Scandinavian Working Papers in Business Administration

Discussion Papers,
Norwegian School of Economics, Department of Business and Management Science

No 2022/9: Transition to Marine Mining?

Bang Rasmus Noss () and Lars-Kristian Lunde Trellevik ()
Additional contact information
Bang Rasmus Noss: Dept. of Business and Management Science, Norwegian School of Economics, Postal: NHH , Department of Business and Management Science, Helleveien 30, N-5045 Bergen, Norway
Lars-Kristian Lunde Trellevik: Dept. of Geography and Centre for Deep Sea Research, University of Bergen, Postal: University of Bergen, Department of Geography and Centre for Deep Sea Research, Postboks 7802, N-5020 Bergen, Norway

Abstract: This study explores possible futures of the mining industry through numerical analysis of a conceptual mineral extraction problem with two resource stocks - terrestrial and marine. The model is inspired by the manganese mining industry. We consider four model scenarios. The first two consider a principal representing a cartel that invests and extracts to maximize the net present value of extraction from the onshore and offshore reserves. The second two consider two principals, each representing one cartel, that invests and extracts to maximize the net present value of extraction from their respective reserves subject to the decisions of the other cartel. The scenarios include several realistic features such as convex demand, operating costs, capital dynamics including irreversible investments, reserve-dependent capital efficiency, and capacity constraints. We present associated extraction paths and industry transformations. The results indicate that reserve-dependent capital efficiency and cross-sector competition can drive transition. Moreover, our results and discussion indicate that a transition to an industry with both onshore and offshore mining may be near, and that once the transition sparks, it may happen quickly.

Keywords: Terrestrial minerals; marine minerals; industry transition; monopoly; duopoly

JEL-codes: C61; D24; D25; Q30; Q32; Q33; Q34; Q37; Q40; Q50

Language: English

31 pages, March 4, 2022

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