Looking More Closely at Asteroid Mining Economics
Asteroid miners hunt for platinum, leave all common sense in glovebox, Register
“But back to PGMs. We have something that we know the demand for, in the short term at least, is relatively insensitive to price. An increase in supply of as little as 250,000 ounces – seven metric tons – will drive the price down by a quarter. So instead of the $500m they were hoping for, our lads [at Planetary Resources] would only (yes, I know, “only”) get $375m. Can we run a space programme on that? The more platinum they try to bring down from space the lower the price gets, and so even more has to be brought down to finance the whole shebang.”
Unless they establish ownership rights and just leave bricks in a box with the work BANK on it. Just like in california, when faced with high transportation costs, they just shoveled it into vaults. As long as ownership is established they get to put that assests in the account books. On earth, most gold that goes into a vault doesn’t get hauled out, the only thing that changes is, who owns how much. Electronic banking and property rights is all we need.
Gold on the Moon will need auditing. Particularly after the rumours about what has been happening to gold on the Earth.
How you want to assure it will not be another “buy acre on Moon!” scam? I can claim ownership of some asteroid randomly selected from some catalogue and sold it to suckers.
So no, we need to be able to physically transport materials two-way – if not goods themself, then at least auditors, as other commenter pointed out.
I really wish the folks at Planetary Resources would do their research on this subject. Easily refuted and badly done economic analyses and business plans like this do nothing to help us in the economic development of the solar system.
A better argument would be to explain how the decrease in the cost of Aluminum that came about by the invention of the Hall Process, which was once more expensive than gold, changed the world for the better. Our aviation and space industries would be hard pressed to use Aluminum if it cost as much as it once did and there is no real replacement for it.
Taking this argument into the Platinum Group Metals discussion, today the implementation of fuel cells as the motive power in automobiles is stymied by their cost and their availability. A 2001 study by the UK government showed that we don’t have the necessary resources here on the Earth to support all of the automobiles in the world should they be fuel cells. This is on top of the problem that fuel cell vehicles cost too much today because of the required PGM loadings.
If a fuel cell was of comparable cost to an Otto cycle (gasoline) or desiel engine then we would see a rapid move to them simply due to their greater efficiency, as much as 50% better fuel mileage. The efficiency is still 30% higher when using reformed hydrocarbons such as methane, which we have in plentiful quantities today.
Extraterrestrial Platinum Group Metals from the asteroids is a bridge too far today, and this is why in my book I focused on the near term opportunity at the Moon for these metals. Even there as a stand alone product PGM’s are not where they should be from the Moon but are part of a larger ecosystem created by the industrialization of the Moon, the supply of water, the ability to do manufacturing on the Moon, and to develop a sustainable off planet presence that enables the cost effective colonization of Mars.
In the analysis that I did in my book “Moonrush” we postulated a PGM price in the $300 per ounce range, which is sustainable and is only marginally higher than the production cost on the Earth per ounce today. Trite answers to journalists that get propagated into the public mind that are not tenable does not advance the cause of expanding humanities reach beyond the Earth and makes the theory of “abundance” and those that push it seem to be charlatans and promoters. We must not allow this cheapening of what is a necessary evolutionary step in the advance of our society to happen by simplistic and easily refuted promotional statements.
The market for gold is an order of magnitude more than for PGM’s. The the Earth’s market could thus absorb several hundred tonnes or more per year worth several 10’s of $B without disrupting the price of gold.
LCROSS reported an upper limit gold concentration of 3 ppt; even if this was overstated by a factor of 20 and the Au concentration in polar cold traps is only 150 ppm, an aggressive ISRU station producing 10,000 tonnes of LH2/LO2/year (assuming 10% water content) could easily produce a billion dollars worth of gold per year as a byproduct.
“LCROSS reported an upper limit gold concentration…”
Pay attention to that phrase: “UPPER LIMIT”. The lower limit is zero.
In other words, they didn’t find any gold, to within their (relatively poor) detection limits.
“IOW, they didn’t find ANY gold”? Huh? Sir, how do you figure that? There were all kinds of metals that were also detected. The silver peaks were obvious to the naked eye, so was the Hg peak. They didn’t believe their own Hg results until they found George Reed’s paper. If they hadn’t found that paper, they probably would have prefaced the Hg concentration with a “<” as well. Just because they couldn’t figure out a concentration mechanism for the other metals does not entail that they didn’t find them. If we accept the Hg peak, we must accept the others as well.
Mercury and silver are not gold. Finding mercury and silver is not the same as finding gold. What they were thinking about when they wrote their findings up is not something I have any way of verifying.
Here is what is important: They did not report finding gold.
I like your commentary Dennis. When people talk about asteroid mining for platinum, I have to laugh. I’ve worked with most of the mining majors for decades, so let me add an interesting data point for you:
Around 1999 what is called a “remarkable find” occurred. It was over a 100 foot diameter spherical ore body of high grade platinum. You can do the math for the approximate tonnage. The introduction of the ore body into the market would, obviously, have tanked the market greatly, so it’s been held covertly off-market ever since then, being very slowly metered into the market and in to use. There are currently about seven readily accessible similar ‘finds’ predicted on Earth the exploration technology exists to locate those as well, not just for platinum, but for nickel and other high-value ores. All and all the identified and future finds, just for platinum, wind up being many 100’s of tons of platinum. And no, the owners are not inclined to list their platinum find in an entry on Wikipedia. From that, one has to question why a space-based exploration and mining activity would be business-justifiable at this time. Ditto for diamonds, evidenced the recent Yakutia, Siberia diamond source revealed.
Given current technology, launching heavy things out of our gravity well is a costly drag. That data point said, I do think that there is an eventual need to pursue mining, in space and on Moon, Mars, etc. but more for use there, in-situ, not here on Earth. Unfortunately, moving discovered ores through production in to finished and useable metal products requires some heavy and expensive production equipment, an issue that needs to be addressed in whatever location you are mining.
It would be good to see someone write a comprehensive plan that shows how mining in space would work, successfully. The plan would have to include the value proposition, the business case, the economics, the full value stream, how and why it is more effective than Earth based production and how the activity would be cost/benefit justified and sustainable in whatever use-domain it would prevail in. I’ve never seen any such plan. Have you?
npng
Knowing the geology of platinum on the Earth as well as in space lets just say I am extremely skeptical of such claim of a spherical high grade platinum ore body on the Earth.
I know very well the Nickel ore body in Sudbury of which there is known another $100 billion dollars worth there.
I do see the value in drawing up such a plan but in order to make it work it has to include the entire ecosystem of products from space.
Unless you were in front of the ore body with me and with spectrometer and analytics in hand, I see no reason for you to do anything but to maintain a healthy skepticism. Keep it healthy. Nice you know of the Nickel one. Yes, sure, a plan with the entire ecosystem of products would be even nicer, but again, I’ve never seen one written. Perhaps rigorous plans are passe anymore and things get done by politics, hype, spin, and whim.
I began the effort with my first book. The problem is finding the time to do the follow up.
npng,
I agree with you that mining the asteroids will happen eventually — for use in space, as you said. Having once done some very rough figuring on the matter, I believe there are two other qualifiers in addition to in-space use only. First, you’d have to be mining and processing a large number of ores/alloys simultaneously and either be capable of processing them or know that you have long-term customers who are. (The idea of just going after PGMs, or just one or two ores doesn’t pan out at all cost-wise.) And second, no matter how much of any given ore you find, only carefully calculated limited amounts can mined and processed per unit time without destroying all kinds of markets.
I might also add that most of the “analyses” I’ve seen for asteroid (or any space) mining have the same big hole in them that Earth-based proposals often suffer from — they don’t differentiate between detectable ore amounts at a location and accessible ore amounts, which means that all cost estimates and assigned values are meaningless. Ore lying pooled on the surface and ore 500 feet down in small veins are treated as of equal market value, which is not valid when their acquisition costs are going to be so different, if the veined ore is in fact accessible at all.
There’s another overlooked factor as well. As on Earth, initial cost estimates often neglect to set aside funds for restoring the mining site to a reasonable condition. Even on a rock out in space you’ve got to do some clean up or you end up with hazards (aside from the ugliness). Yes, the asteroid belt is big, but loose material drifts and aggregates and eventually becomes a growing danger to traffic. The same “logic” was used for dumping stuff in LEO and today we’re facing the consequences.
Steve
I think the economics of asteroid mining requires an in-space market for propellent, water, or radiation shielding. Asteroid mining could be a much cheaper way to get these materials than by launch from the Earth (especially if you are at the Moon or further out). It could be argued that anything that would lower the cost of launching material from Earth would also lower the cost of asteroid mining so that asteroid material would probably always be cheaper. A market for asteroid material could start by selling the material to NASA, ESA, and other government space agencies. But hopefully, once the cost of access to space drops enough, there would be a commercial market as well. Asteroid spring water for Lunar tourists? Sintered regolith to build orbital movie sets? Who knows… but grabbing an asteroid to jump-start an in-space economy could be a very worthwhile thing to do.
” Asteroid spring water for Lunar tourists? Sintered regolith to build orbital movie sets? Who knows… ” Or tungsten rods in LEO with a reentry guidance system?
Stop stomping on my intellectual property.
I registered MartianSprings.com when the first signs of water were detected on Mars several years ago.
I let it lapse, but I still have priority dangit!
This is partially speculation on my part, but I think that PR’s actual business plan most likely closes entirely off of the near-term earth observation market. Ie I think they’re competing in the same market area as SkyBox. The asteroid mining stuff is important to the company, but is probably entirely blue skies financially on top of the base of a solid near-term focused execution plan.
A few other quick thoughts:
1- While the current platinum users (like Aluminum users in the 1600s) are probably fairly insensitive to price, the odds of that holding all the way down is…remote. At some point you’ll start seeing demand respond to price, and may very well create a much larger pie.
2- There may be ways to internalize some of the benefits of them providing lower platinum prices. For instance maybe partnering with some of the main “new users” of low-cost platinum. Maybe some sort of strategic partnership with one or more automotive companies.
~Jon
It was only with the invention of the Hall Process AND the availability of inexpensive electrical power (Tesla’s Niagra falls power plant was built to provide power to an Aluminum smelter) in the 1890’s is what allowed the price to fall and the applications to explode.
The value side remains unclear. Unfortunately none of the many proposals to produce high-value materials in weightlessness in low earth orbit has panned out. That said, the analysis is better than the abysmal case for lunar helium-3 (it can be produced on earth just by letting tritium decay).
But cost is the long pole. The biggest obstacle remains the surface-to-LEO portion of the trip and more emphasis on low cost access to LEO remains critical. Recovery cost could easily exceed $60M/ton. Finally, without at least a precursor mission it seems unlikely that anyone can accurately predict total cost.
The essay doesn’t seem to distinguish short-term inelasticity of demand and long-term inelasticity of demand. As a result, the analysis is rather superficial.
Well, they made some reference to it in the article, but dismissed it. It’s not something that is easily quantifiable, so they handwaved it away.
That said, I have wondered if the business case for such mining makes sense in the short term. Long term, no doubt that it does, but can they hold out until markets develop?
I would think that largely depends on initial investments. If they have to generate their operating cash flow from profits any time within the first ten years minimum (a number pulled from gut feel only), then I would suspect the answer is no, they wouldn’t be able to hold out.
And that’s why the somewhat superficial analysis baffles me. I would have thought they would have made it as complete and compelling as possible in order to attract more up-front investments. It makes me suspect that there’s more to this than we’re seeing.
By the arguments made by the author, no one should have ever invested in early aluminum processing schemes (Hall process). Cheaper PGMs should open up new markets.
There is another market model at play here, however, and that is the De Beers diamond monopoly. The price of diamonds has nothing to do with the actual supply. It has to do with the supply that De Beers releases to the market.
The price of the platinum doesn’t have to drop to any level lower than the earth bound production costs. What are those production costs in relation to the price? If the earth bound producers can sell for a lot less than they are now, than the price will drop but I doubt that that is the case. If the production costs are low than the price will be low. By production costs I don’t mean processing costs per say. I mean all of the costs to find, license, extract and refine.
Michael, and yet today I can buy diamond sandpaper as some clever folks have figured out how to make diamond material extremely inexpensively.
Just because the price of a commodity plummets does not mean that it is no longer valuable. Another interesting application would be for iridium inserts as a piston sleeve in internal combustion engines. This would allow for a higher operating temperature and thus boost the carnot efficiency of an IC engine. Plentiful Iridium would be a major boon in industrial processing on many fronts.
This is another thing that is lacking in many of these discussions. Whether it is on the Moon, an asteroid, or even the Earth, Platinum is not the only PGM and the other PGM’s such as Ruthenium, Rhodium, and Iridium are all valuable in their own rights and are all products from the acquisition of Platinum. As bonuses you also get large quantities (much more in tonnage) of Germanium, Gallium and other metals. If Germanium and Gallium were 1000x more plentiful we could have 35% solar panels that would cost the same as the 18% solar panels we make today.
Cobalt and Nickel, which are tens of thousands of times more plentiful in the same production scheme would be the metallic foundation of off planet industrial equipment, including things as diverse as a bulldozer, a building, or a mass driver. Throw in the iron which is even more plentiful and you have a marvelous means to build lunar railroads, buildings, and all manner of useful items.
Now all we need is lunar low-wage workers to make those things. That’s how we built most of the terrestrial railroads and now the electronics we use those metals in.
Maybe Foxconn and NASA need to team up.
Robots
Asking “a buddy who evaluates mining companies for inclusion in the London Stock Exchange’s AIM” for his opinions about a business model is like asking Jack the Ripper for advice on finding true love. These are the same guys who said Google was a terrible business because no one would pay for search. Sure, to build a successful business you have to capture some of the value you create. But creating value is, by far, the hardest part.
nobody pays for search now, unless you count eyeball exposure, which isn’t really paying in the usual sense, and I think that’s where you are going? that valuing these companies will require a space-specific methodology?
My point is that, historically, those who focus on extracting profits aren’t as successful as those who focus on creating value. If you can really create immense value for lots of people, profits generally follow. On the other hand, finance guys all have completely the wrong attitude—they could care less whether you’re doing anything of value if you can somehow extract profits from it. Not a successful long-term approach to business.
David,
The concept of value is subjective, which is why they typically can’t deal with it — it requires subject matter knowledge and relevant experience, but something else besides, something intuitive which I suspect most of us don’t have. Calculating profits is just arithmetic, a lot simpler.
It costs around $10,000/lb to get something to geostationary orbit and way more to go beyond. The asteroid miners aren’t trying to bring stuff back to sell on Earth, they’re trying to make raw materials available in-space for in-space construction. They will be teaming with people who think big and are willing to work for a long-term plan. That would rule out answering articles by boneheads like the ones that write for the Register.
I don’t pretend to know what the Planetary Resources people are thinking, but if they find a way to generate income and profits, if they survive long enough, I suspect it will likely be from other operations and discoveries than those being imagined and discussed at this point in time. These days it’s often the diversification of business that brings in the big money in the long run, rather than simply sticking solely to the original business plan. Back here on planet Earth, a lot of companies probably make as much money financing what they sell as they do selling their products. Who can say what Planetary Resources will be doing 20 or 30 years from now if they’re still around. I doubt very much it will be strictly asteroid mining.
Steve
@ Geoffry, I know you are a respected NASA scientist, so I am genuinely curious as to why you would say that the authors of the LRO LAMP paper “did not report find gold.” It’s right there in Table 1 of Gladstone et al. (2010, Science Vol 330, page 476) “Elemental contributions to the plume spectrum observed by the LAMP. … 2 sigma upper limits to the line-of-sight column density [within the plume] are given, along with the corrsponding soil mass abundance.” The row for Au reports on two lines @ 169.93 nm and 187.98 nm with oscillator strengths of 0.05000 and 0.02506 respectively. Note that the reported Ca concentration was reported as the same number as Au, although Ca was not prefaced with a “<“. The Oscillator strengths for Ca were 0.01016 0.01698–less than Au. The “g-factors” for Ca in photons/sec were also less than gold. Granted, despite the fact that the parameters for Au were in the same ballpark as Ca, they were for whatever reason less confident in the Au results. Yet 18 elements (including several other metals) in all had the “<“. If “they did not report finding” these elements, then why include them in Table 1?
I submit that at least one reason they were confident in the Hg result is because George Reed’s theory of the volatization of Hg at Lunar temperatures provided a plausible theory that could account for the astonishing apparent concentration. Before they dug up Reed’s theory, they didn’t believe their own results. This is attested to in several post-publication interviews with the authors, so there is some published verification of their thought process.
Frankly, I don’t believe the Au concentration is anywhere near 3 ppt, but I do believe they detected /some/ gold. Rather than dismissing empirical data because it doesn’t fit our preconceived notions, perhaps it would behoove us to consider whether the LCROSS results are one of those niggling little details that signal the verge of a Kuhnian paradigm shift.
Consider that Apollo 12 found 5 ppb Au in pristine rocks, yet only found 2 ppb in the regolith cores. Where are the missing 3 ppb? Well, if we assume it all went to the PSR’s and using Reed’s concentration factor of 10,000 then we get 150 ppm Au within the polar craters. This is a factor of 20 less than the LCROSS reported 2 sigma upper limit, yet a 30 ppm Au deposit would be considered a respectable resource on Earth. How the gold could get moved to the PSR’s I will leave as an exercise for the reader. HINT: it has to do with the photoelectric effect…