Critical Minerals: Opportunities in Deep Sea Mining to Secure Supply Chains

Bradley Intelligence Report

Client Alert


Last week the Biden administration issued long-awaited guidance on sourcing of content in batteries eligible for electric vehicle (EV) tax credit. The guidance seeks to balance the need to wean U.S. manufacturers off materials from China, while providing incentives to American consumers to boost demand for EVs and time to manufacturers to clean their supply chains. The guidance will temporarily exempt some trace critical minerals from countries designated as a “Foreign Entity of Concern” – China, Russia, North Korea and Iran. The rules will come into effect in 2024 for completed batteries and 2025 for critical minerals used to produce them. While the new guidance received mixed responses (particularly negative from China), it does provide a needed window for the U.S. and trusted supplier countries to spin up mining and refining operations for minerals whose demand is slated to grow exponentially over the next 20 years, per estimates from the International Energy Agency.

The supply chain challenge is complicated. The U.S. and its allies need to identify new sources of critical mineral deposits, overcome regulatory obstacles, develop more ecologically acceptable mining and refining technologies at commercial scale, and establish a market pricing mechanism for “clean” minerals. In terms of new sources, deep sea mining presents notable opportunities, albeit with major regulatory challenges. One deep seabed in the Pacific Ocean, the Clarion-Clipperton Fracture Zone, has an estimated 21 billion tons of polymetallic nodules, large concentrations of copper, nickel, cobalt, iron, manganese, and rare earth minerals, more than all known land deposits combined.

Clarion-Clipperton Fracture Zone

The Clarion-Clipperton Zone (CCZ) is a region spanning 3,100 miles across the central Pacific Ocean. Potato-sized nodules of concentrated minerals rest on the ocean floor, at depths of 12,000 to 18,000 feet. Using specialized underwater mining technology, these nodules can be harvested without digging into the seabed. The CCZ is located outside national jurisdiction (countries’ exclusive economic zone) and exploration and mining is regulated by the International Seabed Authority (ISA). The U.S. has observer status in the ISA. This reflects U.S. interest in the policy-making body, though the U.S. is not a full member as it has not ratified the Convention of the Law of the Sea, the legal framework under which the ISA was founded.

The ISA has issued 17 contracts for exploration of the CCZ. The contracts were issued to countries and country-sponsored business consortiums. China and Russia hold two exploration contracts each for the CCZ. Others are held by European consortiums, South Korea, Singapore, Japan, France, Germany and the island nations of Nauru, Kiribati and Cook Islands. Again, the U.S. is ineligible to sponsor companies interested in seeking ISA contracts for exploration or exploitation of seabed mineral resources through the ISA system. 

Part of the ISA’s mandate is to “ensure the effective protection of the marine environment from harmful effects that may arise from deep seabed related activities.” According to a report by the Congressional Research Service on issues for the U.S. Congress to consider, seabed mining impacts in the marine environment are incompletely understood. The deep-sea ecosystem is sensitive; species have low metabolic rates (moving slowly, living long and taking many years to reproduce). The species may be slow to recover from disturbances, making them vulnerable to deep sea exploitation activities. Sediment dispersal may harm the ecosystem. Because deep-sea nodules form over millions of years, their removal in an area of the seafloor would equate to the permanent loss of a part of the marine habitat that some deep-sea species depend on for their survival. The counter argument is that the environmental impacts on the ocean would be far less than the land-based impacts already observed.

Moving Beyond Exploration to Exploitation

While ISA has granted exploration contracts, it has not yet authorized exploitation, despite running afoul of its own rules. In June 2021, the Republic of Nauru notified the ISA of its intentions to mine the CCZ through the Nauru Ocean Resources (a subsidiary of Canadian firm The Metals Company). This notification triggered a legal provision requiring the ISA to establish standards and guidelines for mining deep-sea resources while minimizing environment risks. The IRA had two years to complete the regulations but failed to do so by July 9, 2023. In a high-stakes meeting behind closed doors, ISA’s policymaking council pushed the deadline to 2025 to finish writing the rules. In the meanwhile, ISA must accept license applications from mining companies. Adding to the obstacles, the European Parliament and countries including Germany, Chile, Spain, and several Pacific Island nations have joined dozens of organizations in calling for at least a temporary moratorium on deep-sea mining.

Despite regulatory uncertainty and environmental concerns, startups are forming and gaining private equity backing as high-risk, high-reward ventures. The above-mentioned Nauru-linked company, The Mining Company, has also applied for a grant under the U.S. Defense Production Act. Companies are seeking partnerships with refining companies eligible to qualify under IRA’s tax credit.

With the U.S. content sourcing rules coming into force in 2025, it is highly optimistic to think that deep-sea mining will be ready to start exploitation in time to be a reliable source for U.S. EV battery manufacturers. However, with the steep demand growth curve, deep-sea mining could be part of the secure supply chain of the future.