Is Asteroid Mining the Next Gold Rush?

Over the year’s I’ve read about a handful of space mining companies. As someone who’s participating in the existing mining ecosystem, there’s always a thought in my mind; could we get disrupted? It happens to everyone eventually, why not mining right now? Despite this thought, it’s impossible to not be skeptical about these sorts of propositions. I mean, mining companies struggle to generate economic returns on earth. How the heck could they pull off anything in space.

I understand the appeal that asteroid mining provides. For those of us that believe humanity’s exponential growth will outpace resource supplies, the unlimited resources of space provide a comforting proposition. I don’t disagree that there are massive resource supplies in space, which some proponents value in the quintillions! It’s worth highlighting, though, that there are a lot of “resources” on earth. The question isn’t how much there is. The question is what can be mined profitably.

I started getting into the weeds on this topic after reading an article recently published in the Journal of Mineral Economics titled “Mineral scarcity on Earth: are Asteroids the answer”. Funny enough, this twitter post jumped up on my feed at the same time. Seems to be a timely question…

What Would it Cost?

When thinking about the feasibility of space mining, we need to ask ourselves two questions: 1) what will is cost, and 2) what will it provide ($). It’s my opinion that no one truly knows how space mining would occur from an operational perspective. The reality is that the “technology to excavate and refine metals in situ in a near zero gravity setting”1 has not been invented yet. While this is the case, we know how metals are extracted on earth and there are a few interesting points that we can look into.

When I think about space mining, I think about a rocket getting fired into space with some mining equipment that gets dropped off on an asteroid. The mining equipment collects and concentrates the minerals. When a large enough payload is collected, the rocket transports the material back to earth. The first question we need to ask ourselves is, what would it cost to get a reasonable supply of mining equipment onto the asteroid or, much less, outside of Earth’s atmosphere.


This interesting chart shows how much it has costed through time to launch 1kg from earth into low earth orbit (LEO). LEO is not an asteroid. For our purposes, however, this cost can be used to illustrate what it would cost to get mining equipment into space.

The picture above is a CAT 930E haul truck. A fairly run-of-the-mill piece of equipment at an operational mine on Earth. Obviously, I don’t expect a haul truck to perform too well in a zero gravity environment. I’m using this example to cost out space mining as it is indicative of the huge amounts of physical resources that are used in mining. While this haul truck may be an egregious example in isolation, the reality is that mining operations (at least on earth) require drills, trucks, shovels, crushers, mills, and refining facilities. The true requirements to convert rock to metal are truly staggering

A 930E haul truck weighs 210 tonnes. As shown in the chart above, the Falcon Heavy can transport material to LEO for $950/kg. Nasa’s goal for 2040 appears to be $90/kg.

If we use the equivalent weight of 10 haul trucks as a proxy for the construction weight of a small mining operation, this would cost about US$2B for launches. Again this ignores the costs of actually getting this material to the asteroid, the equipment costs, space fabrication, etc. For simplicities’ sake, let’s say it costs 3x this amount to get the asteroid mine up and running ~$6B in CAPEX. Large mines on earth cost $1-$2B. For earthly profiteers to go to the hassle of getting to space there’s got to be some sweet metal up there!

What Will It Provide ($$$)?

Let’s ignore the price impact associated with “flooding” the earth with space metals and assume that existing metal prices remain constant. How much value could be on a single asteroid?

The paper that I referenced earlier highlighted grades for a potential asteroid. It is worth noting that the concentration of gold on an asteroid is very low (hardly economic if it was on earth). I imagine that the author’s asteroid prospecting experience is probably lacking so this information should be qualified with a big question mark regarding its validity. It’s interesting, however, that the example that was chosen highlighted that gold grades on asteroids are really unimpressive.

Source: “Mineral scarcity on Earth: are Asteroids the answer”

If we assume 100% recovery of the metals (which is impossible). The in-situ value of a tonne of asteroid rock would be approximately $1.4M. This is a lot! I mean, on Earth, a “good” open pit orebody would have an in-situ value of $100/tonne. This 1400x higher!

Unfortunately, however, I don’t think this cuts it. We haven’t really talked about operating costs or how this material would be making its way back to earth. It’s not like you can just push it into the atmosphere and it’s going to land at a refinery. Remember that cost to transport material into LEO works out to about $950,000 per tonne. If we assume that operating costs of a similar magnitude are required to blast, concentrate, load, and bring this material back to earth are required, then operating profits are reduced to $500,000 per tonne.

We, however, we need to think about transporting this material to smelters and refining the metal. If we assume that 90% of this material is payable (after smelting costs) and a further 20% is costed as part of transportation, the net revenue per tonne falls to US$350,000.

To produce US$1B in free cash flow per annum the operation would need to transport 2,800 tonnes of material back to earth per year. Maybe this is possible. Who knows? Even it was, this would produce an annual return of 15%; not too stellar given the risks.


After looking through the numbers:

– It appears that the economics associated with space mining are pretty poor, even after assuming some very low capital numbers

– Even if space mining was economic, the gold grades on an asteroid really aren’t compelling when compared to the grades on earth

Given these points the prospects of “gold raining down like sand” appear pretty poor. Good luck!

References: 1) Mineral scarcity on Earth: are Asteroids the answer, Dahl et al

Skeena, Eskay Creek, Exploration Results

2018 has seen its fair share of stock price reactions to exploration results. The release of Cuale’s trenching results sent Evrim’s stock to 200% returns within a matter of weeks. Great Bear Resource has seen more than a 600% return since releasing the results from Dixie Lake in September. Conversely, Skeena Resource’s Eskay Creek results have garnered zero impact at all. This discussion will investigate some of the market responses to Skeena’s 2018’s exploration results and try to understand the context behind some of the reaction.

Evrim Resources, Great Bear Resources, and GT Gold had great years, achieving 150% to 700% returns so far in 2018. The charts below track cumulative AuEq gram * meters from intervals >5m in length and over 100 g*m. As I would’ve expected, there’s no clear relationship between cumulative AuEq meters and total stock returns. There is, however, a very strong relationship between the timing of the exploration results and the positive reaction. These folks found something that people weren’t expected.

To contrast possible exploration outcomes, look at the Skeena Resources vs. GT Gold. Similar cumulative AuEq meters, very different outcomes. No reaction at all from Skeena’s results. What gives?

Well Skeena resources is pretty small which I would’ve thought would work in its favor (enterprise value of 22.2M). Ok, so what’s wrong with the asset? Eskay Creek. Results looks pretty interesting. 30g/t for 28 meters at 62 meters from surface. Similar lengths and grades from a couple holes. Project is in BC, that’s good. Barrick used to own it. Lots of ounces produced in the past. Hmmm. Ok. So we’ve got a tired old mine that people are discounting. I imagine these results are as the public has expected? Pretty low enterprise value for 1.4M oz of resource in a good jurisdiction with a site that’s probably easier to permit than most. What am I missing here? Let’s go to their website and check it out.

Ok, interesting. Technical report issued on Nov 1st.  What’s this property all about:

  • Geology: VMS
  • Location: BC, Golden Triangle
  • Access: All season road
  • History: Mining started in 1995. Barrick mined it until 2008. On care and maintenance until 2017 when Skeena entered into an option agreement with Barrick.
    • 270 tpd mill
    • Drift and fill
    • Very high grade, 3.3M oz produced from 2.55M tonnes of ore
  • Resource:
    • 207K oz of open pit
    • 589K oz inf open pit
    • 814K oz of indicated underground
    • 261K oz of in underground
  • Option agreement:
    • 10M to Barrick
    • Need to spend 3.5M before 2020
  • Metallurgy:
    • Concentrate production
    • Lots of penalty elements
  • Mining

Ok, so Eskay creek is a tired old mine. Small. Not too surprising that the exploration results didn’t yield too much excitement.

The strip ratio is pretty low for such high grade in the open pit. Kind of interesting. 700K ounces at ~ 5g/t. That could produce a decent amount of cash.

Overall, it’s tough to make an investment thesis. The exploration results didn’t do anything for the share price and they are a long way out… I’m kind of surprised that the exploration results didn’t garner any interest. The property would check a lot of boxes. Nothing special but good jurisdiction and appears to have a decent shot at reopening in the future. Skeena seems cheap.