Are Strong Lithium Earnings Exposing a GFEX Disconnect?

Whenever there's a dichotomy of commodity price and equity price, you should pay attention. GFX is not trading on fundamentals. It's trading on rumours about the CATL mine. People are still not factoring in non-Chinese prices into the equity evaluations. The 378% increase in indicated resources at the property, also another almost 90 million tons of inferred, so that's very special. Welcome to our weekly Rockstock recap. It is Thursday, October 29th, and I'm here as always with my partner, Matt Furnley, and we'll be joined shortly by Thomas Nadrausky of Amvest Territan Fund, and also the author of Mineral War, which we've flagged when he was here before. Before we begin, just first a big thank you to everyone who joined our quarterly battery materials review webinar this week, which is available for our silver and gold patrons. Matt will touch on some of the takeaways from that today, and with Lithium earning season underway, we'll also flag our comprehensive Lithium and Rare Earth quarterly review, which will be distributed in a few weeks, which is at our $25 Patreon tier. If you want to go deeper into the companies and numbers behind all of our, you know, for free public discussions, please visit patreon.com/rockstockchannel and consider subscribing at our bronze silver or gold tiers. Before Thomas joins us to talk about how he's successfully managed to avoid the critical minerals carnage in their Amvest Territan Fund, Matt will work through the reporting season so far from PLS, Elevera, Liantown, and Mill Resources. Politics is also significantly in focus with some major drama in Rare Earths and Lithium-rich Brazil, you know, some ambiguity in Israel, and of course the US midterm next week will ask Thomas about all of those, you know, later. But before that, I just want to flag three videos. One is a short interview with first phosphate, John Pazalacqua, which will appear at the end of this video. And separately, we did two full-length discussions earlier this week with Gary Evans CEO of US Anthemony. The first time we've actually covered that story or even that commodity. And second, we met interviewed an analyst at CRU. Matt, you want to mention quickly what that was about? Yeah, Max Reed is the head of the battery cost team at CRU, fascinating interview and well-worth 45 minutes of your time, anyone who's interested in the battery supply chain, I think. Okay, great. And finally, just a normal plug to ask all our viewers to please like, subscribe, and comment on this video, or if you're listening on Spotify or Apple Podcast to please rate and review it. It really helps for more people to find these conversations. And we'd like to thank our sponsor, Clean Elements, an investor group focused on providing growth capital to critical minerals developers supporting the energy transition. Clean Elements is invested over $30 million to date and is currently the largest shareholder of Galon Lithium and Noah Lithium Brian's two companies developing high-grade Lithium Brian projects in Argentina. And finally, a reminder that arcade equity advisors and holds equity interests in some of the companies we may discuss today, but we are not of course financial advisors, nothing in this discussion, constitutes investment advice, please do your own research and read the disclaimer at the end of this video. So Matt, you know, it's earning season, Lithium earning season, and there's been a lot of manipulation as you tweeted today, you think, you know, in the GFX. Let's go through the earnings and what is the spot, you know, and the futures market kind of telling us. Well, I think maybe start off with the earnings. I think, you know, broadly positive earnings have been quite surprised. For the most part, sort of prices have been, sorry, costs have been a bit lower. The more I expected them, realized prices a little bit higher and performance of the assets pretty reasonable. I mean, there have been a couple of sort of issues of mineral resources, had an issue at Mount Marion. You know, there have been a couple of sort of project specific issues, but across the industry, it looks as though things are going reasonably well. And the reporting season was relatively robust. So we obviously haven't had everybody in through the door yet, and there'll be more to see. But for the time being, the results look pretty good. I think on the futures market, I don't think the futures market is actually telling us anything about fundamentals. I think there's been a massive disconnect between what we see in the GFX and the fundamentals of the industry as I've tweeted on fairly repeatedly over the last five or six weeks or so. And I think now, I think the issue that the industry has is that there are a number of speculators who play on the GFX market, and they've got deeper pockets, necessarily, than the industry does. And I think this is starting to come an issue for the industry. And if it continues, I think it will become a bigger issue for the industry. And maybe it's time that the industry started thinking about moving away from GFX linked prices. I know that most contracts in the industry are related to the SMM price or to the fast market or benchmark Asian, Spodgybean price or Asian lithium carbonate price. But to some extent, those prices are still linked to GFX. And maybe it's time that the industry thinks about going back to courtly contracts rather than spot linked prices as a way of indicating what the strength is in the market, because everything we hear from lithium producers from users of lithium is that the market is very, very tight. Yet the GFX is being m-m-m-m-m manipulated by speculators who are causing it to go lower. And that is not good for any of the participants in the industry, because while the price remains below the incentive price for new production, none of these new projects can get financed. And we need those new projects in the industry if demand is going to grow at 20 percent per year. So, you know, this weakness that is being engineered in the industry is effectively going to cause at some point a spike in the lithium price, which isn't going to be great for anyone. Okay, that's helpful Matt. I want to pivot a little bit, now I remember I pivot, but just, you know, his LME week last week, you went, you gave some views, we had some calls with some others who attended, and I think maybe next week we'll have someone on the on the podcast, but one, veteran, you know, physical medals trader that I spoke to, we had a chat with yesterday, I just want to share some of his thoughts and then your reaction, you know, to these thoughts. So, his assessment of LME week, and this is someone he's in his, you know, early 60s, worked at Glencore and many other places, and it is very much in the physical market, very connected in China, and his assessment overall LME week was that sentiment was neutral to bearish. He certainly didn't come away sensing widespread bullishness. This isn't lithium specific. This is broad based. His concern was that a lot of good news was already priced in. Some medals had rallied very hard, while attractive treasury yields now give investors an alternative to taking commodity risk. China, he described a mixed picture, strong exports, but weak property markets and domestic investment, which left him cautious about the broader demand outlook. He mentioned in particular, and this is something that I've been thinking about, I'm going to be writing about, is that AI is crowding out other investment, right? It's not just all this debt that's coming out there, but even companies like Mehta, you know, are going to issue 95 billion in equity, you know, and Google raised a couple of weeks ago, 85 billion, you know, in equity. So AI is crowding out all other investment. It may create enormous future demand for medals, but today it's competing for capital needed to develop their supply. He also warned about the small specialty metal markets. Prices can run well ahead of fundamentals, but thin liquidity makes the reversal brutal when buyers step back. Strategic importance doesn't automatically make something a good investment at any price. And I think he flagged things like Scandium and Thompson in particular, Antimony, all of which have been hit, you know, pretty hard, and we flag that antimony in the US antimony interview. Let's come it out next week. And then he didn't have such a great view, you know, on Lithium, and then you and him had a bit of a debate there. And we'll discuss that a bit. But, you know, there was more agreement on the longer term energy security argument. You know, the Iran War reinforces the incentive to reduce dependence on imported oil through electrification and batteries. So this guy's a trader, he's very much focused on the short term. And this was kind of his takeaways from LME week. What do you think about that and then we could talk a little bit more about? - I mean, I do agree about the macro environment. I mean, I've been quite worried on the macro environment for about 12 to 18 months, but the market continues to shrug off, relatively weak growth in China. In my, you know, quarterly presentation, I talked about the risk that in the US, the headline numbers look strong, but if you raise the bonnet and look below the headline numbers, there's a quite substantial bifurcation between the haves and the have nots in US economy. I mean, in retail sales, you know, the top 10% of earners are generating 50% of demand and the bottom 80% are generating only 30% of demand. And then in, you know, manufacturing and construction, AI data centers are really driving the strength in that space, you know, with the rest of the old economy and the traditional manufacturing space, really struggling. So, I mean, I think we have a very much a two tier economy in the US and, you know, the economy in the rest of the world while eking out growth is not that strong. So, you know, when you're looking at economy-related base metals in particular, things like iron or steel, copper, aluminum, the demand environment is not that great. And I completely agree with him, you know, from that point of view. And then you come back and you default to the supply environment and the inventory environment. And, you know, the inventory environment in aluminum is we've got very, very low inventories critical. And then the supply environment is a little bit constrained. And then in the copper environment, the supply environment for concentrators, a little bit constrained, but we have an over-supply over-fine copper. And we have a huge blowout in inventories over the last 12 to 18 months, which is, you know, the point that I raised in that blog, I raised a couple of weeks ago. So, you know, I kind of agree with him that some of these materials look over-valued. But then if you look, you know, throughout the critical materials, he talked about antimony and tungsten prices round tripping. But if you look, for instance, in the rare earth space, which is an area that I'm writing on at the moment, you have this situation where NDPR prices have stayed really quite high. In fact, they've been rising. Yet the sector is completely sold off in line with the rest of the critical materials set off. So, you know, there are segments within critical materials where I think they look considerably oversold. Somewhere the material looks oversold. Somewhere the material looks overbought. And, you know, somewhere the equities look oversold compared to the materials. So, it's a really interesting market at the moment. But there are certainly some really interesting opportunities starting to come to the fore. Obviously, the risk is, in some areas, you potentially are catching 49. With respect to rare earths, it's interesting. Whenever there's an dichotomy of commodity price and equity price, you should pay attention. And that is happening there. But I wonder, there's a lot of rare earth stories that are in Brazil. And Brazil just had a tumultuous election, you know, where the Flavio Bolsonaro, a few hours after the election result, you know, was I just read an article in the Wall Street Journal about how he went through Argentina to Colombia and ended up in Miami, right? In this very kind of clandestine way. And he's contesting the election. So, I don't feel, I don't have enough information to actually comment about what happened in this election result and what that may overall mean. But I think the broader stock market went down a lot, you know, the day, you know, Lula effectively won. But, you know, do you sense that this is impacting at all rare earths or lithium stocks? I mean, I don't think it's impacting the sector. But obviously it is potentially impacting stocks listed or operating in Brazil because there's sort of currency fluctuations and, you know, risk appetite fluctuations that we see around sort of contested elections. Don't help, don't help the environment for those stocks. I guess we'll have to see, you know, over the next couple of weeks as the dust settles and hopefully more, more comes out about the elections. But, yeah, I mean, for the time being, I think there's quite a lot of things that are up in the air but obviously quite difficult to contest an election from outside the country. So, I'm not sure how viable that is necessarily going to be. - Yeah, well, we'll see, there's a lot, the US midterms are coming up so, and Israel had an election as well which had a non-definitive result, I think, but wasn't as bad as some people. A lot of people thought Netanyahu would not win or it would be out. So, anyway, we're parsing through what all of this means. Obviously, Trump supported Netanyahu. He supported Bolsonaro. You know, it looks like the Iran War has been paused for a couple of weeks while there's a lot of election nearing stuff going on ahead of the midterms or so. Yeah, I don't feel, we're still digesting it all and maybe we'll have some smart commentators join us who are-- - I mean, I think, you know, we're commodities analysts. We're not political commentators, so I think it's very difficult to sort of, you know, we're sort of like story takers as it were in election news. You know, we're not going to sit there and give you the detail in terms of what's happening and the ins and outs and everything. So, we can only be priced takers in terms of elections, but fingers crossed after the midterms in the US will have a little bit more stabilization. So we'll hopefully take it from there. - So let's pivot to our guest, Thomas Nydrauski, who runs the Amveste Teridan, you know, Critical Minerals Fund. Then there's also an author of Mineral War, which I referenced in the beginning. We'll put a link in the comments below. This is a great book that I read earlier this year where Thomas has been very much on a talk show circuit and has lots of podcasts and other events where he's talking about his perspectives here. And the Amveste Teridan Fund is growing and has actually had pretty good performance. I just got their quarterly letter in my email box. We can't discuss in too much detail the specifics of that, but I did note that your benchmark, which is the Vanneck REMX benchmark, and which was down like 25% or something we've been talking about this Critical Minerals carnage for the past two to three months, but you were actually up in Q3. And so Thomas, welcome back. We have a lot that we'd like to dig into you geopolitical wise and also funds flow wise out of critical Minerals. So let's start with just, yeah, it's been a couple of months since you've been on. I think it was probably after you're Q2 results. So just, yeah, remind our viewers quickly about you and what are you currently thinking and saying? Sure, thanks, Howard, and Matt for the invitation. We've been very much on the defense. You know, this market really peaked early in May, and we've been trying to understand. what the main drivers of the of the sell-off have been. And I think that depends a little bit on the month. The first two and a half months, which is second half of May, then June, and the beginning of the third quarter in July. I was really programmed selling anything that was more related to hardware. And of course, our space is sometimes subjected to that. So much so that sometimes the correlation is with the Korean member at the market where very, very strong. Not all of the bad days, we're related to this, but there were definitely some positive correlations that we could see there. Then we have this very technical rebound in August that didn't last. And then macro issues kicked in again in September and the sell-off has continued. We see this as a fantastic opportunity as we're going through this, as you mentioned, series of different elections that are disturbing and important for our markets, of course, US elections, Brazilian elections. We can come back to this later as well. And so there's going to clean out and I expect a stronger end of the year. I'm sorry to say on your podcast, I'm not sure that actually affects Lithium. I know we've been down in China, 45% from the peak in Lithium, but we are below 90,000 now, Remy and B, and it's concerning. And I'm looking at the capacity, not on the energy storage, 'cause this is a good story, but we've almost 60 million vehicles that China can produce, of which a third are today new energy vehicles with a lot of Lithium and the domestic market for all of the car making about 18 million, of which 53% currently are new energy vehicles. Well, I have to push out between 10 and 6 million, of course, overseas, right now it's six. So there is not much space for growth here, especially if the trade relations are derailed, with Europe we're very close to a proper trade war with China and of course there are a few other markets, unless of course the U.S. market opens, it's a different story, but just on that mobility side, it seems like we have a lot of stock there that can be unsold and those unappealing results from BYD and others is a sort of an ember light, at least for that space. So maybe there will be a rebound like everything else because the space has just sold off so much, but it's just difficult to be very constructive in the midterm right now. - Okay, there was a lot embedded in that brief introduction. We do want to, we talk about Lithium all the time and we do want to talk about Lithium and later. You, we had a space is at the beginning of the year and you were bearish Lithium, you, you, you maybe sold to early Lithium and for a few months, right, until May you were wrong, but you've been right, you know, since May, with respect to Lithium and we'll get into that, I guess a bit more a lot of it is China, you know, related, but you mentioned, you're watching a lot of technical factors in algorithmic trading, or I don't know, program trading you mentioned. And we were thinking, you know, there was a sell in May, go away, and May, June, July were not good. And we did have that August rebound, then we thought that that would be more sustained into September. So what you said, like, so what caused, you know, August to rebound, right, you know, and then how it turns into that, that was a head fake. Like what, what, from a technical point of view, you're sitting here in New York, a lot of this just like, what's his name, Robert Friedland often says like a fish, a school of fish is like going this way and then all of a sudden it goes like the other way, right? So that's seemingly what happened, you know, in August and then September and it could easily happen again, maybe post the elections, but I'm curious, because you're tying it to Korean memory chips and other things like none of us really understand what's going on. - Yeah, September was a bit different. September, if you remember, there was a bit of a stress on the yield curve and that kind of scared a lot of people more broadly, you know, there's concern about over leverage in the credit market and of course, the French yields started to opening this bread that as you know is self-excelerating as most of the big funds are always banking on a tighter spread between riskless, supposedly Germany and risky yields in Europe. So that created a little bit of movement towards the end of September and then into October with some of the sovereigns moving in reaction to the U.S. curve more than the French one. Anyway, there's been a lot of movement in the Bondeo data fact that equity markets as well. In addition to since September, again, a stronger dollar, which is always a headwind for all of us in our business rate. So I don't think, you know, let's see what happens. This week is completely different and yet again, you have as gay high-necks coming with just, you know, blowout earnings and amazing promise of a buyback and sell on the market, you know, likes it. So we have a better week after several weeks, straight weeks of sell off. Another correlation that I say makes no sense to me, maybe you'll have a better view. You know, we are in securities that are outside of the Chinese value chain. So theoretically, we should benefit from scarcity value as the West is rebuilding its industrialization also upstream. However, there's actually strong correlation with Chinese stocks, strangely enough, as if we were still in this old sort of globalized mining world where we just got a move and, you know, alongside with the Chinese equity market. Chinese equity market also peaked again in May and has been sliding ever since. So that's very strange for, you know, sector, especially in smaller metal markets that should not be bad dependent on this on the equity side. But that might mean one thing is that people are still not factoring in non-Chinese prices into the equity valuations. That the Chinese prices still dominant ones. Why, I don't know, maybe, you know, the dominant brokers in this space are Australian, they're still looking at the Chinese thing. We know right now that in many of these metals there are more than two prices. There's a Chinese price much lower than the sort of Rotterdam warehouse price up on which there's very little transactions going on actually. And there's something in the middle that the OEMs are actually clinching, referencing both. But notice how it's the amazing Rotterdam prices for, you know, each among other, you know, and something like that. So reality is somewhere, you know, between the two-- Thomas, I did want to ask you about that because the set off in critical materials stocks has been kind of quite synchronous in September. I mean, everything's gone down. Some of the raw materials haven't gone down. So stuff like rares, for instance, is held up. A lot of-- So sorry, let me interrupt you. I refer only to the equity side of the things, right? Of course, the metals have done very well. And copper has now well, right? So you might, you know, are the two arguments to it? Historical argument, oh my god, if this is a liquid market, now an efficient market, we know that equities are leading indicator where the underlying is going. But the underlying is no longer fungible. So you cannot make this argument. So what you're saying would mean that, wow, valuations are super attractive for some of the future producers of reverse, right? I'm going to agree to disagree with you on that because the relationship between commodities and equities has been, you know, they're through my entire career. And yes, you know, to some extent equities can be forward-looking, but they're not always forward-looking. And in times of volatility, that forward-lookingness does sort of come away a little bit in the market. So what I know-- No disagree with between us on that. So what I'm asking really is that, you know, some of the critical material prices have collapsed. Some of them have held up. A lot of the sectors last year that were very hot, like tungsten and antimony, the prices look as though they've peaked out beginning of this year and of last year. So-- and this is the ex-China prices. So what's happening in those markets that is causing prices that everybody was suggesting would be going up in a straight line to sort of come back again? Well, nothing over goes in straight line, so there will be a very naive approach to this. And I think volatility is our friend in this space. So it's good to actually trade around those flows, not against those. You'll write about, say, tungsten picking over $3,000. Think about the PAs that were done on some of these projects five years ago at $300. There is an amazing opportunity here if we are to plug this gap for this particular product to value these things at $1,000. Still way below the current prices. So yeah, maybe the fraud should go away a little bit. I think there is a little bit of realization in the more generalist crowd. The crowd that I would like to watch your show, but they don't care usually about our little corner of the market. And they spotted that we exist last year after the MP materials deal and thought that, oh, my God, within 12 months, the problem. I'm soft. This is mining. This is mining. This is not sell for years to come. Right? And so that realization at current interest rates that these actually MPVs are going to be much more damage, because it's way out into the future. With this long option, the China has to open and close to evolve in some of these. That's probably also contributed to the fact that we lost some of the generalized mining and that sell off of course is heavy because they're much bigger than our little mining ghetto. Okay. And do you also think the following on from that argument, the increasing cost of capital is another reason for the weakness in stores? And this is a great trading opportunity because there's no running away from that. You know, if you have a complex increase of 150 or 100 percent because you can no longer obtain Chinese equipment, well then be it. You have to obtain it from South Africa, Scandinavia, Canada, somewhere else. Some of this reverse engineers are going to take longer. It's going to cost more. But that's the only way to rebuild this value chain. So we actually look at these as opportunities. Need your reaction to Kapex inflation. This thing still needs to be built and it will be sold and it will be sold at higher floor prices tomorrow. Okay. But I mean, presumably there will be winners out of this as well. I mean, for instance, producers who are not having to access outside capital for their development projects, companies that have lower capital cost, lower equipment costs, maybe simpler processing routes. Yeah, I mean, absolutely. When you look at the cost of capital right now, you need to find guys who have easy access to cash or sit in a lot of cash. Yeah, there are some in this space. Okay. Cool. Cool. Which sort of commodities, materials look most interesting to you at the current time or do any of them look interesting, which you look for prices to correct further before you sort of started Boeing. All of those that are under very harsh embargo against Japan. So these are their heavies. Heavy lanthanize. This is atrium. This is gallium. This is tungsten powder. All of these things are of interest because there's just simply no flow of this material at all. And if it doesn't go to Japan, then it's not embedded in material coming to us. Okay. Yeah, the AFS folks. Itrium and tungsten powder. So you still, like, I don't know how to play itrium. And you say tungsten powder. There's a few tungsten producers, but what you just talked about the tungsten price falling quite a bit. Yeah, it could fall further. Like, I don't know what's embedded. You know, where valuations are for tungsten developers, not relative to their five years ago studies, but, you know, where the market, like, we just, US antimony, we just interviewed and Gary Evans, you know, they're now like a 500 million market cap. They're in production. But, you know, so on a, on a two-year basis, he's up 400 percent on a year-to-day, like, since May, he's down 60 percent. So you're not buying it two years ago, like, super cheap. So certain things are embedded, even though the antimony price, you know, has fallen. And there's some tungsten in that story as well. So much tougher, it's a much tougher job for someone we've real assets. And fine-tuning the plant, the size of a plant or, you know, byproduct flows and so on. For us, we enjoyed his volatility. We like trading around that. You know, we have a long-term view on a lot of these things, but when the market, you know, falls away, we act upon it. This is not just, like, buy and hold linear. I think it's just destroys value. We've been saying that a lot, and that's very important for all of our viewers to just, you know, realize, you know, a few years ago, people, you know, watch Tesla YouTubers and HODL, hold on for dear life, right? They believe in certain stories. None of you rent these things. You don't, you know, long-term own, I think, commodity equities, although that said, right? If you are a retail investor and you believe in a long-term copper thesis, you know, or lithium thesis, and you're happy to ride through the volatility, then you can own a diversified, you know, ETF, or, you know, not an advice. And we don't advise the Amvest Turret and Fund, but I am, I have been looking at a lot of the available products in ETFs where you can play this space in a diversified way rather than going after an individual equity. And I was also doing some research to see if there were, you know, fund inflows versus fund outflows, and how much could be explained by this huge ramp up, and now, you know, downfall of so many of these stocks, and I sense there have been some outflows after massive inflows into, you know, VanX, REMX, and otherwise. And then when I looked at that REMX, a lot, there's a lot of lithium in that, right? You know, so that may be why it, so it's not actively managed. And this space is a place where we've had Tom Mulrich on others, right? You can have true alpha if you really know what you're doing, and if you can trade around certain things, and your fund is obviously actively managed. And yeah, it's very impressive. I was shocked when I got your quarterly result. I was expecting it to be down for the quarter, and it was up, right? And everything was, like, got smoked. So you've obviously traded around it well. We spoke to a trader last, you know, earlier this week from the LME week, you were not an LME week, but he was talking about just AI crowding out, you know, the supply chain, you know, we referenced before you came on, you know, Meta is going to do a $95 billion equity offering, you know, Google did an equity offering. These equity, like you would never think that these big companies are doing equity. And then the debt markets are, you know, they're raising tons of debt and a number of the credit default swap spreads are growing. So it is very real, you know, it's risk off in a lot of ways. There's a number of, you were mentioning in memory stocks earlier this year, but now in these Neo clouds, you know, a lot of stocks are down 40, 50% outside our little critical minerals ghetto. But you know, that that's just a fact, right? That's that's that's the dominant investment theme and thropic and open AI are are going to be sucking some money here. But like, so when I think about all these things, there's rising costs. There's higher interest rate costs. There's higher cost because you can't get equipment from China. There's higher diesel costs, right? So yeah, okay, prices of a commodity could be high. But ultimately, if you're investing in a critical minerals equity, you know, it shouldn't work like any other company, like what's ultimately the profit of that company going to be in the cash flows and dividends that it could return to you as as a shareholder. And how do you assess what that profitability is going to be when you have such rise and costs? Even if the prices are and then the prices are crazy volatile. It's very hard to predict. So what do you think about that? You know, the unfortunate truth about this space is most players are non-producing. Yep. So you have to adjust yourself as close to that cash line as possible. The closer you are, the lower the damage. And it's a good approach because these are small markets and they're going to grow. They're going to grow outside of China. But in three years from now, we're going to have several winners and nobody will need the rest. So you have to really bank on the winners in this space. And the winners are affected by what you said. But also, affected by public policy, support for byproducts. Byproducts are treated certainly very differently. The payability is changing for byproducts in many places. And then, of course, you have things like, you know, resource nationalism is kicking again. And this time it's kicking the Chinese, for example, it's in Bobbi, right? So that has a huge impact on the flows as well. I would expect actually a lot of sputamine accumulation and stockpiling in the fourth quarter, as the Chinese will not be on time with the converters in Zimbabwe in January 1st, as the government would like. So you have to navigate around all of these things that will slow down the delivery of the project. And yet, these are the only kids on the block that there are. So if we are in a mature market, in a mature market with a lot of cash generators, and some kind of a mean reverting, you know, copper like curve, futures curve, against which you can hatch. It's a completely different market. But we're not. We're still in the sort of birth canal of this space. And it's going to be like this for the next three years. So yes, devaluations are important. You write about complex raising. But we haven't seen how this non-Chinese price will eventually settle at what level it would be. And to what extent the public authorities will be supporting this to incentivize further investment and reduce the risk here. I think they end on this, on this, in this particular area. that with so much effort by different governments, Brussels, Tokyo and Washington, there's been less emphasis on the value of death for small junior and the value of death is usually DFS and PFS area, right? So there is just little support for what really matters to move from geology to real business. And that's if the West wants to actually develop these things that will have to change. But yeah, you're right. I mean, there is definitely that CapEx inflation is one area which has shaking off a lot of a lot of interest from this space recently. Okay, we have, I want to talk about elections in various places. So firstly, thought on Brazil. Right, this is this is actually relevant. It's relevant for us because seven most advanced ionic absorption clay projects are in Brazil. And so those that would potentially bring us heavier errors at some point. And Brazil just passed a law a couple of weeks ago. I think it's 15506. It's a compromised law and that's because Congress is mostly in the hands of right wing parties. It's a compromised law against more Trotsky's approaches, which were like, "Hey, let's build a state-owned company. Tara Bras was one idea, right? That would just control of this thing, you know, over 50%. So that was pushed away. But what we ended up with is a committee that would review all the changes to ownership of any Brazilian asset and the sitting under the presidency. And now we have a different president than what the market assumed until Sunday night. This is untested. You know, let's not forget that we're even a pre-cash situation. You're developing a project. One of the sources of value is your corporate flexibility. These are your earnouts, your famines, your optics, your streams, your royalty, what have you, M&A. That's going to be now under federal scrutiny in Brazil. So we don't know if it's going to slow things down. I'm going to use this flexibility of, you know, multiple, mostly Australian juniors or some American presence now as well. Or is this going to actually help? You know, I was of the view always that Brazil did a really good job at the state level and the federal level just didn't matter all that much. And this could change now. So, you know, with the Bolsonaro, the hopes that we're pinned on Bolsonaro win in our space we're about faster permitting and maybe some closer alliance with the U.S. This is not happening now. So, I suppose we're going to test the availability of that law from September of this year. And so it's going to be interesting. If Brazil continues to push for midstream capacity, the way Indonesia does or African countries and so on, we might have, we might see a significant slowdown in some of these projects because only one of them so far is actually a dedicated, solvent extraction plant pilot in Bahia and all the others are planning to a process of either in France or United States or in one case Malaysia now after recent MNA activity. So, question mark. But I, you know, I think that the complete sell-off of the entire Brazilian market and it's and it's and it's currency on Monday was a little bit of an overkill and over-reaction, I think, the snout part of our strategy, of course, but I think it was an opportunity if you have a one-year horizon to benefit from that over-reaction in the broader market. And what do you think about the overall result? There was a lot of, you know, this was a huge surprise and Flavio has been, you know, is in Miami now, right? You know, and the Supreme Court judge, you know, Lula is, you know, personal lawyer and the extent of the election. Do you think there's any, this election is being contested, right? It seems. I don't know if it's formally contested, but is this just all noise and just like, forget it, like Lula's. So, what is it going to, is there any way that this changes? And then also, what do you think it means from a US Lula, you know, Trump Lula dynamic? Yeah, I'm a big, I'm a big friend of Brazil in general and I would like to, you know, see this democracy always being successful, but spending just seven minutes, and this is what Muraj did, right? Judge Muraj, seven minutes from the final result of the election to block Bolsonaro's passport, just smells a little bit banana republic ish. So, I don't know what to make of that. It's too early. It's not helping Lula at all, because it actually deepens the rift. It's a significant rift in the Brazilian society. So, you know, I, I, I would hope that things will move on and Alkman, vice president Alkman, would take over sooner or later. Let's not forget the guy is 81 years old. He's a cancer survivor. He's not going to last his full term. And then, at that point, I think things will hopefully calm down a little bit. Okay. Let's turn to Israel and how this might impact, you know, the Iran war. Yeah, another surprise, right? But I mean, how many times has BB surprised this? The market doesn't like it. The Shekel didn't like it. The only sectors that were sort of untouched and that slump on the Israel market were high-tech and health. Everything else just collapsed. The bank's like six percent on average. So, the market didn't like it, but of course, you know, there's a broader issue here of regional stability or instability. And the Israelis have decided accordingly. It looks like the Arab parties will be, you know, in a position of being king-makers here, for the final coalition. So, I think that's relatively unstable. Who knows? Maybe they need to go back to the polls in a couple of weeks in a very Israeli fashion. Okay. And are you following with, like, in Canada, in Alberta, Montreal, British Columbia, and the US, Canada, kind of trade talks? Yeah, not in any specific detail, though. I was recently in Canada, I speaking. You know, everybody hopes that we'll put this thing behind us. Canada has some concessions to make. There's no doubt about it. But I think the overall support for federal cohesion from Alberta was encouraging for Canadians. Come back is actually a province that's most strongly supported car needs approach. So, a little more robust and conflictual approach to the trade negotiations with the US. So, this is strange coming from Quebec. But, you know, there would be beneficial for both sides of the border to incorporate more on critical mineral space. And right now, this is probably one member of the Western Alliance that doesn't benefit usually from the US generosity in this space. Well, considering kind of Brazil, US, Canada, US, you know, maybe Canada might be a beneficiary who knows on the critical mineral side of things. All right. And what about the US midterms next week? Kind of worms. Thank you for that, Howard. Let me tell you this, we don't have a VMA. Let me offer you. I don't believe that we have swing voters here in this country anymore. And therefore, the outcome really depends on turnout, the turnout. And so, you know, who's turning out for midterm elections is usually just the survey of comfort with the incumbent. And, you know, between the diesel prices, which are so in Pennsylvania last weeks, what was the 660? Something like this that's from 360 a year ago. And the never-ending wars in the Middle East are familiar. I think there are reasons for people who voted Republican two years ago to maybe not vote in very large numbers. And that would mean that we're going towards what the markets are expecting. And because turnout really, really matters. Is it, you know, what is it going to do? Well, I hope it's not going to change too much in our space. We still need government support. Maybe more consolidated support. I don't think this dispersal of support for critical minerals across, I think, seven different agencies is particularly well coordinated. So, there's a lot of effort, but it would be easier to have something, you know, like Jagamack in Japan to have a little more long-term approach with a number of specialists, which by now this government has, but going all in the same direction, whether it's on the military or civilian side. Okay, but one observation, and I want to get the China and China US in a second, but just one observation as the election season has heated up, is that like Trump is, one, the whole administration is announcing lots of deals in critical minerals in energy, like money, money, money, money coming, you know, there was a project in Iowa and Wisconsin for natural gas plus battery energy storage, $5 billion, just announced today. But also, he was in Nebraska and he was talking up, Trump mentioned NIO Corp, right? You know, a NIOBium and Scandium and other play, and then separately, a John Javanovic of the XMBank and Chris Wright. was also there. And it has had no impact on the stocks, right? Because we had talked Thomas earlier this year that like, okay, you're trying to identify which is a good project, which is a good company. But what are prices going to do? But like last year, you had to factor in, you know, which company might receive attention from the US government and then the stock goes flying, right? So here, you've had massive attention to some companies and the stocks aren't reacting at all, right? So that factor, I guess, goes to, you'll love the volatility. You trade around that volatility when, so any comment on that and then let's talk about, you know, Trump and Xi met recently and they're going to meet two more times and what you think may result from that. The fact that the market is not hanging on every word, expressing view on any securities is a positive thing. You know, let's not become, you know, China or any other state directed investment vehicle. So I think that's probably underlies the fact that the generalist money is just simply not there and people who know the value of this asset, have a certain established view of whatever the government says about it. On the China thing, so an interesting thing happened prior to the most recent meeting because I tend to view Chinese control over the flows as an option. It's an option and it's an option that's, of course, driven by, you know, a certain strike price or an underlying price, the duration of the option, the volatility as well and the interest rates. And that duration of the option is what matters here a lot. The Chinese propose to extend the truth for another two years till the end of Trump's term and Greer and the best and rejected this saying, no, no, let's just do it till January when DeFarce kicks in here. So the defense foreign acquisition supplement, regulatory supplement. So the fact that component producers cannot source material from foreign entities of concern that includes China, North Korea, Iran and Russia. There are a lot of carveouts around it as you may remember, the Tesla slash Biden graphite fight or, you know, other cases. And those carveouts will no longer be recognized by the government come January. So US position is no thank you. We will only extend till January that radically shortens the option and reduces the value of the option for Jiangnanhai and they must be scratching their heads. What does it mean? Does it mean that on the dual use, so military use, US has solved this problem or is it just a bluff? There's no way to know for them. There's no way to know for us. But it doesn't solve the issue of the civilian market, which is, you know, much, much, much larger and which may still be confronted with this sort of bully game that China is playing and is controlling the volatility, but opening closing the devalves, you see the flows of the material, including the magnets, are fairly erratic. I just look at gallium flows all over the place and funny places, you know, Japan didn't get any until May this year. So it really is extremely discretionary. So on that, on that level, of course, the value of that call is still very much controlled by Chinese, as is still an amazing gap between the strike price because it costs them next to nothing to control these outflows, just a couple of billion dollars, really nothing in the scale of Chinese economy. And as we know, not having permanent magnets for electric motors is something closer to ten trillion dollars for us. So the underlying is extremely, extremely expensive. So they are still in charge, at least on the civilian side, in charge of that, of, you know, on the long position and they're going to continue playing this and they also plan to use it as a retaliation against any attempts by European Union to negotiate their trade agreement. So much so that Europeans are actually reaching out for what they call second strike, second strike, that's called World War One, a mutual assured destruction. So nuclear vocabulary, what is second strike, that if China dares to use rare earths as they did last year against the United States this time against Europe, Europe would just shout down its market, its market, 17% of Chinese experts go to Europe. So significant blow. So they are announcing a second strike. I wish we had such a second strike here. I'd be surprised if Europe could implement such a. Correct. I agree, I agree, but you know what Merz and Macron did a couple of weeks ago, they flipped the card entirely before it was like we have a coercive measures and we only implement these coercive measures if a majority of our countries members agree to that. And it's of course very easy for China to just establish a coalition, yeah, divide and enroll with Hungary in the past of Spain now, but they flipped it. Now there's certain automatism introduced in that coercive measure and therefore the measure is imposed immediately when the commission decides and then it's apt to different members to create a coalition that would block it. Much more difficult for China to create such a blocking coalition because then they have to open, you know, and say, you know, we are actually supporting Chinese interests against European interests. That's a little, that's a little more difficult, kind of foxy on European Union. I didn't expect that. Okay, just I want to talk a little bit about more about China than I want to end on Lithium because, you know, there's a bold there still debate with Matt and you, but this two years versus two months that you discussed, right? There's still going to be two more meetings between Xi and Trump and my read of this was that like she wanted two years so that it could outlast Trump and then hopefully he has an easier person to negotiate with in two years. And America said, no, no, no, we're not there yet. We're going to meet a couple. There's a lot of warmth between the two of them, but like I think this two-month thing could be extended. Like I don't know how the defense industry is going to not have non Chinese or other, you know, non fiat, you know, compliant. Like there's, I don't know if they're ready. If Lockheed Martin is ready to source everything outside of China, you know, from January, so I think there can be a preview there, but I guess broadly, like if there's a preve, a longer term reprieve, is this bad for rare earth's markets? Or is it good if American China are just on a more friendly path? Okay, a couple of things here. First Lockheed doesn't source magnets from China. It never has always from Japan only. On the relationship, so there are two levels. You have this personalized relationship there, which, as you mentioned, seems to be very warm right now. And then you have the real underlying issues, none of which have been solved by the last two meetings and unlikely to be solved by next two meetings because just the strategic interests are just so divergent. And the fact that that extension of the shortening of the extension was formulated by Greer and Besend, so sort of on the institutional side, and not with a tweet or whatever, true social and the sort of circus side, that means that the OS is happy to actually use its sort of legal constraints as an argument and negotiation, because it's illegal, it differs as a legal thing. Having said that, we also break our law, example, Russian sanctions. And the Chinese are looking at it and maybe giggling because now they see everything is negotiable. Okay, fair enough. All right, so let's turn to Lithium and the Chinese, the market in China has gone down now 12 straight weeks. A lot of the discourse about the Chinese economy is not good, although looking through our, you call it like the critical minerals ghetto, where kind of like a battery materials ghetto, we're like constantly seeing nothing but great success in EVs and batteries from Chinese companies. But you know, the earnings haven't been great, even for, you know, CATL and BYD and the like. And the, a lot of what I'm reading about China is that they just have to produce, produce, produce because, you know, locally the consumer, not good, real estate, not good, you know, equity market, not good. So like, talk about that and then you did make some comments earlier that the Chinese domestic market is not good and it's saturated, you know, on the EV side, therefore, you're less bullish. Lithium, talk about China and then maybe have a little bit of a bull bear discourse, because I would think with Lithium now where it is, right, you know, has made a round trip, you as a trader, you know, I would think could be seeing, you know, a by opportunity. You know, maybe, right. I'm neither, I'm burned or bull. What makes this sector really difficult and, you know, certainly are better informed than I am, is that the prices of GFEX, have become really a speculation of, you know, one marginal mine in each and in John Sheep province, right? This is what happened in July, this is what happened in September, every rumor about some logistical movements and people sending drones and trying to figure out if there's activity or not, and then local governments has known, I know, you're, you know, you're not allowed to operate yet. I mean, what is this 4% of global production? And yet this is the one that really affects trading at GFX? I'm tired. I'm tired of actually dealing with that issue. It's just I'm not there. I cannot follow this. So I cannot be a short-term trading of lithium because I'm going to always lose against lithium traders in China. Okay, so therefore you're not playing lithium equities because you can't figure out what to believe about the underlying price. The underlying price I cannot really figure it out. So I can only focus on the quality of specific one or two projects. You know, what are they? How they're progressing? And you know, what the permitting is, rather than thinking about lithium price too much. I just can't, I just, it's too opaque for me. And I think that comes back to that point. I made earlier on in the podcast how the, you know, GFX is not trading on fundamentals. It's trading on rumors about the CATL mine. It's trading on, you know, rumors and speculative activity about, you know, the trading companies who've got deeper pockets than the industry can move the lithium price around. And I think it's really coming to a point where the lithium market has to, you know, think about what it wants to have as its benchmark grade, benchmark price. And GFX increasingly can't be the benchmark price. Some of these made a really interesting comment on LinkedIn today just saying, look, you look at spot prices, spot prices trading at a substantial premium to the GFX at the moment, an eight or nine percent premium to the GFX. And it's obviously not moving in line with the GFX. And I think that's clearly saying that the industry is starting to back away from GFX because GFX is not presenting a fundamental view as to what's actually happening in the lithium market. So I agree 100% sorry, Howard, you wanted to have a bear and bull, but here Matt and I agree on this. And we know that GFX can push back against it, right? They open just the hydroxide contract, they're trying to attract finally also foreign players, although I don't know how that's going to work with profit rip out creation. So it's going to be a game here. It's still a dominant, it's still a dominant exchange at the moment, but let's see how it develops further. So what, so if you're, you can't figure out what's happening with the GFX, what would make you like invest in lithium? I mean, you're saying you're following a couple of developers, but yeah, like just what your lithium exposure in your fund was like 2%, right? Whereas Antimony was like 28%, right? What might make like three months, six or 12 months from now that kind of reverse? Yes, I'm a wrong person to ask that because our number one differentiating point here is that we don't invest in anything that sells to China. So the Australian operators or Chilean operators and lithium, they sell to China. We cannot as a fund. So we limit it. So we limit it to projects that are in development. As you know, that there are a lot of other idiosyncratic drivers of value there, rather than treating them as a proxy for commodity exposure because they are not producing it. Right. Okay. So you could invest in non-producing Quebec hard rocks or you know, a lithium America's or a standard lithium or something like that, but there are a lot of idiosyncrasies in those stocks that are not necessarily correlated to lithium or GFX and where the current trajectory. Okay, so you can't play a levered bet to the lithium price really because it's all of the product is going to China. Okay, so you're just constrained by your investment mandate. Okay, understood. So you're neutral lithium. You're not someone who's view on lithium is going to it's very differentiated and unique. But it also speaks to again, your performance is good, right? Like whether or not the market is trading on China or X China, whatever, you've traded around the volatility well. I think you've had some pre IPO companies that have gone public, I guess, which may have had some impact in your performance. But for any of our viewers who are interested in, you know, Thomas's book, I highly recommend you look at the show notes, but also there is a fund. Again, we're not soliciting this, but you do have a number of high net worth investors in the invest turret and fund. And if anyone wants more information, you know, feel free to reach out to us, you know, or to Thomas and invest directly. Is there anything we haven't we've been on for a while now really appreciate you're joining us Thomas anything else that we haven't asked you that you'd like to share? I think you covered pretty well. It's a it's a lot of material. Okay. Have a good weekend to all of you and look forward to talking next week. Thanks. Alright, and thanks very much again to Thomas and Drowsky, author of Mineral War, a link in the show notes below for that great book. I highly recommend you read that. And also he's a fund manager at the Amvest Turret and Fund. If you have any interest in that, please email me at rockstock channel at rkequity.com. And now please stay tuned for our interview with first phosphate CEO John Pazalakwa coming right up. And as promised, an update with John Pazalakwa CEO of first phosphate Matt's going to dig in with some updated questions. Excellent, thanks Howard. Yeah, so John welcome back to the show. Not in all species time, but fingers crossed the markets will improve. So the the first phosphate shares of fall and I think in line with the broader critical materials sell off. But obviously you've announced significant progress over the the period. So which two or three developments do you think have most changed the investment case for first phosphate since you last financing? And what do you think that the market is missing with the current valuation it's giving you? Yeah, thank you great for for being here Matt. First of all, you know, I don't think the market is missing anything. I think all the information is out there in the market. And I think, you know, right now markets have to do it. What they got to do and you know, the companies have to do what they have to do. So we're doing what we have to do. We're executing or proceeding towards all our milestones feasibility studied by Q1227. Well down the road. If there's three big things that happen to first phosphate in the last four or five months, it's really been the 378 percent increase in indicated resources at the property. So that's that's very special. Also another almost 90 million tons of inferred. We know the most important thing was in the drilling is that, you know, that the deposit is homogeneous and it's consistent to constant. So that makes for one simple mineralogy and metallurgy. That's something not to be overlooked in mining projects. So that was really refreshing for us. And that's why we now have enough resource. We have the theological confidence to move the feasibility study. So, you know, drills out of the ground and pens pens down and, you know, writing up that feasibility study and working with a number of consultants on it. So that was that's a big thing. The G7 endorsement, the G7 critical minerals resilience and and production alliance wants first phosphate to be in production. And at the 13 projects that they've looked at to stabilize Western supply chains, two of 13 of those projects, i.e. the first phosphate mine and the phosphoric acid downstream plant are endorsed by the G7. And because of that, I guess number three, you know, the government of Denmark has come to the table with about $1190 million US dollars in financial backing to build the mine and the Swiss government as well with about $212 million for products and services to build the mine. So that's really important. You know, on a current cap access, it's been a 500 million. 400 million is already at the table. And this project is not even in feasibility study yet. So this really kind of, you know, bends and breaks and forces those out there to re-question the La Sain curve and where we sit in it. Okay, great. And you know, which approvals remain for the project of what are the next milestones towards construction? Yeah, so the big milestone obviously is the feasibility study, which is slated for Q1 of 2027. Then by Q3 of 2027, we hope to have all of our environmental in our social consultations out of the way, which we've already started on. And then Q1 of 2028, we're expecting permitting. As you know, we're under fast track status from the Quebec government. And then by Q2, 2028 is when we want to have the the final investment decision made. And that's where the Swiss and Danish governments are already at. the table with 80% of that capex and then we're hoping to be able to be in production at some point in late 29 but most likely full production early 2030. Okay great and the Swiss export risk insurance guarantee $212.5 million. Significant I think can you just explain in a little bit more detail what that covers and what conditions remain and how much of the overall project financing that that could unlock. Yeah so that covers about you know 95% of what will be ordered in terms of products and services from Switzerland. It's generally going to be covering things such as hydro equipment, earth moving equipment, water treatment equipment, en route equipment, all the things that the Swiss companies do well right as you know Switzerland they dig a lot, they run a lot of hydro and they run a lot of roads they know the best in the world they're doing it. Excellent. So John can you tell us a little bit about the the shareholders base because I understand there's been a substantial increase in the last few months. Yeah it's it's been really interesting so in August of 2025 when we had our shareholder meeting we had 1300 and one shareholders according to the statistics of broadbridge I believe and then by August of 2026 a few short months ago we had 12,501 shareholders so we had a almost 1800 percent increase in the shareholder base and that's even before we listed on Nasdaq we're now starting to look at the new figures and it seems like that's doubled again from there so we're seeing somewhere around 25 to 30,000 shareholders which is an incredible amount. I didn't do a little research on that and it seems like that's kind of not where you're in small cap it's not where you're in mid cap it's starting to approach the shareholder base of a large cap. So the story is starting to get out we just need to get a little bit more of it out there to more a few more people. Yeah no it's great to see that you know there's there's an army of of interest there's an army of understanding above all behind what it is that first phosphate does and also that the shareholder base is diluting to the hands of many which is great because then that sort of propagates right one friend told another friend and that friend told another friend and so it works very synergistically for us. Brilliant thanks very much for the update. Thank you so much. Great to be here as always.