Nautilus contracts to build deep-sea mining vessel (October 04, 2006)

Vancouver – Construction plans for a deep-sea mining vessel have been initiated through an agreement between Nautilus Minerals (NUS-V, NUSMF-O) and the Belgium-based firm Jan De Nul Group.

Jan De Nul, one of the world’s largest dredging contractors and marine engineering firms, will build the 191-metre vessel expected to be ready for operation by late-2009. Costs for the ship, to be christened the “Jules Verne”, will be borne by the Belgium firm that will also own and operate the specialized mining vessel.

0.3 leagues under the sea

The “Jules Verne” will serve as a platform, deploying mining equipment, pumps and riser pipes for operations at Nautilus’ Solwara 1 seafloor massive sulphide project that lies at depths of up to 1,700 metres off the coast of Papua New Guinea in the south Pacific. Jan De Nul will also provide barges, tugboats and operational capability in its contractor role.

Nautilus will be responsible for providing two seafloor mining devices, power umbilical cables, pumps, 1,800-metres of riser pipe and related handling equipment, all budgeted at about US$120 million. Under the planned agreement, Nautilus will be reimbursed by Jan De Nul for the expenditures through a 6.5% monthly rebate on its mining contract fees.

Solwara hosts seafloor deposits of precious and base metal rich massive sulphides, formed from recently active volcanic vents or “black smokers”. The sulphide bodies contain significant grades of gold, silver, copper, zinc and lead.

Proposed mining plans will see mineralized material dredged from the seafloor, pumped to the surface vessel and then transferred onto barges for transport to a land-based concentrator producing a gold-rich copper concentrate for shipment to a smelter.

Based on planned annual production estimates of about 1.6 million tonnes (about 5,400-tonnes-per-day allowing for two months of service and maintenance down-time), Nautilus tables early-stage cost estimates of about US$83 per tonne for mining and delivery of the ore to the concentrator. Additionally, cost estimates for a 1.8 million tonne-per-year land-based concentrator, port facilities and related infrastructure are pegged at about US$160 million.

Funding options being evaluated by Nautilus for its proposed capital obligations include an AIM listing and financing in London and a possible off-take agreement to cover the costs of the concentrator. The company has initiated baseline environmental studies and will begin permit applications with the Papua New Guinea government.

Nautilus had been previously been partnered with Barrick Gold (ABX-T, ABX-N) subsidiary Placer Dome, which spent about US$12.2 million toward earning a 40% joint venture interest. In mid-2006, Barrick elected to convert its interest into a 9.59% equity stake in Nautilus.

Shares of Nautilus closed down 15 at $1.90 apiece following news of the proposed construction contract with Jan De Nul and mining plans. With its 49.9 million shares outstanding, the company posts a $95-million market capitalization. Since its initial public offering in May-2006, the stock has a trading range of $1.87-to-$4.90.