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Our guest for this episode is Louis O’Connor, the Founder and Principal of Strategic Metals Invest. Louis brings a unique perspective to the table, as his company is the sole industry supplier worldwide that allows private investors to not only purchase but also profit from owning Strategic Metals.
Louis delves into the mechanics of how Strategic Metals Invest operates, explaining how private investors can get involved, the benefits of diversifying into this unique asset class, and the strategies his company employs to keep this momentum going.
Louis dives deep into this innovative investment approach, drawing parallels to the traditional Precious Metals market. Instead of just investing in Gold, Silver, and other precious resources, you can now get your hands on Strategic Metals – a concept that has been outperforming even the well-known market indices.
One of the most intriguing aspects that Louis highlights is the relative obscurity of this investment avenue, particularly in North America. Louis and his team, being based in Europe, are on a mission to bridge this gap by offering North American clients access to geographic diversification that’s sorely needed in their portfolios.
This episode is a must-listen for anyone seeking to explore new investment horizons and capitalize on the often-overlooked opportunities in the world of Strategic Metals.
In This Episode
- The mechanics of Strategic Metals Investment infrastructure
- Supply and demand of precious metals
- The risks involved and Tax efficient strategies for this asset class
- The unique opportunities in precious metals and the importance of diversification of asset class.
Welcome to today’s show on Wealth Strategy Secrets. Today, we’re joined by Louis O’Connor, founder and principal of Strategic Metals Invest, a unique opportunity for private investors worldwide.
They are the only industry supplier that allows individuals to purchase and benefit from owning strategic metals. With their Europe-based operations, they offer North American clients a crucial advantage in geographic diversification. Louis, my friend, welcome to the show!
Thank you very much, Dave. I’m delighted to be here with you.
Thank you. I’m excited to talk about this unique offering, which I think most people aren’t even aware of. Most folks are inundated with Wall Street, stocks, bonds, and mutual funds, but when you mention precious metals, most people think of gold and silver. I’m looking forward to understanding the market dynamics and specifics around these metals. But before we dive into that, tell us a little about your background and how you got into this space.
As you can probably tell from the accent, I’m not from Ohio or born in the U.S. I’m Irish, originally from Dublin, and I’m joining you today from Tipperary. Our business is European-based, but we’ll talk more about that in a moment.
I’m just back in Ireland after 25 years of traveling the world. I lived in Germany for 10 years and spoke German, then moved to Latin America, mostly based in Panama, Central America, but I’ve also done business in Colombia, Nicaragua, and Belize. Interestingly, even though I’ve never lived in the U.S., I’ve worked closely with North Americans for most of my career, even when I was in Germany.
I came back to Europe 3 years ago specifically for this business because it’s a relatively new asset class. There’s a great story behind it, which, as it turns out, is true—specifically the supply and demand dynamics, which we can get into. But that’s the short version of my journey.
Interesting! Was there something specific in your career that led you into the precious metals space?
It was just my curiosity. We’re always living in an age where there’s something new coming around the corner, right? Not everything works out, but when we look at the last 20 years, some of the companies we know today didn’t exist 20-25 years ago. Thankfully, I’ve always stayed curious. I love to hear about new things—whether it’s a new book or movie, I’m interested. From a business perspective, I’m always looking for a niche, something new, and something with a real story.
In this case, it’s about the demand-supply dynamics. There’s no question that the demand for these raw materials is increasing, while one country currently monopolizes the market. The last 10 years have been profitable, and as we’ll discuss, there’s a 5-15 year window of opportunity, especially in rare earth elements.
Let’s start by discussing what exactly precious metals are. Which ones are you focusing on, and where can they be found?
I’ll break it down. You’re using the right term—“precious metals.” They do fall under that umbrella. My company is called Strategic Metals because, while “strategic” isn’t a scientific term, it’s very strategic to our daily lives.
For example, let’s take my smartphone. In every smartphone today, there are 12-13 precious metals. Your phone contains gold and silver, but there are 10 other metals we offer as physical assets.
And the same goes for other materials that we don’t often think about. For example, indium is essential for the touchscreens we use every day. Then there’s gallium, germanium, and hafnium. For instance, the metal or oxide in the speaker of your smartphone—more precisely, the material in the permanent magnets—is the same metal found in the permanent magnets of electric cars, wind turbines, and solar panels.
These materials have numerous applications, yet we rarely think about them. We generally focus on gold and silver. While gold is primarily used for jewelry, and silver has a broader industrial use, these rare metals are crucial for industries like electronics, renewable energy, and more. And you’re right, Dave—most people wouldn’t even know these materials are available as physical assets. It’s a relatively new asset class that has only been accessible to private investors since around 2010.
It’s similar to gold and silver, but with the added distinction that these rare earth elements have intrinsic value, unlike gold, which is often perceived as a store of wealth. These metals are critical in nearly every modern industry—from semiconductors for computers and medical devices to electric cars, nuclear reactors, and even space exploration.
Most people are surprised when they learn about this because, as you said, we interact with these materials daily, yet we rarely consider their value. Where are these metals typically mined, and what does the supply side look like? Are they plentiful, or are they as rare as gold?
Despite their name, “rare earth elements,” they’re not all that rare. Many of them can be found in places like North America. For example, Mountain Pass in California was the largest producer of rare earths in the world until the 1980s. The significant applications for rare earths began to emerge in the 1960s when we transitioned from black-and-white TVs to color ones. Since then, the use of these materials has expanded exponentially, especially with the advent of technologies like the mini-computers in microwaves and toasters. These materials have become essential in all kinds of technology.
Now, here’s where the supply and demand dynamics come into play. China currently controls about 90% of the global supply of rare earths, and that’s a problematic situation. This monopoly was an unintended consequence of globalization. For the past two to three decades, while the world embraced globalization, few realized the risk of allowing one country to dominate a critical raw material that is essential to the economic prosperity and military capabilities of nations.
In the 1980s, Chinese Premier Deng Xiaoping made a very shrewd statement when he said, “The Middle East has oil, and China has rare earths.” This foresight positioned China ahead of the rest of the world, recognizing that rare earths would be integral to 21st-century manufacturing. China understood the importance of these materials long before Europe or the U.S. did, giving them a 25- to 30-year head start.
At that time, the U.S. government believed it would be more economical to outsource the refining process to China, as extracting and refining rare earths is a complicated and costly process. The U.S. set up a Bureau of Mines to monitor the industry, but in 1996, it was defunded. Since then, China has monopolized the rare earth market, largely because rare earths don’t occur naturally on their own—they’re always a byproduct of extracting other raw materials.
For example, gallium is a byproduct of aluminum mining—although in the U.S., it’s pronounced “aluminum,” while in other places, it’s “aluminum.” Hafnium, which is crucial for jet engines and rockets, is a byproduct of zirconium mining. To put it into perspective, the ratio is 50 to 1: for every 50 tons of zirconium mined, you can only get 1 ton of hafnium.
While these materials are rare in that sense, they can be found across all continents. However, finding them in high-grade deposits is another challenge because they don’t occur naturally; chemically, they tend to exist together, requiring extraction, separation, and refining.
This process is complicated and expensive, and, unfortunately, China has dominated this industry. However, recently both Europe and the U.S. have realized the need to reduce their dependence on China, which is why these rare earth elements are a good investment right now and will continue to be over the next 5 to 10 years. I believe that covers everything.
It’s pretty interesting. You mentioned California as one of the mining locations, but I’m assuming there are others around the world outside of China. Can you tell us a little bit about the infrastructure? It’s fascinating that rare earths are often byproducts of other mining operations.
How do the extraction and supply chains work? Are miners involved similarly to gold and other metals, and how do these materials get to market? Are they sold directly to companies like semiconductor manufacturers or automakers, like Tesla? How does that process look?
You’ve touched on an important point. First off, our business isn’t just about the investment opportunities we offer; it’s primarily focused on supplying rare earths. This is the most important part of our business. About 80% of our daily operations involve this core activity. We turn over around $100 million annually in the industrial sector.
Our office and vault are in Frankfurt, where we’ve been buying raw materials directly from producers, mostly in China but also from other regions, for the past 30 years. We then resell them to industrial buyers. At last count, we have 2,480 industry buyers in 70 countries. These include clients across the U.S., Europe, and the Far East. This is the foundation of our business, and it’s because of this that we’re able to offer the “side hustle” investment opportunity you mentioned.
If I were just a sales and marketing person in Tipperary, Ireland, with no connection to the industry, it wouldn’t make sense. The end buyers for these raw materials are major companies like Apple, Siemens, Volkswagen, and Ford. The only way this works is if you’re buying from an industry supplier. Otherwise, you’re just a hobbyist buying small amounts on eBay or Amazon, where you wouldn’t know the security levels of what you’re buying.
Now, in terms of infrastructure, there is currently only one rare earth mine in North America—Mountain Pass in California. However, all the raw materials extracted there have to be sold to China for refining because the U.S. lacks the necessary human capital and engineering expertise that existed in the 1980s. But this is all going to change, Dave because the Inflation Reduction Act has allocated $1 billion in subsidies for rare earth refining in North America. This will bring significant investment into the region. As it stands, China refines 90% of the world’s rare earths.
To give you more context, the key professionals needed for refining these materials are metallurgists and geologists. China has 39 universities offering degrees in critical minerals. They probably graduate around 200 metallurgists every week. In comparison, the U.S. has only a handful of universities offering degrees in critical minerals, with a total of about 300,000 metallurgists in China versus maybe 400 in North America—and none in Europe.
We’re completely dependent on China at the moment, but Europe and America want to change that. This is why it’s such a great opportunity for investors right now. It took China a generation to become a global rare earth superpower, so much so that they can now weaponize rare earths by restricting them.
We’re in a unique window of opportunity for the next 5 to 10 years, where investors can physically hold and store these metals, watch their value increase, and then liquidate them once they’ve realized their desired return. How does the investor participate in this opportunity?
The investment works in much the same way as gold and silver: the investor physically owns the asset. It’s not a share or a piece of paper.
Let me outline the key guarantees we offer. There are three main assurances:
- We guarantee that the client is purchasing industrial-grade, high-value gallium, germanium, indium, or whatever the asset might be.
- We guarantee the purity levels and the chain of custody for the asset.
- We guarantee that what they purchase can be liquidated to an industry buyer at any time.
As an industry supplier, we know exactly what industry buyers are looking for. Similar to gold, there are different purity levels, and some metals come in different forms, such as powder. But we know which forms are easier to liquidate. We also provide storage options.
Our storage facility is located in Frankfurt, Germany, in the banking district. It’s a bank-level secure vault, two levels underground, with two-meter thick walls and doors. The facility was originally a bunker built during World War II and later used during the Cold War. We acquired and invested in it in 2010, and now it’s a fully secure and insured location. We also store precious metals there.
We guarantee to liquidate the raw materials when the client is ready to sell. While the client can find a buyer on their own, since we are an industry supplier, we have a responsibility to provide the option of repurchasing the materials at current market prices.
Now, how does the investor make money from this? Are they looking at appreciation of the metals? Is that the primary benefit? Or is this more of a hedge play, where investors hold strategic metals in their portfolio as a safeguard against a declining dollar?
At the very least, it’s a hedge against inflation, because you’re holding a hard asset with intrinsic value that is in demand worldwide. However, due to political instability and trade tensions, other dynamics come into play as well. To give you an idea, if you’d purchased $100,000 worth of all 10 metals we offer five years ago, your portfolio would have appreciated by an average of 34.25% per year. Some metals have increased by as much as 500% in the last three years, while others have seen around 6% growth. These are just average figures, but they show the potential for significant returns.
Due to the current supply-demand disparity, these metals have historically been increasing in value. So, what’s next? What does the future hold? As I mentioned, just three weeks ago—on August 1st—China restricted the export of gallium and germanium, likely targeting the U.S., Japan, and the Netherlands as part of a retaliatory move. This is speculative, of course—nothing is guaranteed—but if you do your research and pay attention to what’s hidden in plain sight, you’ll see that demand is skyrocketing.
Take gallium as an example: by 2030, Europe alone will consume between 7 to 26 times more gallium than it does today, and there’s probably just not enough to meet this demand. A key factor to watch in the next 10 years is the energy transition metals—five key raw materials used in electric cars, solar power, wind power, and batteries. There will be massive growth in this sector because there won’t be enough raw materials for every car manufacturer to go electric, which is their goal.
That being said, I can’t predict exactly how much the metals will increase in value. They can be volatile in the short term, particularly because China has significant control over pricing. However, in the long term, we recommend that anyone purchasing these metals should plan to hold them for at least 3 to 5 years. Historically, holding them for that period has resulted in significant gains.
Got it. Are there any tax efficiency strategies involved in purchasing these metals? Or, as you mentioned earlier, are there any government subsidies or incentives for tax breaks related to these metals?
Yes, if you store with us in Germany, our vault is located in a Zoll Läger, which is a duty-free zone—similar to storing in Switzerland or Singapore. If you hold the raw materials for a minimum of one year, there are no taxes on either the purchase or the sale when you liquidate. However, as you know, the U.S. has global taxation, so for North American clients, capital gains tax would apply when selling.
We’ve also had several clients use custodian and self-directed IRAs, sometimes referred to as “checkbook IRAs,” to purchase the metals. This allows the gains and profits to be reinvested into the pension, deferring taxes. Of course, tax regulations vary, and clients should consult their advisors on how to report in their jurisdiction.
Understood. So the primary play here is the appreciation of these metals over a 3 to 5-year period?
Exactly. Gallium and germanium have already increased by 10% and 15%, respectively, in just the last three weeks since China’s restrictions were announced. Yesterday, the U.S. president also announced retaliatory measures, which could escalate the situation further.
The last time China restricted the export of rare earths was more than a decade ago, in 2011, when China retaliated against Japan over the detention of a Chinese trawler captain. Prices surged 5x in just a few months during that time. Now, for the first time in over a decade, China is again weaponizing rare earths, this time targeting the U.S., the Netherlands, and Japan.
For clients, I always emphasize that, at the very least, this is a solid store of wealth. On top of that, you could see returns of 15-20% annually due to increasing demand and limited supply. If things escalate and China weaponizes these metals, the returns could be even higher—like with terbium, which is up 500% over the last three years. Even without restrictions, these metals are outperforming traditional precious metals.
What would you say is the biggest risk in this type of investment?
From a business perspective, like any company, there is always a risk that something could go wrong. However, our company has been in business since 1999, and we’ve held an ISO 9001 quality management certificate since 2003. Our products are in high demand worldwide, and that demand is increasing.
In fact, our business is growing—we’ve expanded into a larger office this year and have purchased land to build another storage facility in Frankfurt. So, in terms of business risk, we’re as stable as any company can be. Being a German company in one of the most industrialized nations in the world only strengthens that stability.
As for the metals themselves, one potential risk is technological advancements. For example, with indium, which is used in touchscreens, new technology could come along that makes its use obsolete, reducing demand for it.
One of the risks is that a raw material might eventually be replaced or substituted. For example, you could see advancements in technology that could reduce the need for certain materials. Additionally, there’s the issue of supply and demand. The U.S. and Europe believe there are significant rare earth resources in places like Vietnam, and there’s speculation about deposits in northern Sweden near the Arctic Circle—reportedly about 1 million tons.
Japan is now even mining the seabed for rare earths. Some companies are exploring the possibility of mining rare earths from comets in outer space. Rare earths are crucial to manufacturing in this century, and there’s a concerted global effort to find more sources. However, it will take time. For example, the Sweden discovery may take at least 15 years before they begin production and enter the market.
You’ll likely hear more about new mining projects in the U.S., such as one where Linus Corp from Australia has signed an agreement with the U.S. Department of Defense to build a refining facility, possibly in Florida or Houston. The Department of Defense is securing its supply because one F-35 fighter jet uses around three-quarters of a ton of rare earth, and there’s currently no refining facility in North America.
While more supply will eventually come online, prices will still rise. Labor costs in the U.S. will be higher than in China, which has historically been able to produce rare earths more cheaply. However, as rare earths become critical to national economic prosperity, the dynamic is shifting. Over the next 5, 10, or 15 years, it’s a very good time to hold rare earths.
Additionally, investors can use our platform as an exchange, where they can buy and sell metals like rare earths, PGMs (platinum group metals), gold, and silver within a tax-free zone.
In terms of risk, we’ve covered the major factors. If an investor decides to add strategic metals to their portfolio, we offer some guidance. First, we recommend diversification—investing in maybe 10 different metals. Additionally, we suggest holding them for a minimum of 3 to 5 years, with many clients opting for 10 years, especially those using self-directed IRAs since they typically don’t need the funds for that long.
Interestingly, we’ve had a lot of clients from industries that already use these raw materials, such as surgeons (especially plastic surgeons), engineers from NASA, and engineers from Google. These clients tend to have a good understanding of the demand for these materials. For those less familiar, we’ll have a private conversation to understand their interests. For example, some may be interested in the energy transition (electric cars, solar, and wind power) or the aviation and space industries.
But the safest bet, generally, is diversification. If a client has more specific knowledge and wants to focus on just one metal, we can accommodate that, too. We don’t usually recommend specific metals because the market is driven purely by supply and demand, and we can’t predict what will happen week to week. While prices may fluctuate in the short term, in the long term, the trajectory has always been upward. Since 2010, if you held these metals, you might have seen dips, but you’d always be ahead in the long run.
To engage with us, investors can visit our website at strategicmetalsinvest.com or contact me directly by email at [email protected]. We recommend starting by gathering information. Once people are well-informed, we can schedule a Zoom call or a phone call.
We’re happy to educate potential investors about these assets. Most of what we talk about isn’t hidden but is often overlooked. Once you dig into it, you’ll see the dynamics at play. We encourage everyone to inform themselves first, then, once they feel fully prepared, consider making a purchase. We’ll be with them every step of the way.
It’s truly a fascinating asset class, and as you said, just looking around, you can see the increasing demand. With technological advancements, the demand for these metals will only continue to accelerate in the next two decades. If you could give just one piece of advice to our listeners about how they could accelerate their wealth journeys, what would it be?
I don’t like to give advice—I think the saying “advice is the worst advice” often holds. But if I had to narrow it down to one word, it would be diversification. My first purchase was property when I was in my early 20s, around 23. I bought my first apartment, and for about 10 years, I focused mainly on real estate, buying properties in Ireland, Germany, and Panama. But as I became more curious and educated, I expanded my interests.
Diversification became a key principle for me. There’s always a niche where demand is increasing while supply is limited, and that’s the formula I’ve followed in various sectors, like metals and agriculture. It’s the common thread that ties everything together—demand and supply. And even if one door closes, there’s usually another opening.
At any given time there is always a niche, where a product demand is increasing and the supply is limited. I always stick to that forumula… There’s always sort of one door close and usually another one opens.
Diversification is so important. You could call it insights, not advice, but it’s key for people to understand. Our mission on the show is to help investors gain unique insights from successful people like you. It’s fascinating to look at different asset classes, like strategic metals, which you’ve had experience with. Are there any parallels that stand out to you across these different asset classes? What can we take away to become better investors ourselves?
Definitely. The biggest takeaway is that diversification isn’t just about spreading across different asset classes, but even within an asset class. For example, in the strategic metals space, you’d want to diversify across multiple metals to protect yourself from volatility. So, within and across asset classes, diversification is really important.
I agree. Diversification is key, both across and within asset classes. This has been interesting, Louis. Strategic metals are something I think people should seriously consider adding to their portfolios. But, just to clarify, we’re not offering advice here—just sharing insights and ways to think about it. Can you let everyone know where the best place is to find you?
You can email me at [email protected] or visit the website, strategicmetalsinvest.com. There, you can download a digital prospectus. If you leave your number or email, I’ll get back to you. If you mention that you came through the show, I’ll make sure to take care of you.
Great, and probably at the local pub in Ireland, right?
Yes, exactly! I knew we’d have to mention the pub at some point.
Thank you so much for coming on the show, Louis, and providing such valuable insights to the audience. I look forward to staying in touch.
Thank you, Dave. It’s been a pleasure. Just having a conversation like this and using technology to share these ideas is a great service in itself. Thanks again.
Awesome. Thanks again, Louis.