The commercial exploration of polymetallic nodules in the Pacific may not generate net financial benefits for the international community or for the sponsoring states of the projects, due to the high risks involved, according to an analysis commissioned by environmental organizations.
The conclusion is contained in the report “A Case to Prove: The Economics of Deep-Sea Mining,” carried out by the consultancy Koinon, at the request of Oceans North, the Deep Sea Conservation Coalition, the Blue Ocean Foundation, the International Union for Conservation of Nature, and the Dona Bertarelli Philanthropy.
“In all realistically possible outcomes, the activity tends to destroy more public value than it creates,” the document concludes, presented on Saturday during a “Dialogues on the Deep Sea” event, organized on the margins of the 31st session of the International Seabed Authority (ISA), which is taking place in Kingston, Jamaica.
To assess whether the exploration of polymetallic nodules in the Clarion-Clipperton Zone (CCZ), where the ISA is responsible for managing the mineral resources, could generate net financial value for the international community and for the sponsoring states, the authors analyzed the robustness of the NORI-D and TOML (Tonga Offshore Mining Limited) projects, promoted by The Metals Company.
Looking at different scenarios, including under conditions less favorable than those initially forecast by the project promoter, the analysts concluded that in almost all cases (83%) the project would incur a loss.
On the other hand, the report notes that the probability that the investment will never recover the initial capital is around 60% and points to the risk of rising investment costs as the main factor reducing profitability.
Additional risks include uncertainty about the real quantity of minerals available in that area of the Pacific Ocean between Mexico and Hawaii, their concentration, and the operational difficulties on the ocean floor.
For the international community, the projected financial benefits are likewise considered limited and uncertain.
According to the United Nations Convention on the Law of the Sea (UNCLOS), the mineral resources of the deep seabed beyond national jurisdictions are considered the common heritage of humankind, and their exploitation is managed by the ISA, which must ensure a fair distribution of economic benefits.
However, according to Koinon’s analysis, the revenue destined for the ISA through the benefit-sharing mechanism would be almost half of the promoter’s initial projections.
In a maximum production scenario, the promoter estimated revenues of around $480 million per year for the ISA, but the report estimates a likely average value of approximately $260 million.
For the sponsoring states, the economic benefits are even less expressive and in 48% of the simulations performed, the projects would not generate any revenue through corporate income tax.
In the absence of significant revenues through corporate income tax, the sponsoring states would rely primarily on other fiscal mechanisms, but the authors warn that these tools require a high capacity for tax administration, difficult to guarantee in the context of a remote ocean area and unprecedented in terms of oversight.
On the other hand, UNCLOS provides a compensation mechanism for developing countries that rely on terrestrial mining and that may be harmed by the exploitation of the mineral resources of the international seabed, but the report warns that the revenue losses of these countries could exceed the benefits generated by deep-sea mining.
In years of maximum production, losses for terrestrial producers could amount to around $1.9 billion, according to the analysis, while the ISA’s revenues would be around $1.1 billion, harming, in particular, countries such as South Africa, Indonesia, and the Democratic Republic of the Congo.
In light of this scenario, the report concludes that it will be difficult to compensate the affected countries and, at the same time, ensure revenues sufficient to distribute as a global benefit, casting doubt on the principle that the resources of the international seabed funds should benefit humanity as a whole.
