Robert Friedland on the World's Monumental Shortage of Copper

27:30I don't know, miraculous things that could never happen. Why don't you just talk about, I guess, the math and the engineering in terms of the deficit that you foresee between demand, supply, and what it would take, I guess, from an engineering standpoint or a money standpoint to build out the supply that we need for whatever are the key rungs of that pyramid? That's a brilliant question and opens up an amazing can of worms for your audience. So the largest copper mine in the world is La Escondida. It's in Chile. And we need to look at that clinically to try to understand the existential dilemma we face.

28:14When it was first found a generation ago, the grade was close to 2 % copper. They've been digging deeper, deeper, deeper, and today it's 0.8 of 1%. It belongs to Rio Tinto and BHP, the largest mining companies in the world, in the Western world. But within two years, the grade is going to drop to 0.4 of 1%. So the grade is going down. And as that grade declines, the rock deeper in the pit is getting harder and harder to crush and grind. And you need to take rock and reduce it to talcum powder to get the metal out. The way we get the metal out of rock is we make talcum powder out of it. And about 4 % to 5 % of all the energy produced on planet Earth is utilized in the crushing and grinding of rock, which is a huge number when we're worried about the generation of global warming gas.

29:08Now, that mine sits at 12 ,000 feet elevation in the Andes, and it hasn't rained in the Atacama Desert in 30 ,000 years. And you need two cubic meters of water to crush one cubic meter of rock. So as the grade of that rock is declining in copper, you need to crush and grind more and more rock to get less and less metal. And since you're generating the electricity in Chile by burning primarily coal, they have some solar, but the sun only shines six hours a day, you need 24-hour-a-day power in the mining industry. The global warming gas generated by crushing and grinding that copper is going up and up and up.

29:52And to further confuse you, they built a$4 billion desalinization plant at sea level. They take ocean water, get the salt out of it. That's using a million dollars a day of electricity because you have to pump that water from sea level up to 12 ,000 feet. And the water consumption is going up. The energy to generate and pump that clean water uphill is going up. And the metallurgical recovery is going down. and so they're modeling 10, 12 billion of investment just to make that mine go down in production and that is what's happened to our industry. Our global production of copper this year is down even though prices are up.

30:37And that's amazing because I just told you we need to mine as much copper in the next 18 years as we did in the last 10 ,000 years just to maintain global 3 % GDP growth without the electrification of the world economy. Now, when you look at data centers, it really gets, if you want to use our earlier term, psychedelic. Because the hyperscalers have incredible market capitalizations and they had a beautiful viral technology. And in fact, in the last 30 years, all the capital on Wall Street went into sexy technology like the internet and broadband and Netflix and wireless. And all the kids went into that.

31:21And the Bloomberg Studios were built. But when all the money goes in that direction, we didn't put money into basic raw materials, which are the foundation on which everything sits. In fact, we stopped mining things in the United States. And we sort of pushed this all to China. We said, well, let's let the Chinese build everything at Walmart. You go to Walmart, everything's made in China. So all the pollution was over there in China. And we thought, this is a good deal. We can be a consumer society. We'll drink our lattes here and complain about global warming and just let the Chinese do all the work.

31:59And this model is no longer viable. And now we're waking up and finding that there really is a critical raw material supply chain. In the Biden administration, when I used to work with Amos Hochstein, who was in charge of the energy transition, it was all about global warming. And you remember that world as we came out of COVID? We saw that it was getting hotter and hotter, and we started thinking, for solar power, you need copper. For wind, you need copper. the way we generate electrical energy, the way we transmit it, this studio is ludicrously copper intensive and energy intensive. And there is nothing, and I mean nothing, about the internet that is inherently green.

32:43Let me give you an example. When you do a Google search, and all of us are guilty of having done a Google search, you push that key, you're using the amount of electrical energy that it takes to run a 100-watt light bulb for about 12 seconds, which doesn't sound like a lot, but there are hundreds of billions of Google searches. And that electricity is not free. You think it's free when you do that Google search, but it's paid for by advertising. Now, when you do an AI search, and I use chat GPT-4, and we're using Claude, and you do an AI search, you're using 30 times more electrical energy. using the power it takes to run a 100-watt bulb for two minutes or three minutes.

33:27And every single kid in the world, a five-year-old with an iPad, is going to be using AI searches. And so the electrical demand for AI literally goes to infinity. Now, here's our problem. Here is our dilemma. AI is at its roots a military technology, and I want to explain why. Do you want to hear this? Please. So we have a genius, a polymath named Elon Musk. You know, his brain is beyond most people's comprehension. It reminds me a lot of Stephen Jobs. But he's developed a series of low-Earth orbiting satellites where the latency, when we send a signal up to outer space, is 27 millionths of a second, going up and coming down.

34:16Now, if I'm sending a drone to kill you, Joe, it knows what you look like, even though you've grown your beard a little longer. It can identify you. To hide from drones. You know, a little micro-drones. They could be a mother drone. It releases baby drones. And this drone is looking for you. And going back to the hippie era, all it has to do is attach itself to your third eye. Boom, and you're gone. Now, this is a military technology. drone technology is so efficacious that the Leopard tanks and the Abrams tanks we were giving to Ukraine are parked and no longer used because a$12 drone can find them from the heat signature, from the tailpipe, and just kill them.

35:00So drone warfare depends on AI because there's an AI identification of the target. Up it goes to the satellite. It comes back down, wipes out the target. And if my satellite system has a millionth of a second less latency than yours, you die, I don't. So AI first goes to military application, and later on it goes to a beautiful, sexy doll to make love with. They're selling those beautiful robots right now in China, and those humanoid robots also will utilize astronomic amounts of these same critical raw materials. And maybe those robots to be a Terminator, or maybe they'll make a great lover, you know, very sympathetic chatting to you.

35:47But all of these technologies are insanely consumptive of electrical energy. Your AI girlfriend is actually created by servers. And a server in a server farm uses 20 critical metals that are the new oil. And you don't even know that you need niobium and tantalum and palladium and rhodium and rhenium. Or for example, if you're Jensen Wang and you've got NVIDIA, you need gallium nitride. Or if you want to improve memory and chips, you need scandium nitride. And so instead of the food pyramid that the Army, Navy, and Air Force relied on, in those days it was stuff like coal and oil. And yeah, they had a little bit of copper in the old food pyramids.

36:38Today, it's what we call critical raw materials. AI girlfriends and boyfriends, please. Let's see. Equal opportunity for parasocial relationships. We agree. If you want Arnold Schwarzenegger style male robot, they're coming and they're opening soon at a theater near you. And the actuators, the electrical motors, these things are going to go and plug themselves into the grid to recharge. are incredibly dependent on AI and this whole unbelievable machine we're building that requires the metals that I'm talking to you about right now. I didn't expect this conversation to be the moment where I sort of reveal one of my takes, but while we're here.

37:24It's not on sex robots, is it? It's not on sex robots per se, but kind of in the sense that I think that like the boomer generation had to sort of get comfortable with the fact that their children might be gay. The millennial, the Gen X generation had to get comfortable that their children might have trans partners. And the millennial generation is going to be the one that has to get comfortable when someone brings back their AI robot or girlfriend and they're going to get mad at their parents when they don't respect it. Anyway, keep going. Thank you for that image, Joe. Back to copper. Does technology solve any of the mining constraints that we've had?

38:05Because there must have been technological developments in the industry over the course of your career. And of course, we all know about the shale revolution and what happened there. Do you see tech advancing in such a way that maybe production does increase? Well, now that we've unleashed AI, and I hope as a card-carrying humanoid that we can control it. You're a human, right? That's an open question. I want to tell you, I'm not a robot. I'm a grandfather. You're asking some very, very important questions. We cannot, as an industry, find and responsibly mine the copper that we need for an energy transition with yesterday's technology.

38:52It's just impossible. We can't mine more copper in the next 18 years with yesterday's technology without generating the same global warming gas that we were worried about in the first place. because the energy requirement, I'm just talking about diesel, the diesel price has skyrocketed. Let's talk about that. The straight-door moods remains closed largely today. Global hydrocarbon coming to the market is down at least 10%, and the tertiary implications are terrifying. Sulfuric acid, about 25 % of the copper that we recover in the world requires sulfuric acid to leach it, and it comes out of the Middle East from natural gas in places like Qatar.

39:38So without that sulfuric acid, we've seen prices in the last eight months go from$150 a ton to well over$1 ,000 a ton for sulfuric acid. It's also used to make fertilizer or food or to make semiconductors. Sulfuric acid is the king of chemicals, but it's a funny byproduct of the closure of the strait that the price of sulfuric acid is skyrocketing. And in the Congo, we heap leach copper. About 25 % of the production needs that very same sulfuric acid. Now, I'm fortunate in that our company built the largest copper smelter on the African continent. It's the most modern copper smelter built in the world.

40:20And we produce sulfuric acid as a byproduct of our copper mines. And we sell that sulfuric acid to our brother copper miners in the Congo at higher and higher prices. But there is a worldwide shortage of sulfuric acid. Russia and China have now banned the export of sulfuric acid. And if we don't have more of it, food prices are going to rise globally. And we are seeing incipient inflation arising through the supply chain as our beautiful, integrated, just-in-time world economy breaks down into a just-in-case economy. me. And now what do I mean by just in case? So every country in the world is looking to their own supply chain.

41:04Japan is building up its military. North and South Korea are building up their respective militaries. They don't like each other. Taiwan is trying to turn into a big porcupine. And in fact, if Taiwan goes to Chinese control, TSMC, they're a semiconductor company, and AMSL, who make the lithograph machines to make semiconductors, are rigged to be exploded in the event of falling into Chinese hands. China has a massive military buildup. India and Pakistan fought a war a little over a year ago. Could have gone nuclear. They're both increasing their military budgets. Europe is waking up and going to a 3 % GDP military budget, worried about Russian drones and unconventional warfare.

41:51And you know the Trump administration is proposing a$1.5 trillion budget next year, up 50 % for defense. And all of these modern systems are copper intensive. And what happens as these countries start to look at copper as a proxy on money, let's just explain that in the last year or two, we've seen the dollar price of copper go from $4 to$6 or$7. But if you live in Japan, it was only 50, 60, 70 yen of the dollar. As I went to 160 yen of the dollar, it just took so much more yen to buy copper. It looks twice as expensive in Japan. And in fact, as Scott Bessand, our treasury secretary, is trying to prevent the yen from melting down.

42:41It's so good for the carry trade, for all your hedge fund listeners. But if the yen collapses, Mrs. Watanabe might not buy our treasuries. And then rates go even higher, and that wouldn't be good for the midterm elections or the 2028 elections. So we've come to a point where push has come to shove, and we just haven't had enough capital or technology in the mining history. So we're getting back to your question. Can we use Yankee ingenuity and innovate our way out of the fact that the walls are crushing in on us? That, you know, Indiana Jones and the Temple of Doom. You definitely have a way with metaphors.

43:23Can I just say that? Well, no, we're, you know, those of us in the mining industry scratch our heads and wonder, don't these people on Wall Street understand how hard it is to build a mine? And the resolution copper project in Arizona has been trying to get a permit for 35 years. So the banana principle is build absolutely nothing anywhere near anybody. And, you know, we just, you know, the old adage was, what's 50 ,000 lawyers at the bottom of the sea? And the answer was a good start. How does Japan work with only 2 ,000 lawyers? We have millions. So we need to re-perceive copper as a good. And in the Biden administration, we finally got copper added to one of the lists as a critical raw material.

44:09But the Democratic Party under the Biden administration couldn't bring themselves to putting a good housekeeping seal of approval on a mine. They were sort of warming up to the idea that we need mining. Otherwise, you have to burn coal or oil. And they were moving in the right direction. I worked with Amos. He was in charge of the energy transition. and they were recognizing that solar is good, wind is good, but the wind doesn't blow all the time, the sun doesn't shine all the time, you need grid-scale batteries. My obsession is with geothermal power, and my obsession is with a cleaner and greener way to liberate these metals.

44:47And the good news is that there is disruptive technology available that we are working on. We've had the support of a lot of major tech investors and a number of governments, Japanese, French and the United States government. And we do think it is with great difficulty possible to innovate our way out of this mess, but it's going to be very tough, and it's going to be a very closely fought thing.

45:30This is the Bloomberg Tech Minute brought to you by ChatGPT. Now with ChatGPT Work, I'm Carol Masser. Has the AI moment arrived at corporate offices worldwide? Not yet, and it's perhaps several years away, according to one survey of corporate recruiters who circle the world's business schools each fall and spring. Bloomberg's Rob Mandelbaum notes that, according to the Graduate Management Admission Council, the skills recruiters sought most among 2026 graduates of business school master's programs, including MBAs, were communication, problem-solving, and adaptability, which changed little from last year.

46:07Training in artificial intelligence tools ranked in the bottom third of the skills list, but recruiters did say AI-specific training will be more important in five years. On that, recruiters rated current graduates as only somewhat prepared or less to work with AI tools, and said business schools are not doing a good job of teaching AI skills. Bottom line, according to the survey, what most companies want when it comes to AI skills is for candidates to be able to automate routine work. That's the Bloomberg Tech Minute brought to you by ChatGPT. Put ChatGPT to work on your most ambitious ideas and projects.

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48:16easy to use and built to grow with your business. Thousands have already made the switch. Why not you? Try Odoo for free at O-D-O-O dot com. That's Odoo dot com. You know, I recognize that you, you know, when we talk about your actual operational footprint, you're talking about Africa. We've also talked about South America. In this world now where everybody is trying to called balkanization or resource nationalism or so forth. Earlier this week, I know that's not where you're digging stuff out of the ground, but where you have kind of a base in Canada, there was a news of the government investing$405 million on a new highway project, build out the transportation infrastructure in parts of the country, a country that is endowed with quite a bit of important materials.

49:09Do you think like there is a big opportunity there if there, you know, the Kearney government actually seems quite serious about resource investment in a way that perhaps prior liberal governments in Canada hadn't been. Are you optimistic or do you see a prospect for there is a lot there if we invest in the infrastructure to drive out and get it? So I need you to understand that we are in the low foothills, not the Rocky Mountains. We're in the low foothills of the Himalayas in the metal demand we face if we want to green the world economy, because the Bloomberg organization has a lot of good work done on global ecological issues.

49:57And yet we face the incipient and viral war that has broken out in Ukraine, in the Middle East, Iran, Hormuz, and we have balkanized ourselves into two giant opposing groups. We have Russia, China, North Korea, and Iran closely cooperating. Iran now has hypersonic missiles, which, by the way, we don't have yet, that are steerable, that are incredibly amazing, that Iran can target missiles so precisely with technology that must have come from Russia or China. And we have a countervailing pressure. And if you look at our president, he told Mr. Zelensky in Ukraine, I will help you if you give me critical raw materials.

50:46It's become very mercantile. You never saw an American president say, I will help you only if we have critical raw materials. If you'll give me five minutes, I want to talk to you about World War II and the current situation. Tracy and I are both middle-aged dads who love World War II. Proverbial middle-aged dads. Most of your listeners are too young. So I really need to explain this to you by analogy. The Japanese thought it was a good idea for some reason to bomb Pearl Harbor. They had an idea in their mind, and they did it. And Franklin D. Roosevelt, who was a Democrat, was president of the United States, and he was an isolationist.

51:23He did not want to get involved in World War II, but in England, you had Chamberlain, and you had Churchill. And Churchill was obsessed with the Nazis, and he came to Franklin D. Roosevelt begging for help. And ultimately, in 1940, 41, Churchill grudgingly said, got a message from Roosevelt, I will lend you and I will lease you what you need for the war effort. I won't give you anything for free, but I'll lend you coal, I'll lend you oil, I'll lend you copper, I'll lend you tin, I'll send it over on my merchant shipping with American boys, and later on you pay me back with interest because he was an isolationist.

52:04He didn't want to get in the war. The Germans invented these incredible little U-boats, their little needle submarines, and they started sinking our merchant shipping, interrupting the supply chain between the United States and Great Britain during the war. Fortunately, a group of mathematicians in England broke the Enigma code. And had that not happened, everybody in England today would be speaking German. It was a very closely fought thing. The Germans were working on heavy water reactors and nuclear weapons. Ultimately, we dropped an atomic bomb on Hiroshima. It was a uranium bomb. And then our second bomb we dropped was a plutonium bomb.

52:50It was a science experiment. Truman authorized a second bomb to be dropped, and America came out on top of the world. Now, today, the supply chain is being interrupted, and none of those commodities that we need in World War II are relevant. Without gallium, there is no NVIDIA, no NVIDIA chips. Without scandium, rhenium, dysprosium, niobium, tantalum, these are metals you don't even know about. We can't build this studio. We can't develop AI as fast as the Chinese, and our hyperscalers are getting in debt. They're borrowing money to pour concrete and steel. Their heads are in the clouds, but their feet are of clay.

53:34They're sitting on the earth, and there's a shortage of electrical capacity in our country to run these data centers. In fact, there's a backlash against data centers in the U.S. because voters are seeing the price of electricity go up. And so this is a very strange, weird thing unfolding here, that China has more than twice the electrical energy it needs to run its society, and we don't. You know, there was a power failure here in New York. I think it was the 1970s or 1980s. Our power here in New York comes from hydropower in Quebec. It comes down from hydroelectric dams that you could never build today.

54:12A bunch of hippies would lay in front of the bulldozers to prevent those lakes from being developed. But, you know, when the power we're not here in New York, a lot of babies got made. Nine months later, there was a big bump of babies because there was nothing else to do. It was dark out and people stayed at home. They were worried about looting. But today, if you want everything Elon's doing, if you want Grok, if you want AI, you want humanoid robots, you want electric cars, you want microwave ovens and washing machines, you want to clean the environment and you want to defend yourself against drones coming to get you, you need ultra-sophisticated critical metals.

54:54And unfortunately, all of them are developed by China. They're not found here in the United States. And the Chinese are very rationalized and very, you know, in an intelligent way, are saying, we're not going to sell them to you unless we agree. In fact, if you're a U.S. manufacturer, you now have to give your plans to the China Military Commission and say, why I want one of these metals, and then they study it, they look at your blueprints, and they can refuse the supply of those metals for any reason or no reason. Now, we're ahead as a society on chips, and they're ahead on critical raw materials.

55:31And maybe there's some big trade to be made here when Scott Besant negotiates, and in fact, President Xi Jinping is due in the United States September 24th, and this could go two ways. we could play the game with each other like on a level playing field with a game of rules like rugby where i break your collarbone and you break mine but we don't kill each other or this could spin out of control because chinese ai is coming it's as good as ours it's 99 as good as ours and they're going open source they're going to give it to american enterprise for free while the hyperscalers are betting the farm on astronomically large capital investments, but they can't find the electricity in the United States and the critical raw materials to develop these things.

56:22And that's why I told Bloomberg recently as a miner, I'm being approached by unconventional interest out of Silicon Valley. And we're talking to the big hyperscalers who are saying, my God, we've got a problem now. If you want to get - What exactly do they want to do here? Are they talking about investing equity or owning some sort of facility? Well, you know, nobody that's in technology wants to get their hands dirty mining because, you know, a tailings dam can collapse. There could be an environmental issue in mining. And we like to think that technology exists in a parallel universe where we never get our hands dirty.

56:58But it's the technology that's drawing all this electricity that is generating global warming gas. In other words, it would be neat if Microsoft could run all of their power off of nuclear power plants. In fact, they went after Three Mile Island to reopen it to provide the electricity for these data centers. But actually, currently, they're going to natural gas, and that's not really that green. And there's a seven-year wait to get a gas turbine to power a natural gas power plant, ergo Bloom Energy. Their stock has gone up because they They have solid oxide fuel cells as an alternative to generate electrical energy for a data center.

57:39A data center needs uninterruptible power. It can't work on solar because the sun doesn't shine all the time. It can't work on wind. The wind doesn't blow all the time. And so to build a solid oxide fuel cell, you need scandium metal. You can't build it without it. or to build a natural gas turbine. You need rhenium metal in the core of the turbine. And so we're really bumping up against critical materials to enable this kind of thing that we're doing today to exist at scale. And the problem for us is that the response to this question has to be at the scale of the American economy. If we're a little country like Honduras, we wouldn't need very much, but we're big.

58:24And in order to keep growing and going to AI, suddenly the miners become the key. And we can't go on mining the way we used to mine, or we're going to destroy this planet. Instead of mining oil and gas and coal, we're going to rip up every mountainside on the planet, trying to find enough copper to have an energy transition. And so we are dependent on becoming technologically savvy and a technological revolution. It's not going to be easy, but I'm working on it. And a lot of people I know are. Thank you. Just real quickly, you mentioned the long wait for natural gas turbines right now. For you, placing orders for equipment, just the standard run-of-the-mill equipment, things that dig stuff out of the ground.

59:11Are there like constraints these days, the likes you wouldn't have faced 10 years ago to buy the same thing? It's beyond, it's so bad that it's beyond your Wallace imagination. When we built the, you know, we went up to Mongolia in the Gobi Desert and we discovered the Oye Togoi Copper and Gold Mine, which today is ranking about number four in the world in copper and has the world's second or third largest gold resource. And we're in the Gobi Desert and we invested about $7 billion to discover this thing and to start to build it. But we didn't have the water. We didn't have enough water around the mine.

59:47So we had to go out looking for water and if we couldn't find the water we would have had a$7 billion modern art sculpture out there in the middle of the Gobi Desert. Today, about$20 billion of capital has gone into that mine. Rio Tinto bought the company and it's in production. And it runs on imported electricity from China on a$100 million extension cord, and the Chinese can just unplug it. But they sell all of that copper into the Chinese economy, so it's in China's interest to allow that mine to operate. So, you know, there's an example of going somewhere to find something that's very energy intensive.

1:00:27Now, repeat your question. No, I just mean you want to buy a big shovel, a big, like, what's the backlog to that? I want to tell you about that mine. So when we were building that mine, I built the phase one mine. We had the world's largest electrical motors. They're like giant washing machines. And there's rocks and steel balls. You tumble the rocks. And slowly the rocks bash against each other with these steel balls. And with a huge amount of electrical energy, you grind it down to talcum powder to liberate the copper. And the ring gear around those giant motors, these motors are 40 feet in diameter approximately.

1:01:04it was a four and a half year wait to get the ring gear. In other words, you order the motor, four and a half years later, Siemens or ABB could build it. Today, it'd be an eight or 10 year wait, if ever. And the hyperscalers are trying to get a gas turbine today. Because we have a lot of natural gas in the United States. You're generating global warming gas for your AI, but it's about a six or seven or eight year wait. And today, when you read the fine print in those supply contracts, they say, well, there's a forced Missouri clause. If we can't get one of the metals, we just won't deliver it.

1:01:39Now, I'll give you an example. We had a temporary problem at one of our copper mines in the Congo. We had a flood due to a seismic event, and we needed to pump the water out of the mine. And, you know, the mine's about the depth of the height of the Eiffel Tower or a little, maybe two Eiffel Towers deep. And the pumps we needed pump 1 ,300 liters per second, three times the height of the Eiffel Tower. So these are very sophisticated pumps. And we called the Americans. They said, sorry, we can't build them. We called the Germans. No deal. We called all over the planet. We said, why not? and they said we can't get the samarium cobalt magnets for the electric motors because these pumps are like a rocket ship.

1:02:28They're almost three meters in diameter. They're 80, 90 feet long. We lowered them down these shafts. Only the Chinese could build those pumps. Fortunately, the Chinese were buying our copper and so they built the pumps in 30 days and we got the mine pumped out. When we were flooded, we were losing about$15 million a day in revenue. It wasn't a money question. It was just, who's going to sell us a pump? So there's a great song by Bob Dylan. You're both too young to remember it. It was the first real rap song. It was called Subterranean Homesick Blues. And you should play it because it's early rap.

1:03:09But there's two great lines in that song from Robert Zimmerman, a.k.a. Bob Dylan. One was, you don't need a weatherman to know the way the wind is blowing. And the final line in the song, it ends with, the pump won't work because the vandals took the handle. And what's happening now is that it's recognized that by withdrawing certain critical raw materials, you can bring our economy to a halt. If you look at a Boeing 747 on the runway, it's got four million parts. But if one part is missing, it doesn't take off. And so as our systems get more complex, we're in a position to blackmail each other.

1:03:56And right now, we could tell China. I'll give you an example. I was talking to our Treasury Secretary. He's an amazing person, Scott Besson. And I was asking about our discussion with the Chinese. And he said, I sat down with the Chinese and they said, you bastards haven't delivered the Boeing, the General Electric engines for our Boeing airplanes. You promised us. And he said, well, you haven't given us the critical metals. We need to build those engines. And so we're starting to point a gun at each other's temple. And there's this giant chess game going on. And we used to get this over crude oil, and now it's moving towards a suite of critical metals that you don't talk about enough on odd lots.

1:04:42Well, we're fixing that now. So related to this, one of the reasons that copper is falling this morning, and we're recording this on September 10th, but there's a report out saying that the White House hasn't made a decision yet on refined copper tariffs. Do tariffs help boost production in the U.S. if the constraint is, you know, geological and legal and bureaucracy? So Ernie called me from Reuters yesterday and I told him I didn't want to comment on it because I've been wearing out my shoe leather going into the Biden administration and Trump administration. But I could argue both sides of the proposition for you without telling you where I stand personally.

1:05:24Smart. You know, in the old days, tariffs was the principal way that governments collected revenue. In the British Empire, when the sun never set on the British Empire and we had ships, the British crown authorized piracy. You know, you're a privateer, you go out and kill somebody. And as long as 12 and a half percent went to the crown or they had tariffs. And we didn't invent income taxes until the 1930s or so. And the problem is that if I go to the Congo, the grade of the copper there is 3%, 4%, 5%, 6%. It's unbelievably rich. And there's 100 million people in the Congo. The median age, do you know what the median age of a person is in the Congo?

1:06:1318.7. So it's a very young population, Generation Z. and they don't remember the days of the Civil War. They want to work and I can get a brilliant software engineer that's Congolese, who knows AI or who can run automated equipment for$800 or$1 ,000 a month. If I want to mine copper in the United States, the United Steelworkers of America want over$100 an hour to go underground and we have environmental legislation and legal constraints that make it much more expensive to mine in the United States. But this is a paradigm. If you want to build a nuclear power plant in the United States or you want to put it in a data center in the United States, it takes big, big money.

1:06:57So mining tended to go around the world where the resources are higher grade or lower cost. But what happened was the financial system invented the net present value model. It was originally made for oil and gas. The mining companies started NPV models. All the mining companies were valued on NPV, and it's a stupid idea because mines cannot be modeled to NPV. Oil fields can, but not mines. Oil fields decline very fast if you don't put money into them. The energy in the reservoir depletes. But a mine with 100 years of reserves doesn't deplete like an oil field. So the NPV model suppressed the valuation of mining companies.

1:07:40In fact, today, mining companies in the aggregate only have the value of less than 1 % of the S &P 500, which is an all-time low for mining. Now, the Chinese saw this and they said, my God, we got 1.3 billion people to feed forever. These stupid Americans are willing to sell all this. And they just came in over the top and they intelligently just bought the entire supply chain. They bought everything that wasn't bolted down. And so, you know, the problem is that the Chinese did something very intelligent for the Chinese people. And today we don't own these assets anymore because all of our money went into Netflix.

1:08:22You know, this really has to be, somebody has to tell the truth about all this because basically we got caught with our pants down. Now, can I tell you about my interviews with American billionaires? so um you know every time bloomberg writes about me they say billionaire robert friedland i kind of get tired of that phrase i've now interviewed 50 male and female billionaires and i've asked them do you um kind of sit down and put your pants on one leg at a time or do you hold your pants up in front of you and jump in with both legs simultaneously. And I haven't found one billionaire who claims that he or she jumps into their pants both legs at a time.

1:09:09And so this whole thing is overrated. It's just paper money. What I'm worried about is my grandkids. I'm worried about the sustainability. How do we provide food and water and clean air to 8 billion inhabitants without warring groups. We used to fight over crude oil. Most of the wars of the last century was over crude oil. And now we might start fighting related to AI and the critical raw materials to support that AI. And that's why I think this should be a series. This should be like Breaking Bad, not a one-off movie, where we peel this onion and go deeper into the core of this issue. And I know a lot of your guests have been starting to talk about this.

1:09:55But this is a subject that is not going to go away for the next 10 or 20 years. This is like a permanent subject. For example, I remember the 1987 crash. Rates were 12%, and the stock market crashed, and Volcker cut rates, and the bond market went up for 35 years. Right now, this is not an ephemeral short-term thing. That article that came out on Reuters today that spooked the copper market a little bit is talking about tariffs. You asked me what I think about tariffs. Well, if you want to mine in the United States, if you want to be self-sufficient, tariffs are a great idea. Because if copper is six bucks, you put on a 30 % tariff, 30 % of six bucks is$1.80.

1:10:40You'd have$7.80 copper. I could afford to hire a mine worker at the United State Workers of America and mine in the United States. It would make it more viable to do that here. However, the other side of the equation is it'll create domestic inflation. Rates will otherwise go up. We have the midterm elections coming. So there's a political issue. Do you want to re-industrialize America or do you not want to re-industrialize America? If you can't build a nuclear power plant, if you can't build a ship, you lose your sovereignty. Last year, America built about eight ships and China built a thousand.

1:11:22And so this is a very big question. And do you really want to replace the entire system of crude oil and replace it with huge data centers run by clean energy or don't you? And, you know, I want to tell you, this country is well endowed by the creator in all manner of good things. We have water. We have amber waves of grain. 10 % of the copper ever mine in the world came from the great state of Arizona. The California license plate used to say the golden state because we discovered gold in California. And the Arizona license plate said the copper state. And people were proud of it. And listen to Bruce Springsteen.

1:12:07I mean, we used to do stuff in this country. You know, we used to have blast furnaces and steel mills, and we lost all that because we thought we could outsource all this to China. And everything at Walmart said made in China, whether it's a microwave oven or a washing machine. And this is part of the big debate is if you want to re-industrialize America, let's do it in a better way. Let's try to figure out a more sustainable way to do it. But if we don't do it, we have lost our sovereignty. And I think that you're discovering this in Europe, and this is being discovered globally, and that's why we're beginning the age of hoarding.

1:12:47What's happening is that governments are buying copper metal as a proxy on money, and they're not reporting it. And nobody can calculate the supply-demand balance on any of these metals because why would you? We're seeing the statistics that China's buying gold all of a sudden, and they're not buying our treasuries. They're selling our treasuries. And some people think Bitcoin is an alternative asset for the United States dollar. There's a great debasement trade starting. Hedge funds borrow the yen and rely on the end a week and not have to pay the money back. But we're at an inflection point now where this is all being exposed and everything is becoming naked and available to global scrutiny.

1:13:37And we're seeing that demand has come against push. And we're getting into a more sophisticated understanding that do you want AI? To what good? Do you want to make all of our kids get brainwashed on TikTok or Facebook? Do you really want to get our kids? We're turning into two rival tribes here in the United States with the way social media is working. And it's all driven by AI. And AI can make it even more dangerous. You know, I've got a grandson. When I took my grandson's iPad away, just freak out, right? So, yeah, I'm a baby boomer. I admit it. You know, I admit it. Well, Robert, really looking forward to having you back tomorrow for part two and then the next day for part three of this discussion.

1:14:29But no, really appreciate you coming on OddLodge. That was fantastic. We should talk again. Yeah, you know, to be continued.

1:14:48I wasn't expecting to talk about sex robots. in that conversation. But when we're thinking about future sources of demand for cover. For energy. I suppose that's one. Yeah, got to plug in your significant other. You got to build it in, you got to plug it in. And you have to keep it plugged in. Well, as far as baby boomer conversations go, that was a fun one. Yeah, for sure. I didn't hear a lot of solutions to the problem, which I guess is why we're talking about this at all. There are obvious solutions. But I think before you can even talk about solutions, you have to identify the problems. And I think one of the problems that we face is that at every step of the chain, there are constraints.

1:15:31So let's say you make the decision to really want to make a big investment in a new copper mine somewhere. Well, there's a year's long wait to get the equipment, to get the earth moving equipment or the engines that you need to do that. And the builders, someone says, OK, we want to build a lot more engines because there are people who want to build a lot more mines. Well, I guess then we need more gallium or whatever critical resource it is. And so I think one of the things that's very helpful is to say, like, oh, just build more mines, just build more memory. But in each leg of the chain, one level up, you know, higher up river, et cetera, they have their own backlog.

1:16:11And it's still not clear that the market will actually reward you for increasing production because you still have the volatility and super cycle supply problem. Yeah. Seems hard. I think he said plenty. It's like almost I don't have anything to add to it. You know? Yeah. All right. Shall we leave it there? Let's leave it there. This has been another episode of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me at Tracy Alloway. And I'm Joe Weisenthal. You can follow me at The Stalwart. Follow our producers. There's Kerman Rodriguez at Kerman Armand Dashiell Bennett at Dashbot Kale Brooks at Kale Brooks and Kevin Lozano at Kevin Lloyd Lozano.

1:16:44And for more Odd Lots content, go to Bloomberg.com slash Odd Lots. We have a daily newsletter and all of our episodes. And you can share about all these topics 24-7 in our Discord, discord.gg slash Odd Lots. And if you enjoy Odd Lots, if you like it when we talk about mining, then please leave us a positive review on your favorite podcast platform. And remember, if you are a Bloomberg subscriber, you can listen to all of our episodes absolutely ad-free. All you need to do is find the Bloomberg channel on Apple Podcasts and follow the instructions there. Thanks for listening.

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