What are asteroids worth?

It is just fascinating to watch the worldwide interest in space mining grow. Our Off-Earth Mining Forum at the University of New South Wales drew international media attention.

As you might expect, as in other "viral" phenomena, there is some craziness. It's a great ride!

One crazy thread is the discussion about "What are asteroids worth?" Deep Space Industries kicked off the topic as they breezily suggested that asteroid 2012 DA14 might be worth $195 billion. Since we are so early in the space resources business, such speculation might not be too harmful. (Our friends engaged in actual mining on Earth remind us that value estimation of mineral resources is subject to strict regulation, and mis-stating values can get you sued or even imprisoned.)

But, in fact, DSI's comment was probably useful, because it keeps the conversation going. And indeed it has: one tech blogger in Forbes countered that the asteroid's value is zero. Well, that bounds the problem!

Both DSI and the Forbes chap are inexcusably wrong. DSI's $195 billion estimate is wrong because it doesn't cost the tech development. Tim Worstall's estimate of zero is wrong too. If someone gave me $50 billion, I could CERTAINLY develop a complete asteroid mining architecture. Technology doesn't have to be completely in hand for things to have value. The oil industry is constantly developing new technologies to exploit previously inaccessible but known oil reserves.

But unlike the oil case, if there is no market, valuation is very challenging.

If we decide that resources mined in space are going to be brought back to Earth, then there are existing markets. But we also know that it's hard to compete in those markets. I have created a new aphorism which addresses this: "Reentry burns up value." We suspect that our mining products have significant value in space, because of launch cost avoidance. But THERE ARE NO MARKETS IN SPACE. Yet. And to state the obvious: there is no justification for developing a commercial technology if there is no commercial market.

There have been some suggestions of markets that could develop. Jeff Greason, CEO of XCor Aerospace, was a member of the Augustine commission that reviewed US plans for human spaceflight. Jeff suggests that the US government could pay for propellants in order to make human planetary exploration more efficient. Surely I've included Jeff's ISDC 2011 talk in previous blog entries, but if not, here it is:

https://www.youtube.com/watch?v=Wy2kIPLsUn0

The Augustine report itself also makes reference to propellant depots--but does not say how they will be filled!

Wannabe space resource developers must address the establishment of markets for their space products, thereby addressing the value question. DSI has actually been very open about its business case, as have Planetary Resources and Shackleton Energy. Shackleton is focusing on the propellant market.

The question of value versus system design was at the core of my work as a principal investigator for the DARPA F6 project developer's kit. The inventor of that concept, my good friend Owen Brown, published several articles on introducing real options into spacecraft engineering. Owen and co-authors found that a fractionated architecture gave options that enhanced the value of the architecture as a whole, and value of each participant's piece. My own work built on the advances of computer scientist Dr. Tatiana Kichkaylo to develop an automated design tool, which searched for optimal designs within fractionated (and non-fractionated) design spaces.

This work led to the realization of how ephemeral the concept of "value" is. An early output of our tool was a set of design points for an imaging spacecraft system--many cameras in space looking at the Earth, able to downlink images in real time. The optimal design point would change as the number of images per day was varied. If you're only interested in 1000 images per day, you don't need 100 cameras, but if you're interested in 100,000, you need several, etc., and the processing power, downlink, etc., all varied.

But the question is: how many images per day do you want? If this is a commercial system, the question becomes, how many images per day CAN YOU SELL? It's not an engineering question, it's a MARKETING question. The engineer should not proceed to design until the customer has made a decision on this point.

Which brings us back to space mining and the value of asteroids. For the sake of credibility, the industry needs to be doing CO-DEVELOPMENT OF TECHNOLOGY AND MARKETS FOR SPACE RESOURCES. This actually represents a fascinating intellectual challenge. How does a given technology IMPROVE the ultimate market?

Let us not be daunted by our current lack of market understanding. The computer industry, as did most of the revolutionary technologies of the 20th century, developed with significant misunderstanding of the market. Bill Gates, one of the world's most successful businessmen, has at least three huge misapprehensions attributed to him: "We'll never develop a 32-bit operating system," "No one needs more than 640k of RAM," and "OS/2 is destined to be the most important operating system of all time."

Perfect understanding doesn't seem to be required. What is required is courage and determination. Gates had them. I hope the space resources community maintains its courage and determination too. The good stuff is out there.

A good summary of the off-Earth mining concept

The Australian radio show Future Tense pulled together half a dozen guests with fairly sophisticated insights in the area of exploiting off-Earth resources. The half-hour broadcast looks at technical, legal and economic prospects in an even-handed and thoughtful way.

What's funny to me is that I was portrayed as a skeptic!

Dumb like foxes

There are so many new programs for Earth-observing satellites, it's hard to imagine how the market could support them all. The number of national space programs is astonishing (Australia, in contrast, sees no value in such things). Then there's Skybox Imaging, whose unique business case includes data mining and HDTV from space in addition to the mundane imaging market. 

Lest you think that the supply side is saturated, check out how the asteroid miners at Planetary Resources are positioning their Arkyd 100 imager for the same market. This should silence some of the skeptics: PRI is not going to wait for decades until the profits roll in from platinum-containing asteroids (don't hold your breath); they are putting out dual use products that can provide near-term revenue.

Mark Sonter, director of the other asteroid mining company, Deep Space Iindustries, is an expert on the history of mining. He gave a fascinating lecture at our Off-Earth Mining Forum here in Sydney. (His slides haven't been released yet; keep checking the link if you're interested.) One of his main points was that mundane, run-of-the-mill terrestrial mining projects span many decades. There is thus no reason to be contemptuous of off-Earth mining efforts simply because of the time scales being discussed.

DSI does not mention the Earth imaging market in their business case. But they do mention an intriguing mid-term revenue source: replenishing the propellant tanks on GEO satellites. This will not come to fruition as quickly as the imaging market, but it could represent a viable business, given that every kilogram of stuff DSI provides avoids the $40,000 cost of launching it to GEO. And recall that NASA is developing the other end of the technology: the robotics to put the propellant into the satellites.

Asteroid miners: dumb like foxes. I've been trying to get this message out in all the radio and TV interviews I've been giving. And the most important reason for that is to keep the flow of engineers coming--our bright young people need to know that this is real, and not be discouraged by the skepticism.