NEEP602 Course Notes (Fall 1997)
Resources from Space

NEEP602 Summary Notes



For the exam, I refer you to the two questions presented for your pre-exam preparation. They should help you integrate your knowledge in two major areas:

1.The overall evolution of the terrestrial planets (see "Apollo Model" figures in Lectures 10 and 11, and "Everyperson's Mars" figure in Lecture16),


2.The business concepts that should be considered if the resources of the Moon are to be available to improve the human condition on Earth and in space (see the five "implementation" figures in Lecture 42):


In preparing for this version of the "Resources from Space" lectures, I personally found the explosion of new knowledge about the solar system to be phenomenal.This has been particularly true in two areas:

1. The growing integration of data on Mars, including the Pathfinder mission and the analysis of Martian meteroites, and its impact on our insights into the development of early life forms, and,

2.The growing maturity of thought about the corporate and financial structure of a largely private 3He initiative the may be attractive to future investors.

I continue to impressed by the interest and enthusiasm of the class in the face of a daunting spectrum of issues and information that must be considered when examining the role that "Resources from Space" may play in the future of humankind. Your positive response to the possibility of personally going into space is particularly encouraging.


I hope that this means that some of you may help make it happen during your careers, careers that will span much of the future time to which we have directed our attention this semester.


If you take nothing else away from this course, I hope it will be a belief in your ability to tackle some very critical problems that will face you and your children during the next and succeeding centuries.



Major Points to Remember From Professor Kulcinski's Lectures

Expand Your Time Horizon!

Serious energy problems will be encountered when you are 45-50, and your children are just entering college.

"There's Gold in Them There Hills!"

The existence of 1 million tonnes of 3He on the Moon has been established (and we know how to get it)

Solar Wind Volatiles Will Be Enabling Resources for Future Space Exploration!

Fusion Energy is Closer Than You Thought!

After 50 years of research we now are a factor of 2 away from break-even

We Can Produce Nuclear Energy With Little or No Long Lived Radioactivity

The use of 3He fusion fuels greatly reduces (D3He) or even eliminates (3He3He) radioactivity in power plants

Solar Energy From Space Can Be Beamed to the Earth

Several schemes for conversion of the Sun's energy to microwaves have been proposed. The question is "Is it economical?

Consider the "Net " Environmental Impact of the Earth/Moon/Mars System

The recovery of any mineral or fuel involves some effects to the locality in which it is extracted or used. The question is .. "Will the use of that resource produce more benefits than the environmental cost of obtaining it?"


What I want you to take away from this course is an intuitive feeling for the major financial issues associated with projects in space-or any project, for that matter.

In lecture 33 (viewgraph 4) I presented you with the 10 Maxims of Finance. I want to review few of them with you in terms of mining 3He (however, the principles apply more generally).

a.) Maxims 1&9 (The Risk-Return Tradeoff & All Risk is Not Equal)

When evaluating projects, the required rate of return (or the cost of capital) will be related to the risk of the project--the higher the risk, the higher the cost of capital.

What does this mean for 3He mining? Once we have passed the R&D phase, the cost of capital should not be extraordinarily high. It should be comparable to the cost of capital for electric utilities, fuel suppliers to electric utilities, and aerospace companies.

b.) Maxim 2 (The Time Value of Money)

This is the most important maxim for our purposes. It is illustrated in Figure 1.

Figure 1

Figure 1 shows the cash flow needed in the future (in then-year dollars) needed to make a $1 investment today worthwhile. Note that if the pay-off is 20 years away and the cost of capital is 14%, the cash flow in 20 years must be $13.74 for every dollar invested today just to earn the cost of capital on the $1 invested.

The application to 3He is clear. Both investment in miners and launch investment earn returns over a 20 year period and the time value of money is very important.

Secondly, if we must make up front investments in R&D, there is a long lag before any payoff. So the time value of money is working against 3He mining.

To see the impact more clearly look at viewgraph 25 from lecture 34. Note that a large fraction of the cost of 3He which is profit and income taxes. Note that this proportion gets larger as the cost of capital increases.

c.) Maxim 5 (The Curse of Competitive Markets)

If some other producer of 3He exists, or there are producers of some other product in competition with 3He, there may be difficulties in earning the cost of capital. Figure 26 of lecture 34 illustrates this point quite nicely.

d.) Maxim 6 (Efficient Capital Markets))

The important point here is that investors will not supply the financing unless the expected return is commensurate with the attendant risks. This means that there are no secret ways to finance investments in space. Gimmicks will not work as investors will always have alternates to invest in if they are uncertain about the proposed concept.

To paraphrase the muse who spoke to Kevin Costner in the field of Dreams,

"If you provide investors a good return, they will come"







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