The prospect of mining the ocean floor for transition minerals is being called into question by financial market observers who warn of the growing biodiversity risk in deep-sea mining for investors.
Ratings agency Fitch said in a statement on Monday (7 August) that as biodiversity becomes increasingly relevant across financial markets, high-risk activities such as seabed extraction are likely to fall out of favour with investors.
“This could negatively affect future deep-sea mining development through reduced access to capital, particularly if deep-sea mining is subject to negative screening by environmental, social and governance (ESG)-conscious investors,” said Fitch analyst Jonathon Smith.
The ratings agency noted that other controversial mining practices, such as riverine tailings disposal and mountaintop removal mining, have been common targets for portfolio exclusions.
Fitch’s statement comes a week after negotiations over the regulations for industrial-scale deep-sea mining in internationals waters stalled.
Currently, seabed mining in international waters is at the exploration stage, although commercial-scale seabed mining could go ahead once mining regulations are settled.
The lack of agreement over seabed extraction regulations is a “signal of serious socio-environmental concerns from relevant stakeholders, including investors,” said Fitch.
To date, scant data on the impact of seabed mining on ecosystems has deterred investors from allocating capital to extraction projects, resulting in delays to an agreement over how and when large-scale ocean mining can go ahead.
After negotiations hit the rocks last week, the share price of The Metals Company (TMC), a leading proponent for seabed extraction founded in 2011 by mining giant Glencore, sub-sea construction firm Allseas and others, dropped by 20 per cent.
On Tuesday, TMC said it intends to submit an application to mine the ocean seafloor after the July 2024 meeting of the International Seabed Authority (ISA), a United Nations-backed body that regulates activities concerning the seabed.
The company added that it expects a one-year review process, and production to begin in the fourth quarter of 2025. TMC noted, however, that it will need a US$60-70 million funding injection in addition to a US$25 million cash facility from Allseas to carry out the exploitation contract.
“TMC’s experience is bearing out the massive uncertainties Fitch is talking about,” said Duncan Currie, political and legal adviser for the Deep Sea Conservation Coalition, a collective of non-governmental organisations campaigning against deep-sea mining.
Though well-funded, critics of deep-sea mining suspect that TMC could go down the same path as Nautilus Minerals, a deep-sea mining company that collapsed in 2019 at a cost of more than US$100 million to sponsoring state Papua New Guinea.
TMC had not responded to Eco-Business’ queries at the time of going to press.
While mining supporters – which include China, Japan, Singapore and Germany – argue that seabed metals are essential to power the energy transition, potential environmental risks include obliterating undiscovered species, ruining fisheries and altering the oxygen-carrying capacity of the ocean.
Despite the risks, observers believe that lure of the sea-bed’s riches may outweigh fears over the potential damage to fragile ecosystems. By some estimates, there are US$8-16 trillion worth of metals such as nickel, manganese and cobalt on the patch of Pacific ocean floor being divided up for exploitation.
Currie told Eco-Business that the process for negotiating the rules for seabed mining have been ongoing for a decade, and the slated date for the completion of the regulations – mid-2025 – was by no means certain, as a number of factors still need to be decided – including issues of financing such as how funds from deep-sea minerals will be dispursed.
Currie’s comments echo the sentiments of deep sea explorer and private equity investor Victor Vescovo, who said while negotiations were underway in Kingston, Jamaica, the technological and financial uncertainties of mining metals at great depth were being underestimated.
“It’s an article of faith among these mining companies that they are going to make tonnes of money, that it’s ‘just picking rocks up off the seafloor’. There’s no ‘just’ anything when you’re at 4,000 meters in the ocean. It is an act of God to do anything at 4,000 meters,” he told Bloomberg Green at an event hosted by conservation group World Wide Fund for Nature.
In July, a coalition of mainly European finance groups joined scientists, the seafood industry and brands including Samsung, BMW and Volvo in calling for a moratorium on seabed mining until more is understood about its impacts.
