Extraterrestrial Returns?

You’ve probably heard by now that a group of venture capitalists have formed a company called Planetary Resources for the purpose of mining near-Earth asteroids for precious metals, especially scarce ones like platinum and rare earth metals. The announcement of the venture has sent the internet (and The Daily Show with Jon Stewart) abuzz with varying degrees of skepticism and enthusiasm. Since we’re big sci-fi fans (and because platinum is an exchange-traded commodity) we thought it would be fun to do some back-of-the-napkin calculations to see what would need to happen for a project like this to turn a profit bringing asteroid platinum back to sell on Earth (although the idea might be to mine it and keep it in space, building space hotels and such).

First, you need to get to the asteroid… what will that set you back? Well, NASA is currently looking at a price tag of about $1 billion to retrieve two ounces of asteroid ore. Of course, NASA isn’t attempting to bring back commercial quantities – how much would a larger extraction mission cost? The most serious economic analysis we found suggested a very conservative estimate of $5 billion to establish large-scale extraction from an asteroid, but the upper bound could be much higher.

With a $5 billion price tag, how much platinum would the venture need to bring back to profit? At today’s prices, they would need to bring back more than 200,000 pounds of platinum just to break even. For comparison, the Apollo program’s retrieval of rock and dust samples from the Moon (the largest retrieval of non-Earth material to date) could only handle a payload of about 200 pounds per trip. That clearly isn’t going to cut it.

But what if platinum prices went way up? Say, to $10,000 per ounce? Assuming the same $5 billion cost of extraction, the ambitious space miners would still need to retrieve a hefty 31,000 pounds of platinum to break even. Better, but still no small task.

Obviously these calculations leave many variables out – spaceflight may be much cheaper in the future, and asteroids do contain other valuable rare earth metals (are they still rare earths if they’re from space?). Barring some major development, however, it looks like the dream of bringing extraterrestrial platinum down to Earth will remain science fiction for the time being; we think we’ll stick with managed futures.

Write a Comment

The performance data displayed herein is compiled from various sources, including BarclayHedge, RCM's own estimates of performance based on account managed by advisors on its books, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.