Playing gold under the sea
Posted
Oct 13 2009, 08:46 PM
by
InvestorPlace
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This article was written by InvestorPlace.
In the 1970s, when crude prices were skyrocketing and demand was high, a new industry emerged: Offshore drilling.
"Why limit ourselves to land," the energy companies asked, "when there is so much wealth under the sea?"
Now, gold companies are asking themselves the same question. And the result is a new industry that sounds like science fiction: Mining for gold at the bottom of the ocean.
Mining the seafloor is in its infancy, but has all the potential that offshore oil and gas drilling held a few decades ago. Start-ups abound, and venture capitalists are racing for a piece of the pie.
Two of the leaders in the hunt are Sydney-based Neptune Minerals and Toronto-based Nautilus Minerals, but neither has yet started any mining. There will surely be a long list of mining firms that try to cash in on the sunken treasures under the sea floor, and many will fail.
But one company stands out as a stone-cold lock in this emerging undersea mining business. South Africa’s AngloGold Ashanti (AU) is already one of the world's biggest gold producers on land, and is now racing to have what it calls "first-mover advantage" on the ocean floor.
Its ace in the hole? AngloGold has partnered with diamond icon De Beers, a world leader in marine mining for precious gems. The pair will now have a huge economy of scale and split the profits -- diamonds and gems for the jewelry giant, and precious metals for AU.
What’s more, De Beers has an established track record of successfully mining the ocean floor. Its De Beers Marine Namibia unit produced almost 1.06 million carats last year, from a depth as great as 500 feet. Not quite the deep-water finds the oil industry is chasing right now, but certainly no dip in the kiddie pool.
And for an emerging industry, ever small step opens up greater possibilities and puts the trail blazers like De Beers and AU in a league of their own.
Undersea mining is not without its challenges. But with gold soaring week after week, companies are likely to find much less risk and much more reward with the prospect of an underwater mining adventure in the Pacific or Atlantic oceans.
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