With new technology, the age-old hunt for gold, copper and other precious minerals is shifting to a new frontier: the ocean floor.
And having metal commodities in high demand, mining companies are looking to the sea. Mining companies have long known the world’s oceans and seas cover vast troves of metals. Yet, unlike oil-and-gas companies, which have operated offshore for decades, miners lacked the technology to haul metals to the surface.
As, the global boom in commodity prices has encouraged mining companies to take another look at undersea mining. With Nautilus Minerals Inc. leading the effort. Nautilus’ Canadian outfit backed by some of the biggest names in mining, include large shareholders such as U.K.-based Anglo American PLC along with Barrick Gold Corp. of Canada–one of the world’s largest gold miners.
Nautilus is using complex underwater robotic vehicles to search mineral deposits 1,500 meters or more below the surface in waters off the coast of Papua New Guinea near Indonesia.
So far, Nautilus has focused its efforts on deposits left over from “black smokers,” or chimney-shaped structures formed after underground magma pushes mineral-laden fluids through cracks in the sea floor. As the heated liquid comes into contact with cold salt water, the liquids minerals fuse into deposits of gold, silver, copper and other metallic elements.
Once the best under-water mines are identified, Nautilus plans to use remote-operated vehicles that will move slowly across the ocean floor. The vehicles grind up 400 metric tons of rock an hour and siphon the ground rock into a pipe to be pumped to the surface.
Yet another start-up, London-based Neptune Minerals PLC, has launched its own deep-sea-minerals project off the coast of New Zealand, and other offshore ventures may follow.
A few mining companies have extracted diamonds and other minerals from shallow waters along shorelines, mining experts say the latest efforts would be the first to mine significant quantities from deep waters. Miner’s common goal is a future in which underwater robots and other equipment search the ocean floors, cracking open new sources of minerals.
Chief executive officer of Nautilus, David Heydon says, “We’re doing this to start a whole new industry, just like the [offshore] oil-and-gas industry [did].”
Some mining-industry veterans remain skeptical and worry that the latest aquatic adventures could reflect an expanding market bubble. With investors pouring millions into high-risk projects could fail if raw-material prices fall, and with new technology fueling new supplies could bring prices down.
Because the practice of underwater mining is new and unproven, it isn’t clear what price levels would be needed for offshore mining to remain profitable. A similar, $500 million effort by other major resource companies to raise manganese from the ocean floor in the 1970s collapsed amid technical difficulties.
Deep-sea mining also faces criticism from environmental activists, who question whether it’s worth the ecological cost to tear up areas rich in aquatic life.
“I’ve got major concerns” about the Nautilus project, says Techa Beaumont, an analyst at the Mineral Policy Institute, an Australia-based mining-watchdog group. She says she attended a sustainable-development forum in Papua New Guinea recently at which numerous local residents raised complaints about the project. “There’s no real accountability beyond them saying it’s all going to be great,” she says of Nautilus.
Mr. Heydon acknowledges that deep-sea mining will cause some environmental damage, but he argues the impact will be less than with larger, on-land operations. Consumers have to get resources from somewhere, and taking minerals from the sea could mean less interference with local populations at above ground mines, he says.
Mr. Heydon, who grew up in Australia and became a geologist before moving into other fields. In part from reading magazines, Mr. Heydon long knew about black smokers, but the industry had never successfully developed the technology to mine underwater. After Heydon failed to launch an airline customer-relations business during the dot-com boom, Mr. Heydon teamed up with Nautilus–a fledgling outfit that had hoped to mine offshore deposits since the 1990s. “People said we will mine the sea floor someday, and I just said, ‘What’s stopping us today?’ ” recalls Mr. Heydon, who joined after the company was founded.
Using his own credit card to help pay for engineering studies, Mr. Heydon says he began meeting with oil companies, equipment suppliers and other experts who understood the technology behind working in deep waters. He recalls one episode where he waited in the lobby of an Italian offshore-engineering company and overheard executives referring to his idea as “crazy.” “We’ll have him out of here in five minutes,” he remembers them saying.
Amid these difficulties, Mr. Heydon persisted. Nautilus negotiated with the governments of Papua New Guinea, Fiji, Tonga and the Solomon Islands to secure exploration rights to an offshore area the size of the U.K. Nautilus also listed on the Toronto Stock Exchange and the Alternative Investment Market of the London Stock Exchange; to date, the offerings have raised $295 million through stock sales.
Working from a command ship some 50 kilometers off the Papua New Guinea coast, Nautilus uses a number of underwater-exploration tools to determine which areas would be most profitable. They include a so-called autonomous underwater vehicle, or AUV, that looks like a torpedo fitted with a computer and propeller system that can be programmed to guide the vehicle to specific areas to collect data. When it finishes, staff members send a signal from above that triggers the AUV to surface so its data can be retrieved.
For sites that need closer scrutiny, Nautilus sends down a more-powerful remotely operated vehicle, or ROV, which is connected to the ship by a cable and includes cameras and “hands” that can be manipulated by staff on the ship to pick up and move rocks. The ROV can even drill into the sea floor to collect samples. When particularly enticing objects are found, the objects are placed in a container and carried to the surface.
Nautilus says it has identified enough minerals to mine 150,000 metric tons of copper per year and 400,000 ounces of gold, with production beginning in 2010.
However, bringing the minerals to the surface poses a bigger challenge; on land, mining companies use excavators, trucks and other tools to dig up rock and haul it to a processing center.
Nautilus says it is working with existing ROV makers to develop new ones it says will be able to perform similar tasks underwater. The vehicles would crawl along the ocean floor, grinding up rocks as they go. Then, the material would be sucked to the surface by a 30-centimeter pipe and transferred by barge to a processing plant onshore.
Mr. Heydon estimates the underwater rock is 8% to 10% copper, compared with 1% or less at comparable sites onshore, meaning vehicles would need to dig up a smaller fraction of the dirt than would on land. And this lower volume of activity would be crucial to making Nautilus profitable–if production commences.
Of course, all that could depend on where commodity prices go. Although copper–up dramatically from 2002 levels–copper has fallen about 10% from its recent peak in May. Copper would be the key revenue source at Nautilus’s first project, now trading above $7,300 per metric ton on the London Metal Exchange.
Technology such as this pose a threat for the profitability of precious metal investors. If new technilogical advancements such as underwater mining became hugely profitable, huge supplies could flood the current metals market shooting prices down. However, the Nautilus project will most likely remain unprofitable for awhile.