![COLUMN | “Not a matter of if, but when”: Subsea mining on hold, for now; Teddy goes to St Petersburg; Safer gets safer [Offshore Accounts]](http://media.assettype.com/bairdmaritime%2Fimport%2Fwp-content%2Fuploads%2F230731-Offshore-Accounts.jpg?w=480&auto=format%2Ccompress&fit=max)
It has been a rollercoaster couple of months for seabed mining pioneer The Metals Company. For most of the last year, the company's share price languished below one US dollar, as it has burnt cash on its experimental phase to prove the effectiveness of the deepwater polymetallic nodules collection system owned and operated by Allseas. Allseas demonstrated that the robots and suction devices deployed from its converted deepwater drillship Hidden Gem could operate 4,500 metres down on the seabed of the Clarion-Clipperton Zone of the Pacific Ocean last year and harvest tons of the mineral-rich nuggets. Allseas now says it is gearing up to be ready for the annual collection of 1.3 million tonnes of wet nodules from the end of next year.
Then, partner Maersk Supply Service, which had been earning "sweat equity" in the company through the provision of one of its anchor handlers to take samples and gather data from the proposed mining area, announced it was selling down its shares. On May 3, Maersk told The Wall Street Journal that it now held an interest of less than 2.3 per cent in The Metals Company, down from 7.8 per cent when we last checked in January. Maersk also said that it was in the process of selling all of its shares in the subsea miner. The timing of that announcement proved a little unfortunate.
Commercial operations by The Metals Company and its subsidiaries in various Pacific Island states have been dependent on events at the headquarters of the International Seabed Authority (ISA) in Kingston, Jamaica. The ISA is the body created by the United Nations to manage seabed mineral rights in international waters, supposedly for the benefit of all humanity. After The Metals Company and Nauru dropped the bombshell in 2021 that they intended to commence commercial mining, the ISA had struggled to put a regulatory code in place for the industry. The ISA was supposed to do this within two years of that announcement, so that there would be an industry-wide code to ensure that the environment was protected, and that taxes and royalties were agreed before the dredging equipment moved in.
Many scientists and conservation bodies were worried that we simply don't have enough data on the deepwater ecosystems where the nodules would be collected to assess the impact of the mining. They called for a moratorium on any commercial subsea mining operations, a move backed by governments as diverse as Palau, Canada, Costa Rica, Switzerland, Germany, France, and Brazil.
Since July 9, the two-year anniversary of Nauru's application, the ISA has been obligated to consider — though not necessarily grant — licenses for commercial mining operations. The ISA Council, comprised of 36 states, met from July 10 to 21 in Jamaica to try to find agreement on how to deal with the so-called "two-year-rule" and what regulations to put in place.
As you can imagine, the meeting of the ISA and the possibility that the authority would grant the company a permit to mine the 1.6 billion tonnes of nodules – nodules it says are in place in its concessions – sent The Metals Company's shares skyrocketing, probably to the consternation of Maersk, which is believed to have sold its shares at around US$0.60 apiece. On July 11, amid fevered speculation of an imminent approval, the stock soared to US$2.85, up 400 per cent in just over four weeks.
Unfortunately for the speculators and for the company's CEO Gerard Barron, the ISA Council ended its meeting on July 21 with no deep-sea mining code agreed or adopted, and no approval for Nauru and the company to proceed with the project. This resulted in The Metals Company's shares halving back to US$1.38 on Monday, July 24, and ping-ponging around that level over the last week. Countries opposing deep-sea mining had managed to halt efforts to move commercial seabed mining forward, at least in the short term.
The ISA Council meeting ended with compromise decisions largely negotiated behind closed doors, as usual. We keep asking for a press pass, but we never get one. The Council meeting ended with no deep-sea mining code agreed or adopted. Instead, in a consensus decision, the Council agreed what it described as "a roadmap" towards adopting final rules, regulations, and procedures (i.e., the mining code) to allow for the exploitation of seafloor resources. The Metals Company said (with gritted teeth) that it "applauded" this decision, and that it was "a major step toward regulatory certainty."
The ISA Council says it will continue the elaboration of the mining code during formal sessions in November 2023, March 2024, and July 2024 and informal intersessional working groups.
"It is now a question of when — rather than if — commercial-scale nodule collection will begin," said The Metals Company chairman and CEO, Gerard Barron. "Since June 2022, under strong pressure from global NGOs, seventeen ISA Member States representing a minority of the 169 ISA Members have formally supported a precautionary pause, moratorium, or a ban on deep sea mining. While the legal obligations of Member States to adopt [the mining code] pursuant to the United Nations Convention on the Law of the Sea… remain unchanged, these actions introduced a degree of political uncertainty around the timing of the adoption of the mining code. Last Friday's consensus decision that included member states who have called for a precautionary pause is a hard-won compromise that reduces this uncertainty.
"We are obviously disappointed that the ISA failed to adopt the mining code by July 9, 2023, as we hoped two years ago. But we also recognise that the vast majority of member states worked very hard in the last 24 months and demonstrated strong continued commitment to finalising the Mining Code through increased number of formal sessions and twelve informal intersessional working groups. I believe the finish line is now within sight and we look forward to the consolidated regulatory text at the next meeting in November 2023…"
The company's wholly-owned subsidiary, Nauru Ocean Resources, which made the application to commence commercial mining to the ISA in 2021, reiterated its preference to submit an application for a plan of work for exploitation once the mining code is in place. However, consistent with Nauru's rights as the company's sponsoring state, it still reserves its right to submit an application for a plan of work in the absence of the adoption of a mining code, as permitted under ISA rules. However, such an outcome appears very unlikely until at least 2025, in light of the agreed roadmap and the opposition of so many states at the recent ISA meeting.
The Metals Company says it "will continue to work tirelessly to complete a comprehensive, science-driven environmental and social impact assessment of the highest quality."
Never one to miss out on the latest buzzwords to boost its shareprice demonstrate its cutting-edge technology, The Metals Company recently put out an intriguing video advocating its use of artificial intelligence (AI) to make its mining more ecologically-friendly:
"Our Adaptive Management System (AMS) [is] an iterative operational process [that] will leverage AI to enable us to keep learning, predicting, and adapting, to optimise environmental protection and operational efficiency in the deep sea," The Metals Company said. "This is a mission-critical system for us. The AMS will provide the regulator and stakeholders with eyes and ears on our operations in near-real time and could potentially have commercial applications for the adaptive management of environmental impacts for resource projects on land and in the deep sea."
The roadmap looks like a fudge, the AI looks flaky, but the can has been kicked down the road. Mining can't start now, but the rules are not agreed, and they are unlikely to be agreed within the next year. The position of Nauru and The Metals Company remains poles apart from the desire for a moratorium held by many ocean scientists and many states.
Not enough is known about the loss of biodiversity that mining will cause in the Clarion-Clipperton Zone, which remains one of the least understood ecosystems on Earth. The battle over the future of the seabed and the privatisation of the mineral resources there is not over; it has only been postponed.
In the meantime, stock in The Metals Company will remain highly speculative. The company could be worth a fortune if it can proceed with mining quickly under a "light-touch" regulatory regime rubber-stamped by the ISA, downplaying the environmental harm, or it could be worth nothing if it runs out of cash in a prolonged pause on its activities, as governments and environmentalists wrangle for years over the protection of the flora and fauna on the abyssal plain.
Other companies, including Belgian dredging company DEME's subsidiary Global Sea Mineral Resources and Norwegian companies Green Minerals and Loke, are also looking to mine in international waters once the final rules and regulations are in place. China has a large number of concessions to collect nodules from the Pacific Ocean seabed, too. I suspect its state-owned companies have greater patience and greater resources at their disposal than The Metals Company.
One of the executives of Loke, Tore Halvorsen, who attended the ISA meetings as part of the UK delegation, told reporters that he believes that "the regulations will come when the regulations come."
Indeed. We'll keep you posted.
Two weeks ago, we discussed the shocking miscarriage of justice in Equatorial Guinea, where two South African offshore workers employed by SBM have been jailed on absurd drugs charges and fined nearly US$8 million each, seemingly in retribution for the arrest in Cape Town of one of the many yachts of the president's son, and also vice president of the country, Teddy Nguema. We highlighted how one of Teddy's yachts had been bought from Suleiman Kerimov, a Ferrari-crashing Russian oligarch now on the western sanctions list.
This week, Mr Nguema was in Russia at a summit of Africa leaders, shaking hands with a man who knows a lot about owning big yachts, stealing millions from his country, and jailing his opponents on trumped up charges: President Vladimir Putin himself. An ebullient Teddy posted photos of their handshake together on the site formerly known as Twitter.
With ExxonMobil due to exit Equatorial Guinea as its production assets run dry and the FPSO Zafiro Producer is despatched for scrapping in Norway on a Boskalis heavy lift vessel, let's hope that the door is not open to more Russian influence in the Gulf of Guinea.
Mr Putin announced that Russia would be opening an embassy in Malabo, and in Ouagadougou, the capital of Burkina Faso. Burkina Faso literally means "Land of Incorruptible People" in the languages of the Mossi and Bobo people. You couldn't make this stuff up, with Ghana already protesting that Burkina Faso has deployed Russian Wagner Group mercenaries.
There's a headline I never expected to write. But there is good news from Yemen.
The latest update from SMIT Salvage on the efforts to remove the million barrels of crude oil from the decaying floating storage unit FSO Safer off the coast of the war-torn Arabian state is positive. On Friday, SMIT announced the start of the ship-to-ship transfer of oil from FSO Safer to the replacement oil tanker Yemen, the tanker formerly known as Nautica, which is now owned by the United Nations.
The commencement of the cargo discharge is an important milestone in this UN-coordinated operation to avert a potentially massive environmental and humanitarian disaster in the Red Sea. SMIT says that the oil transfer is progressing well, and likely will take two to three more weeks.
The SMIT salvage crew lowered pumps into the cargo tanks of the FSO and supplied inert gas from mobile generators. Once all the pumpable oil has been removed from Safer, any remaining sludge will be removed with the aid of a mobile tank cleaning machine.
SMIT's video of the mooring of the replacement oil tanker Yemen and the start of the ship-to-ship oil transfer is here. Great video, guys!
Background Reading
See our past coverage of The Metals Company: what lies behind the subsea mining pitch? – Part One and Part Two, and our March coverage of the company's complicated dealings with Allseas and Maersk Supply Service.
Our detailed June background piece on FSO Safer is here.
