Cook Islands Investment Corporation and its interest in Seabed Minerals

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It’s hard to have a conversation these days without Covid coming into it, and few of those stories around the pandemic have a silver lining; but this one does.

The spread of the coronavirus Covid-19 has severely damaged life as we’ve known it on our planet. Many countries – like us – have closed their borders or greatly restricted entry; many economies have been crippled and brought to their knees.

In our case without having even one confirmed case of the virus, our principal money earner – the tourism sector – has been shut down for 20 of the last 24 months. The loss in revenue to the sector and therefore the economy as a whole, is estimated to be about $1million a day. In the public revenues, the government has gone without an estimated $8million a month in taxes, and has paid out $7million a month in business support; financed from savings built up opver the last few years, through a grant from New Zealand and loans.

So we have been severely affected too.

The vulnerablity of a largely one industry economy is plain to see. Switching and finding long term sustainable alternatives or supporting sources of revenue is not so easy; but in our case there is a very strong possible candidate: harvesting deep sea minerals from our sea floor.

Prime Minister, the Hon Mark Brown had this to say earlier this year:

“We face serious challenges ahead, and our ocean provides us with the opportunity to further diversify our economy and deliver to our people much-needed socio-economic security and development.”

At first glance harvesting nodules appears almost insurmountable. The nodules are at a depth of 5000-metres – 5-kilometres – that’s roughly the distance from Tupapa to Black Rock. The technical and engineering challenges are enormous; there are also complex environmental issues to be dealt with. But most will be surprised to hear that a company 50% owned by the Cook Islands, through the Cook Islands Investment Corporation (CIIC), has already had five years experience working on these issues.

The company is a joint venture owned 50/50 by CIIC and a Belgium based company called Global Sea Mineral Resources (GSR). The two organisations got together because of their adjacent areas in their Clarion-Clipperton Zone – a vast undersea plain stretching from Hawaii to Mexico in international waters. The concessions were allocated to the two countries by the International Seabed Authority and the Belgium government has contracted GSR to explore its concession. The muddy underwater plain, which is wider that the United States of America, has lying on its surface – or just below it – trillions of potato sized polymetallic nodules.

The head of CIIC – Allan Jensen – says , “Teaming up with GSR has been a win/win situation with the Cook Islands able to access valuable knowledge about seabed exploration and harvesting.  All the development costs are being met upfront by GSR. We have been able to access training for some of our young people to begin gaining a foothold in, and learning about this new world industry, and that is ongoing.”

“If nothing else it stands us in good stead to monitior what happens in the two polymetallic zones we have an interest in. Cobalt and nickel is a highly sought after mineral which has many uses – including in green industries – which will contribute to a sustainable future for our planet; and can become an alternative, longterm, sustainable source of revenue for our country.”

“While commercial nodule collection is several years away, our Joint Venture is quietly making progress towards safe and sustainable exploration and collection operations.”

GSR is an ideal partner for CIIC, because its parent company – Dredging Environmental and Marine Engineering (DEME), has 140 years experience in dredging, marine engineering and environmental remediation. CIIC manages the Cook Islands interests for the government.

The joint venture aims to be a global leader in the responsible exploration and harvesting of polymetallic nodules, contributing to the responsible development of the planet using best available techniques and the highest scientific standards. The JV – called CIIC-Seabed Resources or CIIC-SR – has  already organised two deep sea expeditions to gather engineering data to develop, construct, and test a pre-prototype nodule collector.

The joint venture’s vision is:

The exploration and harvesting of deep sea minerals (polymetallic nodules) within the Cook Islands contract area of international waters (CCZ) and within area under application of the Cook Islands EEZ, in an environmentally responsible way, where this creates a transformational shift to the Cook Islands economy, sound returns are returned to the shareholders, innovative technology is utilised and capacity is built within the sector for the future.

The joint venture’s vision while wordy, is simple. It’s about being involved in the seabed minerals sector, in an environmentally responsible way, so that there is a transformational shift for the nation.

The joint venture has five key strategic pillars to achieve its vision;

•          Acting in the best interests of the Cook Islands

•          Investing, training, and developing Cook Island Staff

•          Acting in an environmentally and socially responsible way

•          Use of innovative technologies

•          Long term sustainable returns

The joint ventre Board is made of up to 3 appointees by each shareholder. CIIC’s interests are currently well represented by 3 Cook Islanders; Michael Henry, Mark Short and Tamarii Tutangata.

The joint venture is managed by Cook Islander Eusenio Fatialofa who was appointed as the inaugural General Manager in May 2020. Eusenio has participated in several GSR Offshore research expeditions in the CCZ since 2017. It can be boasted that only CIIC SR has a head of a seabed minerals company, worldwide. The organisation is committed to developing and training Cook Island staff and selected trainees across the seabed minerals sector, through training, internships, scholarships and mentoring.

All the joint venture preliminary work is being financed by GSR; and if harvesting occurs the Cook Islands begin settling its share of the development costs, with the revenues generated. There are various indemnities and protections embedded in the joint venture agreement to protect CIIC and Cook Islands Government, particularly if the JV does not proceed to the harvesting stage.

The Cook Islands is strategically well placed with interests in both international waters as well as within our Exclusive Economic Zone (EEZ). While the Cook Islands could have decided to play exclusively a passive role in the exploitation of its two areas of seabed containing nodules – by  simply licensing international companies to harvest the minerals and for these companies to pay a royalty., the government has opted instead to follow Norway’s current approach.

Initially Norway’s vast offshore oil and gas fields was dominated by international companies with the government receiving royalties only. That’s not to say that the royalties weren’t substantial, but in 1972 a Norwegian state owned entity was set up, and it is now a requirement that the state owned entity is a 50% partner in every production licence. Since then this sector and nation’s direct involvement in the sector has contributed greatly to the economic growth of Norway and the Norwegian welfare state, which has given its people one of the highest standards of living on earth.

Allan Jensen in closing stated that “CIIC’s function  is to own and manage Crown assets and manage the undertakings of statutory corporations, on behalf of Government. CIIC’s involvement in the seabed minerals sector has been well thought out in terms of delivering benefits to the nation and has spanned many years, involving extensive public disclosure, which has been and is always open for feedback. Jensen further added that “legilsation and policy allows CIIC to hold interests in entities involved in the private sector, where the private sector is unable, unlikely or unwilling to undertake business in the long term interests.  Such an example is CIIC’s shareholding interests in the banking sector, through its shareholding in the Bank of the Cook Islands. CIIC’s shareholding in the banking sector is critical in terms of ensuring Cook Islands interests are served in the banking system, where other organisations also exist in that sector.”

So while covid has dealt a severe blow to our tourism sector – although some way off yet – help appears to be on the way.

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