Critical Minerals: Mining for the Industrial Future

21:53And it does stack up, I've been calling it a death spiral for a lot of the folks that are trying to sell into the mining industry because it's hard. Just to like step back a little bit on the geopolitical context. The stuff you're describing, I think very obviously true with a lot of Western companies, but at the same time a lot of Chinese companies that have sprouted over the last 20, 30 years have grown rapidly. Curious, why do you think that is? Yeah, I mean, I think that there's like a lot of top down and early recognition that critical minerals were going to be critical. and needed to be supported.

22:24And so, like, shouldn't kind of, like, that everything around policy and everything around, kind of, like supporting companies to go and deploy both infrastructure domestically and infrastructure internationally to kind of, like, secure critical minerals build infrastructure that secures a position, like, that has definitely happened. But I think that what people often don't talk about enough is that the talent pool is insane. Like, it is not just a large talent pool. It is a large -scale, experienced talent pool. I was in Indonesia in February. and was kind of visiting one of the recent Chinese nickel refining operations.

22:57And so they buy or they also have some mining operations, but they had 13 ,000 people on site during construction and commissioning. And if we were building a refiner in the US, which we did, it's hard to mobilize a tenth of that realist. And it's not just about the number of people. It's about being able to iterate on every individual work front as fast as humanly possible. And we just don't have that label. 15 years ago, or 20 years ago, with the same companies that were big now, have been big then, where is kind of the evolution of the space event? Yeah, I think that there's been like a clear splintering on kind of who does the expiration and who does the development.

23:32Like right now, the industry is set up where junior mining companies switch domain, they explore, go and sometimes they'll get maybe a resource from a major mining company that's held in their portfolio for a long time. But it's like a different risk -reward profile than what the mining majors are ultimately looking for. And so you have this junior mining ecosystem that sometimes is well funded and sometimes is competing for capital with the cannabis industry in Canada. And they're taking shots in the dark. And there's a lot of work that's going into trying to make that expiration activity more intelligent.

24:00Streamline it drill less expiration holes while still being able to interpolate or extrapolate what is in between those drill holes. But it's a you're going out in kind of the middle of nowhere either it's really far north in like the Arctic Circle or the Yukon or it's overseas in Africa and you're doing expiration or it's in Southeast Asia or in South America. And those folks, like they have one job, which is to define a resource and pump up its value sufficiently to flip it to a major. And there's a lot of companies that aren't able to discover a resource that is either large enough because the big mining companies, like they wanted to ploy large amounts of capital.

24:34We're talking about like multi -billion dollar investments. And so they won't really look at projects that don't have the scale that kind of enable them to underwrite their own inefficiency. Like they want to build really large infrastructure that enables them to capture the economies of scale. And so there's actually a really long tail of mining projects that don't have the scale that would justify getting acquired at a major premium. And so they'll go into this kind of orphan period is what it's called in the industry. And it's hard for them to break out of that orphan period. And that's kind of where we see our ability to kind of step in as a more efficient builder and operator is kind of take these, what the industry calls sub -scale assets, but we see metal there.

25:10and come in and bring those into production as we kind of are building the platform and then eventually scale into the same scale that the big money companies are operating at. Your thesis being that you can get the metal out and process it into a product that you can sell more efficiently than the majors such that it's economically viable. To offset the scale advantage. Yeah. I think there might be a good opportunity then to talk a little bit more about what is Mariana's product. You said a few minutes ago, you're not a SaaS product. What does it mean to be a diversified metal and minerals company, technology enabled mining company, give us a little bit more detail?

25:47So we're a vertically integrated software first, minerals project developer and operator. And so we focus on the back end of the minerals value chain, which is actually doing the detailed engineering, getting through the permitting, building the asset, commissioning the asset and then operating the asset. And going back to some of what we were talking about around the labor pool, like those labor pool shortages exist in construction and they exist in mining. Like, they're felt very, very intensely. And so our fundamental thesis is that with a contracting labor pool, you have to start with an awesome team.

26:18The table stakes is that you build an awesome team. But how do you enable 200 people to do what 10 ,000 people are needed to do today? At least on the, like, parent co -sider things. And that comes from leveraging the recent advances and LLMs to automate workflows in the construction side of things, and the engineering side of things and the procurement side of things, which take an insane amount of time. You make a lot of lists and you fat finger a lot of data between databases. And that is all about reducing churn in construction. Churn in latency. Latency is one thing that I think people sometimes don't appreciate from status quo, construction like large scale mega projects is that what's happening in the field and what the back office kind of sees or what the executive team sees or what the project director sees.

27:00There's a three -week lag, generally, for like really large construction projects, where you are trying to aggregate data from all the different contractors and all the different parts of the facility into a consolidated integrated schedule, which you can then make decisions off of like, how do I prioritize what I'm doing today? And the way you run in between those three weeks is people stand in circles every morning and they say, what are you doing today? What are you doing today? What are you doing today? And they go off and they do the thing. They'll send a very brief progress report back and it takes a long time to then take those progress reports and actually measure progress us so that you can re -evaluate priorities and understand kind of like how the project is trending.

27:37And so we're really trying to accelerate and democratize access to data fundamentally and run construction projects like manufacturing facilities. And it starts there. And the reason construction and mining are so kind of integrated and some people might disagree with me, but like a mining project is a big civil construction project, it just never ends. And it's more of a deconstruction project. Yeah, that's fair. Well, you do, when you're... I guess you have to make a deconstruct pile. You're building piles. Okay. But there's actually a lot of similarities in kind of like just moving the dirt for like site prep.

28:08And the same kind of like software stack that is enabling you to get feedback from the field live is the same thing that the mining industry struggles with. Mining companies will lose equipment, especially in underground mines that are like these like deep mazes and the industry is getting better at having like actual location sensing on like where the equipment is. But losing equipment in the mine is like it used to be a super common thing. But, you know, we start with construction and then we start to get into the second core software stack is what we're calling plantOS. The construction stack is capital projectOS and plantOS is really aimed at removing humans from the loop and deciding how the chemical processing operations and the refining operations work.

28:45And big refineries are effectively big robots. You have the sensing and telemetry, you have the actuators to control how the plant operates. and imagine like teleoperating humanoid robots like forever. That is what the refining industry and the pressing industry has been. And there's obviously a PID control loop that kind of maintains that point, so you can maintain temperature automatically, maintain pH automatically. But the thing that really matters is that the feed material to the pressing facilities is constantly changing, because the or body is changing every time. And so the way that the industry manages that today is they will blend the feedstock to minimize variability that's going into the pressing facilities and that enables them to minimize the amount of change that has to happen on a processing facility.

29:25So we're trying to flip that and say, okay, if we build a hyperdynamic and highly flexible refining circuit, ideally without adding a whole bunch of cost, what does that do to optimizing the global operation from the mine to the refinery? But it's first aimed at reducing region consumption, reducing energy consumption, and Google kind of proved this. They bought DeepMind in 2016, 2017, And one of the first things they did was throw the deep mind team at automating and optimizing the data center thermal systems. So air handler, chiller, cooling tower. And that's not a super complex system. You have weather, which is a factor.

29:59You have loads within the building, which is a factor. But you ultimately have nine control variables between like airflow rate, supply or temperature, the cooling water, temperatures and flow rates, both in the chiller system and in the cooling tower system. And just in that relatively simple system, they were able to reduce energy consumption by 30 % or 30%. Yeah, it was like 40%. 40%. Yeah. And it happened relatively quickly. And so that's the opportunity when you remove humans from making the decisions on how kind of like these process systems operate. That's the opportunity. And then when we look at kind of refining and processing facilities, that's like a thousand to control variables.

30:32And it's no longer single pass. Because what's really interesting about minerals refining is that you never want to lose the metal, right? Every atom that you lose kind of in the processing facility is another atom that you have to So recovery in the refinery is actually like the biggest lever when it comes to cost. And so what that means is that the upstream unit operations think of a refinery as like 20 unit operations kind of all in series in a relatively simple refinery. The upstream operations obviously impact the downstream operations because if you're changing the process conditions in the upstream operation that changes what the downstream operation is seeing.

31:04But the downstream operations will recycle the reject stream back into the upstream operations. And so it's this big interconnected web, and it's a high latency web also, where if you make a change in one part of the circuit, you may not see that change cascade for another 24 or 48 hours. And when we're commissioning refineries like the world, that latency ends up being a major driver of the time it takes to bring a refining operation to spec and eventually ramp it to throughput. There are some refineries that were built recently that are still not commissioned. They were built like three years ago.

31:37But the Chinese companies are doing it in six months. And a lot of Western companies, it takes two to four years. And that stacks up where we need to build like an insane number of mines and refineries. And if you are kind of four times longer or five times longer, every time you build a refineries step of the process. Yeah. And so we're trying to bring down the time that it takes to bring the refineries to spec, basically through put and hitting the kind of like output requirements of the product that you're making. And then ultimately you start this historically very long of gradually bringing down the cost over time.

32:10And that's something that we think that reinforcement learning is going to do quickly, much, much faster, kind of like in line with what Google demonstrated with the thermal systems and data centers is achieve global optimal operating conditions on an order of magnitude faster at timescale. So how do you think about like, you're building a company that minds and refines a product? There's a lot of tech that you can interject at essentially every step of that process. Like, how are you deciding what to build, where to partner, what are you developing in -house versus where are you going to market?

32:43Yeah, I think at the beginning we're focused on how do we take kind of commercially demonstrated unit operations and be a better integrator and a better like operator of that integrated circuit. And so focus on the software systems that enable you to kind of control the plant more optimally. And that's generally what project level financing parties want to see also. Like it's hard to get project finance on a first -of -a -kind facility where you're demonstrating a new unit operation for the first time. And so we think that as we're entering the market, the right place to start is take commercially demonstrated individual unit operations that operate globally and go after the uplift that's available just by being a better integrated operator.

33:20There's a whole bunch of bottlenecks in building these facilities that we will need to solve and the industrial supply base just for manufacturing tanks is broken. Like there's specialty. That's a new one. Like things that we take for granted to just take a really long time. If you wanna not go to China for sourcing that equipment. And that has a big impact on the operating side of things too, where the supply chain for like a new pump in Australia could take 30 weeks and getting that exact same pump, but with a mine in China, it shows up in a week or three days. And so that entire industrial like equipment supply base, we're gonna have to look at some point.

33:57And that's obviously a much bigger bite to go after like commodity equipment manufacturing. You're not gonna vertically integrate to be a mining equipment manufacturing company. I don't think so. I hope not. You'll let me know. This is the incentive structure of the partners and the suppliers and is it required or not. I think there's a whole bunch of companies that are working on awesome novel process technologies that have not quite gotten over the hump trying to sell to the big mining companies. We want to be the customer that helps accelerate commercial deployment and the partner that helps accelerate commercial deployment.

34:28One of the big issues that comes up when you're deploying new processing technologies is is that part of the reason why it takes a long time for it to get to the point where it's commercially viable other than all the headwinds from the industry being conservative and processed driven and all those things, is that humans have actually never operated that processed chemistry at scale before. And so you'll learn a bunch of things at pilot scale, but pilot doesn't really tell you what's happening. I get to train people. You have to train the people to operate it. It's like new environmental things that might come up depending on the chemical that you're using.

34:58And that scale jump is actually something that we think that RL will enable with a pretty meaningful pace adjustment, where you don't need the humans to kind of like fine tune the process conditions around a new process chemistry, because the plenty of us is doing it. Ryan and Aaron, how did we approach this industry? Is this a space that we spend a lot of time thinking about or thinking about opportunities in the space or how did we approach it? We've wanted to do a mining investment for a long time. When you think about venture capital, We care about massive markets and there's not that many massive markets left that have been sort of like largely unpacked by technology and mining sort of screams.

35:39One of the largest markets in the world, very little adoption of technology. So over many cycles, we've gone out and spent a lot of time meeting companies. And as I mentioned before, the challenges, how do you sell a point solution or a point piece of technology into this industry that has very little incentive to adopt it. And it also has a very complicated geo -political dynamic where you have a very large global player with their hand on the scale. We put out a piece a couple weeks ago around our thesis and mining and why we think of vertical mining company is the answer because we actually do believe you have to control every single piece of the entire journey, the entire life cycle of an atom of metal end to end to actually be able to build a tech company here.

36:26This is not about a point solution for one particular part of the process in order to actually capture the gains in efficiency and build a feasible business. You really have to own the entire process end to end. The only thing I'd add there is that this is the intersection of geopolitical urgency and tech. To what it's stuff's turners been talking about, is like now we have technology that can actually go and disrupt this. But also as a talent base, people coming from companies like Tesla, SpaceX, and all other sort of hard tech companies working in sort of dirty spaces, is willing to go out in the field and actually, yeah, roll up their sleeves, go out in the middle of the desert and work on this stuff.

36:58So now's the time to build this company. And the political tail winds are there. Even my conservationist mother, who I think if like we had this conversation five years ago, she would have clutched her pearls. She isn't wear pearls, but she would have clustered her pearls at the idea of domestic US onshore mining. I think broadly speaking, the American public and certainly the government has come around to the idea that metals are in every single thing we use as consumers. Our supply chains are highly reliant on China. It's a huge problem. We have to figure out how to address it. And that means investing and mining in the US again.

37:31We mentioned like rare earths, you mentioned lithium and things like that, but there are many different critical minerals. You talked about a little about in the very beginning, but specifically what are the interesting ones for you? How does that map to sort of what people see on the headlines and what are the business opportunities are? Yeah, I mean, when we look at what needs to happen in the next 10 years, and forecasted demand will only materialize if the supply is there. So we'll see if that forecasted demand materializes. The metals that actually need to grow the most by mass flow rate are the big metals.

37:59We need a lot of aluminum, we need an insane amount of copper, we need more iron, we need more zinc. What are some of the things that these metals are in? Yeah, sure thing. Iron goes in everything that is infrastructure. We got iron, we got iron for them. Zinc is one of the people's sleep on, because you actually have to galvanize a lot of that steel. And so Zinc oftentimes kind of pops up every once in a while, as being something that we really do need to continue to focus on. Copper is the workhorse of this push to electrify everything and to just grow the grid to be able to supply it, AI to be able to enable accelerated renewable penetration for EV penetration to happen, like you're going to need a lot of copper.

38:33Aluminum is one that I think is underestimated, like people underestimate kind of its importance. It's actually like the number one most consumed metal in defense applications, like the grid is, people talk a lot about copper, but there's a lot of aluminum conductors in the transmission lines that are critical to actually growing the grid capacity and in automotive obviously aluminum's big. Magnesium has a whole bunch of defense applications potentially could get more into automotive applications and like for lightweight metals. Lithium needs to forex in terms of production capacity in the next 10 years, roughly, in order for the batteries that we want to build to be built.

39:07Well, we're all about batteries, so. Right, right, right. And then, Nicole is a big one, I think that what has happened in nickel in the last five years is Indonesian production capacity has scaled to the point where it's now something like 70 % of global nickel comes out of Indonesia. And a lot of that was on the back of like meaningful investment from China to be able to kind of expand production capacity in Indonesia and then also do more of the downstream processing in Indonesia. And nickel goes in everything that is specialty alloys, anything that needs high temperature or corrosion resistance.

39:36And also is like kind of the unsung hero of high energy batteries where these lithium -transition metal oxides which are high nickel. Manganese is important. Manganese goes into a lot of alloys and also goes into batteries. The uranium if decision is going to continue to grow and we're going to continue to like deploy more nuclear capacity in the rest than uranium is going to be needed. It's a long list and the rare earths they're important. Obviously they are omnipresent in like everything that we use. But they show up as a relatively small on a volume basis when we look at kind of the stack of metals that we need to mine.

40:08Definitely, we need a ton of process innovation in how rare are refined. Solving extraction circuits are kind of like the status quo. The chemical intensity is high and the recovery is relatively low. And the know how is kind of like highly concentrated in China. But it is a little bit of a frothy market right now. And so being a diversified minerals company kind of enables us to pick our spots and areas where it makes sense. like these things still do move on commodity cycles. And you actually want to be building infrastructure at the bottom of commodity cycles, not at the top of commodity cycles.

40:38That's the Warren Buffett quote of Invest when there's blood in the water. Like you want to be coming into metals when they are at this trough, really, where no one is investing in them. They still have a macro long term critical point with them is exactly in this position right now. And that's why we're focused on lithium. Copper just has this macro trend that is pretty hard to ignore. We're just gonna need an insane amount of copper. where copper grids are going down globally, which means that our ability to extract copper from those ores is gonna get harder and harder to extract copper from those ores.

41:07And that's where the Planto S -Hide of Things we have a high degree of confidence that we'll be able to step in and optimize the refining circuits to still be able to extract copper from these lower -grade ores without seeing meaningful kind of cost increases. So everyone knows people here takes forever to get a mine started. I don't know how many new greenfield mines we've developed in the United States in the last decade. Not many. Yeah. And then Australia and Canada have been able to do this faster, which is interesting. You don't know Canada for moving quickly. What are some of the bottlenecks there?

41:34What does America need to do to accelerate this as one of these companies trying to not only mine, but also refine in the United States? Like what needs to be done? One thing that folks don't always see is actually the permitting requirements for exploration. So if you are exploring over on federal land, if you're exploring over more than a five acre parcel, you have to submit like a plan of record or a plan of operations that needs to be approved by the BLM before you can start to expand and explore over a larger piece of land. And so bringing down the permitting thresholds and the permitting burden associated with exploring, like that is why we have such a relatively small rare earth resource.

42:09It's like it's not because there isn't, like the US has tons of natural resources. And the kind of like USGS estimate for like the US reserve on rarest just picking on that, like that is tied to lack of expiration activity, not necessarily fundamentally like a lack of kind of geology presence. Yeah, we haven't either. We haven't looked forward towards, Yeah, it's hard to find in high concentrations that are mindable, which we're trying to drop the percentage requirement that makes something economical. But it's also that there's just a lot of permitting burden to be able to actually go into play droids to go and actually explore.

42:40And then the government currently is doing a good job of highlighting the importance of the minerals industry. And you're definitely seeing a little bit of a tone shift over the last 20 years. That is much more supportive. There's way more tailwinds when it comes to making mining viewed in a more positive light in a critical light, and that will help to solve some of the talent pool problem, where people that are awesome, they want to go build things. They don't want to go and work on a project that sits around for five years and maybe gets permitted and maybe doesn't. They want to go work on hard problems where they can see the impact of the work that they're doing.

43:13And so if we're getting in the way of enabling projects to get built, that is actually a major deterrent for talent, because they want to actually see the like output of their work. And then I think the permitting requirements broadly for going from a discovery to an operating asset. There should be a big focus on efficiency in reviewing environmental permits. There should be a big focus on streamlining those workflows in the back and forth between field offices and state offices from the BLM just focusing on the federal side of things. Because the way that projects get permitted right now is you'll throw like your environmental assessment over the table and then they'll go and they'll divvy it up between a whole bunch of experts or like kind of consultants that they bring in to review the permit.

43:51And they'll get back to you eventually at some point. But there isn't a lot of visibility into how they are progressing with reviewing the permit applications. And discussions are getting more bilateral. And again, there's been definitely a change with the new administration where there's a lot more accountability on the permitting offices. But there's tons of room for making those reviews more efficient. And again, LLMs will make it more efficient. We just need to penetrate that side of the federal bureaucracy and enable people to review things faster. What else, aside from kind of permitting efficiency, what are other things that if you could send a list of recommendations to the government for what they should do to support the US mining industry, what would be your top three?

44:30Yeah, I think supporting the demand side is probably like the biggest lever. And if you want to mobilize kind of private capital into the sector, having some level of support on the demand side is major. And so that's offtake agreements with floor pricing and they did this just now with MP materials and that ideally provides some stability on the revenue side of things so that investors like there's trillions of dollars of capital kind of like dry powder just sitting around waiting to be deployed. It is historically kind of avoided the mining industry because of the market price uncertainty. And so as soon as you provide it's a commodity cycle and what if you're building at the wrong time and yet the infrastructure funds are not the ones that are here to play like the intelligent about the commodity price cycle like they're looking for a new type of returns.

45:07And so those folks would mobilize if there were more demand side support from the government, either providing price floors or fixed pricing for critical minerals that you're trying to incentivize more production of in the US. Participating in the capital stack is important. I think lowering the hooks or the extra burden that comes in with receiving government funds is important. And like some government agencies probably have more leeway to do that. Like the DOD, obviously, again, just did this big deal with MP materials. And actually it went all the way to participating in the cap table or as an equity holder.

45:40But when you receive federal funds from the DOE or if you receive federal funds from like on the debt side of things from XM, it comes with some like additional burden sometimes. If you are building on state land and you just need a state permit and then you bring in federal funds, you now bump your permitting requirement to a federal level permit. And that's the NEPA process, which again, the NEPA process wouldn't be as burdensome if there was some more efficiency on the permitting side of things. Middle deposits, specifically the high grade of middle deposits, don't obey borders. Is there a broader international strategy here?

46:11I mean, it would love to think we can mine and we'll find everything in the United States. But obviously there's a lot, Australia, Canada, Latin America, Africa, underwater, sea floor. What is the overall strategy in your mind? We're starting in the US because it's closer to home and we're focused on developing a platform that we can scale off of. But at no point have we told ourselves that the US is the sole focus. Like you have to be able to bolster the company to be able to operate internationally if you want to be able to scale beyond the resource base that the US has available today. And so more expression is going to happen in the US.

46:45We'll probably discover more resources and that pool will grow over time of projects that we can build in the US. But yes, we are absolutely going to expand overseas and underwater maybe. When we look back a decade from now, what's the single clearest indicator that Mariana has achieved when it's set out to do? We won't be as worried about our ability to secure the critical minerals that we want to secure because we will have kind of rebuilt and established like an entity ideally that is able to go across borders to your point and build these projects cost effectively, time effectively and responsibly, ultimately.

47:20And the reason that we are so panicked about it right now is because we have fundamentally lost the ability to build large scale infrastructure and we have lost the ability to operate complex minerals plants. That's where we have lost. And we need to build that back. We want to build 10 projects in 10 years. Those projects will be an increasing scale over time, but the work will not be done in 10 years. What I think will have demonstrated that the 10 -year mission will have been accomplished other than building those 10 plants is that we will no longer be as worried about our fundamental capability to go and build this complex infrastructure.

47:52We will have unlocked it. Thanks for listening to the A16Z podcast. If you enjoyed the episode, let us know by leaving a review at ratethispodcast .com slash a16z. We've got more great conversations coming your way. See you next time.