Odyssey Marine Exploration (NASDAQ:OMEX) is a deep sea exploration and salvage company. It identified a large area of phosphate some 200 feet deep, about 450 miles southeast of San Diego, CA, USA. Its subsidiary Oceanica has been awarded rights to extract 327 million tons of phosphate ore from this area. The area is 12-25 miles offshore, west of Baja California Sur, near N26-22', W112-40.5'. An Environmental Impact Study has been submitted to Mexican authorities. The project is being opposed by the usual suspects.
This project is very important to OMEX since it could provide substantial annual income which would support its exploration efforts. Deep sea salvage is a feast-famine business, and a steady income would transform OMEX. In order to understand the nature of this development and its environmental impact, a look at the area involved might be helpful.
Scorpion Bay is near the northern end of this area. Scorpion Bay is a surfer hangout said to have world-class waves. The nearest town is San Juanico, at the head of the bay, with a population of 687. It is approached from the north on a poorly marked dirt road accessible with off-road vehicles. A new paved road goes south. Local fishing boats are launched through the surf, and the catch is sold locally. The local airport is closed, but there is a dirt strip 13 miles north. For the next 55 miles south along the coast, there are no towns worthy of placing on a map, and no paved roads. The area with phosphate runs offshore about 40 miles southeast of Scorpion Bay.
Since the area containing phosphate is 12-25 miles offshore, it should have no effect on this town and generally the dredges should be out of sight along the coast.
The town where a recent public hearing for environmental issues was held, Ciudad Constitucion, is 100 miles away from the area to be dredged. The largest town in the area, it has a population of 40,000, three gas stations, and an airport served by an airline with a fleet of two small twin Cessnas and one turbo-prop single.
To say the area is sparsely populated would be an understatement.
Objections from environmentalists contain the omnipresent vague catch-words "may", "could", "if", "potential for", "potentially dangerous", "exploited", "biodiversity", "controversial" officials (those on the other side), etc. Potential environmental threats seem limited only by imagination. No consideration is given by these folks to the benefits from this project to the Mexican economy.
Mexico imports 40% of its food, and fertilizes only 25% of arable land. Mexico imports 83% of its fertilizer. A local source of cheap fertilizer could be a game changer for Mexican agriculture.
There would be 80 direct dredging jobs, two crews of 40 working 24/7/365 for 50 years. Some of these jobs could go to seamen in nearby communities, depending on their education. In any event, a nearby ship would be a ready market for local fresh fish. The availability of fishermen capable of landing a boat through the surf could come in handy to an offshore dredge.
The major direct benefit would be jobs associated with separating out the phosphate from ore, forwarding the end product to the user, and construction of facilities to process the ore. It is unlikely these facilities would be in Baja California since the necessary transportation infrastructure does not exist there.
A 400 mile barge ride to Mazatlan or Puerto Vallarta on mainland Mexico would find adequate harbors and space for processing plants.
The real benefit would come from an increase of agricultural products, the planting and harvesting thereof, and with lower priced produce for Mexican markets.
While local environmental concerns will be heard, the decision to proceed will come from the upper echelons of the Mexican government. They will weigh the interests of Mexican agriculture versus American surfers. Which group do you think will be favored?
Disclosure: The author is long OMEX.
The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.
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