A particularly unusual announcement that may have come across the radar of those of us investing in the resource sector is that of Planetary Resources, a company pursuing the goal of extracting natural resources from near-earth asteroids. Planetary Resources boasts an impressive team, which includes past and present high-level Google executives Eric Schmidt and Larry Page, multiple former NASA members, a former CTO of Microsoft (MSFT), acclaimed film director James Cameron, and of course seasoned space exploration entrepreneurs as physicists. As impressive as this team is, I do believe they would benefit greatly from having a visionary geologist as well.
As far out (literally!) as asteroid mining may sound, it is reminiscent of the ideas proposed by Zecharia Sitchin and Michael Tellinger -- students of ancient history who have authored books that have popularized the idea that humans were created by extraterrestrials as a slave species designed to mine earth for mineral wealth. These ideas are, needless to say, controversial and widely criticized. But for those who give them some credence, human endeavors to mine asteroids could simply be seen as a species' natural progression that may have occurred before with other species as well.
Regardless of whether or not there is a historical precedent for such activities, let's take a look at what is needed for mining of asteroids to work:
A very high price for natural resources like gold, silver, and copper. Very high quantities of minerals on these asteroids. Moreover, these minerals must have very high grade ore, so that the metallurgical process of refining them is not extremely costly. In other words, because of the inevitably high fixed costs of mining asteriods, there needs to be an abundance of minerals extractable at low prices to make this project economically viable. A strategy for water. The Planetary Resource team admits that while they are certainly interested in securing critical resources like platinum and palladium from these asteroids, these asteroids are likely to contain abundant supplies of fresh water. What is the strategy for dealing with this water? Will it be sold? Sufficiently advanced robotics technology. The ability to reduce energy costs significantly. This is what I regard as the biggest obstacle; in a world where crude oil is over $100 a barrel and where oil production has plateaued since 2005, energy costs are crucial -- especially when you want to do something like mine near-earth asteroids. There are many asteroids up there, and a game plan for how to scale an asteroid mining operation and actually get large quantities of what's valuable needs to be thought out carefully. Ultimately, though, I'm skeptical that systems reliant upon fossil fuel will be low-cost enough to make this work; I think nuclear powered space vehicles are needed before serious space exploration and mining can begin.In sum, I think this idea is very promising and illustrates where we are headed to solve our natural resource problem -- but this is going to take a while. Given that real world mining companies often take years to get to any meaningful production, I think the timeline for near-earth asteroid mining is going to take a decade or more to get going. Moreover, I also consider it more prudent to explore the under-explored areas here on planet Earth before going to near-earth asteroids. For instance, Nautilus Minerals is a company dedicated to mining the ocean floor; I think that is a strategy that is a much better starting point, and companies that experience success in such endeavors are positioned to use the competences they develop in robotics and massive energy usage to take on more ambitious projects like asteroid mining.
Ultimately, the fact that a company like Planetary Resources is even emerging, is securing top talent, and is gaining media coverage illustrates how critical natural resources are becoming and how high the price is headed. For those of us investing in the resource sector, staying abreast of these "out there" ideas is what will help us stay cutting edge and find the best first mover investment opportunities.
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