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A high-profile deep-sea mining company is struggling

Nautilus has multiple problems, including the loss of an expensive ship

The Economist | December 5 2018

AFTER LISTING on the Toronto stock exchange in 2006 Nautilus Minerals became the public face of a daring new industry: deep-sea mining. It planned to pursue riches on the ocean floor, mining metals such as gold, zinc and copper, desired respectively for lustre, alloys and electronics. Robotic machines would cut, grind and gather volcanic rock at a site called Solwara 1, located 1,600 metres beneath the surface of the Bismarck Sea near Papua New Guinea (PNG). The resultant rocky slurry would be pumped up to a support vessel, then shipped to a site at which the metals could be extracted. Investors were convinced; Nautilus’s shares doubled from their initial price of C$2 ($1.80) in a few months.

Today a Nautilus share is worth just a few Canadian cents. Three problems have changed sentiment. First, the firm has had substantial contractual trouble with the government of PNG, in whose territorial waters Solwara sits. The two sides wrangled for years over payments that the government owed for its equity stake in the project. The government eventually stumped up, but the row slowed progress.

Second, the idea of using Nautilus’s vast machines to carve and crush underwater volcanoes does not sit well with environmental groups in PNG and around the world. That may have unnerved investors.

Third, uncertainty after the financial crisis of 2008-09 made it harder for Nautilus to fund its untested venture. That has left only two big shareholders: MB Holding, an Omani conglomerate, and Metalloinvest, a Russian steel and mining firm.

Timetables have slipped badly as a result. The firm states only that mining at Solwara 1 will now be delayed “past” the third quarter of 2019, with no start date offered. Meanwhile, the firm’s finances are making a descent. Some $350m is required to get mining going. Nautilus has drawn down half of a $34m credit line that MB Holding and Metalloinvest extended to it in January in exchange for the rights to purchase more shares (an arrangement which coincided with the departure of some senior managers and Nautilus’s chairperson). The company is due to start repaying these loans in January but, as of September 30th, only had $200,000 of cash.

To add to these problems, Nautilus appears to have lost the specialised support vessel that it had planned to use. It had chartered a new ship through MAC Goliath, an Emirati shipowner and operator. The vessel was nearing completion at the docks of Fujian Mawei Shipbuilding in Fuzhou in southern China in December 2017 when MAC Goliath defaulted on a payment. Nautilus was given the option to step in and make the missing payment, but was unable to do so. In July the Chinese shipyard found a new firm to take over the contract, MDL Energy, an Indian shipowner that is planning to engage in deep-sea mining explorations for India’s government. Kulpreet Sahni, MDL’s chief executive, confirms that his firm now owns the ship.

On December 2nd Nautilus stated that it was “in negotiations with various parties” about ownership of the vessel; its shares surged in response. But Mr Sahni says his firm terminated negotiations about Nautilus’s continued use of the ship months ago. On December 3rd Mr Sahni wrote to Nautilus’s boss, John McCoach, warning that the firm’s statement was detrimental to MDL Energy, and to Nautilus’s own minority investors, and that it might contact the Toronto Stock Exchange or take legal steps if the matter was not clarified. (In an emailed statement to The Economist, Mr McCoach declined to comment on the specifics of this story but said that some of it was “not accurate from our perspective”.)

If the vessel is gone, that would be a huge blow for Nautilus, for it had been custom-built for the firm’s particular mining methods. It will be near-impossible to replace, especially given Nautilus’s beleaguered finances.

But Nautilus’s travails have offered lessons to the rest of the deep-sea mining industry. Gerard Barron, Nautilus’s first financial backer (who sold out of the company years ago), has hired some of Nautilus’s ex-employees for DeepGreen, a new deep-sea mining venture which focuses on harvesting metallic nodules that are scattered across the sea floor in the deep ocean. These contain metals such as cobalt and nickel needed for the batteries and wind turbines that power the clean economy. Having watched Nautilus’s progress, he reckons that hoovering up nodules will be easier than grinding volcanic rock, and that their uses lend such activities a more environmentally friendly sheen. Other firms have made a similar bet.

Although the water in the Clarion-Clipperton Zone, a patch of Pacific sea floor in which such firms will operate, is some three times deeper than that at Solwara, the location is out on the high seas. That means it is subject to a clearer set of rules for mining and exploration which is overseen by the United Nations, thereby reducing the scope for wrangling with national governments. Nautilus holds a concession there, too. But if the firm does not secure a fresh infusion of cash, its machines may never venture further than a dock in PNG.

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Nautilus setting JV to secure support vessels for Solwara 1 project

Nautilus’ floating base.

UPDATE: 6 Dec. Nautilus Minerals is reported to have been referred to the Toronto stock exchange for misleading investors over the fate of its mining vessel which it is claimed has already been sold to a third party despite Nautilus claims below that it is preparing to buy the ship.

Cecilia Jamasmie | Mining.com | 5 December 2018

Shares in Canada’s Nautilus Minerals (TSX:NUS), one of the world’s first seafloor miners, climbed more than 10% on Monday as the company disclosed is negotiating the terms of an agreement with arm’s length third parties that would involve the creation of a joint venture company.

The purpose of the new firm, Nautilus said, would be to fund the acquisition of the Production Support Vessel (PSV) that Nautilus had previously arranged to be procured through shipbuilder MAC Goliath.

In July, the Vancouver-based company announced that MAC Goliath Pte’s had failed to pay part of a contract with the owner of the shipyard where the Nautilus’s support vessel were being made.

Nautilus, which is in the last stages of developing its Solwara 1 gold, copper and silver project, off the coast of Papua Guinea, said the support ship would be used at that venture.

The miner, which also is developing another underwater project, off the coast of Mexico, secured in May $34 million from lender Deep Sea Mining Finance, to finish Solwara 1, which is set to become the world’s first commercial deep-sea mine.

However, it lost support from Anglo American’s (LON:AAL), which decided to divest its 4%-stake in Nautilus.

Environmental groups have criticized the project, which will use three robotic machines weighing up to 310 tonnes to mine copper and gold from extinct hydrothermal vents on the ocean floor.

Nautilus plans to then mix the ore with seawater to create a slurry, which can be drawn to the surface, stored and then put on other ships for transport. The extracted seawater is then pumped back to the seabed.

Nautilus’ shares were trading up 10% in Toronto at 0.5 Canadian cents by 11:35 am Toronto time.

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Deep sea mining is bad: Activist

Roselyn Erehe | The Sunday Bulletin | 25th November 2018

DEEP sea mining is a risk to the people’s way of life and a threat to the environment says activist Lucielle Paru.

The deep sea mining which covers 16 marine-time provinces in Papua New Guinea does not have laws governing the seas, said Paru.

“We don’t have any laws governing our seas and how they should be managed,” Deep Sea Mining Campaign- Papua Land Rights Council and activist, Paru said.

There is a high possibility of the deep sea mining running through New Guinea Islands – Manus, East New Britain, and New Ireland; the Momase region – East and West Sepik, Morobe and Madang province; and the Southern region- Oro and Milne Bay provinces.

She raised her concern on the issue of Deep Sea Mining in relation to Papua New Guineans not taking the issue too seriously by letting the government and foreigners mine their land at the helm of the recently concluded Asia Pacific Economic Cooperation (APEC) Leaders’ Summit.

“That is a very big issue in terms of how the sea should be mined and how to govern the ocean, and whose territory it is,” Paru said.

She called on the people to not only see the benefits of mining but to also see the disadvantages of mining operations in the country.

She said, “The world may be looking at technology and the world maybe looking at mining but how much does that actually benefits us? And we are actually destroying what belongs to us.”

“Why are we allowing other countries to come into our country and destroying what makes us proud”.

Paru will be the first Papua New Guinean to represent the country and bring the ‘deep sea mining’ issue to the United Nations (UN) attention during the UN conference in Geneva- Switzerland from the 26th – 28th November, this year.

Her aim is to ask the UN to ban the deep sea mining in PNG and hopefully in the Pacific as well.

Issues she’ll be raising at the UN meeting are;

  • Mining Territory Claims
  • Environment and Climate change, especially when Papua New Guineans are depending on sustainable living, like fishing.

And basically how all these issues are linked to deep sea mining and how the people of PNG will be affected if its operations take place in PNG and in the Pacific Ocean.

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Call for Cooks’ seabed mining licences to require risk research

Kelvin Passfield of Te Ipukarea Society. Photo: RNZ/ Sally Round

Radio New Zealand | 21 November 2018 

The Cook Islands government must focus as much on the potential environmental risks of seabed mining as it does on the economic benefits, an environmental organisation says.

In recent weeks, the government has been holding public meetings to hear feedback on its plan to open tenders for five-year, deep sea mining exploration licences at the beginning of next year.

Kelvin Passfield of the Te Ipukarea Society said little was known about the biodiversity in the exploration area.

Environmental research should be included in exploration operations, Mr Passmore said.

“We would like to see at least an equal emphasis on the biodiversity and the potential environmental impacts on that biodiversity,” he said.

“So we would like to see any exploration licence having a condition that there must be a partner in that exploration programme of a research institution.”

The Cook Islands News reported that Deputy Pm Mark Brown as saying the government was only concerned with exploration at this point.

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Deep sea mining zone hosts CO2-consuming bacteria, scientists discover

phys.org | November 20, 2018

Scientists have discovered that bacteria in the deepest parts of the seafloor are absorbing carbon dioxide and could be turning themselves into an additional food source for other deep-sea life.

Bacteria living 4000m below the ocean surface in the Clarion-Clipperton Fracture Zone (CCFZ) are consuming carbon dioxide and turning it into biomass, a new study shows.

Until now, scientists believed the main source of biomass on the seafloor was the organic matter that floated down towards the depths: dead fish, plankton and other detritus.

Prof. Andrew K. Sweetman from the Lyell Centre for Earth and Marine Science and Technology at Heriot-Watt University in Edinburgh said:

“We have recently made two major findings.

“In contrast to similar studies in the north Atlantic Ocean, we found that bacteria and not seafloor animals were the most important organisms consuming organic detritus that floats down towards the ocean floor.  

“We also discovered that benthic bacteria are taking up large amounts of carbon dioxide and assimilating it into their biomass through an unknown process. This was completely unexpected.

“Their biomass then potentially becomes a food source for other animals in the deep sea, so actually what we’ve discovered is a potential alternative food source in the deepest parts of the ocean, where we thought there was none.  

“If we upscale our results to the global ocean, our findings reveal that 200 million tonnes of CO2  could be fixed into biomass each year by this process.

“This equates to approximately 10% of the CO2 that the oceans remove each year, so it’s possibly an important part of the deep-sea carbon cycle.

“We found the same activity at multiple study sites separated by hundreds of kilometres, so we can reasonably assume this is happening on the seabed in the eastern CCFZ and possibly across the entire CCFZ.”

The CCFZ is a prime area of interest for future seabed (polymetallic nodule) mining. Sixteen contractors from countries like the UK, Germany, France and Korea have claimed exploration rights in this region, and have begun conducting surveys to gather baseline data on biodiversity and genetic connectivity across their claim areas.

Dr Sweetman is calling for the International Seabed Authority to ensure contractors in this area will implement carbon cycling monitoring as well as biodiversity and genetic studies.

Sweetman said:

“If mining proceeds in the CCFZ, it will significantly disturb the seafloor environment.

“Just four experiments similar to ours have been conducted in situ in the abyssal regions of the oceans; we need to know much more about abyssal seafloor biology and ecology before we even consider mining the region.

“The full-scale mining proposed in the Clarion-Clipperton Fracture Zone could significantly impact benthic ecosystems for decades, perhaps even longer.

“Now that we have shown that novel carbon cycling processes are happening on the seafloor in this region, which may be very significant in terms of the carbon cycle, authorities should insist that hopeful mining contractors study these  processes in baseline surveys, impact assessments and monitoring, so that mining-related changes in this important ecosystem process can be identified and tracked.”

The findings were published in the journal Limnology and Oceanography.

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Deep sea mining: Riches or ruin?

The OK Tedi gold mine, which caused huge environmental problems in New Guinea, is an example of how mining can go horribly wrong, a letter-writer says.

Letter to the Editor | Cook Island News | November 19, 2018

The government is in raptures as they prepare for a bonanza of riches that they hope will flow from deep sea mining in our exclusive economic zone (EEZ).fish

Before matters proceed to the point of no return, we the Iti Tangata need to ask whether mining will lead to riches or to our ruin.

Should we allow our Government to jeopardise the main industry of our country that is the backbone of our national economy? Does anyone really think that paying guests will come to a destination that has been polluted from the byproduct of mining, if it were to go ahead?

Word is that government is so keen, that they are in the process of trying to water down the Marae Moana Act in order to take away some of the protections in relation to environment impact assessments. Being so secretive about the proposed changes, which the public are not allowed to view until the Amendments have had a first reading in Parliament, does little to dispel that impression.

Right now, our visitors pay good money to come to our tiny Ipukarea to experience the beauty of the environment on land, lagoon and ocean and to enjoy the holiday of their dreams before heading back to their own homes. They came here for the clean air, the green hills and flowers and immaculate gardens and the beautiful lagoons and friendly people to host them and while doing so, they generate more than $200 million annually to our local economy.

Does anyone really think that paying guests will come to a destination that has been polluted from the byproduct of mining – if it were to go ahead? Of course not, they will go elsewhere.

Actually, I am not necessarily a fan of tourism. That seems to have gone into overdrive in the past couple of years and seems to have created a certain level of environment and infrastructure issues of its own. These include periodic shortages of water supply in parts of the island, an inadequate septic system – and of course, our roads could do with a bit of an upgrade.

However, those issues are being addressed albeit with mixed results thus far, but will fade into the background in comparison to the irreparable damage to our ocean environment and leisure industry that a high-risk industry such as mining would cause.

Honestly, can the advocates of mining point to a place anywhere in the world where mining has not polluted the surrounding environment?

Nope?

But there are plenty of instances about the adverse effects of mining. Papua New Guinea, one of our Pacific neighbours, has had its fair share of horror stories in relation to mining.

There was, for instance, the notorious case of the OK-Tedi gold mine in PNG where the toxic by-product of the process of extracting the gold were released into the OK Tedi and Fly rivers and poisoned the water and killed all the fish. (By the way, the by-product is arsenic for those who are wondering).

After a media campaign in Australia to expose the malpractice of the mining company and a court case against them for their misdeeds, the mining giant negotiated to pay a tiny fraction of the costs to remediate the environmental damage and eventually walked away from the mine. PNG was left to deal with the mess the mining company left behind.

There are other case, but the point is that mining companies have very deep pockets to retain the highest paid legal minds from anywhere in the world to defend their position, while our Government has the services of the Commissioner and Crown Law. In a battle between global giants vs idealistic local lawyers, it is not going to end well for us.

One last point: even if the nodules are worth zillions of dollars – which is uncertain – the Government will only receive a tiny percentage of the value via royalty payments.

It is rather like our tuna fishing industry, where tuna is sold at $20-30 per kilo, but that Marine Resources have signed away for a few cents per kilo. Enough said.

The byproduct from deep sea mining of our nodules will be  the huge amount of “plume” of the muck that constitutes the seafloor.

Apparently the nodules will be either scooped up or vacuumed upward and then the seawater will be released back to the ocean.

How to return vast quantities of dirty water to the ocean without causing an environmental disaster sounds like mission impossible to me.

The upside is that the byproduct will not be arsenic, as with the OK Tedi case.

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PNG experimental seabed mining project another ‘failed investment’, says ex-minister

The proposed production method for Solwara 1 Project. Image Nautilus

Pacific Media Centre | November 14, 2018

The controversial Nautilus Solwara 1 deep sea mining project has been accused of being another Papua New Guinean government “failed investment” on the verge of bankruptcy, claim campaigners citing a former attorney-general.

In a statement by the Deep Sea Mining Campaign, former PNG Attorney-General and Minister for Justice Sir Arnold Amet is quoted as saying:

“Nautilus is propped up by US$15 million in loans from its two major shareholders, it’s been forced to reduce its workforce and to terminate contracts for the construction of equipment.”

“Even the production support vessel crucial to Nautilus operations has had to be shelved due to failure to pay the shipyard constructing it,” he said.

“And Nautilus is now virtually worthless with its shares at a new record low of less than 10c  each.”

Deep Sea Mining Campaign said Nautilus was still desperately seeking funds for its flagship Solwara 1 deep sea mining project, while its commercial operation had been delayed ever since it first received its licence to mine the floor of the Bismarck Sea in 2011.

As a final attempt to save Solwara 1, Nautilus’s two largest shareholders, Russian mining company Metalloinvest and Omani conglomerate MB Holdings, formed a new company to secure funding for the Solwara 1 project, but this rescue attempt has gone in vain.

“Nautilus is due to repay the US$15 million loans to Metalloinvest and MB Holdings on January 8. How will it achieve this? There’s no likelihood of production starting until the end of 2019 or even later,” said Sir Arnold.

Economic burden

“I am really worried that the PNG government invested heavily to purchase 15 percent of a company that will be a burden to our economy. Our country’s over-extended finances may have to contend with a 15 percent stake in Nautilus’ bankruptcy,” he said.

Sir Arnold stated his position by urging the PNG government to terminate the contract with Nautilus so save the country’s money.

“Wiser investors such as Anglo American and Loews Corporation got rid of their shares early this year to reduce their exposure to risk. The PNG government should terminate its contract with Nautilus now before it sacrifices even more of our nation’s funds,” he said.

“In light of PNG hosting the APEC Summit at the end of this week it is important to highlight risky commercial ventures such as Nautilus Solwara 1 project that have used scarce public funds over environmental safeguards, regulatory frameworks and the livelihoods of our coastal peoples.”

Papua New Guinea is hosting the 2018 Asia Pacific Economic Cooperation (APEC) summi later this week, which is said to have been a huge financial load for the economically challenged country.

While the PNG government prepares for the summit, the country is going through many health crises including re-emerging of eradicated disease such as polio, violations of human rights against the people of Paga Hill, and extravagant spending for 40 Maserati luxury sedans, reports Pauline Mago-King of Asia Pacific Report.

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