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 Minerals officially sinks, shares still trading

Amanda Stutt | Mining dot com | November 26, 2019 

Nautilus Minerals, one of the world’s first seafloor miners, officially went bankrupt this week, its court-appointed monitor, Price Waterhouse Cooper reported.

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 to get back a fraction of what they were owed.

IN THE PROCESS, NAUTILUS HAS LEFT THE PAPUA NEW GUINEA GOVERNMENT FACING A DEBT EQUIVALENT TO ONE-THIRD OF THE COUNTRY’S ANNUAL HEALTH BUDGET

The Vancouver-based company was trying to develop its Solwara 1 deep sea gold, copper and silver project, off the coast of Papua New Guinea (PNG), but the project was plagued with community opposition and financial setbacks.

In June, the owner of the shipyard where the company’s support vessel was being made said it had cancelled the contract with the supplier chosen  to build its ships after Nautilus failed to pay the third installment of the contract price — $18 million before interest.

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

In the process, Nautilus has left the Papua New Guinea government, which still owns a 15% stake in the Solwara I project as well as equipment, facing K81.5 million ($24 million) in debt.

“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,” Andy Whitmore, advocacy officer, Deep Sea Mining Campaign, said in a press release.

Court papers noted that Nautilus had two distinct business units, one dealing with polymetallic nodules, and one dealing with seafloor massive sulphides, which includes the Solwara 1 project in PNG. It is therefore unclear which, if either of the business units, the new company will concentrate on.

“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,” Whitmore said.

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.

A PNG Business News report suggests the new Nautilus has applied to the PNG Mineral Resources Authority to vary the existing mining lease.

When Nautilus was removed from the Toronto Stock Exchange as part of the bankruptcy proceedings, it moved to unregulated trading, with a recent spike in buying.

At market close Tuesday, Nautilus Mineral’s shares had been traded 310,769 times on the OTC, with the stock priced at a penny.

Deep Sea Mining company sinking in deep water

Deep Sea Mining Campaign |26 June 2018

Nautilus Minerals once again faced challenges at its AGM in Vancouver. As the financial crisis mounts Nautilus’ dreams to undertake the world’s first experimental deep sea mine, the Solwara 1 project in Papua New Guinea, look ever more distant. [1]   

Nautilus has been hit hard by the divestment of Anglo American who announced their break with the company just before their own AGM in May this year.

Andy Whitmore of the Deep Sea Mining campaign stressed, “Anglo’s decision to divest, on top of Nautilus’s myriad problems, proves the company is running out of both credit and credibility. It is not just the company that is sinking, but the project – and the concept of deep sea mining itself – that is going down with it.”

Nautilus is now propped up by its two major shareholders – Russian mining company Metalloinvest and Omani conglomerate MB Holdings, both of whom are lending significant amounts of money in bridging loans at 8% interest. [2]

“Nautilus is increasingly controlled by these two entities, which in the case of Metalloinvest opens up serious worries that it could be hit by further US sanctions against Russian oligarchs.” continued Whitmore. [3]

“The company is in a parlous state with its finances. Even if Nautilus was to become bankrupt and someone else took over the project, they would face the same social and legal – let alone environmental – risks.”

“Nautilus is desperate for further funding. Noting it may not succeed the company has introduced cost saving measures including reducing its workforce and not entering into any new construction contracts.” [4]

The reluctance of investors was ascribed by a recent article to “the unknown feasibility of this type of activity and concern that they could potentially be deemed to be complicit in environmental degradation.” [5]

Growing local opposition in Papua New Guinea has seen communities come out in force at formal hearings to oppose the granting of Nautilus’s exploration licences and a legal challenge regarding Solwara 1 has been lodged. [6]

Jonathan Mesulam of Solwara Warriors noted “New Irelanders and communities across the Bismarck Sea call for a ban on deep sea mining. One needs only to look at the history of the civil war in Bougainville Island and the current civil unrest against the Exxon project in Hela and Southern Highlands Province to see how local communities react to projects that ignore their concerns.” [7]

“Canadian mining companies have a shameful history of environmentally destructive mining in Papua New Guinea,” says Catherine Coumans of MiningWatch Canada, “but this project may prove to have the most widespread and irreversible impacts of all.”

“No Canadian company or investors should want to be involved in this experimental destruction of the seabed and of rare hydrothermal vents.”

Nautilus Minerals start date for production has been pushed back to at least the third quarter of 2019, so any potential income will be absorbed by mounting loan interest payments and costs. Adding to their problems is the impounding of their production support vessel due to the lack of finance to complete it. [8][9]

NOTES
[1] If it proceeds the Solwara 1 mine will be located in the Bismarck Sea of Papua New Guinea, approximately 25 km from the coastline of New Ireland Province, about 35 km from Duke of York Islands and 60 km from Kokopo township in East New Britain.
[2] As at May 15, 2018, an amount of $11.25 million in bridge loans have been advanced to Nautilius and a total of 48,324,740 share purchase warrants have been issued to the major shareholders as partial consideration for such bridge loans. The loans bear interest at 8% per annum,  payable bi-annually in arrears with a one year maturity date. See Nautilus statement at www.nautilusminerals.com/irm/PDF/2024_0/MDAfortheperiodendedMarch312018
[3] USM Holdings, the ultimate parent holding company of Metalloinvest Holding (Cyprus), is
controlled by Russian billionaires Alisher Usmanov (49%) and Vladimir Skoch (30%). In the 6 April sanctions imposed by the US, Vladimir Skoch’s son was one of the seven Russian tycoons sanctioned, while David Kramer, a State Department official under President George W. Bush, said he was surprised by the exclusion of Alisher Usmanov. Seehttps://www.bloomberg.com/news/articles/2018-04-11/deripaska-s-two-decade-wooing-of-u-s-ends-in-financial-meltdown and https://www.forbes.com/sites/angelauyeung/2018/04/06/u-s-treasury-department-announces-new-sanctions-against-7-russian-billionaires/#4ce07d243752
[4] See Nautilus statement at  www.nautilusminerals.com/irm/PDF/2024_0/MDAfortheperiodendedMarch312018
[5] See for example posting on the investor bulletin board Shareholders Unite –http://shareholdersunite.com/mybb/forumdisplay.php?fid=41 including quotes such as “So, many of us have been holding on to this stock for years now … and hoping for the best. I’ve always felt generally positive about Solwara 1 and felt that eventually, they would pull a rabbit out of a hat. …  However, I’ve never felt quite as down and out on this stock/company as I do right now.”
[6] Legal action launched over the Nautilus Solwara 1 Experimental Seabed Mine, statement 6 December 2017 –http://www.deepseaminingoutofourdepth.org/legal-action-launched-over-nautilus-solwara-1/
[7] Hela landowners vandalise gas project, block road in PNG, Radio New Zealand International, 19 June 2018,https://www.radionz.co.nz/international/pacific-news/359983/hela-landowners-vandalise-gas-project-block-road-in-png
[8] See Nautilus statement http://www.nautilusminerals.com/irm/PDF/2020_0/Nautilusreceivesadditionalbridgeloanandprovidescorporateupdate
[9] Canada’s Nautilus aiming to start marine mining in 2019 despite enviro concerns, Dylan Slater, Creamer Media’s Mining Weekly, 1 June 2018 – http://www.miningweekly.com/print-version/canadas-nautilus-aiming-to-start-marine-mining-in-2019-despite-enviro-concerns-2018-06-01

Failing seabed miner Nautilus Minerals continues on life support

Nautilus Minerals remains in a critical financial state, able to survive only because of another short-term loan from its main shareholders…

Press Release | GlobeNewswire | Business Insider | January 11, 2018

Nautilus Minerals Inc. announces that it continues to arrange bridge loans from Deep Sea Mining Finance Ltd, which are expected to form part of a larger secured structured credit facility of up to US$34 million to be provided by the Lender to the Company.

In conjunction with initial advances under the bridge loans, the Company has issued to the Lender an additional 8,591,065 warrants of the Company, for a total of 11,812,714 share purchase warrants issued to the Lender to date. Each Warrant entitles the Lender to purchase one common share of the Company at a price of C$0.17 for a period of five years from the date of issuance of the Warrant.

The bridge loans, which the Company expects to be in the amount of up to US$7 million, will assist the Company’s immediate working capital requirements and facilitate payments required to continue the development of the Company’s seafloor production system to be first utilized at the Company’s Solwara 1 Project. The loans bear interest at 8% per annum, payable bi-annually in arrears with a one year maturity date.

The Company will be entitled to pre-pay each loan prior to maturity, by paying 108% of the outstanding principal of the loan plus accrued and unpaid interest. Each loan will be represented by a promissory note and will initially be secured against the assets of the Company through a general security agreement. The Lender may subsequently require the loan to be guaranteed by the Company’s material operating subsidiaries and secured against the assets of such subsidiaries.

There can be no assurance that the Company will be successful in concluding the larger credit facility transaction or that any further funding will be secured by the Company.

As previously disclosed, the Lender is a private company owned 50% by each of: (i) USM Finance Ltd, a wholly owned subsidiary of USM Holdings Ltd, an affiliate of Metalloinvest Holding (Cyprus) Limited; and (ii) Mawarid Offshore Mining Ltd., a wholly-owned subsidiary of MB Holding Company LLC. As the Lender is controlled by two insiders of the Company, the Lender is a “related party” of the Company and the loan transaction constitutes a “related party transaction” of the Company under MI 61-101 Protection of Minority Security Holders in Special Transactions. The transactions comprising the bridge loans and the Warrants will be exempt from the formal valuation and minority shareholder approval requirements of MI 61-101.

The Company did not file a material change report more than 21 days before the expected closing of this transaction, as the details of the transaction were not finalized until immediately prior to the closing and the Company wished to close the transaction as soon as practicable for sound business reasons.

The Company requires significant additional funding in order to complete the build and deployment of the seafloor production system to be utilized at the Solwara 1 Project by the Company and its joint venture partner (as to 15%), the Independent State of Papua New Guinea’s nominee.

There can be no assurances that the Company will be successful in securing the necessary additional financing transactions within the required time or at all. Failure to secure the necessary financing may result in the Company undergoing various transactions including, without limitation, asset sales, joint ventures and capital restructurings.

The Company will provide further updates as circumstances warrant.

K1bn needed for Solwara 1

Cedric Patjole | PNG Loop | October 14, 2017

More than K1 billion in remaining project financing is needed to fund the Solwara 1 Project in New Ireland Province.

Nautilus Minerals Inc. revealed this when announcing the appointment of its exclusive financial advisor – Deep Sea Mining Finance Ltd (DSMF).

In a statement, the Canadian company indicated that a remaining project financing of US$350 million was needed, which DSMF will be leveraging, to complete the build and deployment of the sea oor production system to be utilised at the Solwara 1 Project.

Nautilus said DSMF will seek to leverage the international expertise and financial relationships of Nautilus’ two major shareholders to assist in advancing the development of the project.

Nautilus has stated that there are no assurances that it will secure the necessary additional funding and a failure to do so may result in it undergoing various transactions, which include asset sales, joint ventures and capital restructurings.

DSMF is a newly-incorporated private company in the British Virgin Islands.

Nautilus has also announced that it has terminated a ‘Bridge Financing Agreement’ signed in 2016 with Metalloinvest Holding (Cyprus) Limited and Mawarid Offshore Mining Ltd.

New international report highlights reputation risk for firms involved in seabed mining

ACT NOW!

Business Intelligence group, RepRisk, has released a new report highlighting the environmental, social and governance risks for companies involved in seabed mining and drilling.

RepRisk is a leading international business intelligence provider serving global banks, insurance companies, investment managers and corporates.

In its report, RepRisk, details the many environmental concerns surrounding experimental seabed mining including:

• Irrevocable damage to marine ecosystems that are already fragile because of overfishing and pollution
• Release of toxic particles and exposure of species to heavy metals and acids that could enter the food chain
• Impacts of light on species accustomed only to the dark and of noise in an environment where sound is used for communication
• Spreading of contamination from mine waste or leaks by ocean currents
• Reduction of fish stocks affecting coastal communties
• Loss of complex and diverse ecosystems that could potentially benefit mankind
• Loos of resources that could provide for the discovery of new medicines

RepRisk also reviews the history of the controversial Solwara 1 experimental seabed mine in Papua New Guinea.

Both United States mining company Anglo American and Russian giant Metalloinvest have stakes in the mine lease holder, Nautilus Minerals.

RepRisk outlines the strong campaign against the Solwara 1 that involves groups like Greenpeace, Friends of the Earth and ACT NOW! as well as scientist, university professors, church leaders and local communities.

According to RepRisk these groups have all voiced “fierce opposition to the Solwara 1 Project”.

As well as the environmental concerns outlined above which are all relevent to the proposed Solwara 1 mine, RepRisk highlights the concern over the ability of the PNG government to monitor a completely new mining technique.

RepRisk also outlines the concerns of coastal communities that the project will pollute the seawater, cause other environmental damage, and have a negative impact on their livelihoods and food sources, which are dependent on fishing.

The report also highlights the 2012 report that claims the  Solwara’s Environmental Impact Study was seriously flawed, as it failed to correctly identify the risks associated with the project and had underestimated the impacts on local communities.

Download the full report: RepRisk Special Report on Seabed Mining and Drilling 2015 [245kb]