Nautilus takes three steps forward

Vancouver – Nautilus Minerals (NUS-V) is three steps closer to its goal of mining the sea floor off the coast of Papua New Guinea. In just a few days the company received the first resource estimate for its Solwara I project and awarded the contract to design and build two seafloor mining tools, as well as inking a deal with Teck Cominco (TCK.B-T, TCK-N).

The first ever National Instrument 43-101-compliant resource estimate for a seafloor deposit pegged indicated resources at Solwara I at 870,000 tonnes grading 6.8% copper, 4.8 grams gold per tonne, and 23 grams silver per tonne, and 0.4% zinc. Inferred resources came in at 1.3 million tonnes grading 7.5% copper, 7.2 grams gold, 37 grams silver, and 0.8% zinc. A cut-off grade of 4% copper was used.

The resource estimate for Solwara I is based on results from 111 drill holes completed in 2007, 35 drill holes completed in 2006, and surface mapping and sampling. The resource remains open to the west and at depth 38% of holes drilled this year ended in mineralization.

The vessel contract term limited time available for drilling in 2007. As such, Nautilus was not able to pursue the western extension of the Solwara I deposit or test other electromagnetic anomalies in the area. The depth limitation of the new remote-operated vehicle rigs was also a constraint, as drilling was limited to a maximum of 19 metres depth.

Solwara I is one of several deposits within seven exploration licenses in the Bismarck Sea collectively called the Solwara project. The seafloor deposits, at depths of up to 1,700 metres, are precious and base metal-rich massive sulphides formed from recently active volcanic vents, known as “black smokers”.

Around each “smoker” a fine-grained sediment layer typically 1 metre thick sits atop a chalcopyrite-rich sulphide ore zone, followed by a highly altered clay-pyrite-anhydrite footwall. Nautilus wants ot outline a series of mineral deposits that it could aggregate over time using a mobile ship-supported mining system. Proposed mining plans see mineralized material dredged from the seafloor, pumped to the surface vessel, and then transferred onto barges for transport to a land-based concentrator producing a gold-rich copper concentrate.

Just two days before releasing the Solwara I resource estimate, Nautilus announced it has awarded a contract worth $67.5 million to an English company to design and build two seafloor mining tools. The contract was awarded after a four-month tendering process involving several major remote-operated vehicle and mining equipment supply contractors.

The seafloor mining tool contract is the first of three mining systems components that Nautilus must acquire for its seafloor mining plan to succeed. The second is the riser and lifting systems. Nautilus recently launched a competitive engineering design program for the systems that will run for eight weeks and expects to select a contractor by the end of January.

The third essential component is a contractor to provide mining services, including a mining vessel. Nautilus had a “heads of agreement” with Jan de Nul that would have seen the Belgian company construct a 191-metre vessel to serve as the mining platform but the agreement broke down in July. Since Jan de Nul was to have borne the costs of the vessel, the end of the agreement placed the major capital item on Nautilus. The company expects to finalize a mining service contract in the second quarter of 2008.

And in another Nautilus development, shareholder Teck Cominco has agreed to exercise its share purchase warrants to acquire 3 million additional shares six months early, at a price of US$5 per share for a total of US$15 million. The move brings Teck Cominco’s interest in Nautilus to 7.2%.

And the investment of an additional $15 million brings to US$52 million the funds committed by Teck Cominco to Nautilus, following an earlier placement of US$25 million and a commitment to pay US$12 million as an option to form a joint venture.

Teck and Nautilus have agreed that Teck Cominco can use the US$12 million option payment to conduct a ship-based exploration program in 2008 in one or more of four designated areas in Papua New Guinea, Tonga, and New Zealand. Teck Cominco must commit to a sea-based program by June 2008 or else will lose the right to form a joint venture with Nautilus in that area.