Fireside Chat with Ambassador Kevin Rudd

SAFE
15 Mar 202415:43

Summary

TLDRIn a rapid-fire fireside chat, the former Australian Prime Minister and Ambassador discussed the pressing issue of nickel market dynamics and its impact on Australia's role in the global transition to a minerals-based economy. Highlighting a market failure due to a dominant player's monopoly and monopsonistic purchasing, the conversation delved into strategies to ensure resilient supply chains, the importance of ESG-compliant nickel for renewable energy, and the need for transparent pricing mechanisms. The discussion underscored the urgency of collaborative policy solutions to secure a reliable and sustainable supply of critical minerals, emphasizing the 'green premium' as a security premium for the future.

Takeaways

  • 🌐 Australia is a significant player in the mining industry, being the largest supplier of lithium and a major producer of other critical minerals such as nickel, cobalt, and rare earths.
  • πŸ“‰ There is a perceived market failure in the nickel industry due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser, leading to a concentration issue and operational pauses for several Australian nickel operations.
  • πŸ”„ The Australian government, along with partners in the United States and Canada, is actively seeking solutions to the market challenges in the nickel industry to ensure a resilient supply chain for the global transition to a minerals-based economy.
  • πŸ” The importance of transparency and the need for a separate listing mechanism for ESG-compatible nickel is being discussed to differentiate it from other types of nickel, such as that used for stainless steel production.
  • πŸ’‘ The conversation is focusing on creating a new listing for battery-grade nickel to meet the emerging demand in the market and to ensure ESG standards are met, which is crucial for the production of electric vehicles (EVs) and renewable energy transformation.
  • πŸ›‘ The immediate challenge of price disparity in the nickel market is being addressed by governments, with the aim of finding a solution that balances the need for a 'green' or 'security' premium with affordability.
  • 🌍 Diversification of supply chains for critical minerals, including nickel, is essential to avoid over-reliance on any single source and to ensure the security of supply for the clean energy transition.
  • 🀝 International collaboration, such as the critical minerals compact between Australia and the United States, is key to addressing the challenges in the supply of critical minerals and building a sustainable and secure supply chain.
  • πŸ“ˆ There is a growing awareness and urgency among policymakers and industry stakeholders to act on the challenges posed by market concentration and to develop policies that support a reliable and green supply chain.
  • πŸ’Ό The speaker, a former Prime Minister of Australia, emphasizes the national and global responsibility Australia has in supplying critical minerals and the importance of embracing ESG standards to support the global economy and the clean energy transition.

Q & A

  • What is the main topic of discussion in the transcript?

    -The main topic of discussion is the convergence of market challenges, pricing challenges, standards, and the ability to have resilient supply chains, particularly focusing on the impact of these challenges on the nickel industry in Australia and its implications for the global transition to a mineral-based economy and electrification.

  • What is the current issue with the nickel market according to the Ambassador?

    -The Ambassador identifies a market failure in nickel due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser, leading to a collapse of market principles and causing several nickel operations in Australia to pause.

  • How does Australia's position as a mining country relate to the critical minerals market?

    -Australia is a significant player in the mining industry, being home to three of the world's largest mining companies and having a long history in mining. It is a leading supplier of critical minerals such as lithium, cobalt, rare earths, and nickel, which are essential for modern technologies and renewable energy.

  • What is the Australian government's approach to addressing the market failure in nickel?

    -The Australian government, in partnership with the United States and Canada, is seeking to take action rather than just acknowledging the problem. They are exploring policies to improve transparency and develop different listing mechanisms for ESG-compatible nickel to ensure a reliable and sustainable supply.

  • Why is the establishment of a separate listing for ESG-compatible nickel important?

    -A separate listing for ESG-compatible nickel is important to differentiate it from other types of nickel, such as that used for stainless steel production. This differentiation is crucial for meeting the emerging demand for nickel that is produced with environmental, social, and governance (ESG) standards in mind, which is essential for the production of electric vehicles (EVs) and renewable energy technologies.

  • What is the significance of the 'green premium' mentioned in the transcript?

    -The 'green premium' refers to the additional cost associated with sourcing materials that are produced with ESG standards. It is not just an environmental consideration but also a security premium, ensuring the reliability, safety, and sustainability of supply chains for critical minerals.

  • How does the conversation with Canada on diversifying supply chains for critical minerals like nickel play out?

    -The conversation with Canada involves working together to address the challenges of concentrated supply chains and to establish higher standard supply chains. This includes discussions on alternative sources of supply and the complexities of both supply and demand, with the aim of creating reliable, safe, secure, and green supply chains.

  • What is the role of the critical minerals compact between Australia and the United States?

    -The critical minerals compact between Australia and the United States is an agreement signed by the two countries' leaders to collaborate on turning the vision of secure and sustainable supply chains into reality. It involves close cooperation and discussions on policy solutions and strategies to address the challenges in the critical minerals market.

  • How has the issue of market challenges in critical minerals manifested when the Ambassador was Prime Minister of Australia?

    -During the Ambassador's tenure as Prime Minister, these issues were not as prominent. The trend lines of market challenges in critical minerals were barely emerging, and it has taken time for analysts and policymakers to understand the impact of the scale of the Chinese economy as a purchaser and supplier, particularly with state actors involved.

  • What message does the Ambassador leave with the audience regarding the future of nickel production and supply chains?

    -The Ambassador emphasizes the importance of recognizing the reality of the challenge and moving towards policy solutions rather than just acknowledging the problem. He encourages the audience to see the 'green premium' as a security premium, ensuring the sustainability, reliability, and safety of supply chains for critical minerals like nickel.

Outlines

00:00

🌐 Market Challenges and Nickel Dynamics in Australia

The speaker expresses gratitude for the audience's engagement and introduces the topic of market challenges, particularly focusing on nickel and its role in Australia's economy. The conversation highlights the issue of market failure in nickel due to a dominant monopoly and monopsonistic purchaser, which has led to several operations in Australia pausing. The Australian government, along with partners in the US and Canada, is actively seeking solutions to this challenge. The importance of nickel and lithium in battery production for electric vehicles (EVs) and renewable energy is underscored, emphasizing the need for a reliable and ESG-compatible supply chain. The discussion suggests the development of new policies and a 'green premium' to address the market failure and ensure a sustainable supply of critical minerals.

05:01

πŸ“Š Addressing Nickel Market Failures and Supply Chain Diversification

This paragraph delves into the specifics of addressing the market failure in nickel. The conversation centers around the need for greater transparency in listing arrangements to differentiate between nickel used for stainless steel and battery-grade nickel. The potential for a new listing mechanism for ESG-compatible nickel is discussed, with the aim of attracting end users and original equipment manufacturers (OEMs) to commit to higher standards. The importance of price and the challenges of immediate price gaps are acknowledged, along with the long-term implications of a single monopolistic entity controlling the market. The discussion also touches on the geopolitical aspects and the need for secure and green supply chains, not just for nickel but across all critical minerals.

10:01

🀝 International Collaboration for a Sustainable Supply Chain

The speaker, a former Prime Minister of Australia, discusses the importance of international collaboration in ensuring a sustainable supply chain for critical minerals. He highlights the challenges faced by countries in recognizing the scale of the issue and the need for collective action. The critical minerals compact between Australia and the United States is mentioned as a significant step towards addressing these challenges. The conversation also involves Canada and the potential for collaboration with African countries that have sulfide nickel deposits. The speaker emphasizes the importance of understanding both supply and demand complexities and the role of powerful minds in finding solutions to the challenges posed by market monopolies and the need for ESG-compliant operations.

15:02

🌿 The Imperative for a Green and Secure Supply Chain

In the final paragraph, the speaker reflects on his experience as Prime Minister and his perspective on the evolving challenges related to critical minerals. He acknowledges the slow realization of the scale of the issue and the need for a sense of global responsibility. The speaker calls for the Chinese economy to embrace its climate and sustainability responsibilities and for the construction of reliable, safe, and secure green supply chains. He concludes by emphasizing the importance of a 'security premium' over a 'green premium,' suggesting that the focus should be on ensuring the security of supply, which inherently includes clean and safe practices for workers and the environment.

Mindmap

Keywords

πŸ’‘Nickel

Nickel is a chemical element with the symbol Ni and atomic number 28. It is a silvery-white lustrous metal that takes a high polish and is used in various industries, notably in stainless steel and batteries for electric vehicles. In the video, the discussion revolves around the market dynamics and challenges affecting the nickel industry, particularly in Australia, and its impact on the global transition to a minerals-based economy.

πŸ’‘Market challenges

Market challenges refer to difficulties or obstacles that affect the functioning or performance of a market. In the context of the video, these challenges include pricing issues and supply chain disruptions, especially concerning nickel. The script mentions that there is a 'market failure on nickel' due to a single dominant player, which is causing operations to pause and affecting Australia's ability to serve the global market.

πŸ’‘Pricing challenges

Pricing challenges are issues related to the cost or value of goods or services in the market. The video discusses the current situation where there is a concentration of market power leading to a collapse of market principles and affecting the price of nickel. This is a critical issue as it impacts the viability of nickel operations and the broader mining industry in Australia.

πŸ’‘Supply chains

Supply chains are the networks of organizations, people, activities, information, and resources involved in producing and delivering a product or service. The script highlights the importance of resilient supply chains in the context of market challenges and the need for Australia to maintain its position as a key supplier of critical minerals like nickel to support the global transition to a minerals-based economy.

πŸ’‘Resilience

Resilience in the context of supply chains refers to the ability to withstand or recover quickly from difficulties. The script emphasizes the need for supply chains to be resilient in the face of market challenges, ensuring that the supply of critical minerals like nickel remains stable and reliable for the global economy.

πŸ’‘Electrification

Electrification refers to the process of converting a system or industry to use electricity as the primary power source. The video discusses the importance of nickel and lithium in battery production for electric vehicles (EVs), which is a key component of the global shift towards renewable energy and electrification.

πŸ’‘ESG

ESG stands for Environmental, Social, and Governance, which are three central factors when measuring the sustainability and societal impact of an investment in a company or business model. The script mentions the need for a reliable and ESG-compatible supply of nickel and lithium, emphasizing that without it, the goals of renewable energy transformation could be undermined.

πŸ’‘Monopoly

A monopoly is a situation in which a single company or entity dominates a market, often leading to reduced competition and potentially higher prices. In the video, the Ambassador discusses the issue of a single dominant player in the nickel market, which is causing market principles to collapse and affecting the operations of nickel mines in Australia.

πŸ’‘Monopsony

Monopsony is the opposite of monopoly, where there is only one buyer in a market, allowing them to control the price of goods or services. The script refers to a 'monopsonistic purchaser' in the context of the nickel market, which, combined with a monopoly, leads to market failure and challenges for the industry.

πŸ’‘Transparency

Transparency in a market refers to the openness and clarity of information, which is crucial for fair trading and decision-making. The video script suggests that improving transparency, particularly in the listing and pricing of ESG-compatible nickel, is a necessary step to address the challenges in the nickel market and ensure a reliable supply for the future.

πŸ’‘Green premium

A green premium refers to the additional cost associated with products or services that are environmentally friendly or sustainable. The script mentions the concept of a 'green premium' in the context of paying for higher standard sourced nickel, suggesting that the premium is not just for environmental benefits but also for security, safety, and reliability of supply.

Highlights

The conversation is set to be the fastest fireside chat ever on a difficult topic, the nickel pickle.

Australia is a major player in mining, especially critical minerals like nickel, which is essential for the global transition to a minerals-based economy and electrification.

There is a market failure in nickel due to a single dominant player acting as both a monopoly producer and a monopsonistic purchaser.

Approximately 80% concentration with a single player leads to the collapse of market principles, affecting nickel operations in Australia.

The Australian government is working with partners like the United States and Canada to address the nickel market challenges.

The importance of nickel and lithium in battery production for electric vehicles (EVs) and renewable energy transformation is underscored.

A lack of reliable and ESG-compatible supply of nickel or lithium could undermine the purpose of renewable energy efforts.

There's a push for better transparency and a different listing mechanism for ESG-compatible nickel to differentiate it from other types.

The London Metal Exchange is resistant to separate listings for different types of nickel, raising questions about market responsiveness.

There's an emerging demand for a separate market listing for battery-grade nickel to meet the needs of the EV industry.

End users and OEMs are interested in a different pricing mechanism for higher-standard sourced nickel to drive ESG standards globally.

The conversation about a new listing for battery-grade nickel sulfate is ongoing, with end users considering the benefits of higher standards.

Long-term ESG requirements, driven by legislation like the Inflation Reduction Act (IRA), are prompting OEMs to look at supply chain standards.

There are concerns about future price manipulation and supply uncertainties if the nickel industry collapses into a single monopolistic entity.

Diversifying supply chains for critical minerals like nickel is crucial for the clean energy transition and involves international cooperation.

The Critical Minerals Compact between Australia and the United States is an example of ongoing efforts to build reliable supply chains.

Ambassador Red, a former Prime Minister of Australia, brings a wealth of leadership and knowledge to the discussion on critical minerals.

The challenge is to balance national interests with global responsibilities, ensuring secure, safe, and green supply chains for critical minerals.

The discussion calls for a shift in consciousness towards policy solutions rather than perpetually admiring the problem.

The 'green premium' for ESG-compatible operations is reframed as a 'security premium' for supply, cleanliness, and worker safety.

Transcripts

play00:03

hello everybody I'm so happy to see

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you're still here You' bear with us for

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two very intense days of conversation

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and it's only going to get more intense

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I'm very honored any entertainment out

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there we we are the entertainment oh

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yeah we're we're we're closing closing

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entertainment for everybody they're

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expecting a comedy roast I'm sure uh I'm

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really honored to be joined by the

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Ambassador who I won't go through his

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really distinguished background because

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we are going to accomplish The

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Impossible and have the fastest fireside

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chat of all time on a really really hard

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issue the nickel pickle uh so Ambassador

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I want to get right to it with you you

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know this is the this is the topic

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that's been permeating throughout

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conversations and the conference it's

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the convergence of Market challenges

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pricing challenges standards uh and the

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ability to have you know these resilient

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Supply chains and Australia is really in

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the middle of it so you know yesterday

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we got great uh great great insight into

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the the past couple of months on the

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nickel side so maybe we'll pick off from

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where we left off and just get to the

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real human impact of what's happening

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with Nickel in Australia as a result of

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these market dynamics a and then B what

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does this mean for Australia's ability

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to serve the the global transition to a

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minerals based economy

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electrification well thanks um Australia

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as you know is a very big mining country

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um has been for a very long time three

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of the world's largest mining companies

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are Australian we've done this we've

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done it for 100 150 years in some cases

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so we know what we're doing um secondly

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um in the hard rocks and in terms of um

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critical minerals of which nickel is one

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if you go to your periodic table

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basically you find most of it in

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Australia um first

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largest largest supplier in the world of

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lithium third or fourth largest in terms

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of cobalt rare Earths following not far

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after that and nickel probably fifth

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largest so let's cut to the chase on

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nickel um

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uh at around the world at the moment

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what we would say I think is there is a

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market failure on nickel and that's

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because you have a single dominant

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player both as a um uh as a monopoly uh

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producer and also as a monopsonistic

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purchaser and so you put those two

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factors together and when you get sort

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of 80% concentration with a single

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player frankly Market principles

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collapse which is why you've seen in

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recent times five or six uh nickel

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operations in Australia uh go into um

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into um pause let's say so the key

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question given that challenge is what do

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we do about it we can either admire the

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problem or do something about it and

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what the government and Australia is

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seeking to do with Partners in the

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United States and Canada is to do stuff

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about it so let's let's hear maybe a

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little bit more about that you've done a

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great job as have several of the

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companies that you've implicated really

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underscoring the challenge that we're

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facing with n today but how are we

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turning this talk into action What

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policies are we going to utilize to

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solve this problem Robbie was saying

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backstage that this is this is the face

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of all of that we are struggling with at

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this conference as we we transition um

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and it has a name now in nickel so

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really really interested to hear how

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you're building on policies how you're

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developing new ones how we have a green

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premium okay good well uh one point

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that's been necessary in the entire

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transition debate cuz not everyone's

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completely across it is the fundamental

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role of nickel and lithium uh in battery

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production and and therefore the

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production of EVS which is fundamental

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to fundamental to renewable energy

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transformation around the world but if

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you don't have a reliable uh and frankly

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uh ESG compatible supply of nickel uh or

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lithium then frankly uh you're going to

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be defeating your own purpose which is

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where this big monopolistic

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monopsonistic player comes into the

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market so that's the definition of the

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problem what can you do about it I think

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one of the things that um governments uh

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are now discussing we're listening very

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closely to the industry uh companies

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like you know BHP and Wu that's foris

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and Australia but others as well is that

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a minimum level of transparency is a

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time to develop a different listing

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mechanism for the price of ESG

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compatible nickel nickel is a um is uh

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has a different uh chemical composition

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for example when you're producing

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stainless steel which is how it's listed

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for example crudely on the London Metal

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Exchange as opposed to battery grade

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nickel which is what we're talking about

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so I think the time has come for there

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to be two separate listings lme don't

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like that um and uh they should answer

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to the world why because I think now

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there is a cleared emerging demand in

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the marketplace to service this

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additional need so pillar number one of

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transformation

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of U processed critical minerals Market

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starting with nickel uh is to have

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better more transparent listing

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Arrangements which enables two suppliers

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uh to then use set exchange and three uh

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oems and others to step up to the plate

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and indicate that they would use it of

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course this gets down to the

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nitty-gritty question of price I don't

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push that to one side but these are the

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sorts of uh discussions that we're now

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engaged in and so on on getting this new

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listing for battery grade nickel nickel

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sulfate how is that conversation going

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are the end users interested in having

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this different PR pricing mechanism to

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see potentially the opportunity to pay

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for higher standard sourced nickel that

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you have in Australia Canada and other

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parts of the world to then drive those

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standards um in the places that don't

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currently adhere to them as closely when

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you see end users including oems will

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over time have to respond to Ira

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requirements anyway and so therefore

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you're going to need to be looking at

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listing Arrangements which are specific

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to inputs which are Ira compatible uh

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and that means embeding uh ESG standards

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of the type you use in the United States

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the type you use in Australia the type

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you use in Canada uh into the one as it

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were approach and so therefore a number

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of oems can see the future coming and

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the IRA compatibility uh crossover date

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is probably around 27 or 28 uh in which

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case we're in 202 for now so this is not

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you know uh this is not future Rama this

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is uh this is in the here and now so

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that still doesn't solve your immediate

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price Gap problem um but here's the

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other factor that people are putting

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into their mind if you allow this uh

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industry to Simply collapse into the

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hands of a single monopolistic

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monopsonistic player then what happens

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you're also beginning to engender

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long-term uncertainties about Supply and

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furthermore if you have a single player

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in nickel think about what therefore

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happens once all the competition's

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eliminated in terms of future

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manipulation of price uh in other words

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it's the hazard of um of trust and

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antitrust which you in the United States

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dealt with more than 100 years ago in us

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uh economic law so for those reasons

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you've got a number of oems looking at

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long-term ESG requirements coming in

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anyway because of the IRA but also what

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their shareholders and stakeholders are

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saying separately to that and then on

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top of that uh you've got this parallel

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uh concern about future manipulation of

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price Andor provision of Supply uh if

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there are geopolitical problems in the

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future so I think that's why a number of

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players out there are frankly engaged

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not just theoretically but in a very

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practical way with this discussion

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doesn't overcome the immediate question

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of price and governments are now

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wrestling with this but I'm confident we

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can land something

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that's great to hear this this degree of

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optimism you know you mentioned working

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with Canada so I'm curious how do you

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see and maybe this is in the other

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pillars of driving higher Standard

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Supply chains here as we start to

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diversify a very very concentrated

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supply chain not only for nickel but for

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the other Commodities that you mentioned

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that are needed for the clean energy

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transition so how how is the

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conversation with Canada on this going

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are you talking to some of these African

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countries that have sulfide deposit

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nickel sulfide deposits as well where

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they're trying to do this to a certain

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standard is there a coalition of the

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interested that are trying to work on

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this I think the truth is that many of

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our countries around the world have been

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slow to realize the dimensions of the

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challenge and this is no criticism of

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any government in particular it's just

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it's taken a while for everyone to

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reverse engineer what's happening uh vis

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a nickel what's happening with critical

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minerals more generally where nickel

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goes see that as a market leader for

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where nickel uh for for where lithium

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goes Vis A Monopoly and

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monopsony uh and then uh look at what's

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happening in terms of finish products

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Vis A the EV Market itself and so for

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those reasons countries have sort of

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looked at the manifestation of the

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problem with nickel uh companies

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operating on ESG standards falling over

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some lithium uh um uh mines and

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processes finding the same problem and

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then the emergence of problems in the

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auto sector itself so here uh through

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the critical minerals compact between

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Australia and the United States signed

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by the Prime Minister and prime minister

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albanesi and President Biden last year

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at the G7 at Hiroshima uh we've been

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working like Trojans since then to turn

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Vision into reality and the Canadians

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are now engaged in separate

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conversations through our resources

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Minister meline King including just last

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week uh in Canada and down here in

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Washington I think you had amamos Hawkin

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around the table here earlier today and

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so amamos and the rest of the US

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government team and ourselves wrestling

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this to the ground we're very mindful of

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alternative sources of um Supply around

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the world we understand some of those

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complexities we also understand the

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complexity on the demand side which is

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what do the oems do in the interim as

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well but uh I've got to say there are a

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lot of powerful minds at work on this as

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we speak I I'm curious for those of you

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who don't know Ambassador red was

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previously prime minister himself of

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Australia and so comes at this issue

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with Incredible amount of leadership and

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knowledge so I'm curious when you were

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prime minister was this topic at all

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percolating have we seen this coming

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obviously as a as a mineral rich country

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as a mining exporter with Incredible

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amounts of expertise Australia cares

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about these issues deeply but how did

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this manifest when you were when you

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were back in

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Cur if at all

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the truth I mean I by trade I'm a China

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specialist I mean that's what I um cut

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my teeth on I'm a Chinese linguist I've

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worked in our Embassy in

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Beijing um and uh before I started

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sliding down the food chain of life into

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politics um and uh and ended up as prime

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minister um so um so I've looked at this

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both through the national interest lens

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uh what is China doing in the world lens

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uh as well as the specifics of frankly

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uh the benefit which Australia

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represents to the world is having in its

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possession uh nine of the 10 most

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relevant critical minerals at scale

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already producing and you add graphite

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uh then our prospectivity and potential

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is huge as well so we come to it with a

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sense of national uh responsibility to

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our own industry in terms of its wealth

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generation capability but secondly we

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have an emerging sense of global

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responsibility I left office just on

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about about a decade ago these uh trend

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lines were barely emerging that's just

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the truth of it and I think it's taken

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us a while including those of us who are

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specialist analysts of the Chinese

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economy to understand the sheer impact

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of the scale of the Chinese economy as a

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purchaser and as a supplier particularly

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if you have significant hands of State

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actors in the middle of both and that is

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why we are all wrestling where whether

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it's with critical minerals uh whether

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it's with uh energy uh whether it is

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with uh energy more broadly uh whether

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it is with finished manufacturing Goods

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such as EVS but more broadly across the

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Spectrum or look at the debate now

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unfolding in relation to high technology

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uh this is the same wrestling with

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challenges to markets by an economic

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actor of unprecedented scale and so part

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of our challenge is to cause our Chinese

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friends to fully embrac their Global uh

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climate and sustainability

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responsibilities part of the challenge

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is for us to operate within the

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realities of contemporary geopolitics

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and to construct as to the greatest

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extent we can reliable safe secure and

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green Supply chains not just for nickel

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but across the critical minerals

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category for the economies of the world

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uh in particular those who would be

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vulnerable in the future so we have

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about a minute and a half left here so I

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want to give give you one last

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opportunity to maybe send a message to

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the audience we've got people from the

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hill here we've got people across

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critical mineral Supply chains Juniors

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refiners processors we have oems in the

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room we were just with under secretary

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Fernandez who's up next behind stage

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people who care about the multinational

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Coalition building of these issues what

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what do you leave them with you know

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bring us back to maybe that optimism

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will we have more nickel production in

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Australia and Canada are we going to be

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stuck with all these wonderful

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Alternatives that we heard about

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yesterday okay according to this clock I

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have an hour and no it's a minute and 3

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seconds to uh to make the P I was just

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warming up the uh in politics who never

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do things by half um I think the bottom

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line is this one communicating the

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reality of the challenge and the problem

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that of itself uh begins to change

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Consciousness and push us in the

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direction of policy Solutions rather

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than the permanent admiration of the

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problem uh to give you one classic

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example Beyond nickel lithium uh we have

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one of the largest lithium mines in the

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world in Western Australia uh green

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bushes here is the Dynamics for the

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whole industry worldwide one in four

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devices in the world uh uh currently

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uses lithium which can be sourced from

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that single mine the world economy

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therefore has an interest in us

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sustaining uh an ESG

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compatible um uh set of operations in

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Australia Canada the US and elsewhere so

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that we can be reliable suppliers to the

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global economy for the future some will

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say well don't know if we can all afford

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a green premium I would say to you all

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it ain't a green premium it's a Security

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Premium security of Supply it also is

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clean on the way through and also safe

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for workers which I think is of of

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importance to all folks around the world

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or at least it should be that's a great

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way of putting it thank you so much

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ambassador for joining us today and

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thank you guys for for standing with us

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please join me in thanking Ambassador

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[Applause]

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[Music]

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Related Tags
Nickel MarketClean EnergySupply ChainsESG StandardsGlobal EconomyMining IndustryMarket DynamicsSustainabilityEV TransitionGeopolitical Impact