St. LOUIS () -- Nautilus Minerals Inc. [TSX:NUS; AIM:NUS] closed another private placement last week in the amount of C$39.1 million, bringing the total money raised in two years to more than C$325 million. With large shareholders including Russian investment firm Epion (16.8%), Anglo American [Nasdaq:AAUK] (6.4%), Teck Cominco [TSX:TCK.B, TCK.A; NYSE:TCK] (5.8%) and Barrick Gold [TSX:ABX; NYSE:ABX] (3.7%), the company has no shortage of interested investors.
However, some questions remain on whether Nautilus can deliver on its production target in just three years in Q3 2010, originally scheduled for 2009, while still in need of a resource estimate, mining platform, treatment facility and the all-important Environmental Impact Assessment Study (EIA). RI caught up with Nautilus President and CEO David J. Heydon for a quick update.
"We have stated Q3 2010 subject to timely permitting," he confirmed.
Nautilus is the first company to commercially explore the ocean floor for high grade gold-copper-zinc-silver seafloor massive sulphide. The company's flagship asset is the Solwara 1 Project, which is located in the territorial waters of Papua New Guinea in the western Pacific Ocean.
The company drilled 111 holes at Solwara 1 in 2007. Results to date have returned 36 mineralised intercepts from 44 holes with noteworthy intercepts like hole SD80 with 11.4 metres at 11.1% Cu and 6.5 g/t Au, hole SD109 with 9.6 metres at 8.3 % Cu and 8.0 g/t Au and hole SD052 7.8 metres at 11.8% Cu and 15.1 g/t Au. All samples have been despatched for analysis.
During a 30-day drilling program in May 2007, Nautilus also identified four new deposits: Solwara 5-8. Solawara 5 encountered grades of 17.34 g/t gold, Solwara 6 reported 18.10 g/t Au, Solwara 7 hit 17.15 g/t Au and Solwara 8 intersected 16.90 g/t Au, with all showing significant copper, zinc and silver grades.
With $295 million (C$292 million) cash on hand, the company plans to spend $20 million in exploration in 2007 and continue exploration at current levels for 2008 and 2009.
Heydon at the in late September that a resource estimate was scheduled to be released in December 2007. He confirmed this date with RI for Solwara 1, but "just for the piece where we will start mining," and it will not be a 43-101 compliant resource.
"As our grades are high grade and we aren't using project finance, we don't need a 43-101 resource as you would if you were doing a 0.7% copper porphyry deposit, where if you got it wrong and it only turned out to be 0.6%, you could loose your money - so the bankers want to know exactly," said Heydon. "People didn't do 43-101's in the early days of high grade ore, they just went mining," he added.
He said the company is not focusing on producing a resource statement, but on mine development and commencing mining at the site. The company is not proceeding with any scoping study, prefeasibility or feasibility study, since "such studies are conducted for bankers or financings, and we are not seeking financing."
However, Nautilus was dealt a set back earlier this year after it failed to sign a detailed works contract with Belgium-based dredging company Jan De Nul, which was to build a 191-metre mining ship for Nautilus. Nautilus has since taken over the offshore development aspects of Solwara 1.
Heydon previously said the company expects to secure a new vessel by October 2007, but as of yet no new contract has been signed. He told RI that the company is now down to 5 final tenders for the mining platform, but cannot complete this stage until finalizing the mining machine, riser and pumps.
He said these elements will "impact on the final design and costings of the mining platform, i.e. they all need to be done in sequence of mining tool first, then riser and pumps, then mining platform." The company is in final contract negotiations and plans to have the subsea mining tool contract completed within the next few weeks and then riser and lifting system in early next year.
With respect to the treatment facility, major equipment tender packages have been issued and responses from the supplier and contractor community are being received on time. Heydon said the company is finalizing its location for the facility and has been conducting test work including drilling for a port facility. Development and construction is forecast to begin in 2009.
Lassul Bay
But as the world's first underwater miner, Nautilus may face environmental challenges not yet seen by other land miners, which means that "timely permitting" could indeed be the major hurdle to overcome for 2010 production. And opposition has already emerged.
A study appearing in the May 18 issue of the journal Science, co-authored by Jochen Halfar, assistant professor of earth sciences at the U of T Mississauga, and Rodney Fujita, a marine ecologist with Environmental Defense, asserting that undersea mining could irreversibly damage ocean habitats.
According to the report, mining of massive sulphide deposits near undersea hydrothermal vent systems could smother and contaminate the fragile flora and harm sulphur-loving bacteria, worm and clam species.
The company maintains that the volcanic structures and other features that are of interest to the exploration scientists are being carefully assessed, while environmental authorities and mining regulators are being kept fully appraised.
The company has elicited professional staff from Scripps Institution of Oceanography, Hydrobiology of Australia, Duke University, University of Papua New Guinea, Coffey Natural Systems of Australia, APASA of Australia and University of Toronto, Canada, as well as vulcanology experts and contracted scientists for ongoing environmental studies.
Heydon previously said in Denver that the company will release an EIA in February 2008; however, he told RI this week that it wouldn't be completed until Q2 2008.
The company has 142.8 million shares outstanding, with about 19 million warrants and 9.2 million options, giving it a fully diluted market cap of about C$691 million. Shares are currently trading at about C$4.00 in Toronto.
