Alternative Investment Opportunity – Deep Sea Mining

In the last decade, technology has evolved at an ever-increasing rate, and with each new development, there are a long list of pros and cons. As we consider how things like artificial intelligence, robotic process automation and virtual reality will affect humanity, these technologies have stormed ahead. No matter the potential drawbacks, they have rapidly become a part of our everyday lives. How can we seek out alternative investment opportunity in the evolving landscape?  

As we continue to explore our natural world and develop new technologies, there will be no stopping the progress and innovation that comes from each discovery. For those willing to take risks with their portfolios, evolving technology means more innovative investment opportunities – a huge benefit to being on the forefront of new technologies. 

One process that continues to gain traction is known as deep sea mining, a type of mining that is likely to have an effect on both our economic development and the environment. 

What is Deep Sea Mining?

Deep sea mining is the process of mining mineral deposits from deep within the ocean’s depths. These mineral deposits are found in what is called the deep sea, which begins when light coming from the surface is barely visible under the water. This is generally about 200 meters (or over 650 feet) deep.

Over the years, commercial mining companies have continued to deplete the resources available on land. At the same time, the demand for certain types of metals has been on the rise. As these two realities collide, many are turning toward what lies far beneath the ocean’s surface to find answers, leading to a sharp increase in research and development of deep sea mining. 

There are three different types of deep sea mining being researched right now:

  • Polymetallic nodule mining 
  • Polymetallic sulfide mining
  • Mining of cobalt-rich ferromanganese crusts

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Polymetallic Nodules

The primary focus for researchers and companies has been on polymetallic nodules. These nodules are rock-like structures that lie on the surface of soft deep-sea bottoms at depths of up to 20,000 feet below sea level. 

Polymetallic nodules contain minerals that are critical components for renewable and emerging technologies, like wind turbines, solar panels and electric storage batteries – a commodity that is in high demand.

Industries have continued to embrace green technologies, while at the same time, government regulations on environmental impact have increased. These two factors have led to a significant increase in demand for the metals found in polymetallic nodules, including copper, nickel, cobalt and manganese.

Many governments are introducing new regulations to achieve zero carbon emissions by 2050, something that will require even more production of renewable technologies. 

The Current State of Deep Sea Mining

Deep sea mining is an up-and-coming industry that is currently in the research and development phase. The largest known area of polymetallic nodules that contain metals in high demand lies between Mexico and Hawaii. This area is known as the Clarion-Clipperton Zone, or CCZ, a region of 3,100 square miles and up to 18,000 feet of depth.

This region alone is thought to contain enough raw materials to power one billion EV batteries, a type of rechargeable battery that powers the motors of electric or hybrid vehicles. As these and other green technologies increase in demand, companies are forging ahead with deep sea mining at a rapid pace. 

However, there are several environmental concerns about deep sea mining. Industry experts, lawmakers and environmentalists are debating whether or not the benefits of this process outweigh the potential for environmental damage. 

As the debate continues, industries are striving to develop technologies that can recover nodules from the CCZ with the least possible environmental impact. 

Getting past the regulations around the CCZ is not a simple process. The region is regulated by the International Seabed Authority, or ISA. But despite the ongoing debate and roadblocks ahead, the ISA has issued dozens of contracts to explore mineral deposits in the deep sea since 2018. At the same time, the organization has protected nine areas where mining activities are strictly prohibited due to potential disruptions of the biodiversity and habitats in these regions.

Even though deep sea mining technology is still in the research and development phase and exploration has been limited, preliminary results of the process have been positive.  Initial reports have suggested that deep sea mining can deliver up to a 75% reduction in CO2 emissions when compared to land-based mining techniques. 

Still, there is a long road ahead and much more research to be done before we have a clear picture of the potential long-term environmental effects in comparison to the benefits of this process.

Despite the lingering questions and ongoing controversy, the launch of the deep sea mining industry seems to be as unstoppable as AI or machine learning, with the mining industry projected to continue expanding to the deep sea.

While the practice is still illegal in international waters, it is believed that deep sea mining permits may be issued by international regulators as early as the summer of 2023 as these agencies familiarize themselves with the improved mining technologies.

Risk Assessment

If we assume that deep sea mining is the wave of the future, investors need to consider if this new industry is worth the risk. Before we can perform a proper personal risk assessment for investing, we need to evaluate the pros and cons of deep sea mining.

As we’ve already shown, this topic is not black and white. There are many nuances and complicated factors to consider. 

First, there are billions of dollars’ worth of metals located in the deep sea that are capable of powering a whole new generation of clean-energy technologies. The implementation of these new technologies will lead to less reliance on the fossil fuels that are currently damaging the environment and contributing to climate change. 

Another factor to consider is that land-based mining comes with its own set of challenges and problems, especially for the people who live near the mines. These communities face serious potential issues like soil and groundwater contamination and destruction of natural habitats. The launch of deep sea mining will lead to much less reliance on land-based mines. 

So, how can investors meaningfully assess risk tolerance when it comes to alternative investment opportunities like deep sea mining?

Evaluating risk tolerance, depending on the situation, can involve a lot of calculations and assumptions, and there are many different, but equally valid, processes that can be followed. However, in order to tackle a meaningful risk assessment, there are a few key steps that should never be skipped.

  1. Have a clear idea of how much money you can realistically afford to lose with a medium- to high-risk investment.
  2. Be honest with yourself about your emotional ability to handle financial risk – this refers to the emotion you feel when your investments gain or lose money.
  3. Think about your behavioral risk patterns in other financial investments – have you invested in new technologies before? If so, how did you react to those gains and losses?
  4. Talk with your Wealth Advisor about your mathematical risk, or the probability outcomes of the investment. 
  5. Never put all your eggs in one basket – no matter how high your risk tolerance, always diversify your portfolio.

There is no way to know for certain that a medium- to high-risk investment – like investing in deep sea mining – will pay off in the long-run. So before investing, it’s important to do this legwork and make sure you’re fully prepared to handle the outcome, whatever it may be.

Final Thoughts

Many of the technologies that are in wide use today were once considered high-risk investments. Some of them are so commonplace, it’s hard to picture our day-to-day lives without them. Imagine going back to the late 90s to invest in Google or the early 2000s to invest in Apple. 

Deep sea mining could be the next big industry on the horizon, and only a select few may truly get in on the ground floor. 

To learn more about alternative investing, innovative investment opportunities and investing in new technologies, as well as help assessing your risk tolerance, contact a Fortune Financial Advisor today. 

Important Note

This material is provided for educational purposes only and does not constitute investment advice. The information contained herein is based on current tax laws, which may change in the future. Fortune Financial Advisors cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. The information provided in these materials does not constitute any legal, tax or accounting advice. Please consult with a qualified professional for this type of advice. The information provided above is obtained from publicly available sources and is reliable. However, no representation or warranty is made as to its accuracy or completeness.