Pacific Magazine > Magazine > February 28, 2008

Natural Resources

Riches From The Sea

Nautilus Minerals Charts New Territory In Deep-Sea Exploration. .

By Samantha Magick

Nautilus CEO David Heydon inspects Voest Alpine drum cutter.

The booming economies of China and India, and the
pressure on land-based mineral resources are resulting in the transformation of Nautilus Minerals to a full-blown mining company. And it is creating a buzz across the Pacific.

Nautilus Minerals (TSX & AIM: NUS)  has exploration licenses for high-grade copper, gold, zinc and silver marine deposits in  Papua New Guinea, Tonga, Fiji, Solomon Islands and further applications pending in Fiji and New Zealand.

It closed out 2007 with $312 million cash in the bank, the awarding of a £33 million (US$65 million) contract for the design and build of two remote-operated deep-sea mining machines, and the statement that it was "on track to commence commissioning for mining operations by the third quarter of 2010," with the caveat that this was subject to "timely Papua New Guinea government approval."

Nautilus discovered four new mineralized areas offshore of Papua New Guinea, says CEO David Heydon, and this area will be its focus in 2008. Last year the company used two ships and spent $23 million on exploration. This year the budget is between $20-25 million but up to seven ships will be chartered for use.

As the public face of Nautilus, Heydon has been responsible for promoting the company as a pioneer in its field to potential investors and fund managers, to the Pacific Island governments it is negotiating licenses with, and potentially in the future, with the communities that may be affected by mining.

“It's a new industry, with a clean sheet of paper," Heydon says.

Heydon uses the example of Papua New Guinea, saying, "revenue for (traditional) mining can be used for schools, hospitals, but that’s going to wane by 2020, 2015 unless you replace that revenue with something else."

Says Heydon: "This is a way of opening up PNG again."

The exploration process is complex. It involves identifying and sampling mounds or chimneys, which are formed when metal rich water is discharged from sea floor vents.

“It's very capital intensive," says Heydon. Nautilus's
corporate shareholders have provided not only funds, but also technical support and staff in Nautilus's Australian office. Three international resource companies have a stake, Epion with 22.4 percent, Teck Cominco with approximately 7.2 percent and Anglo American with 5.7 percent as of January 2008.

"These companies will move away in time and develop their own resources," Heydon says. "We're just the first."

With being first comes uncertainty and controversy. In a formal letter to Nautilus, Wencenslaus Magun of Papua New Guinea community organization Mas Kagin Tapani, recently wrote, "we depend on a healthy clean ocean to feed our families as we have done for generations. Any new venture, such as deep sea mining, must proceed slowly at a village pace, rather than at the speed of a multi-national company."

Environmental advocacy organizations such as the Australia-based Mineral Policy Institute share this concern.

"There is little or no independent oversight of companies' activities. Exploration activity... is not subject to appropriate regulation and control. This is a grave issue in this case as the areas targeted by these companies coincide with what has been identified as biodiversity hotspots in the region,"  says the Institute's Techa Beaumont.

“Villagers need to have a say in any project that is going to impact their resources. This is actually the law in Papua New Guinea, as the vast majority of land is recognized under customary tenure, however there is limited capacity for enforcement of these laws,” she says.

Deputy Director at the Pacific Islands Applied Geoscience Commission (SOPAC) Bhaskar Rao says there was an attempt to develop a regional mining code in the 1990s that would include a set of basic policy guidelines- fiscal, environmental and legal-that would be prerequisites for any offshore mining legislation and policy in the region.

“PNG is perhaps the most advanced in the region in terms of policies and guidelines that cover offshore mineral prospecting and licensing. Others say Fiji and Tonga are considering these. This is an area that SOPAC feels able to assist dependent on resource availability,” Rao says.

 

“Attempts should be made to get countries to strengthen existing (or where non-existent, develop) relevant legislation and policies to both safeguard environments as well as to get a reasonable share of the wealth and profits,” he says.

Under the United Nations Convention on the Law of the Sea (UNCLOS), states can extract oil, gas and minerals from the seabed up to 560 kilometers beyond coastlines if they can demonstrate the “prolongation” of an adjoining continental shelf.

Secretary General of the International Seabed Authority and former Fiji diplomat Satya N. Nandan in December 2007 told parties to UNCLOS, “It is fair to say that there are few other activities in the oceans (as seabed mining) that have been studied and regulated to such a detailed extent before the activity has even taken place. Most examples of environmental regulation occur as a response to environmental degradation, often as a result of over-utilization of resources and incidental destruction of habitats. In the case of the authority, most of the efforts over the past 10 years have been spent in encouraging the study of the deep sea environment and in working together with scientists from around the world to analyze and disseminate the results of such research for the benefit of all states.

“The increasing likelihood that commercial mining will take place in the foreseeable future makes it all the more important that the authority completes its work on the elaboration of regulations for exploration for polymetallic sulphides and cobalt-rich crusts as soon as possible. Progress to date on these regulations has been slow.

“In May members of the authority will meet to discuss boundaries and mining allocation areas.

“The negotiations are now at a very delicate stage. It will be necessary to focus on the most difficult and complex issues, including the size of areas to be allocated for exploration to contractors and the fees to be paid for contract areas, “ Nandan says.

For his part, Heydon says Nautilus is well aware of the environmentalist and community concerns, and has given scientists and students from all over the word access to their vessels.

“Contributing to scientific knowledge as well is one of the things that excites us," he asserts. "We don't disturb people's culture directly—we are working at a depth of 2,000 meters, well below the areas where fish are living," he says.

“Our exploration area covers the size of Greece but that doesn't mean minerals are (throughout that area)... I can understand people's concerns but all we have are licenses to explore."

An Environmental Impact Assessment is expected this year, which will inform how the company proceeds.

“The real message is that it's exciting and (has the potential) to turn into a huge industry," Heydon says.