Challenges at Nautilus

Challenges at Nautilus Continue

A series of internal and external pressures have been plaguing the Canadian deep sea mining firm Nautilus Minerals for months with no clear resolution in sight.  The challenges facing Nautilus are hindering efforts to move forward on the Company’s flagship effort, the controversial Solwara One seabed mining project in Papua New Guinea’s Bismarck Sea.  DSM Observer has been reporting on these developments since October 2017.

Local Opposition

On 6 December 2017 ongoing local opposition to Solwara One advanced into a legal challenge against the PNG Government in a bid to obtain key documents relating to the licensing and the environmental, health and economic impacts of the project.  Coastal Communities and environmental non-profit partners claim that very little information about Solwara One has been disclosed by the PNG Government or the project developer, Nautilus Minerals.

“They are seeking information to enable them and all Papua New Guineans to clearly understand whether the project was approved lawfully and what the impacts will be on local communities. The Solwara One Environmental Impact Statement contains insufficient information to determine this,” stated Peter Bosip, Executive Director, Centre for Environmental Law and Community Rights (CELCoR).

However, Papua New Guinea’s Mining Minister, Johnson Tuke, said the government has been open about the project and that Nautilus has already released a thorough environmental impact statement.  He affirms that the government remains committed to the Solwara One project.

Financial Stress

On 4 December 2017 Nautilus announced that discussions over financing with various parties involved in manufacture of their Seafloor Production System continued. They indicated a slight deferment of some of their immediate cash flow requirements, negating the previous funding requirement of US$10 million by 30 November 2017 to a funding requirement of US$10 million by 20 December 2017.

subsea mining vessel challenges at nautilus
A recent photo of the Nautilus Production Support Vessel (PSV),
under construction at the Mawei shipyard in China.
Photo: Nautilus Minerals

On 11 December 2017, the company announced that there had been a failure to pay the third installment of their contract to build a Production Support Vessel (the “PSV”) in China.  The installment of approximately US$ 18 million plus interest was to be paid to the shipbuilder Fujian Mawei Shipbuilding Ltd via the PSV’s buyer MAC Goliath Pte Ltd (“MAC”), with whom Nautilus had contracted for use of the vessel on Solwara One.

At the time of default, construction on the PSV was over 70% complete. The derrick substructure was recently delivered to the Shipyard for installation, foundations for two of the three Launch and Recovery Systems (LARS) were being installed, the Bulk Cutter winch had been installed, work on the cargo handling system was progressing, and both the 100T and 200T cranes had been installed.

In a public statement, Nautilus maintained it was in discussions with the Shipyard, MAC, and third parties with respect to the default and potential remedies, and would issue further updates as matters develop.  However, their agreement with Fujian Mawai Shipbuilding stipulates that the shipbuilder may rescind the contract if the default is not remedied within 21 days of receipt of notice to MAC.

On 27 December 2017 Russell Debney resigned as Chairman and director of Nautilus, as well of its operating subsidiaries.  The announcement comes only months after the October resignation of director Mark P.M. Horn, who left Nautilus to lead Deep Sea Mining Finance Ltd. (“DSMF”), a recently formed joint-venture between the two major shareholders of Nautilus, the Russian-owned Metalloinvest Holding Limited and the Omani-owned MB Holding Company LLC.

As of this date, Nautilus maintains that there are 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.

Meanwhile, new voices, including the BBC’s iconic naturalist Sir David Attenborough, have joined calls against the advancement of this project on environmental grounds.

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