The Transformation of the 21st Century Economy ft. Ernest Scheyder

[00:00:00] Ernest

As we think about where we want to go green and how we’re going to go green, I think these have to be part of the collective discussions. In addition to, are there some places in the world that we wouldn’t allow mining, and if we do allow mining, what would that look like? And so, it’s no easy answer, there’s no free lunch, but it’s a necessary conversation, and I really hope that The War Below is part of that conversation as we think about this transformation for our 21st century economy.

[00:00:36] Intro

Imagine spending an hour with the world’s greatest traders. Imagine learning from their experiences, their successes and their failures. Imagine no more.

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Also understand that there’s a significant risk of financial loss with all investment strategies, and you need to request and understand the specific risks from the investment manager about their products before you make investment decisions. Here’s your host, veteran hedge fund manager Niels Kaastrup-Larsen.

[00:01:31] Niels

For me, the best part of my podcasting journey has been the opportunity to speak to a huge range of extraordinary people from all around the world. In this series, I have invited one of them, namely Kevin Coldiron, to host a series of in-depth conversations to help uncover and explain new ideas to make you a better investor. In the series, Kevin will be speaking to authors of new books and research papers to better understand the global economy and the dynamics that shape it so that we can all successfully navigate the challenges within it.

And with that, please welcome Kevin Coldiron.

[00:02:06] Kevin

All right. Thanks Niels, and welcome everyone. Our guest today is Ernest Scheyder.

He’s an award-winning journalist and senior correspondent at Reuters. He’s the author of a new and widely acclaimed book, War Below: Lithium, Copper, and the Global Battle to Power Our Lives. This is a thought-provoking book because it vividly describes the tension between the need to extract metals to power the green energy transition and the environmental and cultural damage that extraction can cause.

It’s a tension we’re all going to be wrestling with for a while. To quote the CEO of a US-based company that’s involved in rare earths, you can’t have green energy without mining. That’s just the reality.

So, we’re going to spend today’s show digging into this reality, digging into this tension, and Ernest is going to guide us along. So, Ernest, thanks so much for joining us and welcome to the show.

[00:03:10] Ernest

Hey, it’s great to be with you, Kevin.

[00:03:12] Kevin

So, there are two metals in the title of your book. There’s lithium and copper. Why are these two metals, in particular, so important?

[00:03:24] Ernest

Well, the book itself, The War Below, looks at a whole host of critical minerals, mainly about four or five. For me, lithium and copper were extremely important to highlight, especially in the subtitle, just given their prowess in this green energy transition. They’re really the anchors, if you will, for a lot of these devices that we increasingly use every single day.

Copper, of course, is used in a lot of wiring. You know, the microphones that we’re using to talk to each other right now are made with a lot of copper, and copper is in pretty much nearly every single electronic device that’s out there. It’s malleable. It’s great at conducting electricity. It can be recycled like many critical minerals.

And then lithium is in lithium-ion batteries, of course, as the name implies. And many, many devices that we use every single day are powered by lithium-ion batteries: cell phones, laptops, electric vehicles, etc. And lithium is the lightest metal on the periodic table of elements. And it’s extremely good at holding a charge.

Because it’s so light, and it has that property of being great at holding a charge, it is perfect for devices that need to be moved around a lot, you know, things like laptops, cell phones, etc. And as the world goes increasingly electric, you can see why the demand for lithium and copper, as well as many of these other critical minerals, is just going to increase.

And of course, copper has been very popular for a very, very long time. Going back to Thomas Edison and before. Lithium, for a very long time, has been a niche metal. It was used to make greases or in pharmacological drugs or in other sort of very specific applications.

It’s only in the past 10 to 20 years that we’ve really started to see this strong growth in demand for, and production of lithium. And that begs one question. And it’s the key question that I explore in The War Below. It’s where, how and why do we want to get these critical minerals? And where do we expect them to be produced? With what standards do we expect them to be produced?

All of these interesting questions are coming to the fore here as our global economy shifts from a complete reliance on petroleum products into more of a materials-based economy.

[00:05:44] Kevin

Yeah. You essentially tell that story through the, I guess, the eyes of a number of different people who are involved in mining or in opposing the mining. And I thought maybe we would start with one of the lithium stories.

I guess the good news is that you say in the book, the US holds about a quarter of the world’s lithium reserves. The bad news is that by 2030, it’s expected to produce only about 3 percent of annual needs. So why is that the case?

Why, given the huge level of reserves that the US hold, why is it expected to produce such a small fraction of the world’s lithium needs?

[00:06:30] Ernest

Well, we have a lot of tension in the United States right now around where we actually want to get these critical minerals. The reason that I look at several proposed mines, mostly in the United States, is because I wanted US audiences to have to grapple with this concept of choice. What are the choices we’re willing to make if we want the energy transition?

I think it was the pandemic, Kevin, that really brought to the fore this idea of supply chains tends to be a pretty sleepy topic. You know, if you need a sedative tonight, we can talk about supply chains ad nauseam. But it reinforced to people that, you know, the longer the supply chains are, it can have a huge impact on where we actually get these building blocks.

So, take masks, for instance. You know, it was four years ago, roughly, that the world discovered, and especially in the United States, discovered that the US doesn’t make any masks. And that was a sort of most basic, yet essential piece of medical equipment that we needed.

Now, you just sort of extrapolate that across the green energy transition and the supply chains, and you realize it becomes extremely important where we get these critical minerals. And so, while the US. might have a huge abundance of, in this case, lithium, as we’re discussing, there’s site-specific tension all across the country to propose projects.

So, the narrative spine of The War Below is the story of the Rhyolite Ridge lithium deposit, which is about 200 miles north of Las Vegas. And this is a prolific deposit of lithium. And it’s also intermingled with boron. So, the company, who would like to develop it, is targeting the sale of two products at once.

And anytime you can sell two products and have two revenue streams, it’s obviously a plus. And your investors are happy about that. The problem, though, for the company that would like to develop it, and you get to learn this story during the narrative, is that this site is also home to a rare flower found nowhere else on the planet.

And so right from the beginning, the question becomes, OK, what matters more, the lithium or the flower? Could the mine and the flower coexist? If the mine is not developed and the flower is left there unattended, would not climate change affect the flower?

These are sort of the questions that you bring to the fore here. And so, while this is just one specific example, each proposed project for lithium extraction in the United States faces various levels of opposition, whether it’s for biodiversity reasons or for indigenous rights reasons or for other related reasons. And so, when you add each of these up, you know, you start to see how there is this tension around where we’re actually going to get these building blocks and underscores a little bit as to why there is such a delay in some of these projects.

[00:09:12] Kevin

And this this particular one is extraordinary, right? You say that it has the potential to produce enough lithium to support 400,000 electric vehicles each year for 30 years. That’s the Rhyolite Ridge in Nevada.

They’ve been trying to get permission to build the mine for a number of years. And I think as of, you know, I checked as of yesterday, they still hadn’t got it. Can you just give us a little more background particularly on the company, Ioneer, that wants to produce the lithium? Why lithium mining, why does it have such a big environmental footprint or at least conventional lithium mining?

[00:10:03] Ernest

Sure. So that the company, Ioneer, is in the midst of the permitting process right now. And we’ll see, at the end of the year, if they do get their permits.

But you do learn a little bit about the chairman of the company that would like to develop the project during The War Below, as well as a conservation group, and especially a prominent member of a conservation group, that is defending this flower. And during the course of the narrative in The War Below, you sort of figure out what makes each individual tick. And I had the great privilege and honor of spending a lot of time with both individuals, both at the site in Nevada and elsewhere.

It was my real focus, during the writing and reporting of this book, to lay out their issues and to sort of help the reader understand the different perspectives as to this project. I purposely don’t share my opinion as to whether or not this mine should be built or any other the mine should be built, because I really wanted the reader to have to grapple with the sticky situation here as to what he or she values more. Therefore, as a consequence, [also grapple with] what they expect of their policymakers and politicians who ultimately will be making the decisions related to this and other projects that are out there.

So, drawing a contrast between the lithium and the flower, I think, brings up really interesting questions that are not easily discernible or easily answerable. But I think they’re important for us, especially as Americans, to have to actually grapple with and basically wade into the stickiness here and to decide, OK, what do we expect or what do we value more here?

These are some of the tough questions that I’m bringing forward to the reader. But this story, as I said, it forms the narrative spine for the book. It’s about three, three and a half chapters of the entire narrative. But there are plenty of related projects across the United States that also face similar levels of opposition due to various factors. And the reader gets to explore those as well in the book.

[00:12:02] Kevin

Yeah. And it was interesting. I’m just going to read a quick quote. The quote is, “What I want to do before I die is be confident that I’ve done everything I can possibly do to leave this place more livable for my children and grandchildren.” And the interesting thing is that quote’s not from the flower guy. That’s from the mining guy.

That’s the guy who wants to develop the lithium mine. And I thought that really brought into focus that this tension between, hey, these are minerals that could give us a future of low environmental footprint energy, but there’s a big potential environmental footprint up front.

With lithium mining, just circling back, my understanding, based on your on your book, is that at least the way lithium is mined conventionally, it does have a big environmental footprint. So, these are kind of open pit mines where you’re kind of having to get the…Maybe you can kind of explain why it’s such a such a big deal.

[00:13:12] Ernest

Yeah, this is going to get a little bit nerdy, so forgive me if I geek out a little bit. So, there are several different ways to produce lithium. I think that when people think of mining, they think of a giant open pit, which is perhaps the most stereotypical connection the average person would have with the industry. And indeed, here in Nevada, the company is proposing an open pit that would extract lithium and then process it at a plant that they want to build on site.

And so that’s one main way to do it. It’s interesting here because the geology is a little bit different than a hard rock mine, which is typically found in, say, like a gold or a silver mine. Western Australia has large hard rock lithium mines. That are sort of more akin to those traditional hard rock operations.

But in essence, yes, in Nevada, they would like to dig an open pit and then process that lithium on site. There is another way to produce lithium using giant evaporation ponds, and these are more commonly found in South America, especially in the Atacama Desert in Chile.

There you basically take brine, which is salty water found in underground reservoirs, and you put them in these large evaporation ponds and you use the power of the sun to basically evaporate out water. And over the course of several ponds, using some chemicals, you’re able to remove certain chemicals from the ponds, ultimately including lithium. Sometimes they can have calcium or magnesium or other metals in there.

That process takes a long time, obviously, because you’re using the power of the sun and it’s become less popular as times went on for many reasons, not the least of which is that you’re basically taking a water source out of the ground in a very arid climate. So that doesn’t necessarily endear yourself to the local community for obvious reasons.

There’s a third sort of more experimental or novel way to produce lithium. It’s called direct lithium extraction. In part of the book, I explore the history of that. This is essentially a classification of technologies that aim to filter lithium from brines across the world without using those ponds. So sort of what like a household water softener does.

But lithium is a salt, salt does corrode. And so, it can be a very complex process. And indeed, no direct lithium extraction technology has worked yet, at commercial scale, without the use of those evaporation ponds. And during the course of the book, I sort of chronicled the history there of that. But just circling back to Nevada, the company Ioneer would like to, as I said, dig an open pit there and then process that on site.

They would need to use a lot of chemicals, including sulfuric acid, which they have a plan to utilize there on site. And as you can imagine, it will be a rather large operation because you’re taking what is essentially a fallow site right now, and essentially in the middle of nowhere, and you’re going to be turning into a big industrial site. But all that is needed in order to get lithium.

And therein, for me at least, as the author here, gets back to this idea of question and choice and sort of bringing forward this idea that there’s no free lunch. That if we’re going to move away from a petroleum based economy, we’ve got to be thinking about what are the many, many, many steps that will be needed to get all of these building blocks for batteries, et cetera.

[00:16:40] Kevin

Yeah, it was a particularly interesting story because, as you said, the proposed mine is “in the middle of nowhere”. And there are some other stories in the book where proposed mines are not in the middle of nowhere. There’s one in North Carolina, the hills of North Carolina; another one in the Boundary Waters in Minnesota; and I think also in Alaska, a copper mine in Alaska.

There, it’s sort of more clear that you’ve got kind of pristine wilderness. A lot of times you’ve got people, in the case of North Carolina, living there. But in Nevada, it’s desert. Still, even there, “in the middle of nowhere”, there’s a conflict.

I want to just ask you another question about DLE, direct lithium extraction, because that seemed like a technology that if it could be made to work on a commercial basis, had the potential to kind of extract lithium in a more, I don’t know if the environmental friendly is the right way to put it, more palatable environmental way. But also because aren’t there large deposits of lithium in California that could be amenable to this particular technique if it could be made to work?

[00:18:04] Ernest

Yes, therein lies that last part of your sentence there, Kevin. I mean, if it can be made to work, it could unlock vast supplies of lithium across the world. And so, what you’re referencing in California is that there is an underground reservoir. southeast of L.A., near the Salton Sea. which is a manmade sea, in that sort of very rural agricultural focused part of California. And the super-hot brines that are about a mile underneath the surface could contain a lot of lithium.

These are extremely hot at two, three, four or five hundred degrees Fahrenheit. And right now, a lot of power plants basically take that ultra hot water and flash steam off of it, and use the steam to power turbines that generate electricity. So it’s a very clean way of producing electricity. And then they re-inject the brine back underground. So, it’s a big loop.

The interesting question is, could there be a way to extract lithium from that brine before you re-inject it back underground? And there have been several companies that have been trying to do just that, including one linked to Berkshire Hathaway conglomerate that’s led by Warren Buffett.

So, the book does look after how Berkshire Hathaway and some of its partners were working to develop a type of DLE technology. And they still are working on this process. Just that super-hot brine, you know, one scientist, that I talked to for the book, called it basically a nasty mix of a soup. And I think it’s just such a vivid way of referencing that because the technical challenges are huge there.

But to your point, Kevin, just think about like the tantalizing prospect of being able to produce lithium basically right outside Los Angeles and not need to rely on the northern Atacama Desert in Chile or processing plants in China or anything else that’s outside of the country. But there’s just huge technological challenges to be able to do this.

Another region in the United States that’s got a lot of lithium is this Smackover Foundation, which is an underground reservoir that goes from parts of Texas through Louisiana, through Arkansas, into parts of Mississippi and southern Florida. And it had been a huge oil producing region for a long time. It’s got a lot of brine there still in these underground reservoirs. But they also contain a lot of lithium.

Now, they’re not as hot as the underground reservoirs near the Salton Sea in California. But still, there’s a lot of technical challenges there as well that companies like ExxonMobil, Albemarle and others are trying to unlock, so to speak. And if it works at a commercial scale, then that would be another great way of producing lithium needed for the energy transition and could potentially abrogate or lessen the need for open pit mines.

But there again, no deal has worked yet at commercial scale. And there’s a huge race across the world to be first. So, we’ll see. But it could offer a tantalizing prospect there to really revolutionize how we produce lithium if it could work.

[00:21:15] Kevin

Yeah. And so, what’s your take on it? I mean, are we in this just sort of a wait and see? Is that multiple years before that’s likely to make a difference?

[00:21:25] Ernest

We’ll see. I mean, there’s been a lot of companies that have been saying they can do it. As we sit here today, at the end of June, there’s going to be a massive lithium conference next week, which I know, again, sounds really nerdy. But just imagine a thousand people in one room, Kevin, talking about lithium. It’s a good time. And so, we’ll learn more, I think, next week about where we are on that.

But there has definitely been a lot of eyes on this, a lot of investment dollars poured into this space, a lot of engineering focused on this issue. And I think there’s going to probably be some kind of development in the next year or so around whether someone’s able to go commercial. But just because one person does it or doesn’t do it, I mean, I still think there’s going to be a lot of attempt to basically have other companies do it as well.

A good analog that I like to draw is the US shale boom, which I also covered for Reuters when it first took off around 2008, 2009, 2010. And the United States produced oil, obviously, then other countries produced oil. But this technological development with the shale boom unlocked even more oil and allowed even more oil to be put onto the global market.

And so, as we sit here today, the United States pumps more oil than any country at any point in history. It’s the largest oil producer in the world. And that’s all due to this big technological development.

So DLE does hold the prospect of producing lithium faster, but also just a lot more of it. And when we look at the projections from the IEA and other governmental and extra-governmental agencies across the world, we can definitely just see the stark need for more lithium production. So, I see DLE as sort of being an interesting part of that long term play if it can actually work.

[00:23:17] Kevin

Yeah, that’s fascinating. I remember the shale boom, obviously not in the sort of detail that you do, but, you know, it definitely put a downward pressure on oil prices for a sustained period of time. And I guess if something like that happened with lithium, does that kind of imperil the profitability of these kind of more conventional mines that are being considered now?

[00:23:43] Ernest

It’s certainly an interesting question. I don’t know, because when we just look at the sheer demand projections, we know that we’re going to need a lot more lithium. Lithium, of course, can be recycled. Oil cannot once it’s been burned in an internal combustion engine.

So, it brings up really interesting questions around, OK, will demand just outstrip supply for their foreseeable future? Will DLE unlock so much more lithium and that the supply will outstrip demand? I think there’s a lot of really interesting questions here.

But when we just think about all of the electronic gadgets and gizmos that we all use every single day that we didn’t use, say, 10, 20, 30 years ago, and when we look at ways that technology continues to infiltrate our lives. Artificial intelligence being a great example. We just see the electrification trend continuing to grow and thus the need for a lot of these critical minerals to continue to grow.

And so, the question is, OK, where are they going to come from? So, I would think that if we’re going to be saying that open pit mines are not what we want in every single corner of our country or world, then are there other ways to be thinking about how to produce critical minerals? So, I think just from a philosophical level, those are interesting questions to be thinking through.

[00:25:03] Kevin

Yet you mentioned recycling and I was going to cover that a bit later in the conversations, but since you brought it up, that to me was one of the I don’t know, I thought maybe the area that I learned the most and I thought was kind of the most hopeful part of your book. You quote one of the people involved in that, saying all the materials that we put into a battery and into an EV don’t go anywhere.

They don’t get degraded. They don’t get compromised. Ninety nine percent of those metals can be reused again and again and again, literally hundreds, perhaps thousands of times.

So, you know, you tell the story of recycling largely through the lens of a young company called LI-Cycle (L I dash Cycle). Could you tell us about what they do and why you choose to feature them, why you think it’s so important that they were in your book?

[00:26:01] Ernest

Sure. When I started writing the book, Kevin, I mean, a lot of questions that I would get from everyday people were, OK, that’s nice you’re writing a book about mining (which the book is not about mining, I should say, it’s actually about community and choice, but obviously there’s a mining related component here), and people would just say, can’t we just recycle our way to go green?

I wanted to help the reader understand some of the complexities that just go into the idea of recycling in general, and also to look at one or two companies that are trying to move the ball forward. So, one of the interesting complexities around recycling is not necessarily the technology on how to recycle, although that can be a challenge, but logistics. So just think about a lot of batteries at their end of life, whether that’s a cell phone battery or an electric vehicle battery or any kind of lithium-ion battery.

They obviously have a little bit of charge left in them; maybe it’s one or two percent. Then you get hundreds of them, and you put them together, and you take them to a recycling facility, you can see the potential for one or several of them to explode is quite high.

Then, when you get one or two of them, it just starts a chain reaction. So, I chronicle one such explosion, at the beginning of the chapter about recycling, to sort of underscore that one of the main impediments here is that we just don’t have enough recycling facilities across the United States and really the world. So, you’ve got these long transportation chains, that need to happen right now, in order to get these batteries to a facility that can recycle them.

[00:27:33] Kevin

This explosion that you talked about was on a rail car, in the middle of Houston, moving these batteries to a recycling facility?

[00:27:43] Ernest

Yes, yeah, and there was a massive fire, and you can’t put it out with water. You use a special chemical to do that. Thankfully, no one was injured. No one was hurt. No one was killed. Excuse me. Several people had light injuries.

But this is just sort of one example that for me crystallized the logistical challenges here that go into recycling. And so, one of the companies that I do profile in that chapter, LI-Cycle, they’ve developed what they call a hub and spoke model. That is, they sort of mimic what airlines do.

They’ve got spokes across the United States and Canada where they can collect a lot of battery parts and shred them down into this material known as black mass. And it’s essentially shredded battery parts. And then they take them from each spoke to a central hub and they’re building one in Rochester, New York right now, where they would then extract the lithium and other critical minerals from that black mass.

So that’s the business model. And I wanted to explore the genesis of that and the engineer that helped develop it was this engineer from Toronto who had the idea, during the pandemic, of putting this company together and building out this hub and spoke network. Another company that I do profile in that chapter is Redwood Materials, which is founded by Ben and JB Straubel, formerly of Tesla, and has developed his company in Nevada.

So really trying to develop a real cycling infrastructure in the northern part of Nevada. And so, looking at his approach and how each of the companies have sort of different approaches to how they look at recycling. But those two were my way of sort of explaining not only these two companies’ logics, but also sort of the ecosphere recycling.

And it’s not really as big as it could or should be right now. And I do argue this in the books. The analog that I draw is the lead acid battery recycling ecosphere.

So, you have an internal combustion engine car, what you might not realize is that when that lead-acid battery that’s in there, when it dies, you go to the store, and you buy a new one. But you don’t realize that there is a small percentage of the price, maybe a few bucks, that essentially you pay without even realizing it, that essentially goes to paying for this whole behind-the-scenes infrastructure that recycles that lead-acid battery and turns the parts into a new lead-acid battery that is then sort of put out there for consumption by someone else down the road. This has been around for decades.

I’m interested in exploring a little bit of this in the book. Could that same analog exist for the electric vehicle battery recycling infrastructure? And there are some challenges there as well. I mean, each EV battery tends to have a different chemistry and a different concentration of, say, nickel or cobalt or other critical minerals.

And so that could pose a challenge to recycling on a uniform scale. But it’s a bit of a growing pain that the industry will figure out in time. But those are, again, some challenges to recycling here.

And then you just look at the sheer supply-demand needs. I mean, if we’re going to get to the point where we reach what’s called a fully circular economy, that is the idea that old electronics can be completely recycled and then used to make new ones so we don’t have to have mining anymore, I mean, that’s sort of a holy grail for a lot of conservationists and environmentalists.

[00:31:07] Kevin

Is it more than a holy grail? I mean, is that something, potentially, that we’ll achieve? Or is that something that you can only really start to think about 20, 30 years down the road?

[00:31:18] Ernest

I think anyone that tells you exactly when it’s going to happen is not saying that with confidence because nobody can be certain exactly when we’re going to get to a fully circular economy. Certainly, there have been some companies, like Apple and others, that are moving very aggressively towards this.

Apple has a pretty blunt goal of ending its dependence on the mining industry. It says it very publicly as part of its sustainability literature. But Apple, of course, has a lot of money to be able to make some pretty aggressive bets and moves in this space. And not every company is Apple.

But I think it’s also going to have to take huge change in how we, as just everyday consumers, even think about recycling and end of life. So, I don’t know about you, Kevin, but I’ll make an admission here to the audience that I’m pretty guilty of hoarding old cell phones. I’ve got two or three of them in my drawer right now in my office as we speak.

And I suspect a lot of people listening might have a few of those as well. And if you just sort of extrapolate that across the United States and really the world, I mean, you get to really understand why old used electronics sitting in shelves and cupboards at homes are one of the biggest sources of critical minerals really out there.

[00:32:33] Kevin

Is that because you’re waiting for the price of lithium to skyrocket and then you’ll…

[00:32:37] Ernest

(Laughter) Exactly. But no, all joking aside, there are certain ways to recycle these things. But if it were even easier for people to recycle them, and it was clearer how to turn them into the end of life, then I think it would be more palatable for the average person to do that.

But just that reflux there, that muscle is not there yet collectively, or that infrastructure is not built up yet to be able to fully recycle end of life batteries. Like I said, Apple is getting there. And sure, in the book, I do visit their Daisy robot, which tears apart old iPhones so that different parts can be recycled.

But that’s just one manufacturer and that’s one approach there. It’s going to have to sort of take a coordinated, all-of-th- above effort to get there, to get to that idea of a circular economy.

I should say that the mining industry is aware that this will happen at some point. The CEO of a major lithium company I mentioned in the book, he talks about at some point, we’re going to dig the last mine, which is kind of mind boggling when you think about it. But it’s true. At some point, we will dig the last mine here on the planet Earth.

When that is, I don’t think anyone can actually say for certain, but we’re moving in that direction. And so increasingly you start to see some mining companies, when they build processing facilities, they are building in recycling plans for 10, 20, 30 percent of the production. And that’s part of a long-term play there by that industry.

[00:34:13] Kevin

I want to go back to the kind of this sort of central tension in the book between, you know, the desire to get minerals for the energy transition, and then the environmental degradation that potentially involves. You talk about copper as well, and there’s a story of a number of copper projects in the book. One kind of has a, I don’t know if happy ending is the right word, but a kind of an ending where there’s some compromise.

And there’s another one, the Resolution Copper Mine, where you say you kind of came away feeling that the issues were intractable. So, this is a mine where, I believe it’s in Arizona. And, you tell a story from the perspective of an indigenous tribe who feels that the mine would endanger an area of great cultural and religious significance to them.

Then there’s the local townspeople who by-and-large want the mine because they believe it will bring jobs. And there’s the mining company, and even the Biden administration. So, I think you did a great job of kind of telling all the perspectives there.

But in the end, you said that it just felt to you like there was no way forward. When you say intractable, what did you, I guess, what did you mean by that? And why did you come to that conclusion in that case?

[00:35:33] Ernest

It’s a sticky situation and there’s no clear-cut answers. I think that too often we just sort of expect answers to be neat and clean and prepackaged for us, especially in our busy modern lives. And this situation here with the Resolution Copper Project, which is about an hour east of Phoenix, is not clear cut.

There are no clear answers here, but we do need copper. The United States is overly reliant on other nations right now for copper. Copper is, as we were discussing earlier, basically one of the key anchor metals for this energy transition.

And this mine would supply about a quarter of the US copper needs.

[00:36:11] Kevin

A quarter of the US copper needs. That’s extraordinary.

[00:36:13] Ernest

Just this one, just this one mine, yes, it’s a massive deposit. At the same time it would cause this giant crater that would destroy a site of religious and cultural significance for the San Carlos Apache people.

And during the course of the chapter, you get to hear of the history of the San Carlos Apache people, including how they were basically forcibly resettled onto a nearby reservation by the US federal government during the 19th century. And this site where this proposed copper mine would be is in their historical and ancestral homeland. And therein lies another tension point.

So, while each chapter does talk about specific projects in the US and other parts of the world, it also sort of eclipses those projects to be more of a specific story about how different tension points can emerge. And so, we talked about the rare flower, which to me is around a tension around biodiversity. Here with Resolution, it’s a tension around indigenous and religious rights.

What matters more here, as we think about fighting climate change and we think about the energy transition? And like I said, there are no easy answers here, but you get to read the history and how this project has basically been ping-ponged back and forth, depending on who was sitting in the White House. President Trump had a very different perspective on this issue than President Biden does currently.

Of course, here we are right now in a U.S. presidential election year. Critical Minerals presumably will be a key talking point as that moves forward here. But when it comes to Resolution, there’s just no easy answers.

And what are the right ways to move forward here? And so, I had the honor of spending a lot of time with the San Carlos Apache people, as well as with Rio Tinto, the company that wants to develop this project, as well as leaders in Superior, Arizona, who are very supportive of the project for socioeconomic reasons and would like to see it opened.

And the best way that I knew how to help people wade through this situation was to respectfully and honestly tell their stories to the readers so that she or he can determine what they would do here and what they expect of their elected officials. Because by not having the debate around where, how, and why we want to get these critical minerals, I mean, we’re basically letting indecision be our choice.

Indecision is a choice. But what we also do know is that China and other countries across the world recognized 10, 20 years ago that critical minerals were an extremely important part of the 21st century economy and invested heavily in that space.

And so, as we sit here today, I mean, China controls so much of the critical mineral supply chain and is willing to use that control as an economic weapon for its own benefit and has used it as an economic weapon for its own benefit. And so, we’ve got to be making tough choices around all of these projects and just sort of kicking the can down the road. While it is an action, but it doesn’t help us in the long run. We’ve got to be grappling with this stuff.

[00:39:19] Kevin

Do you think, this is a little bit off the trail here, but you grew up in Maine. Do you think growing up in a somewhat rural environment helped you in terms of connecting with the different people you talk to in these projects as opposed to, I don’t know, someone from the coastal elite showing up in these towns and asking questions. Do you think, personally, you kind of understood the people you were talking to better because of your background?

[00:39:49] Ernest

I think growing up in Maine was an amazing experience for me. I grew up in a rural part of the state and had just the great opportunity to explore nature and really get to know a lot of different people. And so, I think that, yes, it definitely was a benefit for me.

I’ve also had the privilege of living in many different types of communities across the US and elsewhere. I mean, I spent eight years living in New York city, so I got very familiar with an urban environment. And then I lived for almost two years in North Dakota writing about the oil industry. So, a very rural, but also energy dependent economy there, and fracking, of course, not completely popular with everyone and does have its detractors. And so, I, got to see their perspectives as well. I tend to draw on the experiences of every single place where I live and really see it as an opportunity to learn from the people and the places where I do live and have the occasion to speak with them.

Here, with the book, obviously it was impossible to live in every single community that I profiled. And so, I was conscious of the fact that I was visiting for a finite period of time. But, I think when you do that, the best way to respectfully show that you want to honor their stories and honor their lived experience is to come with an open mind. Is to listen before you speak and do your homework and to really learn as much about a project, a people, a history before you even set foot on the ground.

That’s what I really strove to do here, with The War Below, is to respectfully chronicle all sides of an issue. I often find that there’s more than just two sides to an issue. There are often multiple sides to issues that do not present clean answers.

I think the more that we respectfully dive into these multiple angles, then we can sort of maybe get at the other side with maybe potentially some answers.

[00:41:53] Kevin

Yeah. It was interesting because even in that specific example, there was another copper mine in Arizona where I believe it’s the same tribe who supported an extension of an existing copper mine by providing the water rights that they would need to use. So, if I got that right, that’s showing that even the same group of people have different perspectives depending on this specific situation and, I guess, the level of kind of inclusion and cooperation involved in the decision process.

[00:42:31] Ernest

Yes. Yeah, correct. The tribe you’re referring to, the San Carlos Apache, they are opposed to resolution as we just discussed, they do though lease, water to Freeport-McMoRan, which owns the Morenci copper mine in Arizona.

It’s actually the largest mine, for any metal, on the North American continent. I do visit Morenci as part of one chapter in the book because I wanted the reader to see an active mine site, in the United States, that’s been around for more than a hundred years, that’s earned the social license to operate, that works with local indigenous communities, and that supplies a huge chunk of American copper. So here, yes, you’ve got the San Carlos Apache people that have this agreement with Freeport-McMoRan.

And I actually put it to the chairman (and this is mentioned in that chapter of The War Below), I said to the chairman, “Hey, you have this opposition to this one copper mine, but you lease water to another copper mine.” And he raised a really interesting point around tribal self-determination and how the water deal was one that they decided to do for themselves. And so that was a decision that they made.

And so that was an interesting perspective that I felt was really important to include in the book here, especially given the complexities of tribal relations in the United States.

[00:43:46] Kevin

Another, I guess, interesting perspective, that caught me a little by surprise, was some of the mining supporters kind of used the language and logic of social justice to push their case. So, in other words, why should rich countries enjoy the benefits of using products while outsourcing the mining environmental impact to poor countries? One person that you interviewed in Idaho, I think she even said it was our “obligation” to mine here because we’ve got higher environmental standards.

What’s your take on this? Are they sort of just talking their own book, and kind of using that language or is there a logic there that you buy into?

[00:45:03] Ernest

Well, it is an interesting perspective to have. And oftentimes a lot of the folks that are involved in either mining companies or just pro mining in general will bring up examples of say, child labor, for instance, in the democratic Republic of the Congo.

And sometimes it is true. You can have children as young as six or seven that go out there with pickaxe and shovel and sort of dig ore out of the ground and then sell it to a middleman who will then put it into the global processing network. And, as we sit here today, products that contain lithium-ion batteries that you or I might own, it’s nearly impossible to figure out where the cobalt came from, and if sadly, if a child was part of that production supply chain. That can happen.

So, sometimes you’ll hear, especially in the United States, folks say, well, why shouldn’t we develop (in this example) a cobalt facility or a facility that would produce cobalt here in the United States, knowing that we’re not going to use child labor, that we often would use union talent or talent that’s highly compensated, that we have high safety standards, that we respect water, that we respect all worker rights? And it’s an interesting line, I think, for the reader to have to actually explore here.

I’m not necessarily saying it’s that stark of a contrast, but in some instances it can be. It is true that the mining standards in the United States are quite high compared to other countries in the world. And while the US doesn’t have all the critical minerals it needs in its own borders, it is true that there are certain projects that are not being developed as we sit here today. So, for me, that was an interesting thing to bring to the reader here to have them explore a little bit as they sort of think through these issues.

But yes, you’re right, Kevin. Mining executives in the United States are increasingly talking about, if we want to have all these electronic gadgets and gizmos, then we have to be willing to make them ourselves. And this was again, reinforced during the pandemic, going back to that sort of nerdy idea of supply chains. People began to realize that the longer these supply chains are, they’re perhaps not the best because they could be interrupted by weather or armed conflict or a global medical emergency like a pandemic. So, that is what the industry is using, again, to sort of reinforce that perhaps we should have more regional or domestic production of these building blocks.

[00:47:03] Kevin

Yeah, that’s, it’s like, as you say, there’s more than two sides and it’s not just between, do we want to mine, get the minerals, and what’s the environmental damage here, but okay, if you say, all right, well, we’re not going to do the mining here because of the environmental damage. Well, then the mine is going to happen somewhere else and the damage might, might be worse.

I wanted to, when we were talking about copper, I had meant to ask a question about labor that kind of surprised me. So, in the, if you will, the positive outcome where there was an extension of the existing copper mine and the water came from the San Carlos Apache. Even then you said the company production in 2023 fell because they didn’t have enough workers and that half their workforce, half the miners were over 45 and a significant chunk were nearing retirement age.

So that, that surprised me. I mean, presumably these jobs are, I’m sure they’re difficult and, and challenging, but I guess they’re pretty well paid. Is the ability to attract labor a significant constraint in the United States’ ability to ramp up its mineral production? Is that something that’s on the critical path?

[00:48:23] Ernest

It’s a huge challenge right now, especially for the United States for many reasons. Not least of which is obviously we’re going to need more of these minerals and there are many challenges to getting more labor into the industry.

One of the biggest ones is that just mining is not sexy anymore. It’s not what you would sort of think of as an industry that would be appealing to an 18 or 19 year old who is thinking about what to study when he or she is in university. For better or worse, the industry right now has an association with coal mining or with other industries that have been considered sort of dying in the United States or as environmentally deleterious. So, what you get is, if you go into an engineering program, maybe you might go more into say civil engineering instead of mining engineering.

We’ve also seen the number of mining engineering schools in the country just atrophy. Right now, the US, I think, has about 11 or 12 certified mining engineering programs in the country.

China has several hundred and the number is growing. It’s invested heavily in R&D for mining, certainly mining engineering programs. So, it is a huge, huge challenge. For Freeport, I share your shock, Kevin, when that happened and the production fell in 2023, just because they couldn’t find enough people, not because they had regulatory issues or power issues or any of the other sort of normal things you would think of that could pose a problem to production. They actually just didn’t have enough boots on the ground, which is sort of crazy when you think about it.

Now, that’s actually not the same issue facing the industry in other countries in the world. Chile, Peru, have huge mining industries. Indonesia has got a huge mining industry. They have people applying for all sorts of jobs that they have come open.

But for whatever reason in the United States, the industry has faced a huge challenge on attracting talent and retaining that talent, even though it does have extremely high salaries as well as other benefits. But oftentimes mines are in pretty rural regions and it’s not really necessarily conducive to family life. So, it can be hard.

I mean, Morenci, the mine that buys its water from the San Carlos Apache, it’s a pretty rural region. So, the town where the mine has its operations headquarters is basically owned by this company here. And I do visit it a little bit for that chapter, but the company owns all the houses, the company owns the gym, the company owns the Starbucks and the grocery store.

And so, it’s, it’s a company town literally, but it’s in the middle of nowhere. And so, the company realized that they needed to have all these creature comforts in order to attract talent. But still, you know, you’re pretty far from the nearest airport. You’re pretty far from perhaps loved ones and other family members. And so it is, it is a lifestyle shift.

So, these are all sort of the structural impediments that the mining industry as well has to contend with just getting more people interested in actually wanting to be miners. But I will say this, Kevin, if you know of any young person that’s 18 or 19 and considering where to go to college and what to study, have them connected with me because I know a bunch of mining engineering professors that just have scholarships, just they’re willing to give out to any young person. So, it’s a lot of these schools are very interested in attracting talent.

[00:51:45] Kevin

Well, okay, I’ll keep that in mind. I think you actually said in the book that the town’s been moved a couple of times, like literally just physically moved as the mines expand.

[00:51:57] Ernest

I mean, you got mining under your feet, you have to move.

[00:52:00] Kevin

We should wrap up here, but I had a final question I wanted to ask you, kind of a personal question, which is, you spent a long time chronicling these, these stories. You did a great job. We’ve only really scratched the surface here. Each decision is somewhat different, but have you built up a framework, yourself, for how to make these decisions? If you were the mining czar, the green energy transitions czar, how would you think about calibrating whether or not a particular project should go ahead or not?

How would you go about weighing these pluses and minuses or, have you come up with a framework for doing that?

[00:52:46] Ernest

Yeah, no, it’s an interesting question. I think for me as the author here, I approached it from a storytelling and journalistic perspective, and I wanted my opinion to sort of recede to the background here. I wanted the reader to think for her/himself, what they would do.

So, I actually made the conscious choice, when I started writing this, to not put my opinion in about whether certain projects were good or bad. The one opinion I do have in the book, and I share it very prominently, is that we have to be having this collective discussion around where we want to get these building blocks. We didn’t really have it 100, 150 years ago when the petroleum-based economy took off. And what did we get out of that?

We got multiple armed conflicts over oil. We got climate change. We got a cartel that controls a huge chunk of the world’s oil production.

So, if we’re not willing to have these collective discussions in the United States and elsewhere, we’re going to perhaps repeat the same mistakes. In part of the book I talk about this concern that industry analysts have that we could see armed conflict in the 21st century over copper, which sort of sounds mind boggling when you think about it. IF you just look at the sheer need for copper and the anemic production of the metal today, then it’s sort of something to keep in the back of your mind that that could be a potentiality.

In the United States we have a regulatory structure that’s confusing at best, I think is the best way to put it. Time and time again, I chronicled in the book how not only mining industry representatives, but also conservationists and environmentalists found the roadmap not clear. So, having ways to think about, okay, what does it look like to have a 21st century regulatory structure for many of these critical minerals projects, perhaps, should be something we think through.

Kevin, one of the key laws in the United States that governs mining, especially in the West, is the mining law of 1872. That’s been around since 1872 as the name implies. Ulysses S. Grant signed it into law. Now I didn’t meet President Grant, but I can tell you that I’m fairly certain that he did not envision electric vehicles or cell phones or laptops. The law was designed to expand the population of the US. West. And the last time I was in California, and I’m sure you can attest to this, there’s a lot of people that live in California and other parts of the US West.

[00:55:27] Kevin

We succeeded in the goal of bringing people West. That’s for sure.

[00:55:28] Ernest

Yes. The law itself has a unique quirk that oil companies would kill for. That is to say that companies that extract critical minerals, copper, lithium, et cetera, from US federal lands don’t have to pay royalties to the US federal government. Now, if you’re an oil company, you’re paying 8% or higher depending on where you’re extracting it.

So, those are just sort of two areas of this law that folks, as I was reporting in the book, talked about time and time again that they feel should be readdressed. So, as we think about where we want to go green and how we’re going to go green, I think these have to be part of the collective discussions. In addition to this, are there some places in the world that we wouldn’t allow mining? And if we do allow mining, what would that look like? And so, it’s no easy answers.

There’s no free lunch, but it’s a necessary conversation. I really hope that The War Below is part of that conversation as we think about this transformation for our 21st century economy.

[00:56:33] Kevin

Ernest Scheyder, this has been a tremendous conversation. Thank you very much for doing this today.

[00:56:38] Ernest

Hey, great to be with you, Kevin. Thanks for your time.

[00:56:40] Kevin

Make sure you follow Ernest’s work because, as you can tell from today’s conversation, some of these ideas and topics may not be discussed enough on mainstream media.

From all of us here at Top Traders Unplugged, thank you for spending time with us today. We look forward to being back with you next week as the conversations continue.

[00:57:00] Niels

Thank you so much, Ernest and Kevin, for a fascinating look into the global battle to power our lives. This was an eye-opening episode that highlighted the tough questions we’re going to wrestle with in the coming years. It was interesting to think about how the green energy transition is actually coming into conflict with environmentalists.

And, if it’s really better for the environment to stop mining projects in the US and Europe, if that just means the mining will be done elsewhere where standards are lower. On the positive side, I enjoyed hearing about the potential for recycling and how at some point the world will have dug its final mine and how mining companies are even preparing for this.

It was fascinating at the end to learn that even some of the mines that have been approved in the US have struggled to find workers, even though mining is now well-paid and much safer than it has been in the past.

From Kevin and me, thanks so much for listening and we look forward to being back with you on the next episode. And in the meantime, take care of yourself and take care of each other.

[00:58:10] Ending

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