ABSTRACT A 3 mi11ion ton per year, three metal, vertically integrated, ocean exploration, mining, transportation and ore-processing and metal-marketing system is defined and the capital and operating costs estimated in 1980 U.S. dollars. A basic return-on-investment "pay-out" analysis model is presented with several alternate cases investigated. A series of tests is performed to determine the system's sensitivity to realistic variations of key costs and schedule. For a gross investment of almost ﹩1.5 billion, or a fixed capital investment of about ﹩1 billion, an ocean mining system producing nickel, copper and cobalt will yield approximately ﹩423 million in annual revenues, a before-tax profit of about ﹩180 million and an after-tax profit of less than ﹩100 million, providing an unsatisfactory low internal rate of return of approximately seven percent. It isunlikely that ocean mining wi11 be undertaken using the system defined herein at this level of return unless a critical feedstock for a company's major product is produced or a national need for a strategic metal develops. This conclusion is entirely consistent with today's low level of commitment to long-term, capital-intensive natural resource development projects. INTRODUCTION The question of the economic feasibility of mining manganese nodules from the floor of the deep ocean has claimed the attention of many during the protracted debate on the Law of the Sea Treaty and the parallel academic research and industrial development of hardware and techniques to demonstrate the technical feasibility of ocean mining. The economic question was clouded by the early inaccurate writings and speculative promotional efforts of these investigators. The purpose of the research supported by the Office of Marine Minerals of NOAA, later the Office of Minerals and Energy (from 1980 onward) was to develop a straightforward economic model which would provide reasonable accuracy in forecasting the possible return on investment, if any, of a vertically integrated and well-defined deep ocean mining system. An earlier economic model of a deep ocean mining system was prepared by Dr. J. D. Nyhart at MIT in 1978. 1 That report was criticized on the basis of its lack of accuracy and thoroughness in defining the ocean mining system analyzed by the model. This paper is based on the NOAA supported research which is thoroughly documented in the Sea Grant Report, "An Economic Analysis of a Pioneer Deep Ocean Mining Venture".2 The author was the Principal Investigator supported by Dr. Francis C. Brown of Northeastern University and Mr. Benjamin V. Andrews of Menlo Park, California, now a Visiting Associate Professor at Texas A&M University. A HYPOTHETICAL DEEP OCEAN MINING VENTURE The base case described in Reference 2 defines a vertically integrated manganese nodule mining and processing system, including prospecting and research programs, a hydraulic mining system utilizing two mining ships of moderate size, three bulk transport ships to carry the nodules from the mine site to the processing plant, an ore unloading and storage facility, and a reduction/ ammoniacal leaching process plant remote from the port area with waste disposal at an arid land site some distance from the processing plant.