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  • Tulips On Asteroids 3 comments
    Jun 5, 2013 9:40 AM

    Planetary Resources, Inc., (NYSE:PRI) is a pioneering company in the potentially ground-breaking industry of asteroid mining. PRI was originally formed in November 2010, known then as Arkyd Astronautics*. The company was reorganized, renamed, and formally introduced on April 24th 2012 at a launch press event held at the Museum of Flight's Charles Simonyi Space Gallery*. In a nutshell, PRI seeks to identify, prospect, and mine near-Earth asteroids for hydrogen and precious metals.

    Asteroids & Asteroid mining

    Within our solar system, there are roughly 620,000 asteroids that have been discovered, most of which are in the asteroid belt between Mars and Jupiter. Of these 620,000 asteroids, about 10,000 are near-Earth asteroids, meaning they are within 1.3 astronomical units* from the sun. Furthermore, about 1,800 of these near-Earth asteroids are energetically easier to get to than the moon.

    (click to enlarge)

    There are two main types of asteroids that are potentially valuable for their resources. First, there are LL chondrite asteroids, which contain vast amounts of platinum, palladium, rhodium, iridium, ruthenium, and osmium. Second, there are carbonaceous chondrite asteroids, which contain hydrogen, carbon, nitrogen, and oxygen. The reason why hydrogen is potentially valuable is because it costs over $10,000 to take a liter of water into space. Moreover, hydrogen can potentially serve as a fuel in space. The idea is to develop lasers or microwaves which are getting exponentially more efficient as far as the cost to produce a gigawatt is concerned. Thus, the process that the folks at PRI seem to want to bring about is called beam-powered propulsion. In a nutshell, microwaves are beamed onto a rocket, which in turn convert that energy into heat that ignites a working fluid like hydrogen. This could in effect allow a spaceship to roam around the asteroids, refueling itself on every carbonaceous chondrite asteroid on which it lands. While all of this may sound a bit far-fetched, there are a number of reasons why this company has the potential to gain some major attention.

    Reason #1 - Names & Money

    "Prestige is the mainspring of all authority. Neither gods, kings, nor women have ever reigned without it"
    - Gustave Le Bon

    PRI consists of some of the brightest minds on the planet. It includes a number of people who previously worked for the Jet Propulsion Laboratory (JPL), which helped put rovers on Mars for NASA. These include the likes of Chris Lewicki, Chris Voorhees, Peter Illsley, Sean Haggart, Hannah Goldberg, and Spencer Anunsen. It also includes a number of people from Space X, the space transport company founded by Elon Musk. Moreover, there are numerous other people coming from all sorts of top-notch companies, such as Ray Ramadorai, who was an architect of the Intel core i7 series, which drastically improved processing efficiency and lowered the power requirements. In short, the company is a powerhouse of accomplished intelligence and is bound to receive attention ex cathedra.

    The investors and advisors backing PRI are no slouches either. Amongst them are Google CEO Lawrence Page, Google Executive Chairman Eric Schmidt, film director James Cameron (known for blockbusters such as Titanic and Avatar), software architect best known for developing Microsoft Office Charles Simonyi, and billionaire H. Ross Perot, Jr. Furthermore, the company has a partnership with Bechtel Corporation, which acts as a strategic partner and core investor. It would be safe to say that even at this state the company has plenty of capital behind it.

    The founders of PRI are Eric Anderson and Peter Diamandis. Eric Anderson helped forge the commercial market for space travel. Having co-founded Space Adventures in 1997, he reached an agreement with the Russian space agency to purchase seats on the Soyuz space vehicle that would go on to transport private citizens to the International Space Station. The first seat was sold to Dennis Tito for $20 million. Anderson is also President & CEO of International Software Corporation and has worked with Peter Diamandis going as far back as 1994 with the X Prize Foundation.

    At the helm of PRI is Peter Diamandis, who holds a B.S. in molecular biology and a M.S. in aeronautics and astronomics from MIT. In addition, Diamandis also holds a M.D. from Harvard Medical School. While this academic record is impressive, it pales in comparison to the achievements he has already made throughout his career. Diamandis founded Constellation Communications (1991), X Prize Foundation (1994), and Space Adventures, Ltd. (1998). Moreover, he co-founded the International Space University (1987), International Microspace, Inc. (1989), Zero Gravity Corporation* (1994), Rocket Racing League (2005), Singularity University (2008), and most recently PRI. Diamandis also co-authored Abundance: The Future Is Better Than You Think along with Steven Kotler. While some may be good champions of a cause and others great catalysts, it can be safe to say that Peter Diamandis is amazing at being both. It should be of no surprise that he received the 2010 Innovation Award from The Economist*.

    Reason #2 - Backing up the Biosphere

    "The Earth is the cradle of humanity, but mankind cannot stay in the cradle forever"
    - Konstantin E. Tsiolkovsky

    The ancient library of Alexandria, located in Alexandria, Egypt, was burned down in 48BC* during the Alexandrian War. Along in the fire was consumed not only the papyrus paper and the various commodities from which the books and the library itself were made, but also the vast amount of knowledge that had been accumulated there. Thus, the reason for expanding onto asteroids, other planets, and potentially to other galaxies is not only to acquire resources and bring them back to Earth. Were a meaningfully sized asteroid to hit the Earth, humankind will go the way of the dinosaurs, despite all of our accomplishments. Thus, mining asteroids would allow us to not only expand our resource base, but will bring us one step closer to becoming a multiplanetary species.

    Reason #3 - Something New

    "where do we allow crazy ideas to bubble up?"

    Mining is an old affair that goes back tens of thousands of years. On the other hand, asteroid mining is bound to spark extraordinary interest, especially by those who are not professionals in the field i.e., potential investors. Like the railroad, clipper ship, radio, or the internet in the days gone by, the perception of something new has an incredible ability to generate interest. Space exploration, cutting-edge technology, some of the brightest minds, and the potential to open up a brand new world to humankind; PRI has all the ingredients necessary in order to attract lots of attention. Who cares about drinking bottled water from the rainforest or the Alps; it's all about asteroid water.

    Reason #4 - Commodity Bull Market

    "The Earth is a crumb in a supermarket filled with resources"

    Hardly anyone would have cared about platinum group metals (PGMs) at the turn of the century. Commodities in general were at all-time lows adjusted for inflation. Platinum was as low as $350/oz in 1999. Currently, platinum trades at $1,500/oz, which is a nominal increase of 329%. Commodities were in a bear market from 1980 all the way to the turn of the century, declining in both nominal terms and especially in real-terms. Since then, however, commodities have gone up while equities have gone down.

    (click to enlarge)
    This is the S&P 500 ÷ USD price of West Texas Intermediate per barrel. From 1980 the ratio kept rising in favor of the S&P 500 until it reached a peak in late 1998, when it took over 100 barrels of WTI to purchase the S&P 500. Since then, the ratio has persistently fallen in favor of WTI as the S&P 500 has declined adjusted for inflation. On the other hand, commodities in general have gone up since 2000.

    The promise of vast riches to be had from the New World was very enticing during the Mississippi bubble of the early 18th century. No longer did one have to be a king or a colonizer to enjoy resources from distant places, or so people thought. One simply bought shares in the Mississippi Company and waited to get rich as an abundance of resources came flowing in from the virgin lands. Likewise, if commodity prices continue to rise despite relatively low output (high unemployment), then it will become quite alluring to think that abundant supplies of space fuel and precious metals await us in the new New World. What was once only an industry that government could touch will be brought to mankind. One only has to wait for the IPO to purchase a slice of the future. Hope springs eternal.

    Reason #5 - Mitigating War

    "WWIII will most certainly be fought over oil, but for economic survival not for economic advantage"
    - Eric Janszen

    We live in a world filled with scarcity. As such, it is perfectly understandable that wars have been fought over resources. An MIT working paper entitled A Dynamic Theory of Resource Wars came to the conclusion that, "In the empirically relevant case where the demand for the resource is inelastic and the resource-poor country can capture most of the remaining endowment in a war, war becomes inevitable"*. It is important for mankind to secure more and more resources over time, especially those which are relatively scarce and vital. Ecclesiastes 5:11 states that "As goods increase, so do those who consume them". That logic also works in reverse.

    Reason #6 - Inflation

    "An abundance of fictitious and imaginary money causes the same disadvantages as an increase of real money in circulation, by raising the price of land and labor, or by changing the value of money and goods only to cause subsequent losses. This furtive or unnatural abundance vanishes at the first gust of scandal and precipitates economic chaos"
    - Richard Cantillon

    Bubbles and euphoria are almost always associated with periods of vast money and debt supply increases. Inflation is the sine qua non for speculative manias. The result is that the period of provision is stretched to an unsustainable point. The tulipmania coincided with massive inflows of silver and gold from the New World. The Mississippi bubble occurred in an era of John Law, who greatly increased the quantity of money and actively pumped up the stock market in part by making debt more available. The South Sea Bubble, also fueled by monetary inflation, displayed some peculiarities. Bubble companies sprung into existence, such as the London Umbrella Company, which planned to rent out umbrellas at numerous stations throughout the city, being sort of akin to zipcar today. There was even a company in the works which planned to drain the red sea in order to search for gold and jewels left by the Egyptians in their passage after the Israelites. One has to wonder if anyone entertained the idea that the costs might outweigh the benefits. Moreover, rampant speculation in insurance, land, building development, mining, and metals was present during the South Sea Bubble. A company called General Insurance went up by 6,300%, while another called London Assurance Co. by 3,100%*. Perhaps we can expect Elon Musk to insure the endeavors of PRI, that is, if he doesn't run into problems regarding the guarantees that he has already made towards Tesla (NASDAQ:TSLA) thus far*. Inflation of money and debt has a way of distorting the behavior of market participants. It is the fuel that is necessary in order to ignite the flames of speculation.

    (click to enlarge)
    The left-hand side shows MZM (red) which is one of the broadest and perhaps the most useful measures of money supply. MZM is approaching the $12 trillion mark. The right-hand side shows the total amount of credit market instruments (blue), also known as debt, which is approaching the $60 trillion mark.

    Gravity is a Bear

    "I had learned my first lesson in moneymaking - that people who try to get rich from mining often put more into the ground than they take out of it"
    - Bernard Baruch

    It is hard not to like Peter Diamandis, who describes himself as a libertarian capitalist. His accomplishments thus far are surpassed only by his passion for exploring the cosmos. Not only that, he has some of the brightest minds working for PRI and already the company is well capitalized while still private. That being said, all that glitters is not necessarily platinum. Diamandis was CEO of BlastOff! Corporation from 2000 until its failure in early 2001. BlastOff! was meant to get the first private mission to land on the moon. The company incorporated, or was meant to, a mix of entertainment, internet, and space exploration. Like PRI, BlastOff! consisted of some of the brightest minds from NASA, JPL, and Hollywood. BlastOff! was eventually spun off into Desktop.tv, which sought to provide a global peer-to-peer television network for broadcasting unique content. Although very much unrelated to the initial purpose of BlastOff!, Diamandis also served as CEO for the now defunct Desktop.tv.

    Gold mining on Earth isn't a terribly profitable business, so one cannot help but wonder how profitable it is to (1) fly a whole bunch of mining equipment onto an asteroid, (2) successfully mine the ore, and (3) fly the stuff back to Earth. One cannot help but think that this whole affair is equivalent to draining the red sea for gold. Whether or not PRI turns out to be a raging success that expands our resource base and turns humankind into an interplanetary species, it certainly has the potential to become a bubble company. Much like a mirage, in times of easy money and tight commodity supplies, the idea of abundance just around the stratosphere has some verisimilitude to it.

    pecunia pecuniam parere non potest

    * Arkyd Astronautics was the name of PRI while the company was still in stealth mode. The name was inspired by a company which supplied exploration droids in the Star Wars universe called Arakyd Industries

    * http://www.museumofflight.org/event/2012/apr/24/future-of-space

    * An astronomical unit is equivalent to 149,597,871 kilometers. Thus, 1.3 astronomical units would be equivalent to 194,477,232 kilometers, or 120,842,550 miles

    * Zero Gravity would go on to take physicist Stephen Hawking into the upper atmosphere

    * http://www.economistconferences.co.uk/innovation/noboundariesawardwinner2010

    * Some suggest that the library of Alexandria was burned down in the attack of Aurelian in 270AD, or by the decree of Coptic Pope Theophilus in 391AD, while others suggest that it was during the Muslim conquest of 642AD

    * A Dynamic Theory of Resources Wars was written by Daron Acemoglu, Michael Golosov, Aleh Tsyvinski, and Pierre Yared

    * New Evidence on the First Financial Bubble was written by Rik G.P. Frehen, William N. Goetzmann, and K. Geert Rouwenhorst

    * http://www.usatoday.com/story/money/cars/2013/05/03/elon-musk-tesla-resale-guarantee/2133389/

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Comments (3)
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  • JohnKW
    , contributor
    Comment (1) | Send Message
     
    I will now seek out a list of openings for "Miners in space" as well as requirements for such positions...IF I am considered to old for such a position, I will then turn my efforts towards educating others for such dream filled careers!
    6 Jun 2013, 12:09 AM Reply Like
  • Warren Platts
    , contributor
    Comments (2) | Send Message
     
    The biggest problem as I see it with PGMs from asteroids is that the market is just too small to provide enough revenue to support a major space program. Total production for Pt on Planet Earth is on the order of 200 mT which would generate revenues on the order of $10B/year--about the minimum needed to run a major space program. Thus to get that much Pt from space would double the production and crash the price. Sure, they say they'll make up for the difference in volume sales, but with space transportation costs measured in the thousands of USD per kg, there is a rather high minimum price that any commodity from space has to maintain in order to be profitable.
    27 Jun 2013, 06:12 PM Reply Like
  • Patrik Korda
    , contributor
    Comments (35) | Send Message
     
    Author’s reply » YTD Update: Nothing significant to report yet regarding Planetary Resources. The company is still very much under the radar as commodity prices have remained flat over the past year.
    6 Jun, 09:26 AM Reply Like
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