CATs Corner – Episode 7

Nick:
All right. Welcome everybody. We are here with another cat's corner with our esteem panel. We got Scott Poland. How you doing Scott?

Scott:
Hey there.

Nick:
We got Pete Thomas, both from the Zaner group. Thank you for joining us. It's been like a month, maybe longer. We haven't done one in a while.

Pete:
Yeah.

Nick:
You guys are, you guys are all over the world. Where you guys were in Dubai.

Pete:
Yeah, I was. I spoke to the family office, the billion dollar family office round panel, and then I made it to the, to Dubai expo, which was phenomenal. And then I'm speaking in... and Scott's going to be, you're going to be at the Copper Conference, Scott?

Scott:
Yeah, this is the E-Scrap Conference in Chicago. I'll be there in two weeks. And next week I'm at Montana State University talking with the students out there.

Nick:
Who's having the E-Scrap Conference?

Scott:
That's a group called Resource Recycling.

Nick:
Oh, okay. Yeah, I get their emails.

Scott:
Mm-hmm (affirmative).

Nick:
Okay, cool.

Pete:
Okay, cool. And then I'm at the Metal Conference December 1st and 2nd in London. And I'll be speaking on a hydrogen and platinum interface there. So we're getting around.

Nick:
Well, I appreciate you guys taking a little bit of time for us, for a converter reclaim to kind of spread some in for information about the [crosstalk 00:01:23]

Scott:
Hey man. We like what you guys are doing, we always have. We like your work ethics man and we've been behind you since day one, you know?

Nick:
We appreciate that. So what, the last month or so, has there been any major movements in the markets? Has there been any major updates or new news coming through on anything that our customers might be wanting to hear? So.

Pete:
Scott, what about?

Scott:
Well, I'll take it. Yeah, so at the immediate we're still absolutely at the whim of the chip shortage. So new vehicle sales are incredibly low and they're not able to pump out this new vehicle product, which is one of the major consumers of platinum and palladium. So until we see this chip shortage lighten up and these car sales improve, we're going to see our platinum and palladium prices hanging pretty close to where they've been. Which is kind of like a base load price right now, where this is what it could costs to keep it moving. And nobody's getting rich on it right now. Let's say that.

Nick:
Are they making cars and just not putting the chips in it and the cats?

Scott:
Yeah.

Nick:
Is that what they're doing?

Scott:
That's correct.

Nick:
So that is

Pete:
That's exactly right. It's a whole new system to where they have a built out to a certain point and they push them out and park them and then when the parts come back in and they, then they complete them. And I was, I mean I'm talking to people that they're talking February, March to where they have the final parts for their car, but you can come in and buy it now. And we'll put you in the queue and people are like, wait a minute. I want a car now. I don't want to wait four or five months. They're like nothing we can do. And I've heard that in a few places, but I can tell you overseas, I'm seeing plenty of new cars driving around. So I'm not real sure what's happened.

Nick:
Gotcha. So no real insight of when the chip shortage might, that might go away or just kind of still waiting on?

Pete:
Well, I mean, if we automated the ports and everything just were... we could pick up volume by 300%. Things would be done in a very short time, but it doesn't look like that's going to happen. So we just have to wait until they find an additional 60,000 truck drivers is what they're saying. All who have been vaccinated and none of them who have ever used a drug in their life, so.

Nick:
Okay.

Pete:
Mm-hmm (affirmative).

Nick:
I mean good luck. Well, well, cool. Obviously we want that shortage to go away. We've been talking about that on our metal Monday I feel like for six months, you know?

Pete:
Yeah, we have... Hey look,

Nick:
We've been talking about it forever.

Pete:
Dude, look it. Two, a year and a half ago, I sat down with the head of the South African mining division and he's been the head of, from everything, he meets Impala. He does everybody. And all of the refined South African platinum, palladium goes through him. And we did a half hour show it's on YouTube and we'll get you to link if you want for your viewers. But he talked about production. And basically the cut through we... the half hour that we went through with Dr. Davis was... he just said, "Look, we've been mining in the same holes for a hundred, four years." He goes, it hasn't changed. We've gone from six feet to 2000 feet. It costs us more to get it out. We have to pump oxygen down. We have to do, we have to have elevators go down, our crews are bigger, equipment is bigger. He says, "But our production is down almost 40% over the last 30 years." He goes, and it's not going to go up, period.

Nick:
It's because there's no material in that hole anymore? Is that why?

Pete:
Well, exactly right. The veins that they're in are... their yield to the per ton of crushed ore, to the ounce of platinum and palladium has continued to go down. So there have to, develop new mines in order, new veins in order to get a, to bring that yield up. And it takes seven years to bring a new vein in. It's generally the number. So figure cut it in half it goes, in the next three and a half years we're not going to see any new production. So, now we're relying on Siberia and I just read a rather interesting article from the Siberian Development Corp. And they said that they're really making a big push up there. And they're talking about relocating 60 to a 100,000 new people for mining up there, but it takes a while to move 60,000 people and teach them how to mine and get product out and build roads. And so the question is when, when do we get caught up?

Nick:
Yeah, it doesn't happen overnight. Is that why we see sometimes a big spike in the market when it costs that much more to get the material out? Is that a reason why the price of platinum, palladium, rhodium go up? Is that a big driver?

Pete:
Well, I really... the causation between product and availability versus market price, there's always lags in between. Like I'll be looking at production in Siberia and I'll be going, wow, numbers are down. And the market's going down and I'm like, oh, what's going. And they, all of a sudden they decide to release holdings they had in the vaults because they liked the prices here, or they needed to buy some equipment or whatever it happened to be. And then eventually Nick, in the long term, the reality sets in and CEO's of firms all over the place from Fram, using the little bitty nubs that they make for spark plugs, and you'll come in and be big buyers on dips. And people that consume catalytic converter, Honda, Toyota, people like that. All of a sudden they'll come in and buy a lot of product and boom up, off she goes to the races. So it looks like there's no rhyme or reason for it, but the reality is that there is, but there's a lag, and it's confusing for an outsider when they look at it.

Scott:
Yeah. I just want to bring our attention to this year there have been some movements in this market and there happening on the banking side. And Russian platinum and Nornickel, they've come together to put 7.8 billion into developing new projects. That happened during the summer. Impala Platinum is buying out its, the number two south African platinum, palladium producer.

Pete:
Good call, they announced that about eight hours ago.

Scott:
Yeah. So when we're seeing these major, the major providers of this material to the rest of the world, making investments like that. That's a strong indication that not only do they see confidence down the road in the market, they want return on that investment.

Pete:
Oh yeah, nice call.

Scott:
So if you're shelling out $8 billion to build a new mine in Russia. And you're buying a whole nother mining organization in South Africa. Yeah, there's, that's a strong indicator that they're going to see, that we will all see these prices move up.

Nick:
Well yeah, that's great information to have. Do you guys

Pete:
For sure.

Nick:
Have the numbers or have it available? Like, how much per ounce does it cost to mine these PGMs versus recycle the PGMs? I'm always curious on that.

Pete:
That's a good question and it's a good question because it's a moving target, Nick. It really is. It's, how much is the price accrued? All right. In many, many mines they run a number two diesel to pump a lot of their equipment. To make electricity they're running their generators on number two, their elevators that are going up and down and mine shafts are electrically powered so they consume a lot of oil. Price of oil goes up, boom, that number drops like a rock because their consumption shoots through the ceiling. They have to pump oxygen down into all of those shafts, and that equipment has to be reliable. It has to have redundant equipment and they're using it. So if you watch crude that will tell you effectively what cost is going to be because you're bringing it out of the mines, you're crushing it. Then you're going to natural gas to smelt. Then from there, it's going on to a truck. There's just a tremendous amount of energy across the board consumed and that's that. So it's hard to say where you're at, at any given time .

Nick:
That, I would love to see like some type of study on that versus.

Pete:
Yeah.

Nick:
I would think it would be astronomically cheaper to get that material from recycled catalytic converters versus.

Scott:
Oh it is, it is. Absolutely. And that's how we have such a healthy recycling economy is.

Pete:
Yes.

Scott:
As long as it is more expensive to dig it out of the ground raw, you will recycle. That's the common sense of our markets. So the strength of your business converter reclaim is a good measurement of the price difference between raw ore, and recycled material. You guys are doing pretty good, and that's a strong indication that it is getting more expensive to get the material out of the ground.

Nick:
Yep. Yep. We're just trying to give people the resource to recycle this stuff,

Pete:
Right.

Nick:
The right way and dealing with the right people, doing things the right way, the mechanics, the towers, the muffler shop, people that deal with cars every day.

Scott:
Yeah.

Pete:
Right.

Nick:
One that's handled, works at a scrapyard.

Pete:
Well, here's the other thing, Nick. What you're doing, is look at, we are all our brothers keepers. We are shepherds of this planet and when we're not digging out of mother earth and tearing out the soil and the ore, and the whatnot. And we're taking products that's above ground, like Scott just pointed out, and you guys are splitting out and refining. I mean, we're doing over for 50 to 70%, less energy consumption, less CO2 production by doing the recycling. It's absolutely vital to what's going on. And more and more people are realizing that and instead of things getting thrown on the scrap heap, they're going into the bin to be recycled now. So it's a whole new attitude towards what we've been doing our whole life, you know?

Nick:
Yeah. They're just getting into the right places.

Pete:
Yep.

Nick:
Rather than lost in the iron pile, or lost.

Pete:
Oh yeah, Absolutely. I mean I talk to guys on a pretty regular basis that go, well I got eight tons of copper in the yard and I'm thinking maybe I should move it. I'm like, what? What're you doing with it? Why aren't... that needs to get back into the system. And it's like, I have to walk them through it, and eventually we get them there, so. There's a lot of attitudes from the older guys that will stockpile until they see a rally in the prices, to the guys that just, they have a profit margin to look for, and they get the product back out there and moving and they get their cash flow going. It's a whole new way of looking at recyclers. And people are recognizing what we do for a living.

Nick:
Yeah. It's been nice to be involved with that and part of it, so.

Pete:
Yep.

Nick:
Well, anything else to add, gentlemen?

Scott:
I wanted to add something. So back to your question about a cost of getting the material out of the ground. And you and I were talking about this off the camera beforehand, with my mining background. Every deposit has a different cost. So that, and now we're getting into assessing junior mining companies, exploration companies, and top tier mining companies. Every asset is going to have a different break even, and what Pete touched on the input costs and then whatever your grade of ore is, that's really going to determine how profitable that entity is. That's what make or... that's the make or break in mining is. Not so much, what does it cost to get it? It's what is the concentration of metal beneath the surface? And can you get it out and still make money?

Nick:
Got you. That makes perfect sense to me. I mean, I think that would be quite a lofty project to really figure those numbers out, but I, it's a no brainer that it costs a lot less to get it when it... I like how you put it, when it's above earth, you know?

Scott:
Yeah.

Pete:
Yeah, yeah.

Scott:
Well, and if a group of Russians are coming together to put eight, approximately 8 billion dollars into investing infrastructure to get stuff out of the ground. That is, I can't think of a better confirmation of, there's money down there, let's go get it.

Nick:
Yeah.

Scott:
And also, the number two competitor for Impala, which has been the number two competitor for the last 40 years now decided that it's profitable enough to buy them out. I mean, that's a big red flag. All of a sudden it's like, wait a minute, you're no longer number two, we own you. And so I think with what Scott said, it makes a great deal of sense that we're seeing some enormous indicators from some very big players that what we're doing here is going to continue to be in demand.

Nick:
Well, awesome. Well, great insight guys. I appreciate it. I'd like to try to bring this back to like maybe weekly, maybe biweekly, whatever fits in your guys' schedules, you know?

Pete:
Yeah.

Nick:
So...

Pete:
Yeah, we've been doing a lot of running around, but we feel at Zaner Metals that one of the things that is important for us to do is education. And if we could share within the community, ideas, thoughts, updates, what costs look like, things like that. Then we're happy to do it.

Nick:
And we at Converter Reclaim. We're going to be out at the SEMA show in Vegas.

Pete:
Oh, wow.

Nick:
So we are going to be, we have a booth there. We're excited to show, get around a bunch of people that work on cars and car people. To kind of show people our.

Pete:
Yeah. That's going to be a blast, man. I love SEMA. You guys are going to have a tough.

Nick:
I've never been.

Pete:
You guys got a car in there by any chance?

Nick:
No, we just have a bunch of cardboard boxes, so. We might be not the most exciting booth. It's exciting to me, but I meet people that have a pile of catalytic converters that doesn't, don't know where to sell them might like it.

Pete:
Well, I think if they haven't seen what you guys are doing, the guys that are, that have catalytic converters can certainly take a hard look at it because.

Nick:
We should have brought one of our hauling trucks, what we should have done, so.

Pete:
Yeah.

Nick:
You know, it's a little late in the game, it starts Tuesday.

Pete:
And at SEMA, you should have filled it with beer.

Scott:
Yeah. I was going to say, Nick.

Pete:
Yeah, baby,

Scott:
Nick, I've got a CDL, I can fly out. We can rent a rider truck, we'll be in and out of there. No sweat. I'll haul it up north.

Nick:
It might be a 2022 plan fellas. But if we like this, well we're doing it again, and maybe you guys can come out.

Pete:
All right.

Nick:
Be a guest of ours. All right?

Pete:
That would be wonderful. Yeah.

Nick:
All right, gentlemen, thank you, and.

Pete:
All right.

Nick:
We'll get this out to everybody. Thanks again.

Pete:
Sounds like a plan, you bet. Take care now.