Some seriously odd things have been happening with everyone's favourite penny stock deepsea mining player, The Metals Company. On January 31, Gerard Barron's speculative harvester of polymetallic nodules from the abyssal plain of the Pacific Ocean was trading at 87 US cents per share. A week later, it shot up over 50 per cent to peak at US$1.48 on February 7, before plunging back to US$1.09 at close on Friday, February 10.
Such volatility is unusual, to say the least, but at least the company is showing more technical strength.
In late 2022, The Metals Company proved its deepwater harvesting technology when it deployed an integrated collector and riser and lift system from the converted oil and gas drillship Hidden Gem, owned and operated by The Metals Company's shareholder, Swiss-Dutch construction company Allseas. The company was able to recover to the surface 3,000 tonnes of the metals rich nodules from the deep waters of the Clarion-Clipperton Zone up the vessel through its 4.3 km long riser system. Another 1,500 tonnes of nodules were collected by the company's mining machine, but were wet stored on the seabed. Allseas' engineers drove the pilot collector vehicle across over 80 kilometers of the seafloor, the company reported (here), and the pilot nodule collection reached a sustained production rate of 86.4 tonnes per hour.
The tests of the collection system from Hidden Gem marked the first time that an integrated nodule collection system — including a riser system — has been tested in the Clarion Clipperton Zone since the 1970s, when oil, gas, mining and industrial majors, including Shell, BP, Rio Tinto (Kennecott), US Steel, INCO (Vale) and Sumitomo, successfully conducted pilot test work, and collected around 2,000 tonnes of nodules from the drillship Hughes Glomar Explorer.
The Metals Company's recent tests were not without controversy, however, with Greenpeace releasing footage of the discharge of waste from Hidden Gem directly into the sea, claiming that deepsea mining is inherently polluting and destructive. Activists in kayaks posed for photo opportunities protested with banners close to the vessel upon its return to the Manzanillo coast. Hidden Gem is still currently at anchor off Mexico.
The future of the industry lies in the hands of the International Seabed Authority, the conflicted and secretive industry regulator based in Jamaica, which has yet to issue the rules governing the industry. The ISA has granted contracts to 16 deep-sea mining contractors in the Clarion Clipperton Zone, for exploration areas covering approximately one million square kilometres.
The technical success achieved by Allseas is spurring competition and further interest in the sector. In Norway, Green Minerals provided a recent update on its progress to mine the Norwegian Basin and announced a memorandum of understanding for "partnership in a nodule license in the Clarion Clipperton Zone" with what it described as a "competent license holder."
But the big news last week was from Transocean. The world's largest deepwater driller is about to follow in Allseas' footsteps and convert a drillship for seabed mining activities.
Less than a year ago, we noted that on March 29, 2022, Transocean had announced that it was entering the subsea mining space. The driller had bought a stake in Ocean Minerals, which holds a license from the Cook Islands Seabed Minerals Authority in March for the exploration of polymetallic nodules within the Cook Islands' exclusive economic zone in the Pacific Ocean.
At the time, we noted that "with a market capitalisation of over US$3 billion, Transocean is valued at more than five times as much as subsea mining leader The Metals Company." How times change!
The surge in deepwater drilling activity and the slump in The Metals Company's shares means that US$5.3 billion Transocean is now valued 18 times as much as The Metals Company.
Transocean's latest fleet status report, also issued last week, shows that the company has 10 cold-stacked drillships in its fleet, the single largest collection of stacked deepwater assets in the world. The cost of reactivating rigs that have lain idle with skeleton crew continues to soar, even as day rates for such units rise above US$450,000. When Transocean bought Ocean Rig in 2018, it estimated that each cold-stacked drillship would cost US$25 million to reactivate. By 2019, that had become US$50 million, and by 2020, Transocean's CEO Jeremy Thigpen was mentioning US$100 million as a possible reactivation cost per rig.
Now, Ocean Rig Olympia will be leaving oil and gas and will be reactivated for mining work. That's US$100 million in cash somebody is going to fork out. But Transocean's partner DEME already has much of the nodule collection and riser technology required for the project, and it needs a platform from which to deploy it where the nodules can be landed.
Last week, Transocean announced that it has agreed to make an investment in DEME's Global Sea Mineral Resources (GSR). GSR is the deep-sea mineral exploratory division of Belgium's DEME Group and is a leading developer of robotic nodule collection technology. GSR holds leases issued by the ISA in the Clarion Clipperton Zone.
Transocean said that it has agreed to contribute the stacked Ocean Rig Olympia for GSR's ongoing deepwater mineral exploration work, as well as make a small cash investment and to contribute engineering services on an in-kind basis. GSR intends to convert Olympia for a system integration test scheduled for 2025 to validate the technical and environmental feasibility of recovering polymetallic nodules in ultra-deepwater on a commercial scale using its harvesting machinery.
DEME is two and a half years behind Allseas in proving an integrated system, but now it has a clear roadmap and a solid rig. This is a pretty powerful combination, bringing together the deepwater rig experience of Transocean with the dredging and polymetallic nodule capabilities of GSR.
Transocean was at pains to point out how important the minerals found in deep-sea polymetallic nodules – minerals such as cobalt, nickel, copper, manganese, and rare earth metals – are to the production of high-capacity batteries needed for a Net Zero future.
"a mixture of all energy sources will be required to meet future global energy demands," Transocean CEO Jeremy Thigpen observed in a press release. "Transocean's work in deep sea minerals is another way we will continue providing essential offshore energy services."
DEME has a US$3 billion market capitalisation and a strong position in both dredging and the construction of offshore wind farms. Access to Ocean Rig Olympia gives the company the platform it needs to progress its work to develop its technology ahead of a future commercial mining effort in its nodule acreage. Unlike The Metals Company, DEME has a strong balance sheet to weather any legal or regulatory delays to the launch of commercial subsea mining, and to refine its technology to be as environmentally rigorous as required.
DEME's rig selection raises the question of who else might join the race.
There are few deepwater drillships left stacked in the world. Recent reactivations have seen Stena and Saipem acquire two of the remaining newbuild drillships left in Korea and take them into operation, whilst Transocean and partners have taken ownership of the former West Aquila (here). China has several more units, but even here, the surge in deepwater activity has seen a resurgence of interest.
Upstream recently reported that Shanghai Shipyard had reached an agreement to the longstanding payment default with the company that originally ordered the four Tiger-class midwater drillships. The company is Reignwood International, controlled by Thai-Chinese billionaire Chanchai Ruayrungruang.
The newspaper reported that Reignwood is at last going to pay Shanghai Shipyard around US$100 million as a final payment, and will take ownership of the rig, which was completed in 2015. This first Tiger drillship has been idle for more than seven years after Reignwood elected not to take delivery when it completed, and instead, ended up in arbitration with the yard after the subsidiary that contracted the order was placed under liquidation in Singapore. Shanghai Shipyard terminated its contract for the three sister rigs but announced it would be gradually restarting work to complete them in 2021.
One of these Shanghai Shipyard Tiger-class drillships could plausibly be re-purposed for a Chinese subsea mining venture. Another candidate would be Dalian Developer, a high specification deepwater drillship ordered in 2010, which was also subject to default by its orderer, and abandonment at the Dalian Shipbuilding Industry Offshore yard when the market crashed in 2014.
We have always maintained that mining projects in ecologically fragile areas like the Clarion Clipperton Zone will always be easier for autocratic regimes like China. Greenpeace and Sea Shepherd will find it much harder to influence the shareholders in China's ocean mining companies, which are all state-owned.
Subsea mining is a contentious and potentially very lucrative area with vast fortunes at stake and egos as large as the mineral resources they claim to be seeking. We'll keep you posted.
Background Reading
Our favourite Deep-sea Mining Observer journal announced last month that it was closing. Editor Andrew Thaler reflects on the changes he witnessed in the industry in his farewell note. The publication's excellent archives remain online here.
Want to meet the management of The Metals Company in person? The Swiss Mining Institute is offering the chance to meet Gerard Barron in person next month, in an event organised by Bally Capital. Interested parties may register here.