Nick Snyder, Pete Thomas - VP of Zaner Precious Metals, and Scott Poland - Scrap Division at Zaner Precious Metals

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Nick Snyder:
Alright. Welcome everybody. We're here with another episode of Cats Corner to go over the PGM markets and see how the catalytic converter pricing's doing. Can my two guests please introduce yourself to everybody.

Pete Thomas:
I'm Pete Thomas, Senior VP over at Zaner Precious Metals. I'm responsible for the desk that handles recycling, refining, gold bullion dealing, things of that nature.

Scott Poland:
My name is Scott Poland. I'm an understudy here at the Zaner team, working for Pete and some of our other industry experts. I've been working with metals for over 10 years, started studying mining geology in Duluth, Minnesota, and it's taken me all over the world.

Nick Snyder:
That's awesome, man. Alright guys, tell us what's going on in PGMs.

Pete Thomas:
I think the most important thing now are the new laws that are coming out that you've gone over. I know some of the conversation with source was a little confidential, but if you could work around and give us some of our guys the changes that are coming, I think that would be important for Nick's show.

Scott Poland:
Yeah. So I've just got my note sheet here. Over the last couple of days and months, there have been a series of meetings with ISRI and state government officials to try to clarify how to work with the catalytic converter theft issue. A big part of the legalese is the vocabulary that's used to define what a catalytic converter is and what business entity is recycling and processing a catalytic converter. So on a national scale that is taking a significant amount of manpower and woman power, because we want to make sure it's done properly so these new laws or modifications to existing laws... it doesn't create loopholes or further challenges for recyclers. Billy Johnson who works with ISRI, he tracks this every single day. That is his job. I think the New Jersey Bill #3608... it is the stance of the industry that that needs to be further reviewed and it would be better if on a national scale, we adapted and changed existing metals theft laws rather than write new metals theft laws. Because as you know, your business has a significant amount of documenting and reporting you do when people come in to sell metal, and it's easier to adapt that to include catalytic converters than to write entirely new rules for catalytic converters.

Scott Poland:
The program, the Etch & Catch initiative is kicking off. If you have a high temperature paint pen, go under your car and write your VIN on your catalytic converter. That is the easiest first step you can take to make sure if anything happens with your catalytic converter, it's got something written on it that ties it to your vehicle. It's been talked about having the VIN of the vehicle written on catalytic converters as an idea of a way to prevent and improve record keeping for theft prevention for this issue. Today, I think, Danielle Waterfield with ISRI is doing a fantastic job.

Scott Poland:
And then, Steve Levetan is a huge industry advocate and he does a fantastic job making sure that recyclers, our voices, are being heard so that we don't have any rogue legislation coming through in one state that varies from other states too far that makes our interstate activities too complicated, if that makes sense.

Pete Thomas:
Well, we've been a member of ISRI for a very long time. The last meeting I was at was very beneficial. They're fighting for us every day. We sure appreciate them being out there. Give them a little plug here because they deserve the support that we give them. I think, where we're going to end up with this, Nick, is that what they're going to end up doing is just putting a plate on every catalytic converter, because the theft is getting so large state to state now that if it doesn't come in with a plate, it just can't be sold.

Pete Thomas:
It's going to be done rather than our federal level, Scott, correct me if I'm wrong, but we're looking at the first Jersey law, which is the one they're using kind of as a template. It looks like they're going to try to spread it state to state and lay down what the code is going to be and what the stamping is going to look like and then they're going to just go state to state rather than changing all the federal laws, they just go, your cats have to have this stamp on it in order for you to receive it. Am I right Scott?

Scott Poland:
Yeah. We are a union of states and this is better addressed on the state level. That's the consensus.

Pete Thomas:
It'd be faster.

Scott Poland:
Yeah. The consensus is states should take care of this with their existing metals theft laws, as it's easier to make amendments than it is to write entirely new legislation.

Pete Thomas:
Okay. Nick, you're kind of up to speed with what's happening with ISRI and the national laws. It's obviously moving slow. There's 50 states. We've got the first one in and now we're going to see who follows what.

Nick Snyder:
No, it's good. I mean, that's the last thing any of us scrappers or recyclers want is to deal with stolen stuff. We always want to deal with reputable businesses that are, again, those scrap-

Pete Thomas:
Of course, you do.

Nick Snyder:
And cars being one of the most recycled items in the United States, you're going to have a lot of legit recycled converters, without the shitbags stealing them, because it gives us a bad name.

Pete Thomas:
Oh, yeah. For sure. This is what I'm thinking, and you tell me what you think. I'm just thinking you take your gun and you scan it in and it goes right into your system. And if you're hooked up with Zaner Tornado platform, it's instantly sold or hedged and it goes right into your bookkeeping and it goes straight through to your QuickBooks or whatever you're using and it's all done instantly. And it will be very, very fast and efficient once the commercial people get ahold of it.

Nick Snyder:
Yeah, absolutely. So just going back to how the markets are doing though, so what do you guys feel how the third quarter is going to treat the PGM markets?

Pete Thomas:
Well, here's the issue and you and I have discussed this before. Demand is... it's going to flux. It's going to be kind of choppy right now because we're not getting the chips in to build the cars. And the problem is that the rare earth, the metals that you need in order to create a chip they're in short supply, they're difficult to get, and we're going to continue to see shortages of chips, which means that less cars are rolling off. As we know, Ford's been laying people off, we're seeing less production and without chips, we're not going to have cars. And if we're not building cars, we're not going to have catalytic converters.

Nick Snyder:
[inaudible 00:07:59] chips are coming through, they can start building cars, putting more converters on those cars, and then that's going to help those values go back up?

Pete Thomas:
So that's the picture, my friend and we believe that that is going to be one of the big demands. Also a secondary demand, which I think all of your viewers need to start keeping an eye on now over the next year or two, Scott, I'd like you to address what's been going on in Japan.

Scott Poland:
Yeah. So it's been overshadowed quite a bit because of other issues, but the Olympics in Japan are a debut of really revolutionary hydrogen fuel technologies. Toyota, as well as Honda and Kawasaki, they've worked together to provide 500 vehicles. So all the vehicles shuttling athletes and staff members around the Olympic village are powered by hydrogen. There's a hundred buses with huge power packs on each of those, powered by hydrogen fuel technology. There have been lots of issues with the Olympics and I won't be a critic of something I didn't work on directly, but the lights are on and all of the power is coming from hydrogen fuel technology. Even when you look at the torch, and this is a good example, that torch is hydrogen burning, and you'll see the intensity and efficiency of that torch. It's just as different from other torches in the past. You'll see the difference in the burn. And that's hydrogen burning right there.

Pete Thomas:
And tell... the reason, obviously that we're excited about this technology, and it's also by the way, making big inroads in China, is the fact that we're using EGMs to crack water, to split the O2 and the hydrogen off. And in order to start stockpiling O2 as well as hydrogen for powering things. And it's going to be a big consumption usage over the next five years. So unfortunately due to COVID, we didn't get a real good solid launch of this, but it's something for people to keep an eye on.

Scott Poland:
It's very serious. Sorry to cut you off, but they've committed... because they value this as an energy stepping stone, they've already built, I believe, it was either 25 or 35 fueling stations, and they've committed money and resources for 80 fueling stations in Tokyo before 2025, which is right around the corner. And 80 fueling stations, 100 buses, 500 city cars, that's the start of a useful viable fuel source.

Nick Snyder:
So these cars that are using as hydrogen power, do they have a need for catalytic converters on them? I don't know how these hydrogen powered cars work.

Pete Thomas:
Good question.

Scott Poland:
So the rare earth element component of the fuel cell and hydrogen system is the protonic exchanging membrane. It helps facilitate and bring the... the efficiency comes up and the amount of energy that is lost goes down. So that energy gets converted right into fuel. It's chemical energy, to physical energy to move your car.

Nick Snyder:
So the fueling stations, what are they filling the car with? How does that work? I don't understand.

Scott Poland:
I was just reading a paper on this. It's pretty cool. From the paper I was reading, it's a mixture of water and methanol, because it's stable and non-flammable, then water and methanol can be broken down to produce hydrogen. And increasing lithium-ion battery technology, solid state batteries, that are less flammable, they're kind of going for this fire proof... they're really trying to bring the fire risk down on batteries and the explosive component of hydrogen so that it's a safer usable source.

Nick Snyder:
You guys feel like this is the future, rather than electric vehicles like Teslas?

Scott Poland:
It'll be a combination. So your battery will be there to hold and store energy. And a capacitor will help bleed that energy out into your motors and a hydrogen fuel cell is going to be what creates the electricity.

Nick Snyder:
Got you. Okay.

Pete Thomas:
Which is why we're seeing the increase in lithium demand and nickel. Both. President Duarte, if you're watching Nick's show, I'd love to come to the Philippines and talk to you about reopening your nickel mines. Right now-

Nick Snyder:
He's a bright person.

Pete Thomas:
I'm sure he's a big fan. But the thing is Nick, that they're going to need PGMs to crack this off, to create your hydrogen.

Nick Snyder:
[crosstalk 00:13:10].

Pete Thomas:
That's going to give us the demand that we'll be losing as far as getting the NO2 ratios down.

Nick Snyder:
So this is all obviously pretty macro talk right now. Can we go back... talk the week to week? I see just looking at the Kitco App, for example, that you see rhodium up, everything's up. Why are things still holding on... we're not close to the $28,000 rhodium that we had a little while ago, but do you feel in the short term... because those people that listen to our show are more looking what is my cat worth right now today? Not in five years.

Pete Thomas:
Yeah, we're knocking around 2,700 in the Palladium again, really strong morning. They hit it last night in China. And it came back to the Gangbusters, rallied about 30 bucks today. Demand is good. We saw ETFs selling, which are the big powerhouse, the big traders, they started to unload some of their product really last week, Nick. And that pressure has pushed it down a little bit, but we're seeing consumers, guys like us who represent hedgers, who represent end users, automobile manufacturers need it. We're seeing the end users buying it, and they're buying... anytime you see that product get below 25, there's people consuming it. So we're seeing, for your viewers, we're seeing fundamental strength. We're seeing Palladium having a hard time getting through 27 right now, but it's certainly holding 24 1/2 to 25. So let's call that a trading range, Nick, does that feel good to you?

Nick Snyder:
I like it. Yeah.

Scott Poland:
And I want to, just because we live in such a news sensation society and our markets swing so heavily on any news related to each resource... notable mentions, you got to pay attention to the Bushveld complex in South Africa and the Norilsk mine in Russia, the KK mines in Russia, as well, a giant alluvial deposit, supplying a lot of the rhodium into the system. Great Dyke in Zimbabwe, the Sudbury mining region in Canada, and the major producers. Anglo American and Impala. Watch what those 10, 12 groups are doing. And we saw what happened when there were issues in South Africa, and there are issues there right now. And it's very challenging because I've got friends who are from South Africa and lived there. It's really challenging to watch what's going on and not being able to help from here. And just like the issues that they're having across Europe and South America, it's a difficult time we're in right now. And supply chains are so sensitive. Any disruption in any particular place is going to have an effect on the price and especially the futures market, which is going to define where our numbers sit.

Pete Thomas:
So Nick, to go to your question, to give your listeners, your viewers, a good solid input, look... the Impala Mines. I talked to some people very high up in the chain there, and I've been talking to them since the riots started. They're burning the trucks that are delivering the ore. The Durban Court, where a lot of ore comes out of has had large delays. We're seeing... Nornickel is doing their best to expand, but they got Mine 2 open... as everyone recalls when they flooded, all of their equipment was lost. It was underwater for almost six weeks in some cases. And you just don't bring electric equipment back after it's been under water for over a month. So all of that's had to be rebuilt. They're pumping a lot of equity into it to get it up to speed, but we're still seeing them selling reserves and not freshly mined ore. So we might, as we were talking about earlier in your show, Nick, we're going to see some ups and downs here, but I like this trading range. I think that realistically, those levels probably are going to hold.

Nick Snyder:
Okay, cool. We'll keep watching that. We'll keep updating our viewers and listeners-

Pete Thomas:
You bet.

Nick Snyder:
Every Monday to kind of let people know what's going on. Well, guys, I'm going to wrap it up. I appreciate your time.

Pete Thomas:
Absolutely.

Nick Snyder:
Glad we spoke to you. And we'll talk again real soon.

Pete Thomas:
Nick as always, it's a pleasure for you to have us from Zaner Precious Metals on board and we'll try to keep you filled in as best we can when we see something happen.

Nick Snyder:
Awesome.

Pete Thomas:
Great.

Scott Poland:
Thanks for having us.

Nick Snyder:
Thanks Scott. Bye bye.

Pete Thomas:
Bye bye.