The Economics of Platinum mining

[StrandedonEarth]

Platinum is a very useful element as a catalyst for many things. Its rarity makes it a precious metal and its price is mostly driven by industrial demand. Due to its price, it's often considered the "Holy Grail" of asteroid mining concepts, but it's often not considered worthwhile because if a large lump (only 218 tons sold in 2014) was dumped on the market, the price would crash, making it not economical.

But what if that was the plan? What if a company went searching for a platinum asteroid, but not to make money selling the metal on the open market? What if they wanted to secure a large supply of cheap platinum in order to pump out platinum-based goods, crashing the market price of platinum in the process? The particular product I have in mind is fuel cells. Currently, fuel cells are too expensive for widespread market penetration, presumably due to the price of the platinum required. There is lots of research going on to find alternate catalysts for various processes, or making the absolute most of the platinum they use. Research that wouldn't be as necessary if platinum was cheaper.

Could that be a valid plan, for a company to find and wrangle a platinum asteroid, so they could sell millions or billions of cheap fuel cells of all sizes? Residential fuel cells would be a game changer for distributed generation, co-generation, and backup generation, if only they were a tenth of the cost. Propane fuel cells would likely be a godsend for RV's.

Discuss. Any other products come to mind that would benefit from cheap platinum?

Edit. What sort of possibilities and opportunities would there be if platinum was the price of silver? copper? aluminum?

 

Edited February 20, 2018 by StrandedonEarth
clarified that my diabolical plan is to crash the Pt market

[PB666]

Platinum is up to 1 ppm in nickle ore. Its terrible rare. The major portion of cost is the energy required to separated it from other metals. Global demand for both copper and nickle are increasing and as expected so will the global supply of platinum. In many applications were platinum is desired, palladium can be substituted.

[KG3]

  Iridium comes to mind as well.  But I thought the whole point of mining asteroids was the fact that the stuff was already in space.  I mean does a pound of platinum on earth cost more than putting a pound of... well anything into space?  Lets see, according to Wikipedia as of 2011 the price of platinum was about $2050 per troy ounce which comes to about $24,600.00 a pound.  What does it cost to put a pound of payload into orbit these days? 

  I do see your point.  Just the environmental benefit of not mining and processing the stuff on earth would be helpful.  Cheap fuel cells would be good too.

[Starman4308]

2 minutes ago, KG3 said:

  Iridium comes to mind as well.  But I thought the whole point of mining asteroids was the fact that the stuff was already in space.  I mean does a pound of platinum on earth cost more than putting a pound of... well anything into space?  Lets see, according to Wikipedia as of 2011 the price of platinum was about $2050 per troy ounce which comes to about $24,600.00 a pound.  What does it cost to put a pound of payload into orbit these days? 

  I do see your point.  Just the environmental benefit of not mining and processing the stuff on earth would be helpful.  Cheap fuel cells would be good too.

I think SpaceX is around $2700/kg to LEO, $15400/kg to Mars transfer*.

*Used mostly as an OOM estimate for the cost of sending mining equipment to an asteroid. My guess is the cost would be worse, because you'd be sending some fairly sophisticated (thus expensive) kilograms to that asteroid, plus needing to rendezvous, etc.

Still, platinum is around $54,000/kg. If you can scale up to the point where you can get around 1 kg of platinum out of an asteroid per kilogram sent to that asteroid in the first place, you're approaching the point of at least marginal profitability... at least until you crash the entire platinum market.

If we were able to extract platinum in sufficient quantities to crash the market... unfortunately I just don't know enough about its industrial or commercial applications to say much. The one thing I would say is that De Beers would probably start to advertise "natural" platinum extracted from Earth as being the perfect romantic metal to set your natural, mined diamonds in.

I do not like De Beers.

[YNM]

I think stuff mined out of Earth would be better used for everywhere else.

Regarding "crashing the market", it's wonderful to think so, but actually you won't see it. It's bloody expensive to send stuff out, get them back in raw, why sell them cheap ? Why sell them straight ?

Maybe you'll only see out-of-Earth platinum on Earth in "finished" forms, used on whatever it is you're seeing. Or in bulk at other closer colonies.

Edited February 18, 2018 by YNM

[StrandedonEarth]

30 minutes ago, Starman4308 said:

De Beers would probably start to advertise "natural" platinum extracted from Earth as being the perfect romantic metal to set your natural, mined diamonds in.

As compared to an "artisan created" (synthetic) diamond set in primordial asteroidal platinum (mined by an artisan-created robot asteroid miner)?

 

1 hour ago, YNM said:

why sell them cheap ? Why sell them straight ?

Well, the idea is to be able to make the money back by churning out products made with generous amounts of platinum to get maximum benefit from platinum's unique properties. Try to make it inexpensive to sell more of them. The market would need to be crashed or people would just snag the product to break out the platinum and recycle it.

Palladium is currently priced a little more than platinum, and iridium is a little less. Rhodium is nearly double, but rubidium is currently about 20% the price of platinum (which can change by several hundred dollars per ounce over a year).

[HebaruSan]

Ban deorbited raw materials, legalize deorbited products. If someone's going to crash the platinum market, we might as well get more space infrastructure out of the deal.

[DerekL1963]

4 hours ago, StrandedonEarth said:

But what if that was the plan? What if a company went searching for a platinum asteroid, but not to sell the metal on the open market? What if they wanted to secure a large supply of cheap platinum in order to pump out platinum-based goods?

If you want a supply of cheap platinum, then why are you proposing a method that will only obtain expensive platinum?

Besides which, unless you're sharply limiting the amount of cheap platinum goods you produce...  Everyone else will simply buy your goods and mine them for platinum.

[YNM]

5 hours ago, StrandedonEarth said:

Well, the idea is to be able to make the money back by churning out products made with generous amounts of platinum to get maximum benefit from platinum's unique properties. Try to make it inexpensive to sell more of them. The market would need to be crashed or people would just snag the product to break out the platinum and recycle it.

This is the reason why my country is very poor. Forget selling made products - just sell the ore !

 

China, on the other hand, has a lot more mine - but they process them. Look at how rich they are now...

Edited February 18, 2018 by YNM

[KSK]

The cost of platinum is only one reason why fuel cells haven't really taken off. I'm sure that designs have moved on since I was working with the relevant patents but they were a pretty tough engineering problem to solve as well - at least they were if you also wanted to make them cheap and rugged. Simple in concept, difficult in execution.

Hydrogen storage was another of those difficult problems. Not all fuel cells use hydrogen of course but the ones most often touted for vehicle use (proton exchange membrane cells) do. Remember the much hyped 'hydrogen economy'? Another idea that never quite worked.

It's slightly tangential to this thread but I wouldn't pick fuel cells as your mass-market platinum based product.

Edited February 18, 2018 by KSK

[YNM]

3 hours ago, KSK said:

The cost of platinum is only one reason why fuel cells haven't really taken off. I'm sure that designs have moved on since I was working with the relevant patents but they were a pretty tough engineering problem to solve as well - at least they were if you also wanted to make them cheap and rugged. Simple in concept, difficult in execution.

Hydrogen storage was another of those difficult problems.

If you can "cheat" by getting the cost of your platinum incredibly low, you'll win, no other words.

Which is why it's always better to sell out made products rather than raw products. Owning the production pipeline means very high efficacy.

Edited February 18, 2018 by YNM

[StrandedonEarth]

2 hours ago, YNM said:

If you can "cheat" by getting the cost of your platinum incredibly low, you'll win, no other words.

Which is why it's always better to sell out made products rather than raw products. Owning the production pipeline means very high efficacy.

Which is what I’m aiming at. Finding a ten ton chunk of platinum probably wouldn’t be cost-effective. Finding a million ton chunk likely would be. 

Edit: It's the same sort of planning that led Henry Ford to build the Rouge River Plant:

Spoiler

Quote

The Rouge soon became the destination of massive Ford lake freighters filled with iron ore, coal, and limestone. The first coke oven battery went into operation in October of 1919, while blast furnaces were added in 1920 and 1922. Iron from the furnaces was transported directly to the foundry where it was poured into molds to make engine blocks, cylinder heads, intake and exhaust manifolds, and other automotive parts. The foundry covered 30 acres and was, at its inception, the largest on Earth. In 1926 steelmaking furnaces and rolling mills were added. Eventually, the Rouge produced virtually every Model T component...

...Ford put a mammoth power plant into operation in 1920 that furnished all the Rouge's electricity and one-third of the Highland Park Plant's needs as well. At times, surplus Rouge power was even sold to Detroit Edison Company....

...The Rouge achieved the distinction of automotive "ore to assembly" in 1927

I hate to think how polluted that river was, and likely still is...

 

Edited February 18, 2018 by StrandedonEarth

[KSK]

2 hours ago, YNM said:

If you can "cheat" by getting the cost of your platinum incredibly low, you'll win, no other words.

Which is why it's always better to sell out made products rather than raw products. Owning the production pipeline means very high efficacy.

Possibly - but I wouldn't bother making fuel cells. Which was kind of the point of my entire post. Great - you've got cheap platinum. Now go out and solve the rest of the problems with your production pipeline. Now find somebody who wants to buy all your fuel cells.

And what do you mean by owning the production pipeline? Rocks in one end, finished goods out the other? Assuming that you do, can you give me an example of a company that actually does that?

[StrandedonEarth]

8 minutes ago, KSK said:

Rocks in one end, finished goods out the other? Assuming that you do, can you give me an example of a company that actually does that?

I just did..

1 hour ago, StrandedonEarth said:

Rouge River Plant:

  Hide contents

Quote

The Rouge soon became the destination of massive Ford lake freighters filled with iron ore, coal, and limestone. The first coke oven battery went into operation in October of 1919, while blast furnaces were added in 1920 and 1922. Iron from the furnaces was transported directly to the foundry where it was poured into molds to make engine blocks, cylinder heads, intake and exhaust manifolds, and other automotive parts. The foundry covered 30 acres and was, at its inception, the largest on Earth. In 1926 steelmaking furnaces and rolling mills were added. Eventually, the Rouge produced virtually every Model T component...

...Ford put a mammoth power plant into operation in 1920 that furnished all the Rouge's electricity and one-third of the Highland Park Plant's needs as well. At times, surplus Rouge power was even sold to Detroit Edison Company....

...The Rouge achieved the distinction of automotive "ore to assembly" in 1927

 

 

Edited February 18, 2018 by StrandedonEarth

[KSK]

Which didn't turn out to be so efficient. From the article you linked:

"The company grew to rely more and more on an ever-increasing cadre of suppliers and to methodically extract itself from other fields such as mining, lumbering and glass making. In 1981, steel-making operations at the Rouge became part of a new independent company. When these operations were sold to Rouge Steel in 1989, Ford gave up ownership of all Rouge River frontage and boat docks, as well as about 45 percent of the original 2,000 acres. Over time, the number of operations and jobs at the Rouge dropped. Economic pressures mounted to retire old brownfield manufacturing facilities and to replace them with state-of-the-art greenfield plants."

The whole thing looks like a monument to industrial vanity rather than a winning business model. I'd sort of agree with @YNM that selling manufactured goods is better than selling raw materials - you're taking something, adding value to it and selling it at a cost that reflects that added value. I disagree that owning the whole production pipeline means high efficiency. One of the standard bits of advice you see bandied around when a company is in trouble is 'focus on your core competencies'. In other words, pick the few things you do well, concentrate on those and ditch the extraneous stuff that you can buy in from another company which has making that stuff as one of their core competencies.

Edited February 18, 2018 by KSK

[StrandedonEarth]

2 minutes ago, KSK said:

The whole thing looks like a monument to industrial vanity rather than a winning business model.

Fair enough, but OTOH,* maybe that sort of early vertical integration was instrumental in bootstrapping up a major industrial operation, and once the industry was fully matured and demand had been sated, it made more sense to break up the operations. The need to replace old facilities with modern ones in a mature industry probably also played a part in the divestment

*I'll admit I'm no economist, just a speculating layman

[KSK]

2 minutes ago, StrandedonEarth said:

Fair enough, but OTOH,* maybe that sort of early vertical integration was instrumental in bootstrapping up a major industrial operation, and once the industry was fully matured and demand had been sated, it made more sense to break up the operations. The need to replace old facilities with modern ones in a mature industry probably also played a part in the divestment

*I'll admit I'm no economist, just a speculating layman

Which is about all I am. I'm certainly no economist or MBA. And you might well be right that getting off-world mining up and running would require a Rouge River style, highly vertically integrated business model. My gut feeling though is that for the example given in this thread (securing off-world platinum supply to make cheap platinum products) you'd need to bring together so many disparate fields of expertise, including a significant one (the actual space mining part  ) that hasn't been done before at all, that trying to crowbar all that into a single company probably isn't going to work. 

[StrandedonEarth]

1 hour ago, KSK said:

trying to crowbar all that into a single company probably isn't going to work. 

Eventually. Eventually. The first thing some entity needs to do is start mass producing cheap ion-powered (is platinum useful in ion engines?) prospector probes (launched in bulk on cheap re-usable boosters) to get some good in-situ data at what is actually out there (Edit: and where). Then some geniuses can figure out how to harvest the riches.

The phrase "It's not rocket science" will be replaced by "It's not 'roid mining."

Edited February 18, 2018 by StrandedonEarth

[YNM]

22 hours ago, StrandedonEarth said:

Finding a ten ton chunk of platinum probably wouldn’t be cost-effective. Finding a million ton chunk likely would be. 

You're looking at concentration and amount, in which case, the less processing and the larger the reserve, the better.

20 hours ago, KSK said:

I disagree that owning the whole production pipeline means high efficiency.

Many food companies will own the entirety of their supply, production and often distribution chain - there's no real reason not to. So is other companies - why Chinese goods is extra cheap is because not only the labour is cheap, they also saves on the shipping costs by utilizing their own nation's companies (they no longer sacrifices quality - Chinese products are going quickly more qualified (uh what's the word ?) and more self-inspired). They have their own brands, ready to take markets at a moment notice.

 

Edited February 19, 2018 by YNM

[wumpus]

20 hours ago, KSK said:

The whole thing looks like a monument to industrial vanity rather than a winning business model.

To be honest, this is *exactly* the hope I had when reading the original post.  Toyota has both the deep pockets and the face invested in fuel cells to actually go and do this to make fuel cells a reality.  It may or may not make economic sense, but the real cost of such a project might be low enough that Toyota would rather do it than admit error.

Also Elon Musk has had a lot of success in developing models that use a lot of vertical integration.  There is a distinct transaction cost whenever one business buys from another, and avoiding this can greatly reduce costs.  This seems to work at the size of Space-X and Tesla, but expect rival divisions to have similar transaction costs once you get to the size of Ford (at that size, it often makes sense to buy from *anyone* but your own company: the politics are too dangerous).

[YNM]

3 minutes ago, wumpus said:

Toyota has both the deep pockets and the face invested in fuel cells to actually go and do this to make fuel cells a reality.  It may or may not make economic sense, but the real cost of such a project might be low enough that Toyota would rather do it than admit error.

... And they'll probably just incorporate them straight in their cars.

No one sane enough is going to simply sell raw ore. No one.

[Nibb31]

The largest consumers of Platinum today are:

1. 45% by Automobile manufacturers for catalytic converters
2. 34% by Jewellery manufacturers
3. 9% by the oil industry
4. the rest for other industrial and medical uses

Catalytic converters for automobiles are probably on the way out, as automobiles are clearly going to move away from fossil fuels. It's also being progressively replaced by palladium. This removes markets #1 and #3.

The whole point of using a particular metal for jewellery is the appeal of its rarity. Make it common, and it becomes less desirable and less valuable for jewellery. And there goes market #2.

 

 

Edited February 20, 2018 by Nibb31

[Shpaget]

On 2/18/2018 at 5:52 AM, HebaruSan said:

Ban deorbited raw materials, legalize deorbited products. If someone's going to crash the platinum market, we might as well get more space infrastructure out of the deal.

For Sale:

Finest quality reentry fired platinum nuggets.

Available in variety of sizes, up to 50 tons (metric or imperial, customer's choice) or even more!*

Almost unlimited supply.

Order NOW!!!

* Exact size may differ from ordered.
* Delivery time may vary. Customer pick-up and the location to be disclosed, possible need for marine salvage.

[StrandedonEarth]

29 minutes ago, Shpaget said:

For Sale:

Finest quality reentry fired platinum nuggets.

Available in variety of sizes, up to 50 tons (metric or imperial, customer's choice) or even more!*

Almost unlimited supply.

Order NOW!!!

* Exact size may differ from ordered.
* Delivery time may vary. Customer pick-up and the location to be disclosed, possible need for marine salvage.

* not responsible impact delivery site damage

2 hours ago, Nibb31 said:

The two largest consumers of Platinum today are:

1. 45% by Automobile manufacturers for catalytic converters
2. 34% by Jewellery manufacturers
3. 9% by the oil industry
4. the rest for other industrial and medical uses

Catalytic converters for automobiles are probably on the way out, as automobiles are clearly going to move away from fossil fuels. It's also being progressively replaced by palladium. This removes markets #1 and #3.

The whole point of using a particular metal for jewellery is the appeal of its rarity. Make it common, and it becomes less desirable and less valuable for jewellery. And there goes market #3.

 

 

Palladium is roughly the same price as platinum atm, although I don’t know how much is consumed worldwide. As for jewelry, the inertness of platinum is also prized. After all, silver is relatively cheap and yet widely used in jewelry. And a unique lustre can always be marketed 

Edited February 19, 2018 by StrandedonEarth

[PakledHostage]

3 hours ago, Nibb31 said:

The whole point of using a particular metal for jewellery is the appeal of its rarity. Make it common, and it becomes less desirable and less valuable for jewellery. And there goes market #3.

Case in point: Aluminium. In the mid-1800's, it was worth more than gold. Now we throw it into the trash without giving it a second thought.