1. The document discusses developing business models for mining resources on the Moon, including water ice. It considers both a private model, with one vertically integrated company handling exploration through mining, and a public-private partnership model with initial public funding for exploration and private companies undertaking later stages. 2. Key assumptions and methods for evaluating the models are outlined, including using net present value and decision tree analysis considering probabilities of exploration successes and failures. Cash flows, revenues, costs and investments are derived from previous studies on Moon mining. 3. The required rate of return used in the analysis is 20%, reflecting the high risk nature of the Moon mining venture.

1. SPACE ECONOMY EVOLUTION LABORATORY
THE EVOLUTION OF THE POLITICAL ECONOMY IN THE SPACE SECTOR
SDA BOCCONI SCHOOL OF MANAGEMENT

2. RESEARCH PROJECT
The 50th anniversary of the first human landing on the Moon has
revived the interest of space agencies and private companies on the
Earth only natural satellite. Mining the Moon has become the topics
of interest to the entire space community.
RESEARCH QUESTIONS
# Is space resource utilization by solely private markets sustainable?, if
not, what type of public-private partnership are important/appropriate to
enable the development of a private-sector market?; and
# Are the present international legal framework adequate for the
development of private activities on the Moon? and, if not what are the
possible solutions?
2

3. MOON AND EARTH
RESOURCES
3
MOON RESOURCES
Results from Moon’s manned and unmanned missions indicate the
presence of many resources on the Moon, such as Helium-3, rare earth
elements, platinum and other precious metals, and ice.
EARTH RESOURCES
Helium-3 is a scarce element on Earth. Current industrial consumption of
helium-3 is around 60,000 liters per year. Commercial fusion reactors
using helium-3 are not yet available and are not expected to become
commercially available in the near future. Recoverable helium-3 resources
of the Moon are estimated at around 75,000 tons, which could satisfy
future demand for use in prospective nuclear-fusion reactors.
At present, worldwide reserves of rare earth elements are estimated at 110
million tons. World demand is estimated at 136,000 tons, while mine
production is about 134,000 tons. The difference is covered by
aboveground stock or inventories. World demand is projected to rise to at
least 200,000 tons annually by 2025 according to the Industrial Minerals
Company of Australia. Based on current and prospective demand, current
worldwide reserves should suffice for about 600 years.

4. SHORT-MEDIUM TERM
ACTIVITIES
4
In the short-medium term, the most promising resources available are those
(ice) needed for propellant production whose market is in space. The above
figure shows the enormous benefit of one, two or three refueling in reducing
required propellant for a given ∆𝑉. Furthermore, reduced requirements for
propellant to do a given mission entails a reduction in the size of the rocket
or the number of rockets required. Either of these situations results in a
significant reduction in the cost of the mission. Thus a potential demand for
propellant in space exists already. As space agencies embark on the journey
to Mars and beyond, fueling and stocking vehicles at a cislunar refueling
point will be paramount in creating a feasible and sustainable exploration
program. Low Earth orbit (LEO) can be also a destination for propellant to
refuel the upper stage of rockets directed in geosynchronous orbit or to the
Moon.

5. MOON MISSIONS
5
Several exploratory mission have been undertaken to
estimate the presence on ice on the Moon. On January
25, 1994, the Clementine probe started with the primary
task of testing new infrared sensors, inertial gyro laser
and optical fiber systems, and large capacity solid-state
memories. According to Clementine's data, the regolith
containing ice spanned 530 km to the North Pole and
6,360 km to the South Pole. The exploration of the Moon
continued in 1998 with the launch of the Lunar
Prospector probe.
The Lunar Prospector probe has scaled down the
estimates made by the Clementine probe. The frozen
area is more restricted, but the water supply has been
estimated at 300 million tons, about 100 times greater
than was supposed. However, evidence of the existence
of ice by both missions is indirect. Hence, the need to
validate the existence of ice, and to test the mining and
recovering technologies, before investing in mining and
propellant production facilities.
Compound Symbol Concentration
wt%
Water H2O 5.5
Hydrogen sulfide
Hydrogen gas
H2S
H2
0.92
0.69
Carbon monoxide CO 0.57
Calcium Ca 0.4
Ammonia NH3 0.33
Mercury
Magnesium
Sulfur dioxide
Hg
Mg
SO2
0.24
0.19
0.18
Ethylene C2H4 0.17
Carbon dioxide CO2 0.12
Methanol
Methane
CH3OH
CH4
0.09
0.04
Volatiles in lcross ejecta.

6. RESEARCH OUTLINE
RESEARCHCONTRIUTION
6
We focus on defining a model that encompasses three blocks:
1 ECONOMIC MODEL
It involves four steps:
# Identification of commercial uses of Lunar ice;
# Exploration and prospecting of Lunar ice;
# Development of Lunar mining infrastructures;
# Production of commercial goods (propellant).
2 BUSINESS MODEL
It concerns the identification of two business strategies
that can be implemented by private ventures:
# A private strategy
# A public-private partnership strategy
And the evaluation of their financial feasibility.
3 RISK MODEL
It models the probability of different outcomes of the two business
strategies that cannot easily be predicted due to the intervention of
random variables.
It is used to understand the impact of risk and uncertainty not fully
captured by the financial evaluation.
A significant purpose of this study is to assess
the utility of public-private partnerships for
private-sector lunar development. The project
adopted in our analysis is the moon mining
model of the Colorado School of Mines. As the
mass constraints of a lunar polar water mine
are highly restrictive because of delivery costs,
an innovative concept was proposed. Instead
of excavating, hauling, and processing,
lightweight tents and/or heating augers extract
the water resource directly out of the regolith
in place by sublimation (thermal mining).
A cold surface collects this water vapour for
transport to a processing plant where
electrolysis will decompose the water into its
constituent parts (hydrogen and oxygen).

7. BUSINESS MODEL
STRUCTURE OF THE MARKET
1 EXPLORER
# Reserve definition: location, amount
and quality of the ice (exploration);
# Mining and recovering technologies
rendering (prospecting).
1 MINER
# Mining technologies development
# Production stages:
# Build phase;
# Plateau phase;
# Decline phase.
7
STRUCTURE OF THE COMPANY
PRIVATE MODEL
A vertically-integrated private company operates in the
exploration, prospecting, and mining activities .
PRIVATE-PUBLIC PARTNERSHIP MODEL
It involves public investments on a exploration mission
aimed at establishing proven reserves of ice at lunar poles.
Once proven, a vertically-integrated private company will
undertake a prospecting mission to identify extraction
technologies and an extraction demo, followed by
investments in mining activities and the production of
propellant.
STRATEGY EVALUATION
METHOD
We assume that the business strategy
# Private model
# Public-private partnership model
that maximizes the value of the
company, is considered as the best
option to pursue.

8. BUSINESS MODEL
The evaluation of vertical integration
and private-public partnership
strategies requires the use
of two methodologies:
8
1 NET PRESENT VALUE
# The net present value (NPV) is a financial methodology
for measuring value creation;
# The NPV is defined as
# The present values of all cash flows on the project,
including the initial investment
# With the cash flows being discounted at the appropriate
hurdle rate which represents the required return of investors
(time value of money).
# From a financial standpoint, and if forecasts are correct,
an investment with positive NPV is worth making since
it will create value.
# The NPV is
# where Fn are the cash flows generated by the project, r is
the applied discounting rate and n is the number of years for
which the security is discounted. C0 are the initial investments.

9. BUSINESS MODEL
2 DECISION TREE ANALYSIS (DTA)
# Analyzing uncertainties in the exploration (assessment of ice
deposits, phase 1, and assessment of recovering technologies,
phase 2) of ice deposits;
# Estimating probabilities of success (p) and failure (1-p) with the
exploration (phase 1) and assessment (phase 2) of ice deposits;
# Discounting the contingent payoffs or discounted cash flows (v)
by probabilities, net of the investment requirements.
The evaluation of vertical integration
and private-public partnership
strategies requires the use
of two methodologies:
EXPLORATION PROSPECTING
9
9

10. BUSINESS MODEL
10
10
Equation 1 describes the private model taking into consideration the
probability of success during the exploration phases
(1)
A private-public partnership would entail initial public investments on
a prospecting mission, followed by investments of private companies
in extraction assessment, mining activities, and production of the
propellant. Equation 2 describe the NPV of the private companies
taking into consideration the probability tree of the exploration
phase:
(2)

11. BUSINESS MODEL PUBLIC-PRIVATE PARTNERSHIP MODEL
BUSINESS MODEL
KEYASSUMPTIONS
PRIVATE MODEL
Exploring, prospecting and mining company Prospecting and mining company
DTA PROBABILITY
Success and failure probabilities
of the exploration activity
associated with the two phases.
# Phase 1: success of the acquisition,
development and testing of the exploration
technology, and in the identification
of the location of one (or more) ice
reservoir(s) on the moon is equal to 50%;
# Phase 2: success of testing the quality and
quantity of the ice, and performing
a demo extraction procedure is equal to 60%.
# Phase 2: success of testing the quality and
quantity of the ice, and performing
a demo extraction procedure is equal
to 60%.
FREE CASH FLOW
Derived, computed
and projected from
# Revenues
# Costs
# Investments
# Revenues based on studies by the Colorado
school of mines (CSM);
# Operating costs based on the CSM work;
# Investments based on the CSM work.
# Revenues based on studies by
the Colorado school of mines (CSM);
# Operating costs based on the CSM work;
# Investments based on the CSM work.
11
COST OF CAPITAL
Rate of return required
by the project’s investors.
# 20%
# The riskiness of the exploring and the mining
company is the simple average between
the two identified discount factors
of stand-alone companies.
# 17%
# Estimated with the Capital Asset Pricing
Model (CAPM);
# Plus an additional premium to estimate
the risk/return for the mining activity
on the Moon.

12. NET PRESENT VALUE
VOLUME
Moon
100 MT/yr prop
LEO
1,260 MT/yr prop
EML 1
280 MT/yr prop
1,640 MT/yr propellant production on the Moon
GEO
LEO
LLO
EML 1
HALO
• LEO: Low Earth Orbit
• GEO: Geosynchronous Orbit
• EML 1: Earth-Moon
Lagrangian point
• LS: Lunar Surface
12

13. NET PRESENT VALUE
PRICE
Pricing fuel on the Moon:
# Assumption of complete knowledge of the missions;
# Average price moon surface = ∑ x price orbit;
# The orbits are LEO, EML1, lunar surface.
PRICE OF PROPELLANTS ($/kg)
DELIVERED
FROM EARTH
DELIVERED
FROM LUNAR SURFACE
TO LEO 4,000 3,750
TO EML 1 12,000 7,500
TO LUNAR SURFACE 36,000 500
WEIGHTEDAVERAGE PRICE n/m 1,482
13

14. NET PRESENT VALUE
COSTS
Costs of exploration and mining development
INVESTMENT COSTS (million of dollars)
EXPLORING HARDWARE DEVELOPMENT AND LAUNCH COSTS 455
MINING HARDWARE DEVELOPMENTAND LAUNCH COSTS 4,044
OPERATING COSTS (million of dollars)
EXPLORING HARDWARE DEVELOPMENT AND LAUNCH COSTS 245
MINING HARDWARE DEVELOPMENTAND LAUNCH COSTS 2,058
SECONDARY OPTICS
IMPERMEABLE
TENT WITH
REFLECTIVE
INNER SURFACE
CONCENTRATED
SUNLIGHT FROM
CRATER RIM
COLD
TRAP
ICE HAULER
COLD
TRAP
ICE HAULER
14
SUBLIMATION
OPTIMAL CONDUCTING RODS OR HEATING ELEMENTS
ICE REGOLITH
NOT TO SCALE

15. NET PRESENT VALUE
RESULTS
The results of the deterministic NPV for both private model
and public-private partnership case.
NPV (in billion of dollars) AND IRR (%)
PRIVATE
MODEL
PUBLIC-PRIVATE PARTNERSHIP
MODEL
NET PRESENT VALUE -0,04 1.84
INTERNAL RATE OF RETURN 19.3% 30%
15
# They indicate that the net present value of the private model
is negative (thus not acceptable as project), while the NPV
of the private-public partnership model case is positive.
# As the internal rate of return of the private model is below
the discount rate, it is a further indication of the non-profitability
of the strategy. On the contrary, the internal rate of return
of the private-public partnership model is much higher that the
discount rate, confirming a high profitability of these investments.

16. RISK MODEL
The estimates of investment
and operational costs and revenues
of the Colorado School of Mines
model are highly uncertain.
A risk model evaluates the exposure
of the ventures to the factors that
could lower their profits and lead
them to fail.
Anything that threatens a company’s
ability to meet its target or achieve its
financial goals is called business
risk.
BUSINESSRISK
Business risk is associated
with the overall operation of a
business entity.
These are things that impair its
ability to provide investors and
stakeholders with adequate
returns.
TYPESOFBUSINESSRISKS
Strategic risk
Compliance risk
Financial risk
Operational risk
1
2
3
4
IMPACTS
METHODOLOGY
16
Revenues
Operating costs
Investments
1
2
3
that reflect on the variability
of expected cash flows of
the company and,
subsequently, on the NPV.
The NPV approach assumes
that there is only a possible
outcome given its deterministic
input values.
The Monte Carlo simulation
considers the factors of the
business risk that can lead to
future and unprecedented
events (i.e. lower revenues or
higher costs).

17. RISK MODEL
SIMULATION
PUBLIC-PRIVATE PARTNERSHIP MODEL
Assumes that both cost and revenue variables
are distributed as lognormal random variables,
with median values equal to the yearly revenues and costs
in the deterministic model.
Replicates 5,000 times the following steps.
At each iteration we calculated a new free cash flow:
# a new value of the total costs of investments are extracted
from the above lognormal distribution;
# yearly operative costs, and depreciation are computed
using the same percentages of the total expenditures
as in the deterministic model;
# revenues are extracted year by year from the above
lognormal distribution;
# discounted free cash flow to firm (FCFF) for each year
of the project.
1
2
17
17

18. .00
.02
.04
.06
.08
.10
.12
.14
1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 9,000
RelativeFrequency
CAPEX
Descriptive statistics
Mean 4,115
Median 4,028
Maximum 8,960
Minimum 1,887
Std. Dev. 836
Descriptive statistics
Mean 2,385
Median 2,340
Maximum 4,778
Minimum 1,120
Std. Dev. 484
Revenues lognormal distribution
Mining phase Capex Lognormal distribution
RISK MODEL
Assumptions
In the present simulation, all investment
costs are distributed as lognormal random
variables with median equal to the
corresponding deterministic values and
standard deviation equal to 20%. The
percentages of the costs spent in each
year are kept the same as in the
deterministic case. The assumed
distribution for costs of investment is
asymmetric, with a long right tail, which
gives positive probabilities to costs much
higher that the median, while the
probability of having very low costs is null.
Yearly revenues are also distributed as
lognormal random variables with median
values equal to the yearly revenues in the
deterministic model and standard deviation
equal to 20%. This assumption ensures
that revenues are always positive, but that
they may range widely around the
deterministic value. Such variations may
be caused by changes in either the price
or the quantity demanded of the propellant.

19. RISK MODEL
RESULTS
PUBLIC-PRIVATE PARTNERSHIP MODEL
NET PRESENT VALUE DISTRIBUTION NET PRESENT VALUE DESCRIPTIVE STATISTICS
.00
.02
.04
.06
.08
.10
.12
-400 0 400 800 1,200 1,600 2,000 2,400 2,800 3,200
RelativeFrequency
5% and 95% quantiles in red, deterministic value in blue
Miner’s NPV at 17% discount rate (mln $)
Mean 1,867
Median 1,889
Maximum 3,171
Minimum -91
Std. Dev. 409
5% quantile 1,166
Probabilistic 1,843
95% quantile 2,526
19

20. RISK MODEL
RESULTS
PUBLIC-PRIVATE PARTNERSHIP MODEL
NET PRESENT VALUE FOR DIFFERENT DISCOUNT RATES NET PRESENT VALUE AND INTERNAL RATE OF RETURN
DESCRIPTIVE STATISTICS
-1,000
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42
RATE %
V@R 5% 95 quantile NPV
NPV
Discount rate = 17%
IRR
NPV = 0
5% percentile 1,166 23%
Deterministic 1,843 29%
95% percentile 2,526 37%
20

21. The analysis rejects the vertical integration model as it produces a negative NPV:
# The company as a whole takes on the uncertainties derived from the entire exploration phase,
which negatively affect the value of the expected cash flows.
# The longer exploration period also extends the span of time without revenues
that are in turn reduced due to the value time of money.
The private-public partnership model produces positive a NPV, provided a successful completion of a prospecting
mission by government. The Montecarlo simulation shows that the private company faces almost 100% probability
of positive NPVs and of IRR much above the 17% discount rate indicating a high profitability of the model.
A final question is why governments should undertake prospecting missions at the lunar poles.
# Prospecting missions on the Moon by governments should occur if and only if their return exceeds the opportunity
costs. Returns are based on expectations of higher revenues such as taxes, higher employment and growth,
all events that would happen here on Earth.
# Based on the discounted tax revenues generated by the private-public partnership model, the return is about 6%
per year. The opportunity costs consist of reduced consumption and displaced private capital. However,
lunar poles prospecting mission not only crowed in private investments by improving their returns through reduction
of prospecting costs and risks, but also increase consumption in the medium term through higher private
investments and increase in employment.
1
2
3
21
CONCLUSION

22. Private Sector Public Sector
•Additional revenues and profit (as a direct result of the PPP or
through access to new revenue streams)
• Competitive advantage gained as a result of a variety of positive
direct or indirect PPP impacts (e.g. experience gain, new
competencies, customer acquisition…)
• New competences and capabilities that can be leveraged on
other verticals and markets
• Technical and business innovation creating potential
differentiators for industry value proposition and/or business setup
•Improved efficiency and effectiveness through incentives to
achieve objectives on time and on resource
•Development of industrial capabilities based on
complementary public and private investment
•Support to innovation and competitiveness by granting more
flexibility to the private sector to pursue alternative routes (e.g.
business- or process-driven innovation)
•Increased government revenues
•Reduction of costs of future space agencies exploration
programs
22
BENEFITS

23. OST
Art. I : Freedom of Exploration and Use
• the benefit and the province of all mankind principles due regard to the interests of other states
principle.
• promoting the sustainable, efficient and responsible use of space resources.
Art. II : Non-appropriation and ownership
• Outer space is not subject to national appropriation.
• Not clear if space resources are covered by this principle. It is silent about recovery or use of space
resources through means other than territorial ownership.
• Not prevent States (and their licensed companies) from removing and/or extracting and/or using the
natural resources and other substances of the Moon and celestial bodies.
• Not exclude other forms of rights and interests, such as intellectual property rights.
Art. IV - Use for peaceful purposes
• Moon: exclusively peaceful purposes.
Art. VI: State Responsibility
• Non-governmental entities: authorization and continuing supervision by the
appropriate State.
Artemis Accords
• Nations will be able to set “safety zones” to protect their activities on the moon.
• To promote transparency and communication between nations, requiring signatories
to share their lunar plans, register any spacecraft sent to or around the moon and
release scientific data to the public.
• The accords reinforce that space resource extraction and utilization can and will be
conducted under the auspices of the OST, with specific emphasis on Articles II, VI,
and XI..
• It might be the driving force the international community needs in order to avoid a
‘tragedy of the commons’ in space.
OWNERSHIP
OST
• Parts of celestial bodies: Prohibited.
• Parts of resources in situ: Not mentioned.
• Parts of extracted resources: Not mentioned.
Moon Agreement:
• Parts of celestial bodies: Prohibited.
• Parts of resources in situ: Prohibited.
• Parts of extracted resources: Prohibited.
OWNERSHIP
Artemis Accords
• The accords prescribe a framework for claiming ownership of mined resources
pursuant to title IV of the Commercial Space Launch Competitiveness Act.Article IX of
the OST, places an obligation on States to seek international consultation before
proceeding with any activity or experiment that could cause potentially harmful
interference with space activities of other State parties.
• The accords decry the Moon Agreement which stipulates that celestial bodies shall be
considered ‘common heritage of mankind’ and prohibits ownership of space resources.
LEGAL ISSUES: LIMITS AND EFFORTS
LIMITS EFFORTS
23

24. SDA BOCCONI FLIES HIGHER IN EUROPE
WE ARE N. 3 in Europe
European B-Schools Rankings 2019 - Financial Times
SPACE ECONOMY EVOLUTION LABORATORY
# Prof. Andrea Sommariva
andrea.sommariva@sdabocconi.it
# Research Fellow. Clelia Iacomino
clelia.iacomino@sdabocconi.it