Skip to main content

Advertisement

SpringerLink
Log in

Estimating the economics of a mining project on seafloor manganese nodules

  • Original Paper
  • Published:
Mineral Economics Aims and scope Submit manuscript

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.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2
Fig. 3
Fig. 4
Fig. 5
Fig. 6
Fig. 7
Fig. 8
Fig. 9
Fig. 10

Similar content being viewed by others

Notes

  1. A list of abbreviations can be found in the Annexes (see “Nomenclature”).

  2. The NPV is the present estimated dollar value of an investment/project based on future net cash flows adjusted for interest rates and the initial investment. When the net cash flows are even, the NPV can be calculated by using the present value formula of annuity (Wellmer et al. 2008).

Abbreviations

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

References

  • Abramowski T (ed) (2016) Deep sea mining value chain: organization, technology and development. Interoceanmetal Joint Organization, Szczecin

    Google Scholar 

  • Andrews BV, Flipse JE, Brown FC (1983) The economic viability of a four-metal pioneer deep ocean mining venture. Texas A&M University, Texas

    Google Scholar 

  • 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 115–129

    Chapter  Google Scholar 

  • 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–A6

    Google Scholar 

  • Arthur D Little Inc (1977) Technological and economic assessment of manganese nodule mining and processing. US Government Publishing Office, Washington D.C

    Google Scholar 

  • 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

    Article  Google Scholar 

  • Bleischwitz R, Bringezu S (eds) (2009) Sustainable resource management: global trends, visions and policies. Greenleaf Pub, Sheffield

    Google Scholar 

  • Blue Mining (2014) Blue Mining: Breakthrough solutions for sustainable deep sea mining. http://www.bluemining.eu/. Accessed 13 December 2017

  • 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 59/15

  • Bräuninger M, Leschus L, Rossen A (2013) Ursachen von Preispeaks, −einbrüchen und -trends bei mineralischen Rohstoffen. DERA Rohstoffinformationen 17:1–123

    Google Scholar 

  • 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), Nottingham

    Google Scholar 

  • Charles C, Herrouin G, Mauviel F, Bernard J (1990) Views on future nodule technologies based on IFREMER-GEMONOD studies. Mater Soc 14(3/4):299–326

    Google Scholar 

  • Consensus Economics Inc (2015) Energy & Metals Consensus Forecast. Survey date: December 14, 2015. Consensus Economics Inc, London

    Google Scholar 

  • 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

    Article  Google Scholar 

  • 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 2–60

    Chapter  Google Scholar 

  • EC (2017) Critical raw materials. https://ec.europa.eu/growth/sectors/raw-materials/specific-interest/critical_de. Accessed 9 December 2017

  • 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

  • Farris PW, Bendle N, Pfeifer P, Reibstein D (2010) Marketing metrics: the definitive guide to measuring marketing performance, 2nd edn. Pearson Education, Upper Saddle River

    Google Scholar 

  • 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, Cham

    Google Scholar 

  • Gajigo O, Mutambatsere E, Adjei E (2011) Manganese industry analysis: implications for project finance. Working paper series no. 132. African Development Bank, Tunis

  • 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

  • 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):159–171

    Google Scholar 

  • 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 105–111

  • 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

  • Hein JR (2016) Manganese nodules. In: Harff J, Meschede M, Petersen S, Thiede J (eds) Encyclopedia of marine geosciences. Springer Netherlands, Dordrecht, pp 408–412

    Google Scholar 

  • 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 273–291

    Chapter  Google Scholar 

  • 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 51:1–14

    Article  Google Scholar 

  • 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

    Article  Google Scholar 

  • 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.

  • Hoagland P (1993) Manganese nodule price trends. Resources Policy 19(4):287–298. https://doi.org/10.1016/0301-4207(93)90041-K

    Article  Google Scholar 

  • 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

    Article  Google Scholar 

  • 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), Chennai

  • ISA (2010) A geological model of polymetallic nodule deposits in the Clarion-Clipperton Fracture Zone. ISA Technical Study, vol 6. International Seabed Authority (ISA), Kingston

  • 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), Kingston

  • 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

  • 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

    Article  Google Scholar 

  • Jenisch U (2013) Tiefseebergbau – Lizenzvergabe und Umweltschutz. NuR 35(12):841–854. https://doi.org/10.1007/s10357-013-2554-7

    Article  Google Scholar 

  • Kausch P, Matschullat J, Bertau M, Mischo H (eds) (2016) Rohstoffwirtschaft und gesellschaftliche Entwicklung. Springer Berlin Heidelberg, Berlin

    Google Scholar 

  • KPMG (2015) Corporate tax rates table. https://home.kpmg.com/xx/en/home/services/tax/tax-tools-and-resources/tax-rates-online/corporate-tax-rates-table.html. Accessed 16 September 2016

  • Kuhn T, Rühlemann C, Wiedicke-Hombach M, Rutkowsky J, Wirth HJ, Koenig D, Kleinen T, Mathy T (2011) Tiefseeförderung von Manganknollen. Schiff Hafen 5:78–83

    Google Scholar 

  • 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

    Article  Google Scholar 

  • Lenoble J-P (ed) (1992) Future deep-sea bed mining of polymetallic nodules ore deposits. In: XV World Mining Congress, Madrid, pp 1301–1310

  • Lottermoser BG (2007) Introduction to mine wastes. In: Mine Wastes. Characterization, Treatment and Environmental Impact. Springer, Berlin, pp 1–30

    Google Scholar 

  • 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, Hannover

  • 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

    Article  Google Scholar 

  • Marvasti A (1998) An assessment of the international technology transfer systems and the new law of the sea. Ocean Coast Manag 39(3):197–210

    Article  Google Scholar 

  • Marvasti A (2000) Resource characteristics, extraction costs, and optimal exploitation of mineral resources. Environ Resour Econ 17(4):395–408

    Article  Google Scholar 

  • 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

    Article  Google Scholar 

  • Mero JL (1962) Ocean-floor manganese nodules. Econ Geol 57(5):747–767. https://doi.org/10.2113/gsecongeo.57.5.747

    Article  Google Scholar 

  • 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

  • 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

  • Mirakovski D, Krstev B, Krstev A, Petrovski F (2009) Mine project evaluation techniques. Natural Resources and Technologies 3(3)

  • 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, Boston

    Google Scholar 

  • Otto JM (2006) Mining royalties: a global study of their impact on investors, government, and civil society, vol 1. World Bank Publications, Washington DC

    Book  Google Scholar 

  • 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

    Article  Google Scholar 

  • 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

  • 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

  • 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 168–173

  • Sharma R (2013) Deep-sea impact experiments and their future requirements. Mar Georesour Geotechnol 23(4):331–338. https://doi.org/10.1080/10641190500446698

    Article  Google Scholar 

  • 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 88–93

  • SPC (2013) Deep Sea minerals: manganese nodules, a physical, biological, environmental, and technical review, vol. 1B. Secretariat of the Pacific community (SPC)

  • 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), Suva

  • Thiel H, Schriever G (1993) Environmental consequences of deep-sea mining. International Challenges 13:54–70

    Google Scholar 

  • 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

    Article  Google Scholar 

  • 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

  • US Bureau of Statistics (2016) Producer Price Index (PPI). http://www.bls.gov/ppi/. Accessed 21 December 2017

  • USGS (2016) USGS minerals information: Commodity statistics and information. https://minerals.usgs.gov/minerals/pubs/commodity/. Accessed 15 September 2017

  • 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

    Article  Google Scholar 

  • 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

  • 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

    Article  Google Scholar 

  • 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

  • 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

    Article  Google Scholar 

  • Wellmer FH, Dalheimer M, Wagner M (2008) Economic evaluations in exploration. Springer, Berlin

    Google Scholar 

  • 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 DC

    Google Scholar 

  • 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 1–9

Download references

Author information

Authors and Affiliations

  1. Institute of Mineral Resources Engineering (MRE), RWTH Aachen University, Aachen, Germany

    Sebastian Ernst Volkmann & Felix Lehnen

  2. Institute of Geology and Palaeontology, RWTH Aachen University, Aachen, Germany

    Peter A. Kukla

Authors
  1. Sebastian Ernst Volkmann
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Felix Lehnen
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Peter A. Kukla
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Sebastian Ernst Volkmann.

Additional information

Publisher’s note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

The paper is available online as a chapter of a dissertation on the website of the RWTH Aachen university library.

Appendix

Appendix

Fig. 11
figure 11

Cost allocation for mining and transport. The costs were determined as part of the Blue Mining project. Diagram A: the OPEX are shown here broken down by cost element. Diagram B: the OPEX are shown here broken down by cost area. Diagram C: the CAPEX are shown here broken down by cost area (including working capital)

Full size image
Table 4 Determination of the break-even NSR (miner)
Full size table
Table 5 Determination of the break-even TC/RC (processor)
Full size table
Table 6 Constant dollar prices of Co, Cu, Ni, and FeMn for 1970 to 2015, based on nominal prices reported by the USGS used in financial modeling
Full size table

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Volkmann, S.E., Lehnen, F. & Kukla, P.A. Estimating the economics of a mining project on seafloor manganese nodules. Miner Econ 32, 287–306 (2019). https://doi.org/10.1007/s13563-019-00169-4

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s13563-019-00169-4

Keywords

Search

Navigation