Teck Cominco investing US$25 million into Nautilus

Vancouver – Nautilus Minerals (NUS-V, NUSMF-O) has secured another major mining company financing with Teck Cominco (TCK.B-T, TCK-N) planning to invest US$25 million into the seafloor mineral explorer as part of a US$31.1-million private placement.

Teck Cominco has given a nod to participate in the non-brokered deal where it will purchase 7,575,758 Nautilus shares at US$3.30 (about $3.76) apiece for gross proceeds of US$25 million. The Vancouver-based major will also receive 3 million warrants exercisable at US$5.00 each until June 1, 2008 and will be granted anti-dilution rights to participate in future financing.

Epion Holdings, already a significant Nautilus shareholder, elected to participate in this latest financing under its anti-dilution rights and will purchase 1.85 million shares at US$3.30 apiece for proceeds of US$6,105,000. It was also granted 750,000 warrants on the same terms as Teck Cominco’s.

The financing comes just over a month from Anglo American (AAUK-Q, AAL-L) taking down US$25-million of a US$68.5-million Nautilus financing priced at US$3.00 per share. Epion, wholly owned by Alisher Usmanov who is prominent in Russia’s iron ore and steel industries, also participated in the November financing.

Upon closure, Nautilus’s latest financing will boost its treasury to the US$113.5-million level.

On top of its private placement, Teck Cominco also pledges to fund US$12 million in a joint venture option with Nautilus. In its commitment, US$2 million will be earmarked for tenement acquisition and maintenance while US$10 million will go to research and development of exploration techniques and tools as well as exploration on Teck Cominco approved projects.

To exercise its option Teck Cominco must purchase an additional US$15 million of shares by mid-2008, either electing to exercise all of its US$5.00 warrants or subscribing for a private placement at market price. Upon exercise, it will have exclusive five-year rights to form joint ventures on tenements acquired by Nautilus in certain countries since October 20, 2006 (“New Tenements”). Teck Cominco can earn a 40% stake in New Tenements in each of the following four areas: Bismark Sea – Papua New Guinea, Solomon Sea – Papua New Guinea, Fiji and Tonga, by spending US$25 million in each selected area within two years. Once vested at 40% interest in an area, Teck Cominco can boost its ownership to 50.1% in each selected Project Area (defined as an area of 100-sq. km to 200-sq. km) within the New Tenements by spending US$10 million on each Project Area.

Teck Cominco can also earn a 50.1% interest in New Tenements in certain other countries plus an additional 9.9% in selected Project Areas in these countries for the same expenditures as above.

Since Nautilus’ initial public offering just several months ago, the junior has attracted the attention of a few major miners. It was initially partnered with Placer Dome, which has since become part of Barrick Gold (ABX-T, ABX-N), which spent about US$12.2 million toward earning a 40% joint venture interest. However, in mid-2006 Barrick elected to convert the interest into an equity stake.

“Teck Cominco (9.2%) joins Epion (19.9%), Anglo American (10.1%), and Barrick Gold (5.8%) as shareholders of the Company,” states Nautilus CEO David Heydon. “The option and joint venture arrangement with Teck Cominco on New Tenements allows the Company to focus on permitting and developing its 100%-owned Solwara 1 gold-copper project in Papua New Guinea whilst Teck Cominco’s expenditure potentially develops a pipeline of new projects.”

Nautilus also recently entered into an agreement with Belgium-based marine engineering firm Jan De Nul Group to construct a 191-metre specialized mining vessel for planned development of the Solwara seabed sulphides located off the coast of Papua New Guinea.

The seafloor metal deposits formed by “black smokers”, which are hydrothermal, chimney-like structures formed when ocean water is circulated through porous rock in an active volcanic zone and metal-sulphide minerals are dissolved and then re-deposited into sizeable accumulations. These occurrences are essentially the modern day version of the well known volcanogenic massive sulphide (VMS) deposits that are mined throughout the world.

On news of Teck Cominco’s planned investment, shares of Nautilus got a 13% boost to close up 58 at $4.90 apiece on strong volume. The company currently has 72.7 million shares outstanding, giving it a market capitalization of $356 million.