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This article was first published in Mining World on 26 June 2017 Deep Sea Mining – Current Status and Future Potential By Ian R. Coles – Head of Global Mining Practice

Introduction in the deep sea mining environment. Nevertheless exploration and other In one of the most recent editorials on the prospecting activity has continued and new state of the deep sea mining industry technologies and (until relatively recently) an (published on 4 June) the Guardian postulated upward price curve have offered more that “Mining the deep ocean floor for valuable positive potential returns to those prepared metals is both inevitable and vital, according to invest. In addition grades in deep sea Ian R. Coles to the scientists, engineers and industrialists deposits have tended to be higher than with Partner, London exploring the world’s newest mining frontier”. their land based counterparts. For example E: [email protected] Much has been written on the subject ever the copper grade at the Solwara-1 project in T: +44 20 3130 3205 since the potential for extracting metals from Papua New Guinea is estimated to be in excess the ocean floor was first identified. However, of 7%. Resource exploration on terra firma progress has been somewhat stilted over the involves activity in increasing inhospitable years – principally as result of the costs terrain and environments. As a result some involved as well as environmental concerns. analysts have predicted that the deep sea This article seeks to review the progress made sector could be providing 10% of total mining to date and the prognosis for further output by 2030. That, however, is a pin-prick development. when compared to the estimated available deep sea resource – possibly something in The Available Resources excess of $100 trillion (or more) by some Deep sea resources come in many different estimates. Against this should be balanced the shapes and sizes – from sulphide deposits laid fact that potential prospectors have been down next to hot springs to polymetallic speaking about mining manganese nodules nodules lying on the sea bed. Rare earth and since the 1960s. precious metal modules have been at the Some of the early stage promoters of deep sea forefront of interest but more recently mining include UK Seabed Resources, a phosphorus nodules are attracting attention government-backed British subsidiary of in the context of the rush for fertiliser Lockheed Martin. The company has secured a products. While diamond mining on the licence to explore a 4,000-metre deep area of seabed adjacent to the coast in South West the Pacific Ocean which is twice the size of Africa has been active for several years (De Wales. Possibly the most well known project in Beers has been mining for diamonds in the the sector though is the Solwara 1 project shallow waters there since the 1960s) the first being developed by Nautilus Minerals in the firms to target deep sea mining were attracted coastal waters of PNG. Nautilus plans to by the discovery of manganese nodules. construct vessels and other infrastructure to However those pathfinders immediately exploit a deep-sea gold, copper and silver encountered the adverse economics involved Deep Sea Mining – Current Status and Future Potential massive sulphide project. The challenge is Legal and Licensing Framework illustrated by the fact that the deposit on the The legal and licensing framework ocean floor is 1500 metres below surface. underpinning deep sea mining is often Nautilus hopes to bring the project into criticised for its uncertainly and inefficiency. production by the first quarter of 2019. This arises in part from the fact that not all countries have signed up to support the Rare Earths, etc. regime which has been created (as at July 2016 Deep sea mining has been frequently 168 states had signed up – the USA is the most mentioned in the context of rare earths and noteable exception; the United Kingdom is a other metals used in new electronic/ member). The international legal framework technology products. The Pacific ocean floor stems from Part XI of the 1982 United Nations to the east of Japan (around the island of Convention on the Law of the Sea Minami-Torishima) is known to have (“UNCLOS”) and the 1994 agreement relating particularly rich deposits but the comparable to the implementation of Part XI. UNCLOS cost to mining on land has so far prevented provides for coastal states to have exclusive too much speculative activity. The deposits lie rights to resources contained within the at a depth of more than 5 km. On the plus side continental shelf to a distance of 200 nautical the deposits are estimated to contain around miles from the coast. This zone is known as the 6.8 million tons of rare earths. In addition the Exclusive Economic Zone (“EEZ”). The seabed geo-politics of the market for rare earths offer beyond the EEZ, and the minerals contained in compelling motives for a drive to develop it, are proclaimed by UNCLOS to constitute resources to compete with the current the “Common Heritage of Mankind” such that Chinese virtual monopoly. Other metals resources in this area must be explored and needed for new advanced products in the exploited for the benefit of “mankind as a telephonic and electrical industries are to be whole”. The regime is subject to regulation by found in great quantities on the seabed. In a body known as the International Seabed April of this year the BBC reported the Authority (“ISA”) based in Kingston, Jamaica. discovery by British scientists of a deposit States which have ratified UNCLOS are some 500km from the Canary Islands which automatically members of the ISA. contained tellurium in concentrations 50,000 Under the UNCLOS regime prospecting, times higher than in land-based deposits exploration and exploitation (each of which is (tellurium is utilised in the manufacture of a carefully defined activity) beyond the EEZ solar panels – the deposits in question also may only be carried out in accordance with the contained rare earths – used in wind turbines rules and regulations of the ISA. Prospecting and electronics). The scientists calculated that requires that the company in question delivers the deposit – known as Tropic Seamount an undertaking to the ISA agreeing to comply – potentially contained one-twelfth of total with those rules and regulations as well as global supply of tellurium. If extracted to make UNCLOS and also agreeing to accept solar panels it could meet 65% of the UK’s verification of that compliance by the ISA. demand for electricity. Exploration on the other hand may only be carried out subject to the terms and conditions of a contract to be agreed with the ISA. Such contracts may be awarded to either agencies of ISA state members or to private enterprises sponsored by an ISA state member. In each case the ISA state member in

mayer brown 2 Deep Sea Mining – Current Status and Future Potential question is responsible for compliance with Clarion-Clipperton zone in the Pacific Ocean the contract. Each contract is valid for 15 years and expires in 2028. Russia has also signed – although a contract can be extended. To contracts for potential projects in both the date something in the region of 26 contracts Pacific and Atlantic Oceans. China has been have been awarded. very active in attempting to secure contracts. One of the most recent contracts – covering There are currently no ISA regulations in place exploration for polymetallic nodules over for exploitation. A technical study, published 72,745 sq km of the Clarion-Clipperton zone in 2013, set out the issues which should be – was signed with China Minmetals addressed in the regulatory framework for Corporation on 12 May 2017. India was exploitation. These included the procedure awarded one of the first exploration contracts for awarding exploitation licences, the fiscal by the ISA and, as a result of its exploration regime and the division of profit and risk in the activities, has identified an area of around context of the declaration that deep sea 18,000 sq km in the Central Indian Ocean resources are for the benefit of mankind as a Basin with an expectation that actual whole. A working draft of proposed exploitation may commence within the next exploitation regulations was circulated by the five years. ISA in July 2016. By the deadline for submission of comments (25 November) 43 individual sets In addition to the international regulation of comments had been received. On 23 contemplated by UNCLOS as administered by January 2017 the ISA issued a discussion paper the ISA a number of individual countries and designed to advance the discussion over groups of countries have established environmental aspects of the exploitation regulatory regimes for deep-sea mining. regulations. Nautilus Mining, mentioned earlier, is the beneficiary of a licence awarded by the Some states (including the USA) have declined government of PNG. While that was the to ratify UNCLOS and become a member of subject of proceedings in connection with a the ISA. Reasons for refusal differ but dispute the position has been back on track invariably include an object to the for some years with the government making requirement, in connection with the award of the required investment in the project. an exploration contract, to explore two equal Nautilus is a flagship project being observed sites and transfer the benefit (including by many – if it succeeds others are bound to exploration results, etc.) of one – over a period follow in its footsteps. Several islands in the of time – to the ISA. The ISA is then left to Pacific have a combined regulatory develop that site for the benefit of those who framework to cover the exploitation of might not otherwise be able to exploit the mineral resources in that part of the seabed deep ocean environment. Non-member which is subject to national sovereignty. The states have also objected to the ISA’s powers Cook Islands passed legislation relating to of monitoring as well as a perceived opaque seabed mining as far back as 2009. In the UK bureaucracy and process. the Deep Sea Mining Act 2014 was passed in Exploration contracts signed with the ISA to order to amend the existing legislation date include that with UK Seabed Resources (implemented in 1981) to bring the same into referred to earlier – that contract was for the line with UNCLOS. exploration of polymetallic nodules in the

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Environmental Issues Technology While mining on land presents environmental The technology for deep sea mining is concerns there are multiple additional gradually improving and prices are reducing. potential environmental issues with deep sea Most deep sea deposits will be mined through mining. Physical disturbance and destruction of the use of hydraulic pumps or buckets to bring habitat and fauna are of principal concern the raw material to the surface where it can – particularly given the potential for an adverse then be either processed or shipped for impact on marine eco-systems more generally. processing. In addition remotely operated Areas where polymetallic nodules are found vehicles are now used to collect exploration seem to be a natural habitat for fauna which are samples from the target zone. In the one particularly susceptible to damage from mining project which is actually heading towards activity. Modification of natural wave and exploitation the remote vehicles employed by current regimes is also mentioned as a concern Nautilus for actual exploitation are each the as is the potential for pollutant spills from size of a small house – the smallest (of three) vessels and other infrastructure involved in the weighs in the region of 200 tons. The first deep sea mining process. The recent Guardian vehicle is designed to create benches for the report referred to earlier quoted Verena passage of a second vehicle which in turn Tunnicliffe, hydrothermal vent expert at the performs the principal cutting process. The University of Victoria in Canada, as saying that third vehicle collects the mined material and “Mining will be the greatest assault on deep-sea pumps the resulting slurry to surface. The ecosystems ever inflicted by humans”. In the vehicles have technology designed to scientific exploration of Tropic Seamount minimise the production of a plume. Launch – referred to earlier - an experiment sought to and recovery systems relating to the vehicles replicate the process of seabed mining with a were delivered in May to the shipyard in China view to measuring the plume created (the where the production support vessel is being potential size of the plume created by mining constructed. activity on the seabed is a prime environmental concern). Early results apparently indicated Conclusion that the impact of mining operations might The extent of the mineral resources on the possibly not extend beyond 1 km from the mine seabed is without doubt enormous. However site. Other studies have not necessarily been so the obstacles put deep sea mining at a huge optimistic as to the environmental impact disadvantage to the exploitation of resources involved. Greenpeace is seeking an in a drier environment. Those obstacles range international moratorium on seabed mining. from cost to technology to environmental Environmental considerations are particularly issues. Each of these issues is of course high profile in New Zealand (where legislation present in the land based extractive industries restricting activity in the EEZ has been in place but just not to the same extent. Many in the since 2013). Based on environmental concerns industry are looking to Nautilus to see proposals to explore for phosphate nodules whether or not the Solwara 1 project can be by Chatham Rock Phosphate and for iron successfully brought into profitable sands by Trans-Tasman Resources have both production. If it can then it could indeed be a been rejected. A decision on a second game changer. application by Trans-Tasman is expected this year. New Zealand also recently launched a $3.7 million research programme into environmental concerns.

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