Seabed Rare Earth and Precious Metal Mining

by Justin Dove

Seabed Rare Earth and Precious Metal Mining

by Justin Dove, Investment U Research

Tuesday, August 16, 2011

Rising prices in precious metals and China's monopoly in rare earth elements are leading to creativity and innovation in mining.

For instance, Japan reported last month that they found extremely rich deposits of rare earth minerals on the seabed of the Pacific Ocean. In the map below, the rich deposits of rare earth elements and yttrium are shown to be numerous throughout the Pacific.

"The deposits have a heavy concentration of rare earths. Just one square kilometer (0.4 square miles) of deposits will be able to provide one-fifth of the current global annual consumption," said Yasuhiro Kato, Associate Professor of Earth Science at the University of Tokyo.

REY (rare earth elements and yttrium) deposits shown to be numerous throughout Pacific

(Image Courtesy of  The University of Tokyo)

Last year, China used its monopoly in rare earths to its advantage in a territorial dispute with Japan. Apparently, the Japanese, who also depend on the minerals for electronics manufacturing, decided to find other sources for rare earths. Japan began changing its laws to pave the way for seabed mining back in March.

And rare earths aren’t the only things at the bottom of the Pacific...

Nautilus Minerals Finds Seabed Copper and Gold

Canadian company Nautilus Minerals will soon begin mining copper and gold in Papua New Guinea (PNG). So far, Nautilus is primarily an exploration company. The company has exploration licenses for Pacific waters off the coasts of Fiji, Tonga and PNG.

Nautilus gained mining privileges in PNG in January and contracted German ship builder Harren and Partner to build a mining ship. The company is set to begin operations in 2013 and is expects "to produce 1.2 million metric tons of ore a year."

"I don’t think there’s a view that we’re running out of copper or there’s a scarcity but I think there’s a view that it’s becoming increasingly difficult to develop on land," Nautilus COO Anthony O’Sullivan told Bloomberg.

According to the Bloomberg report, the current average grade of land copper deposits is "0.6 percent, dropping from about one percent in 1990." That compares to a 6.5 percent copper grade found in the seabed.

Seabed Mining Investment Opportunities

Most of the companies involved in seabed mining are either private or foreign...

  • There’s Paris-based Technip, which owns patents in the methodology of deep-sea mining.

  • Harren and Partners, which makes the ship Nautilus will use, is based in Germany.

  • Nautilus founder and former CEO David Heydon left the company in 2008 to start DeepGreen Resources. DeepGreen’s Clipperton copper and nickel project is much more ambitious than Nautilus’.  It will likely cost billions, but Heydon believes he can mine up to 60,000 metric tons of nickel and 50,000 metric tons of copper per year for more than 30 years. DeepGreen Resources is Canadian based and private. It’s rumored to go public this fall, however, probably only on a Canadian exchange.

  • Neptune Minerals is a Nevada-based private company started in January that looks to pursue offshore mining opportunities in the future. It recently acquired control of companies from Hong Kong and the United Kingdom.

  • Nautilus Minerals is a public company, but it’s traded on the Toronto and London stock exchanges.

Is Rare Earth Seabed Excitement Premature?

It may be a bit premature to get too excited about seabed mining. For instance, Popular Mechanics and Resource Investor both featured articles doubting the viability of the rare earth extraction.

But mining for precious metals in relatively shallow waters doesn’t seem so far-fetched.

After all, DeBeers and other diamond miners have been mining diamonds off the coast of Namibia since the 1960s.

Developments in seabed mining will be interesting to follow over the next few years.

And if Nautilus can achieve profitability from its endeavor in 2013, there will surely be copycats. Who knows, it may even lead to a modern gold rush under the ocean.

Good investing,

Justin Dove

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