The next real gold rush won't be on a far flung asteroid. It will be under the sea.
In fact, The Wall Street Journal said earlier this month that underwater mining could be a $500 trillion business someday.
That means underwater mining stocks, which are cheap now, could be headed for monster gains.
Scientists now project there are over 10 million tons of gold to be found by sifting through the seas – but don't go out with your shovel and sifter. Most of the gold is buried under a mile of water.
And that is just the gold.
Underwater mining companies also hope to extract copper, nickel, ore, silver, zinc, and even rare earth metals.
So for those of you who are worried that the earth will run out of these minerals, underwater mining should calm your fears.
"It's unimaginable to think we'll need to rely on asteroids from space to supply the Earth with metals," Scott McLean, chief executive of Ontario-based mining company HTX Minerals Corp., told The Journal. He said the idea is "interesting, it is visionary to think about these things," but he concludes: "The Earth's mineral bounty is immense, and it will continue to provide for millennia."
Underwater Mining: Tapping the Unknown
There is very little that is known about what exactly lies at the bottom of the ocean and how much of it there is. Yet engineers and scientists are coming up with newer ways to find out what is hidden below and how to extract those resources.
Last year scientists from the University of Tokyo discovered an estimated 80 billion to 100 billion metric tons of rare-earth deposits in the Pacific Ocean, or almost a thousand times more than current proven recoverable onshore rare-earth reserves, as estimated by the U.S. Geological Survey.
And the interest in underwater mining is booming on a global scale.
Over the last year, the International Seabed Authority, an independent body set up by the United Nations to control mining in international waters, signed four new contracts with groups interested in exploring the ocean floor, says Adam Cook, an ISA marine biologist.
That is a jump from the eight contracts previously, six of which were signed over 12 years ago, Cook said. The new contracts include agreements with state and private organizations from Japan, Korea, Russia and China.
Previously, underwater mining was too expensive and beyond our technologies to see to fruition. But recent advances in robotics, underwater drilling, computer mapping, and record high commodity prices now make underwater mining an attractive possibility.
And there are some Canadian companies already testing the waters.
The Top Underwater Mining Stocks
- Nautilus Minerals Inc. (TSE: NUS): Thought to be the first to mine, Nautilus suffered a setback Friday, June 1 when the company announced that funding issues would delay its scheduled projects. This highlights the fact that the initial costs for underwater mining are still a major risk for investors, especially in the short term.
However, the Toronto-based Nautilus dealt with financing issues after the 2008 crash and this year signed its first customer for high-grade copper and gold that it expects to mine almost a mile below the South Pacific, in several sites off the coast of Papua New Guinea. Nautilus reported that one of its prospective undersea deposits in the Pacific Ocean has the capacity to yield ore with an average 7.5% to 8% of copper, compared with 0.6% at an average onshore mine.
Nautilus stock took a hit following the funding announcement and tumbled more than 60% to $0.94 over the next few days before rallying to its current price of $1.27. This might be the time to buy the dip as it traded above $3.00 just less than a year ago and has an average target price of $3.80.
- Diamond Fields International Ltd. (TSE: DFI): Based in Vancouver, British Columbia, Diamond Fields plans to use a ship or platform fitted with an almost mile-long hose to vacuum up fine silt suspended near the bottom of the Red Sea by 2014. The company says the silt contains copper, silver, zinc and trace amounts of gold.
The stock is currently a penny stock trading at $0.06. Yet, it traded at $0.40 not more than a year ago and over $0.75 prior to the recession.
- DeepGreen Resources: Also based in Vancouver, DeepGreen announced that Swiss-based Glencore International PLC ( LON: GLEN), a commodities trader, agreed to buy half of the nickel and copper it plans to process from tennis-ball-sized nodules sitting nearly three miles below the water's surface between Hawaii and Mexico. The nodules contain about 30% manganese, a metal used in the manufacturing of steel, along with cobalt, nickel and copper. DeepGreen hopes to begin production by 2020.
Once one of these companies opens a producing mine, the benefits of underwater mining stocks will quickly become obvious to long-term investors. As far as underwater mining is concerned the sky, or rather, the ocean floor is the limit.
Related Articles and News:
- Money Morning:
Mining Stocks: Will the Downturn Last?
- Money Morning:
Asteroid Mining: The New Space Race Could be Worth Trillions
- The Wall Street Journal:
Next Frontier: Mining the Ocean Floor