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lunar landing illustration
Early efforts to locate and mine platinum group metals (PGMs) on the Moon could be funded in part by the sales of coins made from lunat platinum. (credit: NASA/John Frassanito and Associates)

Priming the pump for lunar PGM mining

Dennis Wingo’s bookMoonrush should be mandatory reading for space enthusiasts. Although his hypothesis concerning the presence of lunar platinum group metals (PGMs) remains unproven, his hypothesis is also eminently testable—all we need do is go look, something NASA presumably intends to do, eventually at least. Jeff Foust’s review of Moonrush (see “Review: Moonrush”, The Space Review, August 16, 2004) contains a nice summary of the Wingo hypothesis:

The Moon […] would seem to be an unlikely place to find PGMs: the collisional process that formed from the Moon left it mostly devoid of heavy metals. However, Wingo makes an ingenious case for finding PGMs on or near the lunar surface, in the form of debris from asteroid impacts. While conventional wisdom has argued that impacts of large asteroids would vaporize most of the impactor, modern computer modeling has shown that a significant fraction of an asteroid impacting the Earth would survive in some form. In fact, some major sources of PGMs on Earth, such as Sudbury in Canada and sites in South Africa, have been linked to asteroid impacts. The Moon’s lower gravity would mean slower impacts, making it more likely that significant portions of asteroids could survive. PGMs mined from those impacts could meet the fuel-cell needs of the Earth for centuries; the mining process would, in turn, also generate other metals like iron and nickel that could be used for settlements on the Moon and beyond.

If recoverable PGMs are located on the Moon, a robust terrestrial market currently exists to support the commercial exploitation of that resource. At the end of September 2005, the London Fix price for platinum was above $930 per troy ounce, and there appears little reason to believe that price will fall dramatically given platinum’s industrial usefulness and its desirability for jewelry and related purposes. The United States Geological Survey has issued a summary that details the diverse number of applications that arise from the superior catalytic properties of PGM metals.

If recoverable PGMs are located on the Moon, a robust terrestrial market currently exists to support the commercial exploitation of that resource.

The United States is heavily dependent on imports of platinum, with over 90% of its annual demand coming from overseas, primarily Russia and South Africa. The USGS also reports that terrestrial supply and terrestrial demand appear reasonably balanced, provided demand does not ratchet up sharply. As the recent price history of molybdenum proves ($4 to $70 per kilogram since 2002) price swings can be enormous if supply and demand are relatively inelastic. Given the extraordinary usefulness of PGM catalysts, discovery of a new killer application for PGMs will either cause prices to skyrocket or PGM scarcity will inhibit the deployment of promising new technologies, or both. Wingo’s book argues that hydrogen fuel cells are a leading example of a new application that would demonstrate that the Earth simply lacks sufficient PGMs to satisfy unexpected demand.

While lunar platinum would appear a viable commodity, before eager Moon miners can set up shop, one hurdle is the very substantial capital investment that will be needed before revenue can start flowing. No one been to the Moon since 1972 and our ability to live and work on the Moon is far from proven. Perhaps billions and billions of dollars will be necessary for R&D and infrastructure deployment before a business case can possibly be made to begin lunar PGM mining. The significance of startup costs for business ventures in space is not new. Douglas Jobes wrote the following (see “The commercial launch industry needs a boost”, The Space Review, May 2, 2005):

In 1998, NASA sponsored a New Space Industries Workshop to peer into the future of space development. The final report of the workshop, titled New Space Industries for the Next Millennium, evaluated future space businesses such as tourism, space manufacturing, satellite services, space solar power, and more. The report makes fascinating reading. Today, though—seven years later—most of these businesses still do not exist, even in nascent form, in large part because the startup costs for building the necessary space infrastructure are simply prohibitive.
Given the potential importance of platinum as a strategic metal and the US dependence on imports, perhaps taxpayer derived funding can and should be used to “prime the pump” for subsequent commercial mining operations.

In Moonrush, Wingo asserts that lunar PGM mining could be self-supporting (i.e. profitable) but only after the up front costs are paid from another source. He addresses the issue of prohibitive start up costs by writing that “[it] is a proper role for government: to foster facilitate and provide incentives to enable private enterprise to open up a new world for development. This is a role that transcends NASA’s solely scientific efforts although NASA will be a vital part of this process.” (See Moonrush, page 10.)

Given the potential importance of platinum as a strategic metal and the US dependence on imports, perhaps taxpayer derived funding can and should be used to “prime the pump” for subsequent commercial mining operations. However, in an era of growing budget deficits, perhaps we need more creative sources to help finance the infrastructure needed to begin finding and extracting lunar platinum.

It might also be possible to substantially increase the short-term price for lunar platinum by adding an intangible value to the initial shipments of PGMs sent from the lunar surface. In the long term, the global commodity price of platinum will invariably fall once humanity locates an abundant lunar supply of PGM (perhaps offset by rising demand from innovative new uses), however, it may be possible to enhance temporarily the market value of initial shipments of lunar metals by fusing intangible value to an otherwise tangible asset.

Many small diners or retail shops across America have a 20 dollar bill taped to the wall behind the cash register. Why? The first dollar earned has emotional significance far beyond the actual value of the currency. Wouldn’t the first kilogram of lunar platinum ever mined by our species belong in the Smithsonian? Collectors and speculators will surely wish to share in the history and cachet associated with the first lunar materials returned to Earth for commercial purposes.

One mechanism to transform these intangibles into a commodity would be to create numismatic value. For example even a relatively common 1799 Silver Dollar is worth more than 100 times the bullion value of 27 grams (slightly less than one ounce) of silver. The 1964 JFK half dollar is another example. Close to four million proof coins were minted and current prices for these coins fall between two and two and a half times the current bullion price for silver. The very first coins minted from lunar metals should be worth far, far more that the raw commodity price for platinum. Today, China mints panda platinum coins that are worth between 150% and 200% of bullion value.

Suppose an organizing entity (private mint, US government, or foreign government) issued a coin pegged at a face value of perhaps $1,000 with the coin to be minted exclusively from lunar metals, including a fraction of an ounce of authentic lunar platinum. A second series of coins could be issued having a face value of $100 but be minted entirely from lunar nickel and iron, which leverages the unavoidable fact that asteroid ore found on the Moon and returned to Earth will necessarily include large amounts of nickel and iron as well as PGMs. These coins could be shrink wrapped with an embedded microdot to assure authenticity, preventing counterfeits or forgeries. This chip can also assign a serial number to each coin to help create or enhance artificial scarcity and perceived value.

In order to capture and commoditize the future numismatic value of the very first coins ever minted from lunar resources, subscriptions for these $1,000 platinum coins would be sold in advance at a price of five to ten times face value. Subscriptions for the $100 coins would also be sold in advance with an asking price between $500 and $1,000. Sell one million platinum coins at $5,000 each and ten million nickel-iron coins at $500 each and this raises $10 billion dollars from the general public to help bootstrap lunar platinum mining.

While numismatic value is entirely intangible, it is also well established by the market. Banks will loan money secured by reputable appraisals of collectable coins. With each coin having an assigned serial number and the minting strictly limited, buying such a coin could be a lucrative investment. Imagine it is 20, 50, or 100 years after lunar mining becomes established and after a genuine cislunar economy becomes established. It seems entirely reasonable to predict that the numismatic value of the first coins ever minted with extraterrestrial metals will skyrocket.

It seems entirely reasonable to predict that the numismatic value of the first coins ever minted with extraterrestrial metals will skyrocket.

If subscription certificates are pre-sold with advance payment required and if each certificate has a serial number attached to it, then a secondary market can be established before the first mining operation is established. Low serial number certificates might be bought and sold (on eBay for example) for more than the original offering price and the publicity generated from secondary market appreciation will spur further sales.

However, as Michael Mealling has astutely noted in the context of a space-related charitable giving, there is a chicken and egg problem here.

As I discovered with the Artemis Project, any endeavor like this has a huge “chicken and egg” problem: in order to receive those charitable donations you need to show significant and continuing progress, but in order to show that progress you need very large amounts of cash in hand to prime that pump. If you can start out with a large enough sum to create a perception that the effort actually does something then the donations will come in and you can continue that effort. But without it you are continually struggling with a credibility problem that you simply cannot overcome.

Coins to be minted from lunar platinum won’t sell until there is a reasonable prospect that lunar platinum will be discovered and returned to Earth. Therefore this idea cannot work as a standalone funding source for lunar development. However, if the federal government or another organizing entity prepares the groundwork needed to add intangible value to the initial platinum recovered from the Moon, this new non-taxpayer funded revenue source can be added to a basket of other funding sources which also creates opportunity for a genuine public-private partnership.

If NASA were to emphasize the terrestrial benefits of discovering an abundant supply of platinum group metals and if our government offered private citizens an opportunity to invest personally in the creation of an authentic cislunar economy, substantial revenue and interest will become available to supplement taxpayer revenue and Congressional directives to open up the Moon for commercial development. Perhaps hundreds of years from now, coins minted from the very first platinum collected from the lunar surface will be sold at a deep space branch of Christie’s auction house for a few thousand times the bullion value of platinum.