Advertisement

Mineral Economics

, Volume 32, Issue 3, pp 287–306 | Cite as

Estimating the economics of a mining project on seafloor manganese nodules

  • Sebastian Ernst VolkmannEmail author
  • Felix Lehnen
  • Peter A. Kukla
Original Paper
  • 109 Downloads

Abstract

The recent and renewed interest in deep-sea mining relates to the decrease of ore grades of known land-based deposits, the increasing costs in land-based mining, as well as rising metal prices, and an increased demand for strategic metals. This study examines the economic requirements for future commercial mining projects focusing on manganese nodules. Beside the common measures of profitability, the net present value (NPV), and the internal rate of return (IRR), an additional measure, the net profit (NP), is presented to indicate the profitability by considering past and future cost and price trends. Furthermore, the approach may be applied to determine the areas of commercial interest. The Blue Mining project in the 7th Framework Programme of the European Commission serves as a reference case study. Having applied the developed methodology to a set of assumptions and estimates, results indicate that nodule mining projects would—at the time being and the foreseeable future—be launched at the verge of financial profitability.

Keywords

Economics Mining project Manganese nodules Blue mining Nodule mining 

Nomenclature

3M

three-metal recovery (Ni, Co, Cu)

4M

four-metal recovery (Ni, Co, Cu, Mn)

5-YR MA

5-year moving average(s)

CAPEX

capital expenditure(s)

CCZ

Clarion–Clipperton (Fracture) Zone

Co

cobalt

Cu

copper

DCF

discounted cash flow (analysis)

DSM

deep-sea mining

DR

discount rate

FeMn

ferromanganese

GAP

good, average, poor analysis

IRR

internal rate of return

ISA

International Seabed Authority, Kingston, Jamaica

Li

lithium

LOM

life of mine

Mn

manganese

MSV

mining support vessel

MUV

manufactured exports unit value (MUV) index

Ni

nickel

NiEq

nickel-equivalent

NP

net profit

NPV

net present value

NSR

net smelter (processor) return

OPEX

operative expenditure(s) (per annum; p.a.)

PMT

pilot mining test

PPI

Producer Price Index

PVAF

present value annuity factor

REE

rare earth elements

ROM

run of mine

SMnN

seafloor manganese nodules

SMT

seafloor mining tool

TC/RC

treatment charge and refining charge

TRL

technological readiness level

UNCLOS

United Nations Convention on the Law of the Sea

US

United States (of America)

USGS

US Geological Survey

VTS

vertical transport system

Notes

References

  1. Abramowski T (ed) (2016) Deep sea mining value chain: organization, technology and development. Interoceanmetal Joint Organization, SzczecinGoogle Scholar
  2. Andrews BV, Flipse JE, Brown FC (1983) The economic viability of a four-metal pioneer deep ocean mining venture. Texas A&M University, TexasGoogle Scholar
  3. Antikainen R, Lazarevic J, Seppälä J (2018) Circular economy: origins and future orientations. In: Lehmann H, Hinzmann M, Evans N, Kafyeke T, Bell S, Hirschnitz-Garbers M, Eick M (eds) Factor X. Eco-Efficiency in Industry and Science, vol 32. Springer, Cham, pp 115–129CrossRefGoogle Scholar
  4. Archer AA (1981) Manganese nodules as a source of nickel, copper, cobalt and manganese. Transactions of the Institution of Mining and Metallurgy, Section A: Mining Industry 90:A1–A6Google Scholar
  5. Arthur D Little Inc (1977) Technological and economic assessment of manganese nodule mining and processing. US Government Publishing Office, Washington D.CGoogle Scholar
  6. Bernard JT, Khalaf L, Kichian M, Mcmahon S (2008) Forecasting commodity prices: GARCH, jumps, and mean reversion. J Forecast 27(4):279–291.  https://doi.org/10.1002/for.1061 CrossRefGoogle Scholar
  7. Bleischwitz R, Bringezu S (eds) (2009) Sustainable resource management: global trends, visions and policies. Greenleaf Pub, SheffieldGoogle Scholar
  8. Blue Mining (2014) Blue Mining: Breakthrough solutions for sustainable deep sea mining. http://www.bluemining.eu/. Accessed 13 December 2017
  9. BMWi (2016) Analysis of the economic benefits of developing commercial deep sea mining operations in regions where Germany has exploration licenses of the international seabed authority, as well as compilation and evaluation of implementation options with a focus on the performance of pilot mining test. Study commissioned by the Federal Ministry for Economic Affairs and Energy division (BMWi) I C 4, Project No 59/15Google Scholar
  10. Bräuninger M, Leschus L, Rossen A (2013) Ursachen von Preispeaks, −einbrüchen und -trends bei mineralischen Rohstoffen. DERA Rohstoffinformationen 17:1–123Google Scholar
  11. Brown TJ, Hobbs SF, Idoine NE, Mills AJ, Wrighton CE, Raycraft ER, Bide T, Deady EA, Rippingale J, MacKenzie AC (2016) European mineral statistics / British Geological Survey, 2010–14. British Geological Survey (BGS), NottinghamGoogle Scholar
  12. Charles C, Herrouin G, Mauviel F, Bernard J (1990) Views on future nodule technologies based on IFREMER-GEMONOD studies. Mater Soc 14(3/4):299–326Google Scholar
  13. Consensus Economics Inc (2015) Energy & Metals Consensus Forecast. Survey date: December 14, 2015. Consensus Economics Inc, LondonGoogle Scholar
  14. Costa Lima GA, Suslick SB (2006) Estimating the volatility of mining projects considering price and operating cost uncertainties. Resources Policy 31(2):86–94.  https://doi.org/10.1016/j.resourpol.2006.07.002 CrossRefGoogle Scholar
  15. Dick R (1985) Deep-sea mining versus land-based mining: a cost comparison. In: Donges JB (ed) The economics of Deep-Sea Mining. Springer, Berlin, pp 2–60CrossRefGoogle Scholar
  16. EC (2017) Critical raw materials. https://ec.europa.eu/growth/sectors/raw-materials/specific-interest/critical_de. Accessed 9 December 2017
  17. Ecorys (2014) Study to investigate state of knowledge of deep-sea mining. https://webgate.ec.europa.eu/maritimeforum/en/node/3732. Accessed 26 November 2016
  18. Farris PW, Bendle N, Pfeifer P, Reibstein D (2010) Marketing metrics: the definitive guide to measuring marketing performance, 2nd edn. Pearson Education, Upper Saddle RiverGoogle Scholar
  19. Friedmann D, Friedrich B (2016) Optimized slag design for maximum metal recovery during the pyrometallurgical processing of polymetallic deep-sea nodules. In: Reddy RG, Chaubal P, Pistorius PC, Pal U (eds) Advances in molten slags, fluxes, and salts: proceedings of the 10th international conference on molten slags, fluxes and salts 2016. Springer, ChamGoogle Scholar
  20. Gajigo O, Mutambatsere E, Adjei E (2011) Manganese industry analysis: implications for project finance. Working paper series no. 132. African Development Bank, TunisGoogle Scholar
  21. Gertsch R, Gertsch L (2005) Economic analysis tools for mineral projects in space. Space Resources Roundtable, http://www.mines.edu/research/srr/rgertsch. Accessed 21 September 2017
  22. Goldie R, Tredger P (1991) Net smelter return models and their use in the exploration, evaluation and exploitation of polymetallic deposits. Geosci Can 18(4):159–171Google Scholar
  23. Ham K-S (1997) A study on economics of development of deep-seabed manganese nodules. In: Proceedings of the 2nd ISOPE Ocean Mining symposium. International Society of Offshore and Polar Engineers (ISOPE), Seoul, pp 105–111Google Scholar
  24. Hannington MD, Petersen S (2016) Ocean exploration - the mineral resources perspective. Discussion paper. https://phe.rockefeller.edu/noef/presentations/technologies/NOEF2016_Hannington-Petersen_Paper_Ocean-Exploration-The-Mineral-Resources-Perspective.pdf. Accessed 22 November 2017
  25. Hein JR (2016) Manganese nodules. In: Harff J, Meschede M, Petersen S, Thiede J (eds) Encyclopedia of marine geosciences. Springer Netherlands, Dordrecht, pp 408–412Google Scholar
  26. Hein JR, Koschinsky A (2014) Deep-ocean ferromanganese crusts and nodules. In: Holland HD, Turekian KK (eds) Treatise on geochemistry, 2nd edn. Elsevier, Amsterdam, pp 273–291CrossRefGoogle Scholar
  27. Hein JR, Mizell K, Koschinsky A, Conrad TA (2013) Deep-ocean mineral deposits as a source of critical metals for high-and green-technology applications: comparison with land-based resources. Ore Geol Rev 51:1–14CrossRefGoogle Scholar
  28. Hermanus M (2017) Mining redesigned - innovation and technology needs for the future—a south African perspective. J South Afr Inst Min Metall 117(8):811–818.  https://doi.org/10.17159/2411-9717/2017/v117n8a12 CrossRefGoogle Scholar
  29. Hillman T, Gosling BB (1985) Mining deep ocean manganese nodules: description and economic analysis of a potential venture. U.S. Dept. of the Interior, Bureau of Mines, Washington D.C.Google Scholar
  30. Hoagland P (1993) Manganese nodule price trends. Resources Policy 19(4):287–298.  https://doi.org/10.1016/0301-4207(93)90041-K CrossRefGoogle Scholar
  31. Hoagland P, Beaulieu S, Tivey MA, Eggert RG, German C, Glowka L, Lin J (2010) Deep-sea mining of seafloor massive sulfides. Mar Policy 34(3):728–732.  https://doi.org/10.1016/j.marpol.2009.12.001 CrossRefGoogle Scholar
  32. ISA (2008) Polymetallic nodule mining technology: current status and challenges ahead. Proceedings of a workshop held by the International Seabed Authority. International Seabed Authority (ISA), ChennaiGoogle Scholar
  33. ISA (2010) A geological model of polymetallic nodule deposits in the Clarion-Clipperton Fracture Zone. ISA Technical Study, vol 6. International Seabed Authority (ISA), KingstonGoogle Scholar
  34. ISA (2013) Towards the development of a regulatory framework for polymetallic nodule exploitation in the area. ISA Technical Study, vol 11. International Seabed Authority (ISA), KingstonGoogle Scholar
  35. ISA (2017) Ongoing development of regulations on exploitation of mineral resources in the Area. https://www.isa.org.jm/legal-instruments/ongoing-development-regulations-exploitation-mineral-resources-area. Accessed 30 November 2017
  36. Jaeckel A, Gjerde KM, Ardron JA (2017) Conserving the common heritage of humankind—options for the deep-seabed mining regime. Mar Policy 78:150–157.  https://doi.org/10.1016/j.marpol.2017.01.019 CrossRefGoogle Scholar
  37. Jenisch U (2013) Tiefseebergbau – Lizenzvergabe und Umweltschutz. NuR 35(12):841–854.  https://doi.org/10.1007/s10357-013-2554-7 CrossRefGoogle Scholar
  38. Kausch P, Matschullat J, Bertau M, Mischo H (eds) (2016) Rohstoffwirtschaft und gesellschaftliche Entwicklung. Springer Berlin Heidelberg, BerlinGoogle Scholar
  39. Kuhn T, Rühlemann C, Wiedicke-Hombach M, Rutkowsky J, Wirth HJ, Koenig D, Kleinen T, Mathy T (2011) Tiefseeförderung von Manganknollen. Schiff Hafen 5:78–83Google Scholar
  40. Kulatilaka N, Marcus AJ (1992) Project valuation under uncertainty: when does DCF fail? J Appl Corporate Finance 5(3):92–100.  https://doi.org/10.1111/j.1745-6622.1992.tb00229.x CrossRefGoogle Scholar
  41. Lenoble J-P (ed) (1992) Future deep-sea bed mining of polymetallic nodules ore deposits. In: XV World Mining Congress, Madrid, pp 1301–1310Google Scholar
  42. Lottermoser BG (2007) Introduction to mine wastes. In: Mine Wastes. Characterization, Treatment and Environmental Impact. Springer, Berlin, pp 1–30Google Scholar
  43. Marscheider-Weidemann F, Langkau S, Hummen T, Erdmann L, Tercero Espinoza LA, Angerer G, Marwede M, Benecke S (2016) Rohstoffe für Zukunftstechnologien 2016: Auftragsstudie. DERA Rohstoffinformationen, vol 28, DERA, HannoverGoogle Scholar
  44. Martino S, Parson LM (2013) Spillovers between cobalt, copper and nickel prices: implications for deep seabed mining. Miner Econ 25(2–3):107–127.  https://doi.org/10.1007/s13563-012-0027-8 CrossRefGoogle Scholar
  45. Marvasti A (1998) An assessment of the international technology transfer systems and the new law of the sea. Ocean Coast Manag 39(3):197–210CrossRefGoogle Scholar
  46. Marvasti A (2000) Resource characteristics, extraction costs, and optimal exploitation of mineral resources. Environ Resour Econ 17(4):395–408CrossRefGoogle Scholar
  47. Meinert L, Robinson G, Nassar N, (2016) Mineral resources: reserves, peak production and the future. Resources Resources 5(1):14.  https://doi.org/10.3390/resources5010014 CrossRefGoogle Scholar
  48. Mero JL (1962) Ocean-floor manganese nodules. Econ Geol 57(5):747–767.  https://doi.org/10.2113/gsecongeo.57.5.747 CrossRefGoogle Scholar
  49. MIDAS (2016a) Implications of MIDAS results for policy makers: recommendations for future regulations. http://www.eu-midas.net/sites/default/files/downloads/MIDAS_recommendations_for_policy_lowres.pdf. Accessed 13 December 2017
  50. MIDAS (2016b) Managing impacts of deep sea resource exploitation: research highlights. http://www.eu-midas.net/sites/default/files/downloads/MIDAS_research_highlights_low_res.pdf. Accessed 13 December 2016
  51. Mirakovski D, Krstev B, Krstev A, Petrovski F (2009) Mine project evaluation techniques. Natural Resources and Technologies 3(3)Google Scholar
  52. Nyhart JD, Antrim L, Capstaff AE, Kohlert AD, Leshawm D (1978) A cost model of deep ocean mining and associated regulatory issues. Massachusetts Institute of Technology, BostonGoogle Scholar
  53. Otto JM (2006) Mining royalties: a global study of their impact on investors, government, and civil society, vol 1. World Bank Publications, Washington DCCrossRefGoogle Scholar
  54. Petersen S, Krätschell A, Augustin N, Jamieson J, Hein JR, Hannington MD (2016) News from the seabed—geological characteristics and resource potential of deep-sea mineral resources. Mar Policy 70:175–187.  https://doi.org/10.1016/j.marpol.2016.03.012 CrossRefGoogle Scholar
  55. Pophanken AK, Friedmann D, Friedrich B, Heller H (2013) Manganknollen – zukünftige Rohstoffbasis für Technologiemetalle? http://www.metallurgie.rwth-aachen.de/new/images/pages/publikationen/pophaenken_46_m_id_1549.pdf. Accessed 21 December 2017
  56. Reydellet B, Volkmann SE (2017) Deliverable D3.52: Concept for fiscal incentives to stimulate sustainable economic evaluation. Public report submitted to the EU Commission within the 7th Framework Programme (GA No. 604500). http://www.bluemining.eu/downloads/. Accessed 31 October 2018
  57. Rühlemann C, Kuhn T, Wiedicke-Hombach M, Kasten S, Mewes K, Picard A (2011) Current status of manganese nodule exploration in the German license area. In: Proceedings of the 9th ISOPE International Offshore and Polar Engineering Conference. International Society of Offshore and Polar Engineers (ISOPE), Maui, pp 168–173Google Scholar
  58. Sharma R (2013) Deep-sea impact experiments and their future requirements. Mar Georesour Geotechnol 23(4):331–338.  https://doi.org/10.1080/10641190500446698 CrossRefGoogle Scholar
  59. Søreide F, Lund T, Markussen JM (2001) Deep ocean mining reconsidered. A study of the manganese nodule deposits in Cook Island. In: Proceedings of the 4th ISOPE Ocean Mining Symposium. Society of Offshore and Polar Engineers (ISOPE), Szczecin, pp 88–93Google Scholar
  60. SPC (2013) Deep Sea minerals: manganese nodules, a physical, biological, environmental, and technical review, vol. 1B. Secretariat of the Pacific community (SPC)Google Scholar
  61. SPC (2016) An assessment of the costs and benefits of mining deep-sea minerals in the Pacific Island region: deep-sea mining cost-benefit analysis. SPC technical report SPC00035. Secretariat of the Pacific community (SPC), SuvaGoogle Scholar
  62. Thiel H, Schriever G (1993) Environmental consequences of deep-sea mining. International Challenges 13:54–70Google Scholar
  63. Tisserant A, Pauliuk S (2016) Matching global cobalt demand under different scenarios for co-production and mining attractiveness. Journal of Economic Structures 5(1):4.  https://doi.org/10.1186/s40008-016-0035-x CrossRefGoogle Scholar
  64. UNCLOS (1994) United Nations Convention on the Law of the Sea. http://www.un.org/depts/los/convention_agreements/texts/unclos/unclos_e.pdf. Accessed 18 November 2016
  65. US Bureau of Statistics (2016) Producer Price Index (PPI). http://www.bls.gov/ppi/. Accessed 21 December 2017
  66. USGS (2016) USGS minerals information: Commodity statistics and information. https://minerals.usgs.gov/minerals/pubs/commodity/. Accessed 15 September 2017
  67. van Nijen K, van Passel S, Squires D (2018) A stochastic techno-economic assessment of seabed mining of polymetallic nodules in the clarion Clipperton fracture zone. Mar Policy 95:133–141.  https://doi.org/10.1016/j.marpol.2018.02.027 CrossRefGoogle Scholar
  68. Volkmann SE (2014) Deliverable 3.41: sustainable indicators. Public report submitted to the EU Commission within the 7th Framework Programme (GA No 604500). http://www.bluemining.eu/downloads/. Accessed 26 July 2016
  69. Volkmann SE, Lehnen F (2017) Production key figures for planning the mining of manganese nodules. Mar Georesour Geotechnol 36(3):1–16.  https://doi.org/10.1080/1064119X.2017.1319448 CrossRefGoogle Scholar
  70. Volkmann SE, Osterholt V (2017) Deliverable 3.42: Sustainable economic models and evaluation. Public report submitted to the EU Commission within the 7th Framework Programme (GA No. 604500). http://www.bluemining.eu/downloads/. Accessed 31 October 2018
  71. Volkmann SE, Kuhn T, Lehnen F (2018) A comprehensive approach for a techno-economic assessment of nodule mining in the deep-sea. Miner Econ 32(5):32–336.  https://doi.org/10.1007/s13563-018-0143-1 CrossRefGoogle Scholar
  72. Wellmer FH, Dalheimer M, Wagner M (2008) Economic evaluations in exploration. Springer, BerlinGoogle Scholar
  73. World Bank Group (2016) World Bank commodity market outlook: OPEC in historical context. A World Bank Quarterly Report. International Bank for Reconstruction and Devleopment, Washington DCGoogle Scholar
  74. Yamazaki T (2008) Model mining units of the 20th century and the economies. In: Proceedings of the Technical paper for ISA Workshop on Polymetallic Nodule Mining Technology-Current status and Challenges Ahead. International Seabed Authority (ISA), Chennai, pp 1–9Google Scholar

Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Institute of Mineral Resources Engineering (MRE)RWTH Aachen UniversityAachenGermany
  2. 2.Institute of Geology and PalaeontologyRWTH Aachen UniversityAachenGermany

Personalised recommendations