Nautilus development partner bows out

Vancouver – Shares of aspiring sea-floor miner Nautilus Minerals (NUS-V, NUSMF-O, NUS-L) slipped to a several-month low following news its tentative development partner, Belgium-based firm Jan De Nul Group, dropped off the table as plans to formalize a works contract lapsed on July 1st.

Nautilus and Jan De Nul had entered a Heads of Agreement in October 2006 that would have led to the Belgian company constructing a 191-metre vessel to serve as a mining platform for operations at Nautilus Solwara 1 seafloor massive sulphide project located off the coast of Papua New Guinea in the south Pacific.

As Jan De Nul was to have borne the costs for the vessel, the news places the major capital item onto the shoulders of Nautilus.

Nautilus is evaluating it options and plans to deal directly with prospective suppliers of the specialized equipment.

Whilst the Agreement with Jan de Nul called for the construction of a new build ship, the Company is now scoping other mining platforms including the modification of existing vessels and barges to suit its planned production rates and development time line, stated Nautilus CEO David Heydon.

Solwara hosts seafloor deposits, at depths of up to 1,700 metres, 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 sees 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.

Nautilus has raised more than US$250 million through a series of financing over the past several months. On the prospect of successfully proving the feasibility of seafloor mining, a number of senior companies have taken positions in the junior including Anglo American (AAUK-Q, AAL-L) with a 6.4% interest, Teck Cominco (TCK.B-T, TCK-N) holding 5.8% and Epion Holdings owning 16.8%. Epion is wholly owned by Alisher Usmanov who is prominent in Russia’s iron ore and steel industries.

Additionally, Barrick Gold (ABX-T, ABX-N) sits with a 3.7% ownership in Nautilus as a legacy from its subsidiary Placer Dome, which spent about US$12.2 million toward earning a 40% joint venture interest in the project. In mid-2006, Barrick elected to convert its interest into an equity stake in Nautilus.

Shares of Nautilus dropped 19% on the July 6th news, closing down 97 at $4.22 apiece. With its 130.2-million shares outstanding, the company posts a $550-million market capitalization and has a 52-week trading range of $1.84-to-$7.39.