Cook Islands Earns More Than $62,000 From Deep Sea Minerals Agreement

American company pays $8,000/month to reserve first right to apply for exploration license

By Rashneel Kumar 

RAROTONGA, Cook Islands (Cook Islands News, May 15, 2017) – Cook Islands have already earned more than $90,000 [US$62,000] from one deep sea minerals agreement signed in 2016 with an American company to give them reserved rights in certain deep seabed areas within the country’s Exclusive Economic Zone.

In September last year, the Cook Islands led by Natural Resources and Minerals minister Mark Brown signed an agreement with Ocean Minerals (OML) to have the first option to explore and prospect for rare earth elements (REE) in certain high-value deep sea mineral areas. The draft agreement was approved by Cabinet before it was signed.

In the agreement, the Houston-based company now has a five year right to one reserved block of 11,000km2 in the Cook Islands EEZ to one day explore for the elements that are now known to be found in the sediments of our deep ocean floor. No actual seabed licence has been issued to OML at this stage.

In return for this reserved right, the company agreed in the signed agreement, approved by Cabinet, to pay the Cook Islands the sum of US$8000 ($11,681.86) per month for five years or until they apply for an exploration licence over that reserve block from the Seabed Minerals Authority.

Also under the contract, the company has to provide internships and training opportunities to suitable Cook Islanders and contribute to an awareness programme to inform the community about their project.

According to the Seabed Minerals Authority Commissioner Paul Lynch, the company is now seeking to attract the large capital investment needed to apply for the exploration licence.

Therefore, he said under the agreement, the Ocean Minerals has a “holding right” and while it gets organised for exploration, it is required to pay the agreed amount every month to the Cook Islands Government, via its commercial entity, the Cook Islands Investment Corporation.

 “The time is ticking on them. They have got to apply for exploration licence within five years and have it all completed within seven years. So until then that US$8000 keeps coming in,” Lynch said.

“And if they are unable to make an application right to their maximum seven years, without even giving the licence away, we will get about a million dollars just under the existing agreement.

“The Government is already receiving this seabed revenue even without granting any licence. So this is quite a positive progress for our seabed minerals sector. It is separate from the nodules resource and is focused on exploring for valuable REE in our deep sea sediments.”

China controls about 90 per cent of global REE, which is used in many devices that people use every day such as computers, rechargeable batteries, cell phones, catalytic converters, magnets, fluorescent lighting and much more.

It is also used in the security forces for night-vision goggles, precision-guided weapons, communications equipment, GPS equipment, batteries, and other defense electronics.

REE are also key ingredients for making the very hard alloys used in armoured vehicles and projectiles that shatter upon impact.

China’s control over the REE through land mining in Mongolia has disadvantaged other nations who are looking at other avenues to extract these rare earth elements.

Lynch said the country’s deep sea minerals resource may be a viable addition to the global REE market, from which the Cook Islands can benefit

He said the United States Department of Defence has granted almost a million dollars to Ocean Minerals to investigate the recovery of the REE from other sources apart from China’s resources.

“We were able to initiate the proposal between the Government and Ocean Minerals during an overseas seabed minerals conference in 2015,” Lynch said.

“They visited and were referred to the relevant authorities in our country. Ultimately the draft agreement was approved by Cabinet after vetting by MFEM, Crown Law, Foreign Affairs and the Seabed Minerals Authority.

“We were not even really looking at or set up then for sediments or REE. Our regulatory framework that finished in 2015 was really set up for the manganese nodules then. But a 2015 amendment to the 2009 Seabed Minerals Act granted a new power to the Minister to reserve Blocks for special national strategic purposes. And CIIC were the legal government entity to execute the agreement on our nation’s behalf.

“Currently as a nation, we are focused on the exploration phase of our deep sea minerals sector for the next say 3-5 years. One of the reviews that will take place before any possible extraction could happen is that we are going to ensure that we get the benefit if any extraction might happen. Not just from the nodules but also of the sediments under the nodules for REE.

“We have got to have the full suite of regulations in place so that nothing gets taken without us benefiting.”

Lynch said OMI chose the area based on Scripps’ and SPC report done in the 1970-80s which showed an abundance of REE in a specific area in the Cook Islands waters.

“They also realised there were few other areas of interest. So the Cook Islands Government said ‘you can’t have all of them but you have the first right for these other blocks. But if another applicant comes and wants that block for nodules, then you will have to decide where you will have your one reserve block’.

“They will only occupy one block at any time until an exploration application is made under the SBM Act.”

Lynch said Ocean Minerals was already teaming up with expert New Zealand companies to carry out a Resource Assessment to validate the earlier reports produced on REE in the Cook Islands EEZ.

Cook Islander Thomas Whiddon, a young marine geologist, has been contracted to assist on that work in New Zealand.

He said the company can then use that report to attract potential investors to carry out exploration and possibly extraction in the future.

“We will only be able to make the decision on the extraction once they finish the exploration work. Then we can see whether there is anything economically worthwhile to sustainably harvest from our deep seabed.

“And during OML’s anticipated five year exploration programme, they have to take suitably qualified Cook Islanders on the vessels and also share the data with us so we can see the potential impacts of it to our seabed.”

Lynch said usually in the minerals sector globally, in the exploration phase, the resource owner does not receive much revenue. But he said they would most likely earn some “real money”, employment, training and benefits, when the extraction phase begins, which is expected in the next 8-10 years.

He said the Cook Islands has a rigorous licencing process for seabed minerals. This includes a multi-stakeholder consultation process, and Environmental Impact Assessment process and report, among other things, before they would consider allowing companies to extract resources from the deep seabed mineral zones, north east of Aitutaki.

“One economic challenge for the Cook Islands is, we don’t have enough economic opportunities. We have a growing tourism sector, but we need to diversify our income sources.

“The reason our various government’s have progressed seabed minerals is that this new sector can be an alternative revenue source because the tourism industry can be very fickle.

“There is a big risk for any nation in putting all its economic interests into one basket. So for us, seabed minerals sector revenue is a possible addition to our national budget in the future, from our own resources. So we must manage this opportunity well as every opportunity carries its own risks and challenges.

“So what we are doing now is setting up a possible viable industry here for the future. But at least even now we are already getting some significant national revenue from our seabed minerals sector, before even issuing any exploration licences.”

Cook Islands News
Copyright © 2017 Cook Islands News. All Rights Reserved

Rate this article: 
Average: 4 (1 vote)

Add new comment