TORONTO (miningweekly.com) – Prospective ocean floor miner Nautilus Minerals has signed a new sales agreement with China-based Tongling Nonferrous Metals Group for the ores extracted from the company’s Solwara 1 deposit, located in the Bismarck Sea offshore Papua New Guinea, with first delivery expected in the first half of 2018.

The two companies had entered into a new master ores sales and processing agreement (MOSPA), building on the April 2012 binding heads of agreement (HOA) for the sale of the product extracted from the Solwara 1 deposit.

Under terms of the new take-or-pay agreement, Nautilus stood to benefit from significant cost savings and reduced business risk, while giving Tongling the freedom to process the Solwara 1 material in a manner which optimised its return, Nautilus said.

The MOSPA had simplified the arrangements between the parties in several regards and it now operated as a more conventional material sales agreement, where Tongling would pay Nautilus for a fixed proportion of copper, gold and silver contained in the ores.

The copper payment would be for 95% of recoverable copper, as determined by locked cycle test work on samples of shipments. The gold payment was fixed at 50% of the contained gold in the mineralised material and represented a premium payment for gold compared to the HOA. Payment for silver was fixed at 30% of contained silver in the ores. The Asian international copper concentrate benchmark would still be used as the basis for smelter treatment and refining charges related to the recoverable copper.

From Tongling’s perspective, the MOSPA offered greater flexibility over the design and operation of a concentrator to be built specifically for processing Solwara 1 ores. The construction of the concentrator would initially be financed by Tongling, with these costs recovered through a fixed plant capital fee payable by Nautilus monthly over the term of the MOSPA.

Nautilus would provide Tongling with a bank guarantee covering 50% of the concentrator capital cost. Tongling now had the exclusive right to market or process any pyrite concentrates produced from the Solwara 1 material, whereas under the HOA the parties were to jointly market any pyrite concentrates sharing any profit on a 50/50 basis.

"This new agreement provides improved terms for both Nautilus and Tongling and can be truly described as a ‘win-win’ outcome. The MOSPA gives greater flexibility to Tongling with respect to its operations, while providing Nautilus with certainty and an improved net smelter return. I am delighted to be continuing our relationship with Tongling as a key business partner supporting the development of the world’s first Seafloor Massive Sulphide mining project,” Nautilus CEO Mike Johnston commented.

Meanwhile, Nautilus advised that the Independent State of Papua New Guinea’s nominee, Eda Kopa (Solwara), the Company’s joint-venture partner in the Solwara 1 Project, had chosen not to exercise its option to take up to a further 15% interest in the project, and maintained its fully funded stake at 15%.