Nautilus looks for offshore mining partner

August 28, 2012

Nautilus Minerals announced that it is in talks with possible partners to sell a stake in its ocean floor mining project off the coast of Papua New Guinea.

To move forward with plans for its Solwara 1 project off the coast of Papua New Guinea, the company said that may sell shares to help raise $100 million if it can’t find a partner for the project that is 1,600 m (5,250 feet) deep in the Bismarck Sea, chief executive officer Stephen Rogers told Bloomberg.

“We’ve had discussions and continue discussions with a number of parties,” Rogers said. “There are a lot of people interested in what we are doing, interested in this potential new frontier for the metals sector.

Nautilus’s biggest shareholders are Moscow-based Metalloinvest Holding Ltd., which owned 21 percent of the company’s shares as of May 1, London-based Anglo American Plc (AAL), and MB Holding Company LLC, according to data compiled by Bloomberg.

The $100 million figure does not include the funds that Nautilus still needs to pay for the vessel that will be used at the Solwara 1 project. The company said on June 1 that there may be a delay in finalizing the financing amid tighter banking rules in Europe and a “depressed” shipping market. Germany’s Harren & Partner is building the vessel and will own 50.01 percent after it’s delivered.

“We still have to get our vessel program back on track, but we have a way of doing that, we’re not uncomfortable with that situation,” Rogers said in the Aug. 24 interview. The company may arrange a type of ship mortgage, he said.

Nautilus also is seeking an “amicable” solution before full arbitration begins in a dispute with the Papua New Guinea government, which owns 30 percent of the project, Rogers said.

The government agreed in March 2011 to exercise an option to buy a 30 percent stake in Solwara 1. The pact included an agreement that Papua New Guinea pay 30 percent of the funds Nautilus had already spent, as well as its share of development costs going forward.

Nautilus said June 1 the government asserted the company had not met certain obligations required for the March 2011 agreement to be completed, and an arbitrator in the dispute was named last month.

Nautilus fell 7.5 percent to C$1.23 at the close in Toronto, the biggest decrease since June 28, bringing its decline this year to 32 percent.
Rogers said he’s still hoping to reach an agreement with the government before the arbitration begins.

Nautilus was awarded the world’s first deep-sea mining lease by the government of Papua New Guinea in January 2011. The company is developing a production system using technology adapted from the offshore oil and gas industry. It will cut and gather ore from the sea floor and pump it to the vessel, where it will be processed and transferred to barges for transport and further processing.

The company already is building the seafloor production equipment, which was about 50 percent complete at the end of June, Rogers said.
Nautilus had $87.1 million in cash as of June 30 and raised C$34 million in an equity offering this month. The total capital cost of the Solwara 1 project, excluding the vessel, is expected to be $407 million, Rogers said.

Nautilus’s future financing needs will depend on whether or not the Papua New Guinea government pays its share of the costs under the March 2011 agreement, Goldie said.

The company has enough cash to continue work on the project for now, Rogers said.

 

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