Name and Location
Solwara 1 seafloor copper/gold project, Papua New Guinea (PNG).

Client
Prospective marine miner Nautilus Minerals formed a joint venture (JV) company with PNG’s nominee, Eda Kopa (Solwara), in December 2014 to mine high-grade polymetallic seafloor massive sulphide (SMS) deposits.

Nautilus formed the JV after receiving $113-million that had been placed into escrow in May 2014, after completing the sale of 15% of its Solwara 1 project to Eda Kopa.

Project Description
Nautilus Minerals is pioneering the concept of mining the ocean bed for copper, gold, zinc and silver.

The company is exploring for high-grade polymetallic seafloor massive sulphide (SMS) deposits at 1 600 m below the surface of the Bismarck Sea, off the coast of PNG, within the Western Pacific Ocean’s Rim of Fire. The operation aims to produce ore at a rate of more than 1.3-million tons a year, with the capacity to ultimately ramp up to 1.8-million tons a year of dewatered ore, which will be delivered to the Port of Rabaul.

As of November 25, 2011, the Solwara 1 project had an indicated mineral resource of one-million tons, grading 7.2% of copper, 5 g/t of gold, 23 g/t of silver and 0.4% of zinc. Its inferred resource comprised 1.54-million tons, grading 8.1% of copper, 6.4 g/t of gold, 34 g/t of silver and 0.9% of zinc.

Net Present Value/Internal Rate of Return
Not stated.

Value
The total capital cost for the system to deliver dewatered ore on board barges to the Port of Rabaul, including a 17.5% contingency, is estimated at $383-million.

The operating cost, excluding contingency, is estimated at $237 000/d, or about $64/t of mined ore, transported to the port based on a production rate of 1.35-million tons a year. Allowing for a 10% contingency, these operating costs become $261 000/d, or about $70/t.

Duration
First production from Solwara is expected in 2016.

Latest Developments
Nautilus has responded to an environmentalist attack on its flagship Solwara 1 copper/gold/zinc/silver project, describing the critique released on October 5 as being unscientific, and full of errors and misunderstandings.

As steel cutting for Nautilus’s production support vessel started in China last week, environmentalists ramped up the ideological battle against the sea-floor mining project by publishing a critique, titled 'Indefensible Flaws', at the Asia Pacific Deep Sea Mining Summit, held in Singapore.

“Their critique is highly flawed and it is clear that they only partially understand what it is they’re criticising. For instance, to criticise the assessment because it didn’t include gold, had no bearing on the overall mining operation,” Nautilus CEO Mike Johnston told Mining Weekly Online from Brisbane, Australia.

He explains that independent natural capital accounting firm Earth Economics does not include gold in the environmental and social benchmarking analysis released in June, as it is not a critical part of the mining operation, eventhough it has the potential to polarise opinions.

“The reason Earth Economics left gold out was because gold is a little bit contentious with most environmentalists . . . [as it] polarises people’s opinions. However, if . . . included . . . would only improve the economics for Solwara 1,” Johnston has said.

Johnston has questioned the credentials of the people who have criticised the company’s ‘Environmental and Social Benchmarking Analysis of Nautilus Minerals Inc Solwara 1 Project’ report, noting that the company that undertook the field work also services top-tier clients, including the World Bank, the International Finance Corporation and the US government.

Another criticism is that there is not enough information available on the deep ocean ecosystem to evaluate it. “It’s true that there had not been natural capital accounting assessments made of those ecosystems, but what economists did was take the highest comparable land values, so that the values assigned to the ocean floor environment would be very conservative,” Johnston has stated.

He has also waylaid the criticism of the Earth Economics assessment not providing adequate surface current data on the project by indicating that the whole ore extraction system is designed not to disturb the upper layers of the water column.

Certain individuals in the environmentalist lobby are fighting an ideological battle against mining, saying that all mining should end, while others will not want to see any mining happening in the oceans, Johnston has stated.

“We’ve always had an open relationship with environmental lobbyists. We’ve invited them to our annual general meetings and have always had an open-door policy,” Johnston has said, stressing that the world increasingly needs copper to develop.

The company is bullish on the base metal’s strong medium- to long-term fundamentals that will support the Solwara 1 project, with added upside when gold is also accounted for.

Key Contracts and Suppliers
Soil Machine Dynamics (construction and supply of two remote-operated SMTs); Technip (engineering, procurement and construction management services for the RALS components of the deep-water Solwara 1 mining and extraction system, comprising subsea pumps, a riser pipe, a riser handling system and associated deck equipment); North Sea Shipping Holding (supply of a specialist marine support vessel); Harren & Partner (supply of a platform supply vessel); GE Oil & Gas (supply of a subsea slurry lift and pump); SRK Consulting, Ausenco, Clough Engineering and Mineralurgy (offshore production system definition and cost study); Golder Associates (mineral resource estimate); Parsons Brinckerhoff (dewatering study); and Pells Sullivan Meynink (geotechnical laboratory testing programme and on-board ship laboratory, advice on rock mass and material parameters, as well as slope-stability analysis for mining).

On Budget and on Time?
Not stated.

Contact Details for Project Information
Nautilus Minerals investor relations and communications VP Joe Dowling, tel +61 7 3318 5544 or email jjd@nautilusminerals.com.
Soil Machine Dynamics, tel +44 191 234 2222, fax +44 191 234 0444 or email info@smd.co.uk.
Technip, tel +33 1 47 78 24 00.
North Sea Shipping Holding, tel +47 55 08 88 00.
Harren & Partner, tel +49 421 46 86 0 or fax +49 421 46 86 586.
GE Oil & Gas, tel +1 203 373 2211.
SRK Consulting, tel +1 604 681 4196, fax +1 604 687 5532 or email info@srk.com.
Ausenco, tel +675 3256 033 or fax +675 3250 091.
Clough Engineering, tel +61 8 9281 9281, fax +61 8 9281 9943 or email clough@clough.com.au.
Mineralurgy, tel +61 7 3381 9295.