Mining asteroids: Going platinum(economist.com)
economist.com
Mining asteroids: Going platinum
http://www.economist.com/node/21553419
8 comments
Your assuming that as soon as they start producing platinum domestic production stops which seems unlikely unless they drive the price well below 1% it's current value. Still, suppose they have a 20% profit margin on 6 billion / year of raw materials 20 years from now. It would take a huge investment to reach that kind of scale AND huge risks AND a poor ROI. It might be possible, but it's a huge long shot and basic skepticism is reasonable.
Well, here's three things you're neglecting:
1) Planetary Resources is talking about getting access to 10's or 100's of times more platinum than have ever been mined in human history, or even could be extracted from the Earth's crust. "Domestic" production simply cannot scale in this way.
2) Mining platinum is not a very profitable business--it comes out of the Earth's curst in very low concentrations. Without a doubt extra-terrestrial sources will always be able to undercut "domestic" suppliers without driving prices so low.
3) No Earth-base operation would compete with a late-stage Planetary Resources, because at any point they could flood the market and drive competitors out of business. Earth-based mining firms will change their business to extract resources for which return from asteroids remains unprofitable.
1) Planetary Resources is talking about getting access to 10's or 100's of times more platinum than have ever been mined in human history, or even could be extracted from the Earth's crust. "Domestic" production simply cannot scale in this way.
2) Mining platinum is not a very profitable business--it comes out of the Earth's curst in very low concentrations. Without a doubt extra-terrestrial sources will always be able to undercut "domestic" suppliers without driving prices so low.
3) No Earth-base operation would compete with a late-stage Planetary Resources, because at any point they could flood the market and drive competitors out of business. Earth-based mining firms will change their business to extract resources for which return from asteroids remains unprofitable.
1) Platinum is not what they are basing their business on. It's just an example of mining asteroids not their only goal. Good old H20 is probably the safest bet to start with.
2) This is why people don't 'mine' platinum. They extract it from the leftovers when they mine copper / gold etc. The important question when evaluating the response to increased supply is the cost of just that refining step not including all the costs associated with getting to that point.
3) See 2. Unless they drive down the price of copper. However, flooding the market drives down prices so rather than saying they can provide X you need to look at how much they could sell 100 tons of platinum a year for. They can also supply 100 tons of water into LEO a year but you can't look at the current 1k to 20k/lb price of water in LEO and assume that's a constant when their supplying a 100 ton's of the stuff.
2) This is why people don't 'mine' platinum. They extract it from the leftovers when they mine copper / gold etc. The important question when evaluating the response to increased supply is the cost of just that refining step not including all the costs associated with getting to that point.
3) See 2. Unless they drive down the price of copper. However, flooding the market drives down prices so rather than saying they can provide X you need to look at how much they could sell 100 tons of platinum a year for. They can also supply 100 tons of water into LEO a year but you can't look at the current 1k to 20k/lb price of water in LEO and assume that's a constant when their supplying a 100 ton's of the stuff.
"More than $2.5 billion." and "need to be capitalised to the tune of $100 billion." This is about how much the Apollo program cost[1]. If they get some smart engineers and listen to them, I expect they will find ways we never conceived of to save money. These cost numbers are perfectly achievable over the time-frame they are discussing, and if SpaceX is showing us anything it is that when you take the government out of production, you can chop at least a digit off this type of price.
[1] Lafleur, Claude (2010-03-08). "Costs of US piloted programs". The Space Review. Retrieved February 18, 2012.
[1] Lafleur, Claude (2010-03-08). "Costs of US piloted programs". The Space Review. Retrieved February 18, 2012.
SpaceX benefited enormously from free access to Government designs, and through a propped up market for their product--Government.
The core of this argument is to try to demonstrate that the government is somehow necessary. It once was, assuming for the sake of argument that Apollo was desirable and necessary. But the fact is that regardless of the past, what SpaceX is doing now, NASA can not do now for anything like the same price. If NASA is doing the propping and still can't do it at the same price, that's still not a win in their column.
Look, just face up to it. The free market we have right now is doing something the government we have right now can't. It's not like this proves very much on its own.
Look, just face up to it. The free market we have right now is doing something the government we have right now can't. It's not like this proves very much on its own.
Yes, but their cost structure shows that, once the initial research has been done, there is tremendous savings in getting government and government contractors out of the launch business.
propped up market for their product--Government
Platinum group metal prices will fall, but there will be a market, since they have industrial uses.
When Aluminum went from being a rare novelty to an industrially produced material, the price per unit plummeted, but the market volume skyrocketed. The same thing happened to steel.
Also, once mining gets going, SpaceX will have many more private sector customers.
propped up market for their product--Government
Platinum group metal prices will fall, but there will be a market, since they have industrial uses.
When Aluminum went from being a rare novelty to an industrially produced material, the price per unit plummeted, but the market volume skyrocketed. The same thing happened to steel.
Also, once mining gets going, SpaceX will have many more private sector customers.
Surely these guys could get the same access to those government designs, and the market for what they want to sell is already entirely proven.
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What I'm thoroughly confused about is the notion that mining asteroids is that lucrative. The minerals/metals they're mining (example: Platinum) are worth 1,500 due to supply and demand. Only a few hundred tons of platinum are mined on earth every year, restricting supply, thus driving the price up. If thousands of tons of platinum were "imported" from an asteroid, wouldn't this flood the market with supply and collapse the price?
What am I missing here?
What am I missing here?
I think what's missing is the difference between price and value. Price is determined in a straightforward way by supply and demand; value is something more complicated.
Think of the comparison they used to aluminum: Until recently, aluminum was far rarer and more valuable than gold by weight. Discovery of processes to separate aluminum from its oxides made it cheaper than steel.
The cost of aluminum plummeted. That's bad if you're heavily invested in aluminum; it's good if you want to buy a car or an airplane.
It's the same deal for gold and platinum et cetera. We don't want them because they're rare; we want them because they have excellent physical properties, and in fact the cheaper they are the better that is for everyone.
The benefits of abundance of the rarest materials will create a new era of human prosperity which cannot be quantified in terms of current economics.
Don't think of it as "sell gold". Think of it as "make computers faster".
Think of the comparison they used to aluminum: Until recently, aluminum was far rarer and more valuable than gold by weight. Discovery of processes to separate aluminum from its oxides made it cheaper than steel.
The cost of aluminum plummeted. That's bad if you're heavily invested in aluminum; it's good if you want to buy a car or an airplane.
It's the same deal for gold and platinum et cetera. We don't want them because they're rare; we want them because they have excellent physical properties, and in fact the cheaper they are the better that is for everyone.
The benefits of abundance of the rarest materials will create a new era of human prosperity which cannot be quantified in terms of current economics.
Don't think of it as "sell gold". Think of it as "make computers faster".
Howto profit?
Planetary Resources will have a virtual monopoly on the platinum, so they can charge just about whatever they want for it, perhaps only slightly lower than the current selling rate.
Just because they have a market value worth of 20 Trillion dollars worth of platinum doesn't mean there's demand for 20 Trillion dollars worth of platinum.
On the other hand, there's probably a very large demand for cheap platinum.
On the other hand, there's probably a very large demand for cheap platinum.
Maybe they could look for lithium, which we need for batteries. Or maybe platinum will see more use with the new availability, the demand will rise and the price stay worthwhile.
Ooh, ooh, what about phosphorous?
http://en.wikipedia.org/wiki/Peak_phosphorus
http://en.wikipedia.org/wiki/Peak_phosphorus
I know of some EXTREMELY large sources of helium, which as we all know is running out here on Earth. Anyone want to send me some VC funding to start a mining operation on a remote star? ;-)
This didn't happen to Saudi Arabia when they discovered oil there. This is a pretty easy problem to manage.
The entire market for every metal they could mine is larger than any single market. Gold, Platinum, Rhenium, Palladium, Iridium, Rhodium, Indium, Osmium, etc. Also, it can be a question of timing. If it suits them to sit on the equivalent of 10 years of global production of, say, Platinum while selling off, say, 50% of global production a year then that's still an enormously profitable venture for them.
I really don't think they have to do the mining in space.
Realistically, at 80% concentrations of metals, you don't mine the asteroid, you cut the asteroid. In fact, copper cathodes, slabs of 70% copper, are already on metal exchanges in Shanghai and London.
So what you do is, you break off small chunks and aim them--get ready for this--at Earth. A small meteor does not do real harm, and there are tons of them burning up in the atmosphere all the time. In addition, because you chose a high-metal asteroid, it'll get to the surface largely intact--rockier asteroids break up faster than iron-nickel asteroids.
Then, when it's on Earth, you recover it--maybe dredge it, if you sunk the rock--and separate and refine it.
So what you do is, you break off small chunks and aim them--get ready for this--at Earth. A small meteor does not do real harm, and there are tons of them burning up in the atmosphere all the time. In addition, because you chose a high-metal asteroid, it'll get to the surface largely intact--rockier asteroids break up faster than iron-nickel asteroids.
Then, when it's on Earth, you recover it--maybe dredge it, if you sunk the rock--and separate and refine it.
> A small meteor does not do real harm, and there are tons of them burning up in the atmosphere all the time.
I won't say it can't be done, but there are significant challenges here that you may be underestimating. Not the least of which is the fact that there is no "suck" orbit.
You need quite a bit of energy to make the proper orbital adjustments to aim the rock at a precise spot on earth (rather than some random ocean, somewhere inaccessible, a major city...) and lumps of asteroid aren't exactly known for being aerodynamic, making reentry calculations pretty unreasonable.
I won't say it can't be done, but there are significant challenges here that you may be underestimating. Not the least of which is the fact that there is no "suck" orbit.
You need quite a bit of energy to make the proper orbital adjustments to aim the rock at a precise spot on earth (rather than some random ocean, somewhere inaccessible, a major city...) and lumps of asteroid aren't exactly known for being aerodynamic, making reentry calculations pretty unreasonable.
> lumps of asteroid aren't exactly known for being aerodynamic, making reentry calculations pretty unreasonable.
As long as you're cutting it, you could make it somewhat aerodynamic. However, you have to remember a lot of the time you want reentry vehicles (or rocks) to be round so that they get down in good condition.
In addition, you don't need to just fire it off into earth; you can attach a computer and small rockets to it so it can subtly and cheaply correct its own course. The energy you would need for this can be arbitrarily small: http://en.wikipedia.org/wiki/Edward_Belbruno
As long as you're cutting it, you could make it somewhat aerodynamic. However, you have to remember a lot of the time you want reentry vehicles (or rocks) to be round so that they get down in good condition.
In addition, you don't need to just fire it off into earth; you can attach a computer and small rockets to it so it can subtly and cheaply correct its own course. The energy you would need for this can be arbitrarily small: http://en.wikipedia.org/wiki/Edward_Belbruno
Does anyone have any ideas about what new uses might be found for these precious metals should they ever become as cheap as any other metals?
Gold wiring would be superior to copper, what else?
Gold wiring would be superior to copper, what else?
Gold is an inferior conductor to copper, and is used in electronics because of its corrosion resistance, and would not make better wire for most purposes.
"Broadly, there are two ways to get the goodies back to Earth. The first is to attempt to mine a large NEA in its existing orbit, dropping off a payload every time it passes by. That is the reason for the search for asteroids with appropriate orbits. This approach will, however, require intelligent robots which can work by themselves for years, digging and processing the desirable material."
These asteroids will be a perfect place for malicious AI's to spawn...
These asteroids will be a perfect place for malicious AI's to spawn...
It's entirely incorrect that the robots will have to work independently for years. To be economical, they would need the ability to be assigned tasks at granularities of hours, down to 20 minutes. If Planetary Resources engineers can get it down to "retrieve material from sector XY" then the entire operation could be controlled from Earth.
First thing to do: make more robots from materials mined.
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But this is a case where not only did they ignore the substantive details of the press event (Diamandis and Anderson made clear the economic case was based more on in-space use of extracted resources and the birth on Earth of new industrial techniques using once-scarce platinum group metals, and Lewicki explained in sufficient detail how they would achieve order-of-magnitude cost adjustments compared with the NASA model), but they also made truly juvenile mistakes in their economic analysis:
About $4 billion per year is spent on platinum for industrial uses. So if you're sitting on a mountain of platinum you can hope for $4bn/yr revenue for a larger amount of platinum at lower cost (given that's how much industry is willing to spend on the metal), or realistically a value lower or higher based on the the expected demand response to price. Platinum is primarily used in the auto industry, jewelry, and electronics. General motors is not going to sell more product because catalytic converters cost a few hundred dollars less, but jewelers might and the electronics industry certainly would. Either way, approx $4 billion per annum is nothing to sneeze at, and only one part of their revenue model.
This is an industry I know a lot about, which makes me wonder how accurate their journalism is in other areas where I usually just take their word...