rhetoric. Um so getting them to collaborate uh you know there's it's to be seen but um you know so it it I don't know it's um it's a good place to be. We're in a good long-term thematic. there are tools that if I at this moment right I think it's good to see there's a lot of tools in place there's still a lot more to do a lot of capital that needs to be deployed um but uh from I don't see anything yet that has addressed the key this is and this is the point of

my article you know this week is that JD Vance rightly recognized that price volatility ility is the core disease. None of the policies yet address that market structure disease. Right? So a a dynamic strategic reserve that would buy, sell, stabilize markets to enable a 10 to 20 year investment horizon. you know, to address the fact that volatility is um too too volatile o over too short a time frame in certain materials. So, the strategic resiliency reserve that the Secure Minerals Act is talking about is

interesting. There's a lot of details that need to be fleshed out in relation to that. And that's just a bill, right? It's now in committee. There are going to be hearings. Um hopefully that gets passed sometime in the next 6 to 9 or 12 months. I'm advocating for lithium to be the first test case because I understand lithium. I know lithium. But I also think it has all the ingredients in terms of fungeability, in terms of storeability, in terms of market size uh to be first. and you've seen lots of

investments proposed and then stopped. But um I think that needs to be paired with a more battery centric uh understanding you know promotion of the battery supply chain. So you alongside lithium being prioritized, you know, for reserve, a dynamic reserve, you do need the administration to say, okay, we're sorting out mine tomagnet supply chain. We need to sort out mine to battery supply chain. And to do that, we lithium is a good first among equals, but we also need to figure out graphite. We

need to figure out PCAM, CAM, you know, are we doing enough nickel sulfate, manganese, phosphate? >> Yeah. You know, and as an expert, Howard, have you been asked to collaborate or share your research with the current administration? >> Well, yes. I mean, I have the the white paper uh engendered a lot of um inbound from uh members of the executive branch, you know, and legislative branch, you know, and some other Washington um policy people um and journalists to uh uh um you know, inquire, you know,

understand. But um as I mentioned, they a lot's going on, right? You know, David CPPley, you know, um Jared Aen, you know, there's the the White House National um Energy Dominance Council. Um they have a lot on their plate, right? They have 60 critical minerals, right? the the XM bank um the head the head of that XM bank you know said last week that this is project vault was underway for the past six months and he's shocked that it like didn't leak out right there's talks about price floors there's

rare earths so um they're throwing a lot and it's really only been since October when China weaponized the second time so it's only four months and but you're we're starting the here, you know, from the future minerals forum in Saudi Arabia to Davos to last week uh you know and I think at PDAC you're going to see uh you know measures um from Canada uh more you know measures coming out of that. So you you're there's a lot going on. Uh and um I appreciate you're interviewing me

as part of uh I am very interested to help socialize these ideas about lithium. You know that the mind battery needs to follow the mind magnet. Um I think that they wrote in the paper a quote someone else said that like chips are the brain for AI, you know, but batteries are the heart. >> Yes. Yeah. And I think that sums it up beautifully. Um, you know, and then just sort of switching gears a little bit. Um, over the last 12 months, energy storage has become the fulcrum narrative for the lithium sector. During Alberal's

conference call yesterday, the CEO said, "We are seeing a diversification of lithium end markets with stationary storage becoming an increasingly significant demand driver." How impactful is growth in this segment over the next 5 years? I know we've talked about this a little bit in our interview in December and um it's really sort of foreshadowed and overshadowed even the the um EV battery market. >> Um so battery energy storage uh for viewers of Rocktock channel. Um, we'd uh

encourage you to look at uh a number of videos we did where uh both my partner partners Matt and Rodney have been outlier bullish on this market and people like um Iola Hughes of Benchmark Minerals uh as you mentioned earlier um have come on the podcast and YJ Lee in Singapore. So it it yes it is a big driver. It's not only album. A lot of uh investment banks at the end of last year, just in the past few months as lithium prices started rising, you know, they came out with new notes, you know, saying, "Okay, we're no

longer bearish on lithium. We're bullish on lithium. Uh we're bullish on lithium because of battery energy storage." But it's still extreme. It's more difficult to forecast battery energy storage compared to electric vehicles. cuz in electric vehicles there's a lot of auto analysts and you know you just you're estimating what's going to be the EV take up uh you know per country per region um what's the size of the batteries that are going to go into those and then you estimate some sort of

lithium demand in connection with that the um buyers of battery energy storage um you know it's a more diverse market right so there are utilities um it's very China dominated. So data right the the analysts on the cell side have just they ignored battery energy storage for a long time. Now they can't ignore it but um the range of forecasts are very very wide and in general have been underestimated. So I don't know uh I don't think um Albamaral knows I think they still forecast you

know lithium growth could be anywhere between 15 and 40%. That's a very wide range. So they're speaking to a narrative which is out there in the way you just phrased it right you know diversification and whatever they're basically saying you know there's a shift from EV demand to energy storage demand but I don't think they have a super strong um modeling as to how strong it's going to be um but uh it is important for sure and I I think it is being increasingly recognized in the

United States and I think there there needs to be more and this goes back to a lot of what I said earlier. It's military and it's the age of electricity batteries. I think I wrote this in one of my notes. Google is buying hundreds of millions of batteries for a natural gaspowered data center. Right. XAI in Memphis, Tennessee, also gas powered, needs batteries. So natural gas is not providing alone uninterruptible 24/7 365 a day power. Okay. Uh so batteries are needed paired not just with solar, not just with wind, not just

with EVs but to win the AI arms race and coal is not going to be the solution and nuclear is not going to be the solution uh you know for 5 10 or more years. So next year energy the largest utility in the US which has nuclear plants which has gas plants which has solar and wind plants basically saying the fastest and cheapest way to get electrons onto the grid are batteries. So uh China is deploying an enormous amount of solar. I think they deployed in last year in solar more than you know America did

ever you know so but it's not just a China story it increasingly will be in America and European stories so I don't like yes I think it's attractive demand driver and we just but we don't know >> yeah and being that it's sort of an opaque market that's you know hard to sort of forecast um if it surprises to the upside side in 2026. Could we see a structural tightening in lithium and LFP supply faster than investors had expected, particularly if Chinese supply remains disciplined?

>> It's possible. It's possible that's underway already, right? you know so the supply chain for lithium is quite long and it's possible a lot of batteries you know um energy storage batteries were ordered you know last year and that was a part reason for the rapid rise in lithium price so from a short-term perspective I don't know that there we've had some discussion in recent weeks on our channel uh Matt Fernley uh who works with me um follows this more closely, but there were some changes to

kind of like VAT rebates um which might have front-loaded some of the of the orders, but as a that's a these are short-term comments with a medium to long-term uh view. Uh, you know, it's interesting the we're we're very bullish um energy storage, but what's interesting for all the upgrades that the um sellside analysts have done in recent, you know, times, they upgraded their price, but then they only forecast out like two years, right? They say, "Okay, we'll have an up and

then it'll go kind of flat." So, no one has any real good visibility uh or is willing to stick their neck out uh in a meaningful way um you know with a a longer term time horizon than a couple of years >> you know and circling back to your most recent paper and you were talking about the different baskets of critical metals and sort of started with like there's 60 which can be really hard to wrap your your head around you know we might want to have the critical critical metals or

something um but in your paper you list rare earths graphite manganese, cobalt, and phosphate as particular pinch points. I think some people may be surprised to see phosphate on this list as it's often associated with fertilizer as you mentioned before. Can you tell us a little bit about phosphate's increasing use in battery raw materials? >> Sure. I'd encourage um you know our viewers to look at some of the videos we've recently done for first phosphate. Um we do have a client, just full

disclosure, uh not a mess research. Um but uh we uh approached or first they had approached us but we were very interested to talk to them because Matt had written uh a couple of years ago that you know phosphoric acid or phosphate for batteries uh was um no one talked about it right they talked about cobalt nickel but with the increasing use of LFP you know don't forget the P right lithium iron phosphate Uh that's not the same phosphate that is in the fertilizer market, right? So the fertilizer market is huge. The phosphate

market is huge. Um when I was putting together these three buckets, um you know, Matt suggested phosphate is actually a bigger market like copper, right, in terms of size. Okay, that's true. But this subsegment, you know, of it is not that big and is controlled by China. So uh it is an important pinch point uh that with the energy storage growth and that energy storage being dominantly lithium iron phosphate batteries um don't forget the P and uh you know again a plug for you know the one play that we

have in that sector is first phosphate which is uh listed in Canada. >> Yeah don't forget the P I like that. Um and sort of ending um back with Alberal there the CEO yesterday also noted that the market is heading towards bifurcation. Are you seeing this trend as well and what do you think of that statement? >> I think there's a lot of talk about bifurcation uh I think that western OEMs were always paying a bit more than what you saw in China. I mean, for many years, we were following the Korea or

Japan price uh versus the China price, but those tend to have been contracted prices as opposed to spot prices and inevitably those were going to the Teslas of the world and they were Arcadium or Albamaral numbers. So, uh there's talk about it, but and there's talk about it you know, as part of this, you know, Rubio ministerial, like he wants to kind of coordinate the globe in having different price structures, but um you know, so I don't know. I mean, he says he's seeing it, but at the same

time, they're shutting down Kton, right, which was meant to be exchina supply for ex-China demand. and he said, "We're going to process the spamine elsewhere." Well, where is the elsewhere? They have Chinese facilities, their own, and they also have tollers, and they've used tollers in the past. So, um, I need to dig into that a bit, you know, more and I don't know the exact reason for that, but I do know that there is all the margin in spammy. There's not any margin in conversion at present. and

also Albamaral when it came to the foreign entity of concern um rules uh under Biden you know their joint venture in Talisin because it's partnered with Chinese uh China's Tangshi was viewed as not FEOC compliant meaning uh Alam was not getting the benefit from their green bush's feed for western uh American um supply. Uh so that might have influenced their calculate like if they're not getting that right then their Keton hydroxide uh was not getting that benefit and therefore the economics

just don't make sense. So yeah, there may be a bifurcation of the market, but you look at Albamall's actions. Um, one, it's Albamall, but two, I found it um, interesting that there's all this talk about processing is the choke point. We need exchina processing. Here you have the biggest lithium company in the world, um, American company, right? >> Uh, and they have they're reducing their exchina processing, >> right? >> Yeah. I think that's very interesting as

well. >> But but it it speaks to they're a private market actor. there like if the government was supporting Albamarl or there was some public private partnership similar to MP materials um you know maybe that would be thought of differently uh and and maybe it will be down the road, right? I think I I see like a sign a bit in this album um shutting down of of Keton as uh you know you know Washington should be listening like and understanding the implications of that right like they need to pay

attention to lithium and lithium processing and the economics of it that are being thwarted by price volatility. price volatility broadly but also the processing that this it's not spoken about enough that the dichotomy it can't be there's an overupp of capacity processing capacity in China and that's why spajmine prices have gone up a lot chemical prices have also gone up but the margin's still in the spine you need margin in chemical conversion not just in the upstream >> right and I think that circles back to

your strategic reserve very nicely Exactly. And the white paper was focused that processing is the choke point. The price needs to be high enough to incentivize both processing and mining. >> Absolutely. Yeah. Well, thank you so much for speaking with me today, Howard. I really appreciated your insights and I'm so glad that um we have expert analysis like you working behind the scenes to, you know, make sure that the policies that get pushed forward are the best for the industry. So, thank you.

Thank you very much for uh inviting me to have this detailed conversation. >> Once again, I'm Georgia Williams and that was Howard Klein of RK Equity. Thank you for watching. If you like this video, make sure you hit the like button and subscribe to our channel. We'd also love to hear your thoughts, so leave us a comment below.