The Quintillion-dollar Opportunity ... in Space

Space mining is a popular science fiction trope. Precious metals are abundant in space, though. At the same time, the most valuable commodity in the outer limits is actually abundant on Earth.

Bloomberg ran a fascinating story Oct. 25 about the extraordinary valuations financiers are assigning to identified asteroids. One potato-shaped space rock, comprised largely of gold, platinum and iron, is currently valued at $700 quintillion. That’s a 7 with 20 zeros.

With a prize that big, capitalists are starting to look for a way to retrieve the goods. That’s when they hit on a bigger idea:

The real play is water, not metals.

Let me explain …

In 2010, the Japan Aerospace Exploration Agency (JAXA) launched Hayabusa, the first probe expressly built to collect samples from an asteroid.

Although landing atop an asteroid was impressive, the mission was a bust. The $250 million probe only collected dust particles.

Retrieving anything in space is expensive, and that’s before tackling the difficulties of mining in a gravity-deficient environment. Additionally, bringing back several tons of platinum and gold would diminish the value of those metals here. Their value is a function of their rarity.

So, mining and retrieving metals from space would be expensive and devalue the assets even further.

A better business model would be to find, stake and mine the valuable space metals, then leave the minerals there as reserves. Prices on Earth would not be negatively impacted, while reserves could be financed.

The technical term for this practice is “in-situ resource utilization.” The idea is to use the resources where you find them.

But then you still have the issue of expense. As I’ve said, mining anything in space is inherently expensive.

So, how can a smart investor play this opportunity?

Well, it turns out that, in space, water is even more valuable than precious metals.

And not just for its life-sustaining properties. By separating water’s primary components, hydrogen and oxygen, it’s possible to make rocket propellant.

To be clear, space mining conglomerates are going to need an abundance of fuel to build colossal new mining businesses among the stars.

Producing fuel in space is the economical choice. After all, sending anything outside of the Earth’s atmosphere is still very expensive. NBC News notes that the cost to transport 1 kilogram of fuel into space still ranges from $10,000 to $20,000.

And there is water in space. Both the moon and Mars have polar ice caps. While currently in solid form, the ice can be harvested, thawed, and then the elements separated to create fuel … all in space. The moon is the logical place to start due to its relative proximity, gravitational pull and, of course, ice caps.

United Launch Alliance (ULA), a partnership between Boeing (BA) and Lockheed Martin (LMT), is already looking into sourcing fuel in space. In 2016, it announced an agreement to pay $3,000 per kilo of rocket propellant delivered to low Earth orbit, or within 2,000 miles of the Earth’s surface.

While this distance wouldn’t reach the moon, miners on the lunar surface would find refueling just above the atmosphere far cheaper than having supplies sent directly to them. This fuel would play a central role in a larger ULA pan to have 1,000 people living and working in space by 2045.

Since the ULA announcement, the entire world has been pulled into what the New York Times called a lunar stampede. China, Israel, India, the United States and Europe all have programs with a goal of getting back to the moon and ultimately mining water.

The entire concept is a virtuous circle.

Financiers see a trillion-dollar opportunity mining precious and other heavy metals in space.

To build out and maintain the mining operations, conglomerates will need an abundance of fuel. Producing propellant in space, given the transportation costs, is more cost-effective.

This reduces the cost of space mining further, making it even more attractive.

That the metals may not ever return to Earth and devalue their terrestrial cousins makes this more appealing, as Earth’s supply will escape devaluation while still being supported.

Sci-fi first broke through to reality when we started exploring space. And now the tremendous value hidden in the stars is drawing the biggest industry players.

Investors should get ready.

Best wishes,

Jon D. Markman