COLUMN | The Metals Company: what lies behind the subsea mining pitch? – Part One [Offshore Accounts]
There’s so much not to talk about this week.
We’re not talking about Tidewater
Earlier this month, industry leader Tidewater reported its quarterly results (here) with CEO Quintin Kneen unveiling a net loss of US$35 million, compared to a loss of just US$18 million a year ago. The company’s active fleet of offshore support vessels fell from 153 to just 116, as Tidewater sold off another six ships for US$11 million in the January to March quarter, on top of the 53 vessels it sold in calendar year 2020.
Kneen was quick to point out that Tidewater generated US$18 million of free cash flow in the 90-day period, however, and he said that he anticipated that every ship the company owned would be working in 2022. We’re not covering this – yet.
We’re not talking about Esvagt
Windfarm service operations vessel leader Esvagt celebrated 40 years in the offshore industry (here), boasting a fleet of 42 SOV and emergency response vessels today, with two more newbuild windfarm support vessels due to deliver shortly. Esvagt began with two converted trawlers, and has rescued 148 people from the sea in its history. The private-equity owned company also announced that the SOV Esvagt Dana is back in the Baltic 2 offshore wind farm to support Siemens Gamesa during maintenance work (here). We’re not covering this – yet.
We’re not talking about Diamond Offshore
Bernie Wolford, the former CEO of deep-water drilling company Pacific Drilling, which went into Chapter Eleven on his watch, has now joined Diamond Offshore, which has just emerged from Chapter Eleven bankruptcy protection. Wolford takes the positions of President, CEO, and member of the board of directors, Diamond announced here. He will be earning a base salary of US$700,000. We’re not covering this – yet.
We are covering The Metals Company (ex-DeepGreen) again
Sadly, those are three of the important stories we won’t be covering this week… Because there’s an insightful and interesting new interview out with the CEO of subsea The Metals Company, Gerard Barron, a man never knowingly undersold on his own opinions. Mr Barron is interviewed by the Head of Thematic Equities at the Swiss private bank Pictet, whatever “thematic equities” are.
Mining ship designed by ski-slope designers on top of rubbish incinerator
There’s also a futuristic concept released from The Metals Company of its supposed, new subsea mining vessel (here). Readers may be surprised that the vessel is designed not by a team of seasoned naval architects, but instead by a company renowned for placing an artificial ski slope on top of a waste-to-power plant in Copenhagen. Danish ski fans can carve their way down the elegantly sloping roof, whilst municipal trash is burned literally under their feet (here).
It’s unfair to highlight this one rubbish project when BIG – Bjarke-Ingells Group – has also designed a swimming pool in Copenhagen Harbour, an artisanal maze, and an “AI City” in Chongqing, China, plus a station for the pilot of the Virgin Hyperloop. None of these immediately seem to have any relevance to mining vast quantities of metals from 4,000 metres below the surface of the sea.
Needless to say, we have seen this press release reprinted in the industry press dozens of times, without anyone asking “What the f*ck?”
Electro-fuel powered production vessels implies lesser battery revolution
We’ll come to that later in a second article. And we will be critically examining the production vessel concept, especially the fact that the ten vessels that will harvest these nodules will not be battery powered or diesel-electric, but will run on “carbon-neutral electrofuels, with a sunken deck that is covered with photovoltaic solar panels,” according to the press release.
The key point here is that if carbon-neutral electro-fuels take off and become commercially viable, then probably the polymetallic nodes from the abyssal plain won’t be needed or will instead be needed in much lower quantities, because the electric vehicle battery revolution will be replaced (at least partially) by a carbon-neutral electro-fuel revolution, of the sort pioneered by Infinium here.
Meet Gerard Barron and his Swiss bankers
Pictet is highlighting the massive opportunity that subsea mining for battery metals opens up to its discerning high net worth investors here, as part of its Pictet Meets series. The Metals Company is the former DeepGreen, a major holder of deep-sea mining licences for polymetallic nodules in the Clarion Clipperton Zone of the Pacific Ocean. DeepGreen will shortly list as a public company in the USA, following its merger with a special purpose acquisition vehicle (SPAC), which we covered here.
Since every Tom, Dick and Harry likes to fact check our columns (here, here and here), we thought it might be useful to examine some of Mr Barron’s statements in the interview, especially since the disclosure requirements for a listing via a SPAC are so much lower than when a company lists via an initial public offering.
When a bank tries to sell you something, be afraid
We’re also very sceptical of Swiss banks flogging investment ideas to the ultra-rich, following the catastrophic collapse of US$10 billion of certain Credit Suisse funds, which had lent to Aussie-spiv and employer of former British prime minister David Cameron, Lex Greensill (Reuters coverage here); the 1MDB scandal, which saw a Malaysian sovereign wealth fund pillaged by the country’s prime minister and his cronies with help from Swiss, American and Singaporean banking institutions (Reuters coverage here); and the shocking revelations that a Credit Suisse private banker named Patrice Lescaudron stole from his wealthy clients for years with the complicity of the bank’s senior management, before mysteriously dying (here).
Who says that there’s no such thing as karma when you steal from Russian oligarchs?
Pictet is a tarnished bank
Pictet itself also has a somewhat tarnished reputation in private banking. Bloomberg has described it as an organisation torn by “a culture clash” and senior staff resignations, despite the US$20 million bonuses it routinely pays its partners (here).
Pictet’s CEO, Boris Collardi, was “formally reprimanded by Switzerland’s market regulator for [his] role in connection with a sweeping South American money-laundering scandal” in his previous job, according to the Financial Times (here). Last month the same newspaper announced that “Switzerland’s attorney-general is investigating allegations that Lebanon’s central bank governor and his brother embezzled more than US$300 million from that institution through transactions to a mysterious offshore company”, a scandal in which Pictet is involved as an intermediary (here).
So, Mr Barron’s stamp of approval by Pictet might need to come with a few statutory warnings on the ethics of his new fanbase.
So, what claims does Mr Barron make?
Whilst stroking his beard on Zoom, like a classic Bond villain, Mr Barron makes a number of assertions, some true, some false, and many completely irrelevant. Let’s look at them:
- “Life innovates through random mutations and death.”
Fact check: We can’t argue with this statement. True.
- “Last time CO2 was this high was four million years ago.”
Fact check: NASA says it was actually three million years ago (here) in the Pliocene. What’s a million years between friends? Close enough.
- “Sea levels are rising at 30 cm a century after being stable for 7,000 years.”
Fact check: US government scientists at the NOAA state here that sea levels have risen by only 21 to 24 cm since 1880, but agree that in the period 2006 to 2015 they rose by 3.6 mm per year, so over a century they would rise over 30 cm, as Mr Barron states, if that trend continues.
Unfortunately, research shows that sea levels have not been stable over the last 7,000 years and that they have risen approximately four metres over that period (here), excluding hydro-isostatic flexure effects. Close enough, though, given they were 120 metres lower in the last ice age 20,000 years ago. So far, so good.
- “We may very well be the most endangered animal on this planet.”
Fact check: Untrue. There are nearly eight billion people on the planet and we are definitely not amongst the most endangered animals on Earth, even in the face of catastrophic climate change. The IUCN Red List contains 37,400 species in immediate danger of extinction (here).
The tame interviewer doesn’t ask Mr Barron how many species his subsea mining projects will put at risk of extinction, but even if he did ask, Mr Barron would not be able to give an answer, because nobody knows.
- “We all understand that the way to stop using fossil fuels is to make the green, clean transition, build batteries, drive electric vehicles.”
Fact check: It would be fair to say that there are other options to the clean, green transition to electric vehicles such as hydrogen fuel cells (here) and electro-fuels. This statement is disingenuous.
- “Of course, battery metals are entirely recyclable.”
Fact check: True in theory, but, in practice, lithium-ion battery recycling rates are very, very low at the moment, less than five per cent in the US, the EU and Australia (here), and, worse, the current processes are energy intensive and do not recover all the raw materials.
We quote from Chemical & Engineering News:
“Most of the batteries that do get recycled undergo a high-temperature melting-and-extraction, or smelting, process similar to ones used in the mining industry. Those operations… are energy intensive. The plants are also costly to build and operate and require sophisticated equipment to treat harmful emissions generated by the smelting process. And despite the high costs, these plants don’t recover all valuable battery materials… Several large pyrometallurgy, or smelting, facilities recycle li-ion batteries today. These units, which often run near 1,500°C, recover cobalt, nickel, and copper but not lithium, aluminium, or any organic compounds, which get burned. The facilities are capital intensive, in part because of the need to treat the emission of toxic fluorine compounds released during smelting.”
Nice. I fear that Mr Barron is exaggerating the recyclability of batteries here.
- “Mother Nature has provided an abundant resource which sits on the bottom of the ocean.”
Fact check: True, but he fails to mentions that the International Seabed Authority is the body that has provided his company and its state backers with access to this resource, supposedly in the interests of all humanity.
- “[Polymetallic nodules] are basically an electric vehicle battery in a rock.”
Fact check: True, if you completely ignore that fact that the polymetallic nodules don’t contain any lithium, the key ingredient in lithium-ion batteries, as the name suggests. Nor any aluminium, which is eight per cent of a lithium-ion battery by mass.
- “We would carry out extractive industries in the parts of the planet where there was the least life… that is where these nodules sit… [Ocean Mining has] much lower impact on biodiversity.”
Fact check: There is significant life in the deep ocean eco-system and currently The Metals Company cannot provide an analysis of the impact of its mining activity on marine life because it doesn’t have a complete analysis. Mr Barron says that the impact must be less than that of land-based mining, without stating exactly what it is, or how it compares.
- “You have got to have your faith in science, you have got to let science provide the answers…. They are very different eco-systems and environments.”
Fact check: True, but a platitude. So far, the ecological impact of deepsea mining has not been properly assessed by science, so this statement is irrelevant.
- “These nodules were first discovered in the 1870s and they have been studied since the 1960s. And, what a lot of people don’t realise is that in the 1970s, they started to collect these nodules, so they solved a lot of the engineering challenges, the technical challenges, back in the 1970s.”
Fact check: This is completely disingenuous. No commercial method of extracting the nodules from the seabed has yet been proven. DEME is trialling some harvesting equipment in the Clarion Clipperton Zone, its Patania II robot, as we reported here, but has not used it to transport nodules to the surface yet. Using a grab to haul tens of kilograms of nodules to the surface from Maersk Launcher is not the same as the engineering challenge of recovering them to mother ships in millions of tonnes. The Metals Company says it hopes to produce 40 million tonnes of battery metals by 2050 (here).
- “There’s been a lot of science and understanding going on, and you know, it raises the hair on the back of my neck when people say we know more about the moon or Mars than we do about the deep ocean, well, you know, wrong.”
Fact check: No less an authority than Alex Rogers, the professor of marine biology in the Department of Zoology at the University of Oxford said this in 2016 (here) in New Scientist.
If I have to take the word of an actual scientist over a “serial entrepreneur” backed by a former McKinsey strategist who planned to set up fuel stations for rockets on the moon, I’ll take the scientist’s opinion. Thank you, Mr Barron. Keep the hair on the back of your neck lowered until you can prove otherwise.
- “We have had more than 6,000 scientific study days out there.”
Fact check: This statement may be true, but it is completely meaningless and undefined. Who is “we”? Does this include the Chinese state expeditions that we covered, which have published no peer-reviewed data? Does this mean 60 scientists spent 100 days on-site in the Pacific? What were the outcomes of the 6,000 scientific study days? What scientists were involved and what did they publish?
- “We have this year, in fact today, a science expedition setting sail from San Diego. It’s the first of four that we will complete this year. It’s a boat filled with scientists, because we’ve been studying the environmental potential impacts, you know, both baseline and through the water column, and so we know a lot about this part of the ocean.”
Fact check: If you know so much even before this expedition boat “filled with scientists” even reports its findings, what will the impact on biodiversity of your mining operations be? Can you guarantee that no species will be made extinct? And how long will it be before the ecosystems regenerates?
- “In fact, we are already building what we call our digital twin, which we will make available to the regulator, the International Seabed Authority. We’re also going to make it available to civil society because I think people will be really interested to see what’s going on down there. They’re going to be very interested to see the impacts, and, of course, with adaptive management systems you can move on the fly, if you have more information because you have a digital twin, you can make changes, if you came across something interesting, then you can change direction.”
Fact check: Adaptive management systems? Digital twins? What are these, exactly? Mr Barron appears to be saying that if his miners happen to hit upon something ecologically rare and of scientific interest, then they won’t destroy it, but will change their mining plan.
Really? And we take him at his word on this? What teeth does the International Seabed Authority have to prevent any damage and to punish The Metals Company if its “adaptive management systems” somehow fail to “change direction” to protect “something interesting”?
- “I can say with a very high degree of certainty, that based on all the scientific evidence [that] we and others are gathering, that this is absolutely the best planetary decision on where we should be getting these metals from…. We are dealing with an asset that is deemed the common heritage of mankind, right? Because we are in international waters, so it is kind of owned by everyone and should be developed for the good of everyone, especially developing nations. One of the benefits will be that we will pay very handsome royalties, billions of dollars of royalties, back to the regulator and those funds will then be distributed to developing countries.”
Fact Check: I can say with a very high degree of certainty that based on all the economic evidence, that Mr Barron and his colleagues at The Metals Company stand to make a fortune if they can successfully float their company through a SPAC and then offload their stock.
Until the minerals can be commercially extracted, there will be no royalties for the best part of a decade, even in their optimistic assumptions. Ignore the special pleading about “the good of everyone” and “developing nations”. How will the royalties be distributed? How will corruption and cronyism be avoided?
- “With distributed ledger technology, you know, we can keep track of these metals. Eventually we will rent these metals on a return basis.”
Fact check: Is he saying this just because blockchain is hot and cool in investing circles at present? Will there be a Metals Company crypto-currency in the works next? Please!
Conclusion: it’s likely going to happen
The Pictet Meets video contains a lot of hype for investors and several statements that are perhaps not fully correct. We hope that a way of commercially extracting the polymetallic nodes from the Pacific can be developed without harming the fragile marine environment. DEME’s experiments will provide the first real-world evidence and scientific studies on impact. Ignore the talk of digital twins and blockchain from The Metals Company and look to the papers from the marine biologists.
There’s an awful lot of capital to be spent and an awful lot of research to be done before the green light can be given. The International Seabed Authority is motivated to fast track the subsea mining process – remember Mr Barron’s comments that the regulator will be receiving billions of dollars of “handsome” royalties if his scheme succeeds. This is a conflict of interest between a regulator supposedly looking after the common good of humanity and the marine environment, and a commercial entity that will pay the regulator billions. But we can’t stop or change that.
Mr Barron is a charming and well-informed salesman talking up his own company, on which the multiplication of his personal wealth depends. We should approach his pronouncements with scepticism. He tells us to trust the science and then disparages one of the leading marine research scientists in the world.
Trust the science, not the salesman.
The architects behind The Metals Company’s new ship have a full list of their many and varied and completely non-shipping projects here, in the most stylish but hard to search format possible. However, any company whose website is literally big.dk deserves an award for the services to euphemism.
You might wonder about hydrometallurgy processing, or chemical leaching, which is practiced commercially in China as an alternative to pyrometallurgy as a means of recycling li-ion batteries. These processes for extracting and separating cathode metals generally run below 100°C and can recover lithium and copper in addition to the other transition metals. Unfortunately, “one downside of traditional leaching methods is the need for caustic reagents such as hydrochloric, nitric, and sulfuric acids and hydrogen peroxide,” Chemical and Engineering News reported here.
Alex Rogers’ CV is here – he is the professor who claims we know less about the ecology of the deep ocean than the surface of the moon or Mars.
This anonymous commentator is our insider in the world of offshore oil and gas operations. With decades in the business and a raft of contacts, this is the go-to column for the behind-the-scenes wheelings and dealings of the volatile offshore market.