On the Verge

Prospects for Deep Seabed Mining within a Decade

Caitlyn AntrimRule of Law Committee

for the Oceans

U.S. Geological SurveyJanuary 17, 2013

Focus: Outlook for Nodule Development

• Ocean- Based Resource

• Minerals of Interest

• Nickel

• Copper

• Cobalt

• Manganese

• Rare Earth Elements

• Beyond National Jurisdiction

East Pacific Nodule Field

•110ºW-160ºW, 0º-20ºN

•Metal Content

•Ni: 1.2-1.4%

•Cu: 1.0-1.2%

•Co: 0.25%

•Mn: 29%

•REE: 0.08-0.1%

•Depth: 4000-5500 Meters

CCZ Inferred Resources

ISA1ISA2

ISA3

ISA4

Included Area

(km2X106)

Estimated Tonnage (metric tons X 106)

NodulesManganese

(Mn)Cobalt (Co)

Nickel (Ni)

Copper (Cu)

Study Area 4.19 30,700 8,657 67.5 383 341

Reduced Area

3.83 21,100 5,950 46.4 270 234

The Study Area represents the total area of the four ISA rectangles. The Reduced Area eliminates blocks along the inner margins of the four rectangles where data was not available for analysis.

Economics of Deep Sea Nodule Development

• At-Sea Capital and Operating Technology Based on Off-Shore Development and Maritime Shipping Industry

• On-Land technology based on Nickel Laterite Processing Systems and Ferroalloy Production

• Market Prices and Revenues Determined by Land-Based Mineral Sources

Sea System Design

• Nodule Harvester

• Lift System

• Base Vessel

• Tailings Return

• Sea Transport

• Alternative Designs

Unique Marine

Systems

Major Land-Based Sourcesof Nodule Minerals

Critical Mineral SecurityNet Import Reliance*

Major World Ore Producers

US Import Sources

Fraction of US Consumption in 1

million tons of nodules

Nickel 47% Russia, CanadaRussia, Canada, Australia, Norway

10.1%

Copper 35% Chile, United States Chile, Canada, Peru 0.6%

Cobalt 75% D.R. Congo, ZambiaChina, Norway, Russia, Canada

36.9%

Manganese 100% Gabon, AustraliaGabon, South

Africa, Australia, China

35.8%

Rare Earths 100% China China 10.0%

* Import reliance counts secondary recovery (recycling) as domestic production

Price History: 1982 - 2012

Combined value of nickel, copper, cobalt and manganese in 2012 $. REE value is not included.

Costs and Revenues

• Capital Costs: $2.1 to $3.5 Billion

• Operating Costs: $470 million to $600 million

• Contained Metal Value, not including REE values (normalized to millions of 2012 US $)

Annual Recovery Rate(Dry Metric Tons)

2007 2011

3 Metal System: 3 million $2,295 $1,491

4 Metal System: 1.5 million$1,718 $1,415

Rare Earths and Deep Seabed Nodules

• Nodule assay shows .08% REE Content

• Heavy REEs account for 21% of total REE

• By Separating Individual REEs, total REE market value is $247/ton

• REE Content Could Increase Annual Revenues by $375 to $750 million

Benefits to US of Seabed Nodule Development

• Technology leadership in first of three new high seas sources of critical metals

• Capital Investment of about $3 billion

• Annual Sales about $1.4 to $2.2 billion

• 780 direct jobs; 2727 or more total per operation

• Significant contribution to critical materials security

• Significant improvement in import-export balance

• Downstream employment and business benefits will be felt in the Gulf Coast and Ohio River Valley

International Regime:US Objectives in 1982

• Not Deter Development

• Assure National Access

• Assure and Define a U.S. Decision-Making Role

• Allow United States to Block Amendments

• Not Set Undesirable Precedents

• Resolve Issues Identified as Raising Significant

Objections in the Senate

Today’s Investment Climate for Deep Seabed Minerals

• Assured Access, Tenure and Title

• Rule-based International Regulatory Regime

• Dispute Resolution for Investors

• Issue: Lack of Recognition of Claims Outside UNCLOS

Isolation of the US fromDeep Seabed Mining

The LOS Convention establishes that:

•Claimants must be sponsored by a State Party of their own nationality

•Parties to the Convention cannot recognize title to minerals recovered outside the Convention (precluding sale of minerals in international commodity markets)

•Exclusive access can only be recognized through the Convention (no “Reciprocating States Agreement” or international legal protection of US claims)

Current Nodule Claims in the Clarion Clipperton Zone

Conclusions• Deep Seabed Nodules are a World-Class Resource of

Critical Minerals

• Long Term Demand will be driven by industrial development in China, India, Brazil, South Africa and Russia

• Future seabed mining will compete against nickel laterite and porphyry copper deposits of declining grade and accessibility

• Additional development of hundreds of millions of dollars are needed before full investment

• Miners will require international capital and access to commodity markets

• US Industry Needs the LOS Convention’s Seabed Regime

Thank you

SupplementalInformation

Cost Estimates (Million US $)Updated to 2012, Scaled to 3 Million Dry Metric Tons per Year

MIT 1984 Updated MITCapital Operating Capital Operating

Mining 306.2 65.6 857.0 183.5Sea Transport 200.9 22.2 562.1 62.1Marine Support 1.8 4.9 5.0 13.7Ore Discharge Terminal

22.9 3.2 64.0 8.9

On-Land Transport 36.7 7.7 102.6 21.5Processing 449.1 99.6 1256.8 278.7Waste Disposal 15.3 3.9 42.8 10.9General & Administrative

88.2 4.0 246.8 11.2

Continuing Preparations

0.0 6.0 0.0 16.8

Total 1,121.0 217.0 3,137.1 607.3

EmploymentAt-Sea Mining Systems:

Two alternate 40 person teams of ship crew and mine system operators for each of two mine ships

160

Ore Transport Ships:

28 to 32 crew members for each of four ore vessels

112-128

Ore Processing Plant:

24/7 operations with 300 operators, 50 each of supervisors, managers, administrative staff, and support

500

Net JobsPer Operation, not including construction

780

Labor costs in ship construction

Labor costs in construction of mine and transport ships. $2012

$324 million

International PartnersUS Companies Can’t “Go It Alone”; Private US Consortia with International Partners in 1989:

• Ocean Mining Associates (50% by Belgium and Italy)

• Ocean Management Inc. (50.22% by Canada and Japan; Germany takes share in 1990s)

• Kennecott Consortium (48% by Canada Japan, UK; Kennecott itself was owned by Rio Tinto Zinc and later by British Petroleum)

• Lockheed/Ocean Minerals Co. (Dutch partners in early 1980s)