Mark LaVerghetta  00:00

Given tariffs, trade wars, everything that's happening today, the leverage that the CCP has on the Western world is their dominance in rare earth, and all of those things migrate into downstream manufacturing, whether it's a washing machine, an electric vehicle, a battery, a defense system, magnet, all of that stuff ends up in high-tech goods. Now they have that leverage, and so it's not just economic security, it's national security all wrapped into one.

Nico Johnson  00:26

You know, the clean energy transition depends on critical minerals most of you, even myself, can't pronounce properly. And today, the supply chain for many of them runs through China. My guest today, Mark Labor Geta, co-founder of Ree Element Technologies, is working on building domestic refining specifically to give us capacity for rare earths and battery materials and disrupt that supply chain. Mark, great to have you.

Mark LaVerghetta  00:53

Yeah, it's great to see you again.

Nico Johnson  00:55

I think that for most people, even the notion or idea of rare earth, like it's not something that falls into their daily lexicon. The refining of these elements is something that's completely invisible to us, even though it is such an core part of how we engage in technology. However, it seems certainly, if my YouTube is any indication, that rare earths are having a moment. What changed?

Mark LaVerghetta  01:19

Well, first and foremost, thanks for having us on today, and thanks for the support. Now, fact that you guys are getting good clicks and on some of our content means a lot to us. You can turn your television on, right, and see the world changes seems like daily, and I think one of the leverage points that China, and you mentioned it, you has on rare earth and critical minerals is they've dominated the supply chain through the midstream separation, purification, refining, metallization, magnet manufacturing. I kind of put all of those in the midstream, and there's a single point of vulnerability now in the supply chain, and while a lot of people want to focus on supply chain or the supply side of the economy, this is the perfect storm. This is equally as not as much demand driven, given growth of AI, growth of electrification, e-mobility, data center growth, cloud computing, quantum computing, everything that we are demanding from our consumer electronics, from space exploration, all of our technologies is, is this is the perfect storm right now, and from the geopolitical sense, from our government standpoint, it's probably one of the most important topics going on today. So,

 Nico Johnson  02:34

and a lot of folks, when they think about the clean energy economy, or even just energy broadly, if they think about bottlenecks, they think about tariffs, supply chain risk, they focus on mining, manufacturing abroad, things like steel, etc. You've argued that the real bottleneck to clean energy success is refining. Help us understand why this is such a critical piece of the of the process, and why, why it has become so concentrated geographically as a result.

 Mark LaVerghetta  03:04

Yeah, it's a complicated web that that we navigate through here globally in the markets. The midstream is really complex. There's obviously, there's a lot of vulnerabilities. It's one of the most highest important items going on today, geopolitically and through our government, but when you look at how things are refined, it's, it's super high risk, it's very cost intense, it's capital intense, it's energy intense. How China and give, give credit where credit is due, they built a very deep in a very wide moat using conventional refining techniques and methods and technologies that make it hard to take that that technology outside, it's just too high risk, because you can, you can argue at the end of the day that these are commodities or specialty chemicals,

Mark LaVerghetta  03:57

It doesn't matter, at the end of the day we've migrated to a global economy, and end users, manufacturers, they want to go to the source, the low-cost price point, right, the low-cost provider, and that's been China for so long, but given tariffs, like you mentioned, trade wars, everything that's happening today, the leverage that the CCP has on the Western world is their dominance in rare earth, and all of those things migrate into downstream manufacturing, whether it's a washing machine, an electric vehicle, a battery, a defense system, magnet, anything that these, and all of that stuff ends up in high-tech goods now. So they have that leverage, and so it's not just economic security, it's national security, all wrapped into one.

 Nico Johnson  04:44

As you point out, refining these raw materials is extremely complex. It's been consolidated by and large in and around China. How do we disintermediate such a critical path product? Us that our future really depends on

Mark LaVerghetta  05:03

my tagline that I use is we need to solve this through innovation, not imitation. I've been using that for a couple years now, I think, and everybody wants to focus way upstream on mining. Okay, we're going to do a mineral deal with Ukraine, or we're going to buy Greenland, and they have a lot of rare earths there. We'll

Nico Johnson  05:19

find more.

Mark LaVerghetta  05:20

You still got to refine them, right? Right, you can dig them out of the ground as rock or mineral, but you're not putting that raw material into an iPad or an iPhone or a battery or a defense system. It has to be refined into products that the manufacturing base wants and needs and demands, and a lot of times those are ultra high pure in chemical form that that flow downstream into the manufacturing base. A

Nico Johnson  05:48

great example, by the way, is right here in North Carolina, the largest reserve of ultra high pure quartz, and it all gets exported not to Pennsylvania or California or Ukraine, but to China,

Mark LaVerghetta  06:01

and that technology that they use is energy chemical intense, chemical separation, and everybody knows it's not, it's not the dirty secret, it's dirty, it's well known, but it's a dirty process. Yeah, and they don't abide by the EPA, the environmental regulations that we have here. So, if you're going to produce these products, the challenge is, can you produce them at a cost point that you can be competitive in the global marketplace, because your end for decades now, your end customer wanted to go, wants to go to the lowest price supplier, right? That is, that is shifting. There's some bifurcations in the market right now, where, because of those vulnerabilities and supply chains, they'll pay whatever to get it. It's now it's just we need this product now today. Doesn't matter what we cost, because it's going to end up into an F 35 fighter jet, a multi billion dollar piece of equipment.

Nico Johnson  06:51

Yeah,

Mark LaVerghetta  06:51

and the cost of that input is is negligible. It doesn't even..

Nico Johnson  06:55

it's.. it's the similar conversation we're having on electrons for data centers at the moment, right? So rather than imitate and try to bring all of that refining equipment stateside and set up domestic manufacturing and refining the way that we are doing now in the solar and energy and battery storage markets, how do we innovate around that supply chain?

Mark LaVerghetta  07:16

Yeah, it was the question we, you know, myself and my partners asked when we went down this rabbit hole, it was when we looked at, we were being disruptive, entrepreneurial in the mining industry. We started producing our own rare earth concentrates from some of our waste streams, looking at byproduct economics, and can we monetize these, and so we started looking at technology, and anything that was solvent extraction or chemical separation, which is dominated by China, we passed on because of these. We need to innovate our way through this. That was not technically it works here today. Economically, it's just not going to - we're not going to be able to produce it at a cost structure, nor is anybody going to underwrite it.

Nico Johnson  07:54

Right,

Mark LaVerghetta  07:54

raising capital to deploy that technology was untenable. Yeah, not going to happen. So we looked at innovative approaches on how can you do at our foundation of what real element technology does is separation purification into refined products. So how do you separate and purify these things innovatively? So we looked at a variety of technologies. The technology that we use is chromatography, which is 100 year old long standing technology deployed in various other industries, so it was taking a new application or novel application to a longstanding technology, and if you look back at that, back at the roots of it, I mean, back World War Two, out of the Manhattan Project, chromatography was looked at at the preferred way of separation and purification of rare earth elements, didn't know that, and then it got put on the shelves, and then we became global economy, and we're content on exporting that part of the segment of the supply chain overseas. Well, now the paradigm has shifted materially.

Nico Johnson  08:55

Am I remembering correctly that you found the sort of approach, technological approach, through a partnership with Purdue, is that the, that's right,

Mark LaVerghetta  09:02

that's right,

Nico Johnson  09:02

and what makes it different in such a way that you're able to do what is now done in large facilities abroad in effectively a strip mall here in America.

Mark LaVerghetta  09:14

Yeah, when you look at the deployment of that capacity, of the refining capacity, and the capital that goes into it, it comes down to surface area interface with your elements that you're trying to isolate and separate and purify. If you think about it at a very high level, solvent extraction methods, chemical separation to achieve that surface area interface, it goes through a series of equilibrium steps for light rare earth elements that might have to go through somewhere between 100 to 300 equilibrium phases, for heavy rare earths, that's up to about 1000 equilibrium phases, so you're, you're capexing a mixer settler unit with motors to create emulsion techniques, valves, pipe. Keeps a lot of infrastructure that goes in to building these facilities, and you build them at nameplate capacity. They're not flexible for scale. It's very hard to scale.

Nico Johnson  10:10

Oh, they're not. If

Mark LaVerghetta  10:11

you want to add additional production line, if your input shifts or change, you probably have to take your entire production line offline to build additional capacity, you have to start at equilibrium phase one, and then build out through up to 1000 so it becomes very onerous, very high risk, very capital intense to to build that infrastructure for flexibility. China made the decision that they were going to invest and do that, and they went all in on it. Sure, and they produced these things, they produce these high-purity products over the past couple decades. They built scale, we're not going to compete with their scale, and they do it at a price point that you can't deploy that those methods here and try to compete on cost.

Nico Johnson  10:54

You keep dodging my question, How are you guys doing it differently here domestically?

Mark LaVerghetta  10:59

Well, we use again, we use innovation chromatography. We can achieve what

Nico Johnson  11:04

does it look like? Talk about just like the flexibility compared with the rigidness of the existing. So, instead

Mark LaVerghetta  11:09

of hundreds or 1000s of mixer subtle units, we use a column packed with resin, and to those columns we can achieve up to 1000 equilibrium phases in one column.

Nico Johnson  11:20

Yeah,

Mark LaVerghetta  11:20

so it comes down to your mouse balance calculations, when what elements, what's your feedstock, and what you're trying to isolate.

Nico Johnson  11:27

If I wanted to try and talk about it like a high school experiment with my kid, is it closer to like a liquor still or closer to like a Berkey water filter,

Mark LaVerghetta  11:37

more like a liquor still problem? Yeah,

Nico Johnson  11:38

okay,

Mark LaVerghetta  11:39

so our columns are packed with resins that eat that have either can we, we do, we have trade secrets, know how conversions to our resins, we've gotten good at separation and purification using this technology, but those resins will have an affinity or a lack of affinity to the elements you're trying to isolate, and so the way that you scale it, because you achieve so much, so many of those equilibrium phases within one column, you don't have to build all of those, all of that infrastructure, and then your surface area interface is based off of cubic liter capacity of each column, so it comes down to are you using a bigger column or smaller column based off of what your input is, so you become very flexible, we deploy capital and capacity based off of matching supply, what feedstock we're bringing in, whether it's virgin or recycled versus demand.

Nico Johnson  12:31

And what is that feedstock typically for you at the moment? And how does that scale? Like, where can you point this technology to gather more rare earths? Yeah,

Mark LaVerghetta  12:39

it's a great, it's a great question, and it kind of exemplifies of how and why we are able to achieve what we achieve here today. Over the past three years, we've been validating this platform to end-use customers, taking a little bit of feedstock, producing high-purity product, and validating that through, and those are complex, challenging. We need to be congruent with our manufacturing base as well. We need to stand up a lot of manufacturing here, that's a complexity in its own right. The foundation of the of the technology enables us to bring in things like end of life magnets or an entire EV rotor or a wind turbine that has a lot of magnets on it. We ran lithium from end of life lithium ion batteries for about a year.

Nico Johnson  13:18

Okay,

Mark LaVerghetta  13:19

validating that into the cathode market, and then the market quickly shifts through tariffs and trade wars, and all the focus was on rare earth elements, and we converted our production lines to all rare earth elements. So now we're seeing high demand for things that are coming out of aerospace thermal heat coatings that are elements like Yttrium, Gadolinium,

Nico Johnson  13:42

okay,

Mark LaVerghetta  13:43

Germanium, that goes into a lot of advanced optics, fiber optics, I think defense applications, data center, AI demand, things like that. All of those things are seeing some urgent and some near-term supply gaps. Sure, so we can, we can get these type of inputs and help fill in some of those short-term supply gaps as we look midterm and long term on sourcing stuff that's pulled out of the ground and broadening our capacity.

Nico Johnson  14:12

Yeah, you've been very successful recently at partnering with the government on proving out these concepts, getting grant money and partners that are helping to well ensure that we have the capacity for domestic sourcing of these materials. Could you talk a bit about some of the biggest supply chain gaps, like what you're mentioning right now? Where do those gaps show up, and how are we, how are we through the technology advancements that you're bringing to market, shortening supply times and improving national security, and among other things,

Mark LaVerghetta  14:46

the attributes of our platform enable us to be very versatile and very flexible. We went, like, like I said, we went from lithium to rare earths,

Nico Johnson  14:55

yeah,

Mark LaVerghetta  14:55

which are we were focusing on the traditional magnet. Yep, neodymium, praseodymium, some dysprosium, and now we're shifting to yttrium, gadolinium, germanium, gallium, things like that, so we can shift very quickly to respond to market signals. Yeah, so that, that is a key attribute when you talk about partnerships, whether it's commercially or through government, it's, we've, we've had some success on showcasing that versatility that we can be a stopgap fix solution very quickly, and obviously there's a lot of urgency in the market today, so we've we've been identified as a partner, both with the Defense Primes, with our Department of War, other agents, inner agencies of the government, and downstream commercial, whether it's coming out of defense or tech, energy, or just industrial, you know, partners as well, that we can, we can provide these and help fill some of those short-term supply chain gaps, and look at, put all the options on the table to figure out how collaboratively, and at the end of the day, we want to be a very collaborative platform. How do we work together to solve these longer term challenges that we're all facing?

Nico Johnson  16:11

So, I think we all agree we want to build a more resilient, critical material supply chain, one that has more capacity for domestic response. If we get this right over the next five to 10 years. What industries or technologies will benefit the most?

Mark LaVerghetta  16:28

Yeah, I mean, I think you're seeing, you know, an inflection point on just general technology advancements of AI. I think is a whole economy in its own. You're seeing it with data center growth, the energy requirements that are needed, entire ecosystem there, all of our smart devices that we wear. When you look at what those end markets, what's going to be supported here? General manufacturing of goods do, are we going to do? We want to re-ownsure those that manufacturing base again, which goes back to not just national security but economic security. We need to make more stuff in this country, and I think I think we understand that producing jobs, next generation jobs, tech jobs, recycling jobs, all of those things. We're at the UNC clean tech summit today, so obviously there's a lot of focus on when this, you know, portion of the economy, and I think the world's changed, like you said, and all of this manufacturing to bring this on shore. The inputs that go into it are becoming more complex every day.

Nico Johnson  17:28

Marc Labrigetta, we're watching Ree Element Tech, and anxiously, eagerly hoping for a future where you guys help us crack the code, bring all this critical mineral back to our shores, and as you say, revitalize our domestic economy by empowering us to have more readily available access securely to the kinds of rare earths that power our present and future state. Thanks for joining

Mark LaVerghetta  17:56

us. Thanks for having us.

Nico Johnson  17:58

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