Nautilus contracts to build deep-sea mining vessel (October 30, 2006)

Vancouver — Nautilus Minerals (NUS-V, NUSMF-O) and Belgium-based Jan De Nul Group have reached a tentative agreement that would see a deep-sea mining vessel built for use at a Nautilus project in the South Pacific.

Jan De Nul, one of the world’s largest dredging contractors and marine engineering firms, would build the 191-metre vessel, expected to be ready by late 2009. It would also pay for, own and operate the ship, to be christened the Jules Verne.

The specialized mining vessel would serve as a platform, deploying mining equipment, pumps and riser pipes for operations at the Solwara 1 seafloor massive sulphide project, which lies at depths of up to 1,700 metres off the coast of Papua New Guinea. Jan De Nul would also provide barges and tugboats.

Nautilus would be responsible for providing two seafloor mining devices, power umbilical cables, pumps, 1,800 metres of riser pipe and related handling equipment, all budgeted at about US$120 million. Under the planned agreement, Jan De Nul will reimburse Nautilus through a 6.5% monthly rebate on its mining contract fees. The Solwara project hosts seafloor deposits 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 would see mineralized material dredged from the seafloor, pumped to the surface vessel and then transferred onto barges for transport to a land-based concentrator, where a gold-rich copper concentrate would be produced for shipment to a smelter.

Based on planned annual production estimates of about 1.6 million tonnes (about 5,400 tonnes per day allowing for two months of service and maintenance downtime), Nautilus tables early stage cost estimates of about US$83 per tonne for mining and delivery of the ore to the concentrator. Additionally, cost estimates for a 1.8-million-tonne-per-year land-based concentrator, port facilities and related infrastructure are pegged at about US$160 million.

Nautilus is evaluating various options to raise money, including an AIM listing and financing in London and a possible off-take agreement to cover the costs of the concentrator. The company has begun baseline environmental studies and will begin permit applications with the Papua New Guinean government.

Nautilus had previously been partnered with Barrick Gold (ABX-T, ABX-N) subsidiary Placer Dome, which spent about US$12.2 million toward earning a 40% joint-venture interest. Earlier this year, Barrick elected to convert its interest into a 9.59% equity stake in Nautilus.

With its 49.9 million shares outstanding, the company posts a $95-million market cap. Since its initial public offering in May 2006, the stock has traded between $1.87 and $4.90, and sat at $1.92 at presstime.