Google guys to mine asteroids, but where can earthbound investors tap into natural resources?

25th April 2012

Page and Schmidt, Google's chief executive and executive chairman respectively, have joined investors including Google director K. Ram Shiram and former Microsoft chief software engineer Charles Simonyi to finance Planetary Resources. Filmmaker James Cameron is also acting as an adviser.

Sky-high potential for asteroids

The co-founders and co-chairmen of Planetary Resources, Eric Anderson and Peter H. Diamandis, claim that the "effort will tap into the high concentration of precious metals found on asteroids and provide a sustainable supply to the ever-growing population on Earth".

Nearly 9,000 asteroids larger than 150 feet in diameter orbit near the Earth. Some could contain as much platinum as is mined in an entire year on Earth, making them potentially worth several billion dollars each, according to Wired.

Diamandis said: "Many of the scarce metals and minerals on Earth are in near-infinite quantities in space. As access to these materials increases, not only will the cost of everything from microelectronics to energy storage be reduced, but new applications for these abundant elements will result in important and novel applications."

The men behind Planetary Resources already have a stellar trajectory for turning space projects into reality. Anderson is the founder of commercial space tourism company Space Adventures, while Peter Diamandis started the X Prize foundation, which offers prize-based incentives for advanced technology development.

Concerns about putting plans into practice

Progress could still be slow, warned Alex Knapp on Forbes, describing the company as being "frustratingly vague" on how the company plans to mine the asteroids for resources.

Knapp said: "The only technical aspects they discussed were getting through the prospecting stage. "Probes capable of reaching the asteroids are not a new thing, though the autonomous use of robot swarms would definitely be new. But going from prospecting to mining is a big step, and it's a technical problem that definitely needs to be solved."

Natural resources nearer to home

Back on earth, investors without billionaire budgets can also find companies tapping into natural resources in new regions.

Royal Dutch Shell has agreed a £1.12 billion takeover of Cove Energy, an East African oil and gas explorer, as reported here by the Financial Times.

The 220p-a-share Shell bid represents a premium of 96 per cent to the closing price on January 4, the day before Cove said it was putting itself up for sale.

If Shell closes the deal in the face of rival bids including one from Thailand's PTT Exploration & Production, the Cove acquisition allows access to Kenya and Mozambique, with the potential for new liquefied natural gas from discoveries offshore.

East Africa has become one of the latest global energy hot spots, according to The Daily Telegraph, after significant discoveries by companies such as BG Group and FTSE 20 oil explorer Ophir Energy. It reported that "B" shares in Royal Dutch Shell promptly rose 21p to £22.00½p

Risks about what is found and where

Prospecting for natural resources will always be a risky business, as both the mammoths and the minnows of the mining world can discover. The energy companies cannot guarantee their exploration will yield anything worth selling, and political uncertainties can wipe out any opportunity for profit.

The most recent "final frontier" to attract attention is the Falkland Islands.

Oil was located north of the Falklands two years ago by Rockhopper , which subsequently put its Sea Lion discovery at nearly 450 million barrels, a substantial amount that gives it commercial viability.

This week Borders & Southern announced a significant new discovery of gas condensate south of the islands.

However, as ProActive Investors pointed out, the share price subsequently dropped around 30% on the Alternative Investment Market (AIM). Investors had been hoping for an oil discovery, rather than this ‘wet' gas, which will be more expensive to exploit.

The discovery could widen political schisms with Argentina, which had already been making threats against British oil and gas companies exploring in the area, such as the deep water drills planned by  Falklands Oil & Gas.

According to Peter Kiernan, blogging on the Oil & Gas Monitor, "while it is very unlikely that another British-Argentine war will erupt over the Falklands, the heightened prospects of its offshore oil potential raises the diplomatic stakes between the UK and Argentina."

Mindful Money has previously reported on the risks of political intervention in companies, following Argentina's part-nationalisation of YPF, despite protests by its owner, Spanish group Repsol.

Even earthbound prospecting can be a dicey business for investors, never mind the pie-in-the-sky potential of mining asteroids.

More on Mindful Money

Can B&Q turn eco-awareness into cold hard cash?

Why nuclear is no longer the future of energy

Could fracking save the UK energy sector?

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