Are There Fortunes to Be Made in Asteroid Mining?

By Josh Wolonick  FEB 08, 2013 1:15 PM

Will Deep Space Industries change the way we think about the business of space? A look into the possibilities, and insight from one of the company's founders.

 


More than 900 new asteroids that pass near Earth are discovered every year. They can be like the Iron Range of Minnesota was for the Detroit car industry – a key resource located near where it was needed. In this case, metals and fuel from asteroids can expand the in-space industries of this century. That is our strategy.
– David Gump, CEO of Deep Space Industries

Deep Space Industries made news in January by announcing plans to begin space prospecting, setting in motion its goal of mining asteroids for resources. As soon as 2015, the McLean, Virginia-based company, founded last month, plans to launch a small fleet of 55-pound spacecraft, called FireFlies, that will take one-way trips to near-Earth asteroids to take pictures and samples. In 2016, the company, founded by CEO David Gump, Chairman Rick Tumlinson, and 11 others, will launch DragonFlies, larger spacecraft capable of mining asteroid samples and returning them to Earth. The end game is to begin commercial operations by 2020.

Is such a business feasible? To evaluate Deep Space Industries at this early stage, we looked into the proposed business of the company, its competition, and its significant obstacles.

The Market for Asteroid-Mined Resources

Deep Space Industries' First Promotional Image
Many near-Earth asteroids contain iron, nickel, titanium, platinum, water, oxygen, and hydrogen. All of these resources could be shipped back to Earth for use here, but their real value lies in the potential for in-space use.

Deep Space plans to use iron, nickel, and titanium for in-space construction projects. Water and oxygen will be used to sustain astronauts. Oxygen and hydrogen, the primary components of jet propellant, will allow Deep Space to provide in-space refueling.

The biggest initial market for propellant in space would be in communication satellites. According to CEO Gump, refueling in space and adding even just an additional month to a satellite's orbit before having to launch a new one would be worth between $5 and $8 million to a company like Sirius XM Radio (NASDAQ:SIRI) or DirecTV (NASDAQ:DTV).

Furthermore, manned missions to Mars would immediately become more feasible if propellant were available in space. Current models for Mars missions have 90% of the rocket’s weight attributed to propellant, with much of that necessary for exit and entrance through the Earth’s atmosphere. If a rocket could fuel up in space with propellant produced in orbit, Mars journeys would be more cost-effective, and rockets would have more room for astronauts and life-support systems.

In a research paper published in 1996, when the discovery rate of near-Earth asteroids (NEAs) was only 50 per year compared to the current 900 per year, Mark Sonter, one of the founders of Deep Space Industries, explored the technical and economic feasibility of mining asteroids. His paper begins with the statement, "Future large scale commercial activities in space will require raw materials from in-space rather than from Earth, to overcome the high cost of Earth launch." Through his technical analysis, Sonter concluded that, "A teleoperated miner for return of volatiles from NEAs is economically feasible, using present technology, with an initial market of about 1,000 tonnes per year."

That was 17 years ago . Now, independent space companies like Deep Space Industries, Interplanetary Resources, as well as Elon Musk’s SpaceX and Richard Branson’s Virgin Galactic, have emerged, moving space travel's evolution into the private sector.  

"The key markets are not, however, as is usually discussed in the media, the extraction and sale of PGMs, or platinum group metals, which are present in meteorites at something in the order of 50 parts per million," Sonter tells Minyanville, "but the extraction and 'use in orbit' of such simple stuff as nickel-iron metal, and water and other volatiles, for space facility construction and fueling. This market, presently small, is expected to grow significantly as a result of the marked reduction in launch costs following on from the recent successes by SpaceX.

"The value of these space-origin materials, for refueling of geostationary satellites, and for construction of future large geostationary antenna-farm satellites, can be estimated at something like $25,000 per kilogram, or $25 million per ton."

He also offers an example: If a spacecraft were able to harvest 500 tons of raw asteroid material and successfully extract and refine 100 tons of water, nickel, and iron, which he said was not an unrealistic proposition, the refined material would be worth, in orbit, about $2.5 billion.

The Competition

Planetary Resources, founded in November 2010, is the only major competitor for Deep Space. The slightly older company has deep pockets behind it, including financial backing from Google (NASDAQ:GOOG) executives Larry Page and Eric Schmidt, as well as from filmmaker James Cameron, who is an advisor for the company.

To date, Planetary Resources has put a lot of focus on platinum group metals such as ruthenium, rhodium, palladium, osmium, iridium, platinum, and unobtainium (just kidding, James Cameron).

According to Co-Founder and Co-Chairman Eric Anderson, “The platinum group metals are many orders of magnitude easier to access in the high-concentration platinum asteroids than they are in the Earth’s crust.” In fact, a single platinum-rich asteroid that is 1,650 feet wide would contain the equivalent of all the platinum-group metals ever mined throughout  human history. An abundance of these metals would heavily drive down costs, as well as for the products that contain them, like defibrillators, hand-held devices, TVs, and other monitors.

Planetary Resources’ first step will not be to send out probes like those of Deep Space Industries, but to build high-powered telescopes that will take stock of potential asteroids for mining. From there, engineers would survey selected asteroids and use scans and samples to determine the viability of resources. The company has stated it may take a decade to find the best asteroids for commercial mining operations.

It is unclear how the competition between the two companies will play out, if one will dominate market share, or if there's room in asteroid mining for two companies, not to mention whatever future companies might spring into the market.

Obstacles

The single biggest obstacle facing Deep Space Industries is that its potential lies in providing support services for existing satellites, stations, and missions in space. Given international budget deficits, the spending available for space missions is scarce. For the moment, these new companies are meant to support a full-on space industry that does not exist yet, so although upside potential could be huge, so is risk.

Planetary Resources’ platinum-centricity is another problem. If the company were to be successful in delivering huge amounts of platinum from near-Earth asteroids, the price of the precious metal would decline. This would be good for anyone looking to buy platinum or products made with the metal, but miners and sellers of the metal could potentially suffer. That being said, industrial uses for platinum, such as fuel cells, chemical reactors, medical devices, and glass-making equipment, could certainly expand to account for decreased price and increased supply.

Careful Optimism for the Future of Space, and Investors

Deep Space Industries has big ideas, and though the feasibility of its business model is not yet proven, its ambition is exciting. The ultimate goal, beyond asteroid mining, is to play a part in allowing humans to become residents of space. According to Chairman Rick Tumlinson:

We will only be visitors in space until we learn how to live off the land there. This is the Deep Space mission – to find, harvest and process the resources of space to help save our civilization and support the expansion of humanity beyond the Earth – and doing so in a step-by-step manner that leverages off our space legacy to create an amazing and hopeful future for humanity.

This kind of optimism is addictive, and stories of Deep Space's plans have been circulating widely across the Internet.  Deep Space and Planetary Resources are speculative: They are betting on a much increased human space presence during the 21st century, and we cannot be sure this will happen. Then again, the birth of these companies may prove to be a spark in the move to space.

In his January 22 press conference officially launching Deep Space Industries, CEO Gump mentioned several reasons for their press event, beyond announcing the company's founding, saying that one of his main goals was, "Letting the investors know that we are here."

For more writing on the future of space and business, read Next Year, We May Be Investing in a Mission to Mars.

Follow Josh Wolonick on Twitter @JoshWolonick

No positions in stocks mentioned.