Can Deep-Sea Mining Solve the Critical Metals Supply Crunch?

by
0 comment

As the world keeps transitioning toward an electric future, the need for critical minerals such as copper, cobalt and nickel is increasing.

However, as the demand for minerals soars, the challenges associated with bringing them to market is also increasing.

Over the past decade, lack of funding has led to fewer new discoveries and fewer projects entering the development pipeline. Red tape can vary by jurisdictions and push timelines to seem almost glacial. There are also social, legal and environmental concerns that can cause miners to avoid certain jurisdictions.

It’s these reasons why some are turning to the deep oceans as the next resource bonanza for the upcoming energy revolution.

Companies such as The Metals Company (NASDAQ:TMC), DEME (OTC Pink:DEMGF,EBR:DEME) subsidiary Global Sea Mineral Resources and Ocean Minerals subsidiary Moana Minerals are all working on technologies that will allow them to harvest polymetallic nodules from the ocean floor.

Table of contents

What are polymetallic nodules?Where are polymetallic nodules found?How does deep-sea mining differ from traditional mining?Deep-sea mining’s environmental impactWhat investors should know about deep-sea mining

What are polymetallic nodules?

Discovered in the late 1800s, polymetallic nodules are composed of concentric layers of manganese and iron around which nickel, cobalt, copper, titanium and rare earths contained in seawater are deposited.

Exactly how the nodules are formed is still the subject of scientific discussion, but one idea is that they begin to form around a nucleus like a shark’s tooth or a clam shell. The nodules then grow as the small amounts of metals found in seawater begin to collect on the surface. They may also accumulate as the water reacts with sediments on the seafloor and are deposited on the nodule.

Their formation is among the slowest of geological processes, with one centimeter of accumulation taking place over several million years.

Where are polymetallic nodules found?

Due to the way the nodules are formed, they can be found on sea and lake beds around the world.

So far, much of the exploration has been conducted on the abyssal plains within specific regions of the Pacific and Indian Oceans where the seabed is at a depth of 4,000 to 5,000 meters. The majority of these regions are in international waters and overseen by the International Seabed Authority (ISA), a UN agency.

Because of their occurrence, individual nations are also looking to mine the nodules in their sovereign waters.

Norway was among the first countries to do so when it passed legislation in early 2024 allowing for commercial-scale mining off its coast, though it said it wouldn’t do so without rigorous environmental study.

The Cook Islands have also looked into the potential of mining the seabed within its territory. The Prime Minister of the small island nation said in 2023 that it was looking into the feasibility of the practice, suggesting it was the right thing to do.

So far the most studied area is a region in the Eastern Pacific Ocean known as the Clarion-Clipperton Zone, which contains more nickel, manganese and cobalt than all resources found on land combined.

In 1981 it was estimated that a total of 500 billion metric tons of nodules can be found on the seafloor, but the amount that can be extracted would be far smaller due to the low number of economic mining sites.

The ISA defined a mine site as a portion of the seafloor where commercial operations could be sustained for 20 to 25 years, with annual production of 1.5 to 4 million metric tons of “good” nodules. To qualify as good, the nodules must meet certain criteria, hosting average grades of 1.25 to 1.5 percent nickel, 1 to 1.4 percent copper, 27 to 30 percent manganese and 0.2 to 0.25 percent cobalt.

Given these conditions, the estimations for the number of mining sites range between 8 and 225 with a combined speculative inferred resource of 480 million to 13,500 million metric tons.

How does deep-sea mining differ from traditional mining?

With demand set to rise and a limited amount of new resources set to come online over the next couple of decades, operators have looked to the ocean for new resources.

Because the main area being proposed for the mining polymetallic nodule beds is located in international waters, the ISA’s oversight should mean greater consistency in the application of environmental and social regulations.

While mining the deep sea comes with its own logistical challenges, there are several other factors working in its favor. For example, the extraction of minerals from the seabed doesn’t have the requirement for massive earthworks like an open pit or underground mine does, because the nodules are just lying on the seabed or below a thin layer of sediment.

Additionally, deep-sea mining doesn’t require the type of manpower that traditional mines use. Extraction of resources could be carried out via remote control or fully autonomous systems. The styles of machines can range from rovers with scoops that scour the seafloor to pickers that find individual nodules.

Once acquired, the nodules are sent back to the surface vessel through a riser system that was developed by the oil and gas industry. On board, the nodules are sorted from the sediment, which is returned to the ocean.

Like ore recovered in terrestrial mining, the nodules need further processing to separate the individual metals. This process won’t be completed at sea but will occur back on land, requiring more traditional mining and smelting equipment.

Because of the depth of the deposits, it is nearly impossible for artisanal mining to take place. These operations are most often conducted outside of legal frameworks and carried out by criminal organizations that exploit workers, use violence to protect territory and ignore environmental regulations.

How could deep-sea mining impact the environment?

Overall, there are still many unanswered questions when it comes to the implications of mining the deep oceans. The companies wanting to mine the deep ocean are adamant that it is more environmentally friendly than terrestrial counterparts.

This is in part because the method of extraction doesn’t release tailings into the ocean, and the companies believe fears over pollution from sediment plumes are largely unfounded. Because the sediment doesn’t contain harsh chemicals like tailings do, it’s largely benign and the vast majority is released on the seabed as extractors gather nodules.

What is of most concern to scientists is the quantities of sediment that are hauled to the surface and then released into the water column.

In a review of published literature, environmental watchdog Mining Watch Canada reported the effects of sediment plumes released into the ocean could have disastrous effects on phytoplankton blooms. These organisms are critical to the survival of countless species of marine life and are also responsible for the creation of significant amounts of the Earth’s oxygen.

The report notes that because plankton accumulate metals, this could cause a significant amount of harm to both ocean and land animals. The plankton could pass these up the marine food chain as other fauna consumes them. This could ultimately impact human food chains for commercially fished species.

The report also indicates that, depending on the depth that sediment is released into the water column, the plumes could limit the available light that plankton need to survive.

In a paper published in the journal Nature Geoscience on July 22, it was reported that the nodules themselves may be responsible for the creation of oxygen on the seabed. While the process is still being studied, experiments carried out by the scientific mission, funded in part by The Metals Company, demonstrated that more oxygen was being produced in nodule areas.

While they have yet to determine the cause, the theory they’ve put forward is that a higher voltage on the surface of the nodules is causing electrolysis in the surrounding seawater. Scientists are uncertain as to what the removal of these oxygen sources might mean to marine life on the seabed.

In its own response to the paper, The Metals Company said researchers used flawed methodology and there were contradictory studies that showed net oxygen consumption. The Metals Company also said it was preparing its own rebuttal to the paper.

The companies involved in undersea mining suggest the impact to life in the deep ocean will be minimal and recovery relatively quick, but observing the impact of historical trials at deep-sea mining suggest that recovery would be slow.

In the 1970s and 1980s, researchers tested the viability of mining within the Clarion Clipper zone by dredging the seabed and harvesting nodules.

In the past decade, scientists who had returned to the area discovered that evidence of dredging activities is still visible today Because the abyssal plains are made up of sediment beds, some of the fauna would use the hard surfaces of the nodules to cling to. In these regions the nodules are home to sponges and mollusks unique to the deep ocean. The scientists observed that the tracks left in the sediment were still visible and compacted, and ocean life had not returned to normal after nearly 50 years.

In a study produced in 2020 by The Metals Company, researchers suggested that 93 percent fewer organisms would be affected by mining nodules from the ocean floor versus a similar-sized region on land. They also said the abundance of life at the bottom of the ocean was less concentrated and less diverse than on land.

However, the same study also noted that there was still a lack of understanding of marine life at the depths deep-sea mining would be taking place and that “the actual number of species on or in the CCZ seabed and their geographic ranges remain unknown due to limited sampling.”

The deep sea remains largely unexplored and hosts an estimated 10 million species. It will pose a challenge for regulators who need to strike a balance between future energy needs and preservation and understanding of marine life deep below the surface of the ocean.

What should investors know about deep-sea mining?

For investors considering investing in the early stages of the deep-sea mining industry, there are several publicly traded companies in the space, including the ones we’ve discussed above.

However, the regulatory environment is currently uncertain, making the space a risky play.

In 2021, the Pacific island nation of Nauru invoked a two-year rule, forcing the ISA to hold to a deadline to finalize a code for mining the deep ocean. That deadline lapsed in July 2023 as 21 nations, including Canada, Fiji and Palau, called for a moratorium on deep-sea mining, while China, the UK and Norway have supported deep-sea mining.

Ultimately, the delays in ISA regulations has opened up the possibility of unregulated mining in international waters. Although no unregulated mining has begun, the ISA is in a challenging position as it works on regulations. While it presented a set of suggestions at its meeting this past July, it won’t have a ratified code until at least the end of 2025.

In the meantime, 19 exploration licenses have been granted to companies and governments to explore within the Clarion Clipper Zone for polymetallic nodules. This will allow them to advance technologies and study the mineral potential of the region.

The deep-sea exploration companies awarded contracts include:

Nauru Ocean Resources, a subsidiary of The Metals CompanyGlobal Sea Mineral Resources, a subsidiary of DEMELoke Marine Minerals

Ultimately, the ISA and national authorities must weigh environmental concerns against the effects of traditional mining and the increasing need for critical minerals.

But it’s not just the ISA that needs to take a hard look at regulations, so too must those countries who are looking to host mining operations in their sovereign waters.

Although arguments remain on both sides, with a growing list of companies willing to extract resources from the ocean and a growing list of countries backing them, it seems quite possible that mining of the deep oceans will be authorized in some form. However, it won’t happen overnight.

While some of the technology may provide the ability to extract minerals from the seabed, companies still need to build processing facilities for nodules, which will take additional regulatory approvals with partner nations. In addition to the red tape, these operations will take time to build.

Investors should take a cautious approach, especially in cases where regulations are not finalized. Early opportunities may have significant potential, but they also pose the greatest risks and uncertainties, as was the case for Canada’s Nautilus Minerals, which was granted an exploration license in 2011.

The company aimed to mine copper and gold from seafloor massive sulfide deposits in the sovereign waters of Papua New Guinea, but faced significant opposition from Papua New Guinea locals who cited environmental concerns and the effect mining would have on the fishing industry.

Failing to get its project off the ground, the company faced bankruptcy and was bought by private company Deep Sea Mining Finance in 2019. Although the project failed to gain traction then, renewed interest in mining the seabed may provide Deep Sea Mining Finance opportunities to build on the original license in the coming years.

Securities Disclosure: I, Dean Belder, hold no direct investment interest in any company mentioned in this article.

This post appeared first on investingnews.com

You may also like