Javier Blas is the FT's commodities editor
“Harnessing valuable minerals from a practically infinite source”.
That’s the eye-catching mission statement or perhaps slogan of Planetary Resources, the company, backed by Google’s billionaire Larry Page, which made the headlines last week by promising asteroid mining.
If you take the claims at face value, you could almost see the world’s largest natural resources companies, including powerful miners such as BHP Billiton, Vale of Brazil and Rio Tinto, thinking their game will soon be over.
The space mining talk amounts, however, to no more than hot air and gobbledegook.
Paul Horsnell and Amrita Sen, two respected commodities analysts from Barclays Capital, have boldly gone in search of the price levels commodities would need to reach to help space mining break even. It looks like they also had some fun in the process. Planetary Resources declined to comment on the cost it estimates it would take to bring minerals back to planet Earth - or provide any timeline.
Their calculations are based on Nasa’s forthcoming OSIRIS-REx mission, which aims to launch a probe in 2016 to pluck samples from an asteroid called 1999 RQ36 and bring them to Earth.
The mission’s acronym stands for “Origins-Spectral Interpretation-Resource Identification-Security-Regolith Explorer” and Nasa hopes it will be home by 2023, with a couple of ounces of dirt. By then, the cost will have reached $1-billion - made up of $800-million for the vehicle, plus another $200-million for the rocket launch.
Since that outlay will return just a couple of ounces of material, the Barclays' analysts say they could use it as a baseline to estimate break-even prices for asteroid mining. Using the metrics proposed by Barclays, the Financial Times commodities team estimates that copper prices would need to skyrocket from today’s $3.81 per ounce to $476-million for a similarly-funded space mining project to cover its costs.
Clearly, it does look like base metals from space are likely to provide a good return on capital.
So what about precious metals? Gold trades at $1,665 per troy ounce, setting a break-even price of $518-million per ounce troy for space-gold to break even.
Maybe Planetary Resources hopes to find other commodities.
Mr. Horsnell took the time to calculate the break-even price of crude oil - even if there aren’t any in asteroids. It comes out at roughly $2.4-trillion per barrel. “Which is quite high,” he muses. “So, assuming we can get around the problem of there not being much oil on asteroids even if Bruce Willis did use a drilling rig on one in [the film] Armageddon, it would take a lot of cost reduction or a much higher oil price to make it viable,” he adds.
The FT commodities team looked at other examples of space missions, just in case the Barclays analysis missed something.
Searching for past space missions that have successfully returned samples back to Earth. Like Nasa, we didn’t find much.
Apollo took material from the moon, but sadly its sample did not contain any valuable commodities. Genesis and Stardust only returned samples of solar wind and from the coma of a comet, so they are of not much use for comparison.
But the Japanese Hayabusa probe did return samples from the near-Earth asteroid 25143 Itokawa.
The probe cost about $200-million and only brought home 1,500 microscopic dust particles, totalling less than a gram, in 2010. Using Hayabusa as a base to calculate break-even prices, we estimate that the cost of gold needs to rise to roughly $6.2-billion per ounce troy to make asteroid mining economical.
Of course, we have not allowed for any economies of scale, so maybe Planetary Resources believes that sending lots of probes would reduce break-even prices. If not, it does look as Mr. Page should brace for some losses on his investment.
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