Some neglected considerations in the valuation of marine minerals with special reference to cobalt crusts

Seabed mineral resource may possess option value as a result of prospective technical change or low-probability/high-payoff future events. This would explain the current interest in leasing these submarginal resources. Theoretical arguments are used to evaluate the technical change aspect. Specific reference to the cobalt market is used to illustrate the uncertainty case. The paper concludes that leasing interest may reflect legitimate economic considerations, even though the near-term development potential is unpromising.Adapted in part from a presentation given at the KORDI/EWC Joint Workshop in Asia/Pacific Marine Resources and Development, June 1986, Seoul, Korea. The author gratefully acknowledges the support of the National Science Foundation (SES-84-20239) and the National Oceanographic and Atmospheric Administration in separate investigations which the paper draws upon. E. Gardner, M. Jacinto, and L. Seymour assisted in gathering background information. A special thanks to J. Broadus, M. Cruickshank, C. Johnson, G. Pontecorvo, and J. Marsh for their advice and encouragement. Any errors are the author's responsibility.