NAUTILUS Minerals, the Canadian company with ambitious plans to mine minerals from the seabed floor in Papua New Guinea, has terminated its equity option agreement, ending a protracted dispute with the State.
Despite a recent ruling ordering the PNG government pay US$118 million plus interest for its 30 per cent stake in the Solwara 1project, Nautilus decided to terminate the state equity option agreement (SEOA) signed by the parties in 2011.
In a short statement released in February, Nautilus said it would now claim damages but would continue to seek an amicable resolution of the issues with the State.
Nautilus had been unable to move the project forward since 2012 when the PNG government served a notice of arbitration on the company, with Nautilus later having to stop production of the underground equipment.
The project, located in the Bismarck Sea, will involve the mining of copper and gold deep on the seafloor.
Nautilus has always kept quiet on the sticking points which have led to the drawn out dispute. It seemed there was hope for a resolution after the independent arbitrator ruled in favour of Nautilus, but the hope was short-lived after the company confirmed in October that the State had missed the deadline to pay the moneys owed.
Expanding on its decision to terminate the agreement in a conference call, Nautilus interim president and chief executive Mike Johnston said it was left with no other option but to cut ties due to the governments continued failure to perform under the SEOA.
Mr Johnston said the States inability to complete the purchase of the stake in the project was creating a lot of ongoing uncertainty for the company.
“It was restricting our ability to complete the build of the equipment and it was affecting our ability in discussions with potential shipbuilders and partners,” he said.
“Realistically, Nautilus could not continue to carry the state’s share of the development costs for the project so we’ve had to draw a line in the sand.”
“Perhaps the most important part of the termination is it now frees up the company to look at other funding and development options for moving the project forward and moving the company forward.”
Mr Johnston reiterated the company’s commitment to seeing the project come to fruition despite severing ties with PNG officials.
“As a company, we remain committed to PNG, the local community and where we operate,” he said.
The company still had significant support from the state at both ministerial and bureaucratic levels with all licences and permits remaining valid. Nautilus was also continuing to receive strong support from the community.
Despite the setbacks the company has experienced in the past 18 months, Mr Johnston said it was the company’s preference to achieve an amicable resolution over the issues.
“That continues to be our preferred outcome,” he said.
Looking ahead, the company said an essential part of its plan in the short-term was securing additional funding. Nautilus was also in discussions with potential equity partners and hopes to update investors on the status of the talks shortly.
As well as bedding down financing arrangements, the company is focused on completing the equipment build and finalising shipyard selection. It also hopes to have a vessel solution in place by the third quarter of 2014 which will give the company a clearer indication of the developments capital costs.
“Putting a vessel contract in place when there was an ongoing dispute with the state was proving to be a significant impediment to us and creating issues for us so now we’ve dealt with that decisively and are going to be moving forward,” Mr Johnston said.