Mr. James Otto - Tokyo Development Learning Center

“Sea-Bed Minerals: Opportunities and
Challenges in Marine Mineral Mining -
Setting the Stage”
Presenter: James Otto
Governing the Remote: Green Growth in Offshore
Resources
Offshore Mining Session
Development Learning Network Seminar Series:
Session 3
Green Economy in a Blue World

Marine Minerals – Structure of Talk
Topics:
• Marine minerals resource base
• Jurisdictional and boundary issues
• Activities in developing marine minerals
• What needs to be regulated and how?
• Fiscal and economic issues
• What the future holds

Marine Minerals – A Diverse Resource Base
Many Pacific nations have both:
near-shore minerals, deep-sea minerals
National minerals policy, regulatory framework and fiscal
approach need to address the appropriate marine mineral
resources; these resources differ from country-to-country

Marine Minerals – Near-Shore & Continental Shelf
• Sand, gravel (dredging for beach sand replacement, construction)
• Coral (jewellery, landfill, construction …)
• Tin and gold placers
• Black sands (titanium minerals)
• Silica sands (glass, electronics)
• Diamonds (Indonesia, Namibia …)
• Phosphorite (mainly 30 degrees N & S of equator, New Zealand)
• Lime (originally from shells)
• Sulphur (Gulf of Mexico)
• Oil & gas
• Deposits that extend under land and water but are accessed via land
• Salt (evaporative or extractive)
• Water (desalinization or underwater freshwater springs)
many are now commercially mined

Marine Minerals – Deep-Sea
Poly-metallic nodules:
• occur mainly at a depth of 4,000-5,500m in
international waters
• main minerals of value; cobalt, copper, iron, lead,
manganese, nickel, and zinc
• International Law of the Sea may apply (Regulations
for Prospecting and Exploration of Poly-metallic
Nodules have been issued)
• some Pacific nations have this resource
no current large-scale commercial operations

Co-Mn crusts:
Marine Minerals – Deep-Sea
• occur on sides of seamounts & plateaus
• mainly occur up to the mid-latitudes but especially rich in
the central equatorial Pacific Region
• depth dependent (400 to 4,000 m); richest at 800 to
2,500m
• main minerals of value: cobalt, titanium, cerium, nickel
and zirconium
• many occurrences in the EEZs of Pacific nations
• for occurrences in international waters: Law of the Sea
Regulations on Prospecting and Exploration for Cobalt-Rich
Crusts are still being prepared
no current large-scale commercial operations

Marine Minerals – Deep-Sea
Hydrothermal vents:
• underwater metal-rich hot springs (known as black & white
smokers)
• occur where the earth’s crust has been disturbed allowing water to
migrate into the earth, accumulate minerals and then vent on the
ocean floor (such as volcanoes, rim of fire tectonic plate edges)
• main minerals of value: copper, iron, zinc, silver, gold
• occur in both Pacific nation EEZs and international waters
• for minerals in international waters: Law of the Sea Regulations
for Prospecting and Exploration of Poly-metallic Sulphides apply
no current large-scale commercial operations; some
pending operations such as in PNG and Solomon Islands

Marine Minerals – Deep-Sea
Methane hydrates: occur in cold & deep waters
no current large-scale commercial operations
Oil & gas
many examples of current production

Marine Minerals – Jurisdictional Issues
International waters – Law of the Sea or “rogue” nations
Exclusive Economic Zone – 200 miles …
• National laws apply
• Many disputed areas: some are now being measured
• Disputed border zones: amicable solution, joint
development areas are possible (Thailand & Malaysia; Timor-
Leste & Australia; …)
Division of responsibilities within a country
• Central versus provincial governments; where does
provincial jurisdiction end (at the waterline or other
boundary?)
• Which ministry shall take the lead?
• Which ministries will be involved in regulation?

Marine Minerals – Activities to Regulate
• Exploration
• Mining
• Beneficiation (concentrating the mineral in order to
lower transport costs or increase its value, can be offshore
or land-based)
• Smelting & refining or other type of value addition

Regulatory system: what needs to be regulated and how?
Mining Law – granting the rights to explore and mine
• Use the general “land-based” mining law? Solomon Islands
& PNG
• Add special marine minerals sections and regulations in the
general mining law?
• Create a special marine minerals law?
• Negotiate special agreements on an ad hoc basis?
• Optimal approach: may depend on institutional capacity,
budget
Marine mining law topics that may differ from land-oriented regulation:
tendering, open entry, licensing, area size, licence duration, content of
reports, who gets consulted, approval of mine plans, reclamation,
surveying & boundary markers, role of Geological Survey, closed areas,
stakeholder engagement, … there are substantial differences

Regulatory system: what needs to be regulated and how?
Environment Law
• Ecological impacts not well understood for deep-sea operations,
near-shore operations can have large impacts
• Size of area affected depends on the deposit and the means of
recovery and processing - generally likely to be highly localized
with limited permanent infrastructure
• Are special regulations required?
• Issues to be addressed: Environmental Impact Assessment;
Social Impact Assessment; near-shore versus deeper waters;
pollution standards; discharge permits; plume control …)
• Social impacts - probably no mining towns as such, especially if
offshore floating facilities are used - impacts may be felt
indirectly through impacts on coastal economy / displaced marine
livelihoods - low jobs impact due to highly capital intensive
operations (rather like offshore oil drilling)

Regulatory system: what needs to be regulated and how?
• Maritime act (permitting; lighting; discharge; shipping
lanes; inspection; seaworthiness of vessels & platforms;
…)
• Health and safety act (permitting; inspections; hours
…)
• Fisheries Act (subsurface structures; proximity of
fishing vessels to operations; closed zones; …)
• Protected areas acts (such as marine parks)
A holistic approach is required

Marine Minerals – Fiscal & Economic
Fiscal
• Should special incentives be offered to a pioneer industry (can
incentives make marine minerals more competitive?)
• Special depreciation rates?
• Customs: import and export inspections and duty (live aboard?)
• Income tax on expatriates working in the EEZ
• Area based rents & fees
• Royalties on mixed-metal concentrates & ores (such as from
smokers)
• Property taxes
• Distribution system challenges (example: regimes where
royalty distribution is tied to provinces or landholders)

Economic
Marine Minerals – Fiscal & Economic
• Mandatory economic linkages?
- Supply chain (preference for local goods and services)
- Training and employment of nationals (limits on expatriates)
- Local downstream processing
• Economic Scale for deep-sea mining: will be large scale compared to
other enterprises and may result in potentially transformative Foreign Direct
Investment, export, Gross Domestic Product and public revenue impacts for
small island states
• Resource curse: Will additional fiscal revenues be used wisely in a
sustainable manner? Will the investment in this sector impact other sectors
of the economy? Examples of land-based mining have illustrated that large
projects can result in problems: such as in Nauru and Bougainville

Marine Minerals – Looking Forward
• Near-shore: a current and immediate issue in many Pacific nations
(especially sand and coral dredging)
• Deep-sea: except for oil and gas the economics and technology are
unproven; land-based resources are still plentiful but are nonrenewable;
increased level of activity spurred on by high commodity
prices and technological advances; the need to get the regulatory and
fiscal system prepared
• Time to develop marine minerals regulatory system: about 2 years
to draft regulatory changes, receive stakeholder inputs, and place
before the parliament (a holistic approach is needed)
This presentation is intended to set the stage for the next two
presenters who will expand on these subjects. They will also
address a major regional marine minerals project being
coordinated by SPA-SOPAC.