I’ve just returned from a false alarm at the hospital. My third child had second thoughts and decided to avoid emerging into the real world after all, hopefully for another week or two. I’m not surprised given what I have planned out for him: a career in asteroid mining.
It’s easy to dismiss the idea of space mining. The distances, the time, the cost, the technology yet to be proven…how can I regularly poke fun at the green transition for all the same reasons, but daydream about the day we bring space resources back down to Earth?
Well, one reason is that bringing space resources back down to Earth is just a gravity-lubber’s misconception. Resources are worth far more in orbit than on Earth, so why bring them back to Earth at all?
Back to that in a moment. First, the bigger question.
What if being uninformed about the basics of a space-based economy is blinding investors to the hidden opportunity of the millennium? The bitcoin sort of opportunity that you should allocate just a small amount of your money to now, just in case it becomes the next big thing at some point in the future and rewards you so handsomely that even the tiny early stake dominates your portfolio’s future returns?
Today, I’d like to tell you three reasons why I suspect space mining should be on your portfolio’s menu now. At the very least, I hope they’ll stop you from ignoring the sector.
Reason one is the one we just mentioned — misconceptions about what space mining would will actually look like. A lot of space mining’s critics argue it’s ‘utter nonsense’ for the wrong reasons, such as Javier Blas at Bloomberg:
‘If the capsule contains the expected 250 grams of extraterrestrial dirt, the retrieval cost would come to about $4.4 million a gram. Nothing to complain about as researchers attempt to answer questions like why life developed on Earth. But it’s enough to bankrupt any commercial mining operation several times over.’
The trouble with this analysis is that, given the cost of putting earthly resources into space, and the future demand for resources in orbit, there’s no reason to be bringing them down to Earth in the first place. This cuts a lot of the cost of space mining.
The real question is whether obtaining resources from asteroid mining and putting them into orbit will be cost competitive with sending the same resources from Earth into space. A difficult thing to do…
There are some rather large advantages for asteroid miners over their underground cousins. The lack of gravity makes some things easier for miners. The lack of an environment to pollute is helpful. The lack of royalties to pay cuts costs. Timeframes are also not wildly out of line with Earth given it takes decades to get a mine approved and developed, these days.
But what are we going to use resources for in space? Well, those environmentalists who have figured out that renewables won’t work on Earth are already advocating for space-based solar energy.
But our future imports from orbit will likely be finished goods that can be better manufactured in space — a sparingly long list. Medicines and medical equipment are one area of interest, because space is so clean.
But semiconductors, currently the focus of countless geopolitical analysts back on Earth, are the big opportunity. They’re very difficult to make on Earth because of the planet’s annoying environment which must be countered in expensive ways, including vacuum chambers which simulate suspiciously similar environments to those found for free in space.
Space-based manufacturing of chips could unlock a long list of theoretical possibilities and bring us the next generation of semiconductors and microchips. If we can get the resources into orbit in a cost efficient way, that is…
Of course, resources placed in orbit which are owned and available for future use would have value today, just as a deposit of unmined ore does on Earth. Which brings us to the second reason I think now is the time to consider investing. We are on the cusp of several possible breakthroughs in space which could assign value to asteroids under the presumption they will one day be mined and their resources used in those applications.
As rockets become cheaper and companies venture into space, their ability to use resources in space will grow rapidly. Anyone who can supply those resources up there will have a business. Fuel is a good example.
Just as an exploration company’s share price moves when it is granted licences to explore a promising zone on Earth, asteroids could soon create value for investors, decades before they are actually mined, simply on the possibility and growing probability of their use.
This makes sense given the value of the metals in them (sometimes measured in the quintillions of dollars), the likelihood that those metals will outperform inflation by retaining their value over long periods of time, and the fact that their arrival in orbit, or the arrival of their metals, will coincide with a space-based economy which actually needs their metals and has the capacity to refine them. It’s a very long-term investment, that’s all.
A third reason to take note of space investments is one I discussed earlier this year. It involves a tried and tested method of getting governments out of unmanageable amounts of debt very quickly — something that might prove rather relevant today…
The idea is for governments to sell the trading and ownership rights of resources that are currently out of reach. They might sell the right to trade with the New World’s Louisiana or the South Sea, for example — two episodes of history that gave us the Mississippi Bubble and the South Sea Bubble. These dramas are chalked up to free-market irrational exuberance, but they were really schemes to fund government debt by selling trading monopolies to publicly listed companies.
Politicians could once again attempt to repeat this con today by selling mining rights to asteroids in order to pay off their sovereign debts (or just spend even more…). By listing companies on the stockmarket that will buy those rights from governments with the money raised from their listing, governments could unlock trillions in cold hard digital cash today.
I suspect governments need to do this to remain solvent in coming decades. And so they will license space trading rights and asteroid mining rights, creating a speculative frenzy in space stocks that raises the valuations and increase the amount of money raised for governments from stockmarket listings. Space will be carved up and the moon’s real estate will be for sale. If you believe history rhymes, that is what you should expect, anyway.
These three reasons, among others, lead me to one conclusion. Investors really should discount the opportunities in space mining.
In this case, ‘discount’ refers to the complicated financial idea of valuation over time. A mine that is going to produce metals tomorrow is worth less than an identical mine that’ll produce the same starting next year. The difference in value expresses the idea of discounting — how much time is worth in money terms.
My point being that investors should be pondering what the value and the timing of future space ventures will be today. Sure, any ventures are a long time away. And the corporate profits will only flow in the future long after the ventures begin. But if this is being discounted too heavily by markets, you have an investment opportunity.
And we can’t dismiss their value surging in anticipation of a space economy that demands those resources either. Early investors will be the first to profit via capital gains, as in any other venture on Earth. It’s just a matter of time.
Editor, The Daily Reckoning Australia Weekend