Nautilus Minerals: still lost at sea with no life raft in sight

Deep Sea Mining Campaign | 25 November 2019

On 21st November, Nautilus Mineral’s court-appointed monitors, Price Waterhouse Cooper (PwC) confirmed that the relevant legal papers had been filed to assign Nautilus Minerals Inc. into bankruptcy. Whilst this news was expected, there has been no news on their plans for the Solwara 1 deep sea mining project in Papua New Guinea, leaving local communities and civil society who are opposed to the project with many questions.

Nautilus filed for protection from its debts in a Canadian Court in February 2019. The company tried to restructure but it failed to find any buyers for its assets. In August 2019, court approval was obtained for creditors to liquidate the company in order to get back a fraction of what they were owed.

Andy Whitmore of the Deep Sea Mining Campaign stated, “This should be the end of the story, but sadly the liquidation was enacted to give birth to a new, smaller Nautilus.”

“The two main shareholders – MB Holding and Metalloinvest – have effectively taken control of this ‘new’ Nautilus at the expense of major creditors and hundreds of small shareholders. Despite filing an appeal in the Canadian Court, through its company Eda Kopa, the PNG Government remains the biggest loser from the deal holding 15% equity in Nautilus PNG and the Solwara 1 project, effectively losing $US125m.”

“Nautilus gave the impression that the new company was ready to roll. But it has been over a month since the confirmation and there’s been no other information on what Nautilus’ new plans will be.”

“Nautilus stated in court papers that, once liquidation occurs, there may still be a buyer for at least some of the new company’s assets. Does this mean the major shareholders will sell their licences and machinery to make a quick profit and run?” questioned Mr Whitmore.

Local communities opposed to Nautilus’ Solwara 1 project in their seas are still steadfastly opposed to the project, and there are still legal cases in the PNG court system.

Jonathan Mesulam from the Alliance of Solwara Warriors has recently returned to PNG from meetings in Canada where he represented the fierce opposition of PNG coastal communities against experimental seabed mining.

Mr Mesulam stated, “It’s unbelievable for Nautilus to still consider mining the Solwara 1 project. Even if free of its long-term debt, this new company is created on the back of the huge financial loss for our government and the people of PNG. Our people want nothing to do with this company and its lies of prosperity. In Canada I learned that such a project would never be allowed in this company’s home waters.”

This loss adds to PNGs public debt which is at about 33 per cent of GDP. Australia has recently committed a $AUD300 million loan as direct budget assistance to ‘aid its economic reforms and government financing.’

Mr Mesulam continued, “A recent article in PNG Business News seems to suggest the ‘new’ Nautilus has applied to the PNG Mineral Resources Authority to vary the existing mining lease. This is against a background of calls from right across Papua New Guinean society to cancel the licenses.”

An added mystery is that someone is still buying shares in the old, defunct company. When Nautilus was removed from the Toronto Stock Exchange as part of the bankruptcy proceedings, it moved to unregulated trading of the now virtually worthless stock. Yet there has been a recent spike in buying that sent the price up to 0.003 cents per share.

“So many questions, and yet to date no answers. The company still looks to be lost at sea with no life raft in sight” claimed Mr Whitmore.

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Nautilus liquidation looming

Cedric Patjole | Loop PNG | July 31, 2019

Nautilus Minerals Inc will be liquidated if a plan of compromise and arrangement is approved and backed by a court order.

The company revealed this when announcing that they, along with its subsidiaries, have obtained an order of the Supreme Court of British Columbia in Canada to convene a meeting of creditors to vote on a plan of arrangement.

This includes an acquisition agreement and the filing of a plan of compromise and arrangement.

Nautilus Minerals announced yesterday that the granted court order was given under the Companies’ Creditors Arrangement Act authorizing:

(i) Nautilus to enter into an acquisition agreement with Deep Sea Mining Finance Ltd (DSMF) for the acquisition of certain subsidiaries and certain intercompany indebtedness; and

(ii) Certain subsidiaries or “Nautilus Restructuring Entities” of the Company will file a plan of compromise and arrangement among the subsidiaries and their unsecured creditors, and to convene a meeting with those creditors for the purpose of voting on the approval of the plan of compromise and arrangement.

A plan of compromise or arrangement sets out a company’s intentions to deal with its debts and restructure its business and operations.

The plan will be presented to Nautilus creditors on August 9, 2019, who will then vote on whether they accept the proposal or reject it.

Nautilus states that in the event that the plan of compromise and arrangement is approved by a majority of the Affected Creditors, its subsidiaries will bring an application to the Court for an order approving and sanctioning the plan of compromise and arrangement and various transactions related to the Plan and the Acquisition Agreement on August 13, 2019.

If the Sanction Order is granted as sought, and the conditions precedent to the Acquisition Agreement and the plan of compromise and arrangement are met, the Company will have effectively no assets, and, will be liquidated upon implementation of the plan of compromise and arrangement.

Eda Kopa (Solwara) Limited has led a claim of K163 million (US$51 million) against Nautilus Mineral Limited for failing to meets its funding obligations of the Solwara 1 Project.

Early this month, Chairman of Kumul Mineral Holdings Limited (KMHL), Peter Graham, said the Project has stalled with a substantial proportion of the development work still to be undertaken.

The claim has been filed under a Canadian court supervised creditors process initiated by the parent company of its joint-venturer in the Solwara 1 Project, Nautilus Minerals Niugini Limited (Nautilus PNG).

The Solwara 1 Deep-Sea Mining Project is a venture to mine polymetallic sulphide deposits located on the seabed in an area approximately 50km north of Rabaul and 30km west of New Ireland Province.

PNG’s losses from Solwara 1 currently over K350 million

Solwara 1 is chewing its way through PNG taxpayer funds at an alarming rate

In 2014, the State borrowed US$120 million [K375 million] from BSP to buy a 15% stake in the proposed Solwara 1 seabed mine.

Nautilus Minerals says US$113 million from the loan was paid to the company in December 2014.

It is not clear what has happened to the other US$7 million, the balance of the funds borrowed, but at the moment the government’s investment in Solwara 1 is not looking like a very good bet.

While the State’s partner, Nautilus Minerals is on financial life support and haemorrhaging senior staff, the State has written down its investment by over K260 million.

The latest financial report from Eda Kopa (Solwara) Limited, which holds the State’s interest in Solwara 1, shows that while the company still owes K376.8 million to BSP, it is valuing its assets, the 15% stake in Solwara 1, at just K113.7 million.

Above: Excerpt from the Annual Return for Eda Kopa (Solwara) Limited

As well as the K260 million write down in value, it is estimated the State is paying around K29 million a year to BSP in interest payments. This is calculated from the indicative interest rate of 7.75% shown in the financial report of Eda Kopa’s parent company, Kumul Minerals Holdings Limited.

So, not only has PNG already LOST K260 million on its investment in Solwara 1, it has also paid around K90 million in interest payments to BSP (2015-2017) and is still paying an additional estimated K29 million a year.

How many nurses, health centre workers or teachers could that money have paid for instead?

Looking deeper into the company records of Eda Kopa (Solwara), there are also some other interesting numbers lurking there.

In April 2014, Eda Kopa (Solwara) registered a charge in favour of BSP for up to K2.275 BILLION or US $875 million, (which ever is the higher).

Above: Excerpt from the Registration of Charge document

In November 2014, a second charge was registered by Eda Kopa (Solwara). This time a cross charge with Nautilus Minerals in the sum of K10 BILLION.

Above: Excerpt from the Registration of Charge document

The existence of both these substantial charges is verified by Deed documents [BSP Deed – 1mb, Nautilus Deed – 7mb] executed by the parties

Above: Excerpt from the Deed for the K2.275 billion charge

Above: Excerpt from the Deed for the K10 billion charge

Does anyone trust Eda Kopa (Solwara) to be playing around with such enormous potential liabilities?

Money hungry Nautilus weighs funding options as project challenges mount

Henry Lazenby | Mining Weekly | 22 December 2017

Marine mining pioneer Nautilus Minerals is in active discussions with a range of potential financiers and shareholders to secure the funding required to start mining the Solwara 1 project, offshore Papua New Guinea (PNG), the company said on Thursday.

The company has thus far been unsuccessful to secure tens of millions of dollars required to keep the project and associated production equipment and support vessel on track to start production in the Bismarck Sea during the first quarter of 2019.

Nautilus said in September that it needs to raise at least $41-million before year end, in order to meet the company’s contractual commitments regarding certain equipment forming part of the seafloor production system.

The Toronto-headquartered company cautioned that there can be no assurances that it will be successful in securing the necessary additional financing transactions within the required time, or at all. In the latter case, the company will evaluate all options to maximise shareholder value.

Meanwhile, Fujian Mawei Shipbuilding, the owner of the shipyard where Nautilus’ production support vessel (PSV) is being built, has notified the company that MAC Goliath, the buyer of the PSV, has failed to pay the third instalment of the contract price of about $18-million, plus accrued interest.

Should MAC fail to make the payment within 21 days from December 11, the shipyard has the right to sell the about 70% completed vessel. Nautilus has the option to remedy the default on behalf of MAC, or replace MAC as a party to the contract via a novation, but given the current funding shortfall, the company has its work cut out.

Nautilus advise that the vessel’s derrick substructure was recently delivered to the shipyard for installation on the PSV. Further, the builder is installing foundations for two of the three launch and recovery systems, the bulk cutter winch has been installed, work on the cargo handling system is progressing, and both the 100 T and 200 T cranes have also been installed.

The company advised in October that submerged trials of the first of the seafloor production tools (SPTs), the collecting machine (CM), have been completed at the trial facility in Motukea Island, Port Moresby, PNG.

The trial results indicated that the machine can perform to design specifications, and the team is now looking at operating enhancements. The auxiliary cutter has also been trialled and will be followed by the bulk cutter.

Nautilus formed a joint venture company with PNG’s nominee, Eda Kopa (Solwara), in December 2014 to mine high-grade polymetallic seafloor massive sulphide deposits. Nautilus has an 85% shareholding and Eda Kopa 15%.

Nautilus in September 2016 announced a revised work programme, pending the company successfully raising the required capital by June this year. It entails a more staged approach, moving the Nautilus equipment integration phase of vessel construction out until after the vessel has been delivered by Fujian Mawei Shipyard and Marine Assets Corporate in the fourth quarter of 2018, resulting in a 12-month delay to the original schedule. 

$113m to be released to Nautilus next month on completion of State agreement

Leani Kolver | Mining Weekly

Prospective seafloor miner Nautilus Minerals on Friday announced that $113-million that had been placed into escrow in May, would be released to the company on December 11, on the completion of the sale of 15% of its Solwara 1 project, offshore Papua New Guinea, to Eda Kopa (Solwara), which had been nominated by the State of Papua New Guinea to take up this interest.

Nautilus had, on November 6, entered into an agreement with Marine Assets Corporation (MAC) for the charter of a vessel to be deployed for use at the Solwara 1 project.

Under the terms of MAC’s agreement with Nautilus, it undertook to sign a contract with Fujian Mawei Shipbuilding for the design and construction of the vessel and to pay the first instalment of the purchase price by no later than November 28, 2014.

As this had occurred according to plan, Nautilus could now complete the sale to Eda Kopa.

“We are excited that the shipbuilding contact has been signed for the construction of the vessel and the first instalment paid, which now allows for the release of the State nominee’s funds from escrow and the formation of the Solwara 1 joint venture,” Nautilus CEO Mike Johnston commented.