It's not about the platinum, dammit!

01/30/13 15:46:00    

By Michael Mealling

Starting with Planetary Resources (PRI) and now with Deep Space Industries (DSI) the idea of using raw materials from space has become credible enough that news outlets in various markets have felt the need to report on it. The problem is they're getting it wrong:

Yes, both PRI and DSI discussed platinum recovery as a secondary market. But if these were real journalists or financial analysts instead of a link trolls they would have spent the time to understand the market and the opportunity. The latest in this trend is Simone Foxman reporting for Quartz in The crazy economics of mining asteroids for gold and platinum. Simone's opening sentence suggests she may not have read or seen either company's websites or press releases: “Not one but two companies have now decided that they’re going to mine asteroids to collect gold and platinum.” Both companies have specifically said the main justification for the business is in space uses for water and raw structural materials. Simone spends the rest of the article doing basic calculations based on this assumption: “If we assume that an entire spherical asteroid with a 10 m diameter (about 523 cubic meters) is made of platinum, and that one of these asteroid miners could harvest the whole thing, then they’d get about 11.2 million kg of platinum. At current market rates, that comes out to $12.1 billion.”

Simone, neither company has said that is their business model. In both cases the companies assume PGMs are semi-valuable left overs and are NOT the main reasons for the venture. Also, in both cases the business models assume incremental profit from technology development AND incremental cost reductions from technological maturity (especially from reduced launch costs).

So, starting now lets take a look at the cost of bringing 1 lb of material from an asteroid to the earth. The price of something is set by who is willing to pay for it. Right now NASA is building the OSIRIS-REx mission which will return between 2 oz and 4 lbs of material plus a 505 day mapping mission for $1 billion. Assuming a rational NASA (not a good assumption to make but we'll go with it for now) if someone can do it for $1 less it makes sense for NASA to use that other source. So making a financial analysis based on the cost of terrestrial platinum when the scarcity of pristine asteroid material is a much more rational and economic choice suggests other motivations.

In PRI's case the business model is water (and other volatiles) extraction for life support and fuel. In the long run PRI looks more like Exxon NYSE:XOM than Stillwater PlatinumNYSE:SWC. DSI's business model (if it wasn't GLARINGLY obvious from the images on their website) is building really BIG stuff using giant 3D printers. DSI looks more like Caterpillar NYSE:CAT or Halliburton NYSE:HAL. For people who actually understand these markets the most interesting news from the DSI press conference was the Microgravity Foundry which can print structurally capable nickel metal from a nickel charged gas. There wasn't very much detail on how this type of 3d printing worked but printing structurally capable metallic structures in microgravity is something very new.

All of that said, there are plenty of open questions about both business models. Both assume some customer is out there wanting oxygen, hydrogen, water and giant 3d printed structures. Who might those be? Where did THEY get their funding? What's their business model? Those are HUGE questions. NASA thinks there's enough demand for refueling to have just done a test on the ISS. MDA is building the SIS spacecraft. Those are fairly big endorsements of the basic assumptions.

But apparently intentionally misreading or ignoring the data provided by the companies to setup an idiotic “Ooooh! Platinum isnt' worth that much!” or “You'll crash the PGM market” strawman is OK in what people call link trolling …err… 'journalism' these days.

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