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To go to space and mine asteroids is expensive, but it is known that meteorites contain rare minerals in the core that are easy accessible because of the smaller diameter.

The expensive material that is in the center of the asteroid is expensive because it is rare. But when the mission returns to earth with the load, the mineral is no longer rare, and the price drops - making the mission a loss of profit.

How can the investing company keep the price of the product sufficiently high enough to have a reasonable profit margin lets say 20-25%, without losing popularity such as the diamond cartel?

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    $\begingroup$ There are many metals that will retain or grow in value, because they are consumables - not just precious metals - used in production that is just increasing by the day. $\endgroup$ – Mikey May 8 '15 at 17:47
  • $\begingroup$ @Magic-Mouse Why is the mineral no longer rare? Knowing this helps the answer. we need to know what is the use of the mineral or what motivated the company to go get it. Perhaps they can leverage the knowledge they acquired mining the asteroid. Also the mineral can be sold as commodities before acquiring it similar to a insurance for the price. This way you know for sure you'll' be profitable assuming that every malfunction possible is expected and that you estimated your costs correctly. Leveraging knowledge into other domains is my best guess. $\endgroup$ – adrian May 19 '15 at 1:33
  • $\begingroup$ @adrian "when the mission returns to earth with the load, the mineral is no longer rare". Because they pick it up from the asteroid. Eg. if there is a total of 1kg of the mineral on earth, and they travel to an asteroid and brings home 2-3 tonnes, then the mineral is no longer rare. $\endgroup$ – Magic-Mouse May 19 '15 at 6:56
  • $\begingroup$ @Magic-Mouse The company would knew it before going to get it, I doubt they would do it if they knew they wouldn't make a profit in the first place. But if they were profitless its not because the mineral is no longer rare its because the mineral didn't have the utility they thought. "Eg. if there is a total of 1kg of the mineral on earth, and they travel to an asteroid and brings home 2-3 tonnes, then the mineral is no longer rare" it will still be rare to earth because quantity of 3 tonnes of whatever is still rare to earth. $\endgroup$ – adrian May 20 '15 at 4:12
  • $\begingroup$ @Magic-Mouse But if this doesn't make it for you then the company could leverage the knowledge gain into other domains. $\endgroup$ – adrian May 20 '15 at 4:12
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The "real life" solution to the dilemma would be increase demand with availability. Basic idea is that the materials have applications that are uneconomical due to the materials being too expensive due to rarity. When new supply of the material becomes available and the price drops those new applications become practical and the demand increases. This prevents the price from collapsing.

In practice the same people investing on the mining would also invest heavily on those new applications and that would be where they'd get their money back. You can also use derivatives to monetize changes in commodity prices.

So the basic requirement is that increased supply must open new applications.

And yes, oil, steel and aluminium mentioned in the comments are historical examples of how increases in availability of a resource can create entire new industries.

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    $\begingroup$ Brilliantly put. The real parallel isn't diamonds (which are genuinely plentiful but artificially restricted) but oil. OPEC modifies world output and controls the price of a barrel of oil because it has such a large share of the market and can arbitrarily restrict their supply. When oil was first getting started, there were very few uses for it. As supply increased, we found new ways to use oil (plastics, etc.) increasing aggregate demand. Currently, China is the major supplier/price controller of heavy metals since they're the only one willing to do the "dirty mining." $\endgroup$ – Isaac Kotlicky May 7 '15 at 13:48
  • $\begingroup$ @Isaac Kotlicky: Oil isn't a good parallel, because it's a consumable. Just about everything you could bring back from space is fairly easy to recycle. $\endgroup$ – jamesqf May 7 '15 at 17:45
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    $\begingroup$ How about steel? It's literally been around for thousands of years, as a very rare, expensive super-metal with primarily military applications... up until Bessemer had to publish the steelmaking process he'd discovered in order to obtain patent protection. We call what came next "the Industrial Revolution," the beginning of the modern age. The per-ton price of steel plummeted, but the overall value of it increased tremendously, demonstrating that valueless steel is far more valuable than valuable steel. If we could gain make currently-rare minerals valueless, we could expect similar gains. $\endgroup$ – Mason Wheeler May 7 '15 at 18:17
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    $\begingroup$ How about aluminum? The per ounce is tiny fraction of what it would have been in 1800, but I would expect that the total value of aluminum produced yearly--even at today's prices--vastly exceeds that produced in 1800. $\endgroup$ – supercat May 7 '15 at 18:21
  • $\begingroup$ @jamesqf except that recycling from electronics and batteries (the primary use for heavy metals aside from catalysts in chemical processes) is... Not exactly safe, healthy, or common. For all intents and purposes, the metals in your smart phone stay there until they're "mined" again in trash form. $\endgroup$ – Isaac Kotlicky May 8 '15 at 8:19
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All told, there are two ways this could go down. Both have been touched upon in the answers of @Burki and @VilleNiemi respectively, but just to recap:

A) The quantity your company can mine is insignificant next to the size of the global market

In this case, the demand will not change significantly, so there's no need to worry about a market collapse. Some of the earth-bound mines might stop being profitable and go out of business, but since your space company cannot provide enough material to satisfy global demand on its own, the rest will keep going. Since the demand for most materials is increasing long-term, perhaps not even that will happen.

Your profit margin is directly equivalent to proportion of your unit cost and the market price, still mostly dictated by the earth-bound methods. You will be able to make out like thieves, until everyone else catches wind of what you're doing and starts competing with you.

B) Your company is mining enough materials to significantly affect the global market

This is the Ville Niemi's scenario; the price will drop, but new applications will increase demand. Expect competition to spring up shortly.

Finally:

There is one huge advantage that your space mining company has; the material they mine and send to Earth is already in space. This instantly slaps another $4k-14k per kilogram (in current economic conditions) to the value versus Earth-mined materials, if there is any use for said material in space technologies or if it can be advantageously processed in zero-g.

A company that mines the material on Earth would have to pay for the mining and then to launch it into orbit just to make it available for the same applications. This is in fact the principal reason why deep space mining would be considered on an industrial scale; if you're already in space, you can use it to get much, much more stuff into space than if you were to launch it.

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  • $\begingroup$ This is the right answer. Ultimately mining space for materials only makes sense economically if you plan to use those materials in space. Everything else can be made more cheaply on Earth if the intended market is on Earth. It's the catch-22 of space industry, you need space industry in order to justify building space industry. Trade with Earth will be to maintain Earth's space infrastructure (weather, communications, etc. satellites). $\endgroup$ – Jim2B May 8 '15 at 2:18
  • $\begingroup$ I disagree with premise A. It's a clever point, to be sure, but there are definite ways around it. You think they'll load up the ore into a shuttle? It's way easier to attach a heat shield and splashdown chute onto a chunk of asteroid and push it into atmo. The first few loads will get shuttled, but there are WAY more efficient (and less risky) ways of getting this stuff to earth. $\endgroup$ – Isaac Kotlicky May 8 '15 at 8:24
  • $\begingroup$ @IsaacKotlicky I just wrote about that in the comments to an another answer. Bottom line is that for some materials, you can get a lot of them down, but generally not enough to make a significant dent, because the market can be just that big. $\endgroup$ – Mike L. May 8 '15 at 8:51
  • $\begingroup$ @IsaacKotlicky Also, besides your ferry capacity, there's an abundancy limit (ie. how much you can expect to mine from a given asteroid). $\endgroup$ – Mike L. May 8 '15 at 8:52
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The price for whatever the company is mining is most likely determined by the classical system of supply and demand.

That means, if you double the supply, your prices will drop to something approaching half the original price. While that will soon increase the demand (because cheaper stuff might suddenly be interesting where it was avoided before), you will surely still have a significant price drop.

That means, in order to not completely destroy your margin, you should not flood the market with your minerals. Adding a few per cent at a time should be okay and should be the thing to do for your space mining company.

Note that this is not a suggestion to keep the supply short artificially. I was trying to hint at the fact that even through deep space mining, the amount of raw materials they can haul at one time might not be a substantial part of what is already on the market.

On doing some quick research (that is: I googled "rare earth world market"), the amount of rare earths (as in rare earth minerals, not planets) traded each year seems to be 150,000 metric tons. One dragon capsule currently hauls 5 metric tons of cargo to and from the ISS. That makes me assume that it would be a long time until our deep space mining company could actually flood such a market in any way to substantially decrease the price.

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    $\begingroup$ You can transport substantially more cargo in the downwards direction than you can fit in a Dragon capsule. Essentially, take a huge chunk of whatever mineral you have, slap a heatshield and some parachutes on it and send it on an aerobraking trajectory; it's just minerals, there's no need to keep them pressurized (though you might give it a thick layer of paint if you're worried about oxidation and such), worry about boosting it up or to be particularly gentle about sending it down. Better yet, keep it in orbit and use it to build stuff there. $\endgroup$ – Mike L. May 7 '15 at 14:54
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    $\begingroup$ @Burki It really is almost as trivial as I'm describing here. If we're talking about a huge metal ingot, then you can let it impact at a much higher speed than a crewed capsule without much happening to it. Launching it from far away lets you steer it fairly precisely with only a tiny amount of force, and building an ablative heat shield really isn't too complicated; there's little reason to worry about it breaking apart. If it is too fragile to take the deceleration as a solid chunk, you just need to build a container around it. $\endgroup$ – Mike L. May 7 '15 at 15:13
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    $\begingroup$ @MikeL. I think the point is decelerating a large mass is tricky. If you want to land a very large ingot of refined metal, it'll survive the transit through the atmosphere ok, but its going to make a very large hole. Putting parachutes on will work - but the larger the mass, the more parachutes and you get to a point where the chutes will not be able to cope. So there is a limit to the amount you can land, I'm not sure what that is, but I think its considerably smaller than anticipated. $\endgroup$ – gbjbaanb May 7 '15 at 15:25
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    $\begingroup$ @gbjbaanb The atmosphere is what slows it down from hypersonic velocities to where you can deploy parachutes and not have them torn off. That's how spaceships generally land on objects with a thick enough atmosphere. If the object is too dense to decelerate sufficiently on one flythrough (and here we're getting to footbal-field-sized teritory), you can do multiple; raw materials don't spoil in space. $\endgroup$ – Mike L. May 7 '15 at 15:30
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    $\begingroup$ How about some numbers? Platinum is currently about 1130 dollars/oz (prices for precious metals are quoted per ounce, so I won't convert to metric). Thus a 5 ton Dragon capsule full would be worth about 180 million dollars. But just one Falcon Heavy launch currently costs 90 million, and of course you're going to need many launches just to get your mining equipment to orbit. Then you need to find the fuel needed to get everything to your asteroid... $\endgroup$ – jamesqf May 8 '15 at 6:04
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I disagree with Burki, your company suddenly has a vast store of this rare mineral. In a well regulated economy they're stuck with the laws of supply and demand. In an unregulated one they're free to milk the system as long as they have deep pockets.

They've got competitors who have high costs to get the small quantities of this rare mineral. Unless their competitors have very deep pockets the company can flood the market, put their competitors out of business and then jack up the price again leaving themselves as a monopoly. Repeat occasionally when other companies are getting uppity.

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    $\begingroup$ @Lohoris, It's a fair assumption for him to make, as the OP is describing how the market will be flooded as a result of this mission. If it was a trivial task, the resource would not be considered rare, and others would indeed have been doing the same thing. $\endgroup$ – Scherling May 7 '15 at 10:54
  • $\begingroup$ i took the liberty to edit my post, since obviously i was not explaining clearly what i was trying to say. Maybe you'd like to have a look? $\endgroup$ – Burki May 7 '15 at 11:02
  • $\begingroup$ Yes the problem about potential competitors is they are having the same dilemma, they are not going to invest in a mission that might end with profit loss or bad PR. $\endgroup$ – Magic-Mouse May 8 '15 at 5:42

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