Almost two decades after plans to create the world's first commercial high-grade seafloor copper-gold mine were first mooted, Nautilus Minerals is advancing production plans for its Solwara-1 project site in the Bismarck Sea of Papua New Guinea.
 
In a year which has seen the company achieve several milestones, Nautilus is gearing up to make seafloor mining a reality and kick off a new industry of seafloor resource production through the separation of mineralised material from seawater.
 
Earlier this year, the Toronto-listed mining company resolved its dispute with Papua New Guinea, ceasing arbitration proceedings and signing an agreement that will enable Solwara-1 to move towards production.
 
Factory acceptance testing for one of the three seafloor production tools and assembly of the other two which will carry out the excavation and collection of high-grade copper and gold is underway.
 
The company has also entered into an agreement for the charter of an appropriate vessel for the operation.
 
At time of going to press, the Papua New Guinea government was in the process of completing the state nominee's purchase of the negotiated 15% interest in the Solwara-1 project, which will result in funds of $US113 million, currently in escrow, being released to Nautilus to help fund its program.
 
While Nautilus has had to overcome a number of challenges to move the project towards production, company CEO Mike Johnston told RESOURCESTOCKS that the prospect of launching the world's first seafloor mine was a huge accomplishment.
 
"Resolving the arbitration with Papua New Guinea was a major achievement," he added.
 
"This has allowed us to get the project back on track.
 
"We are very pleased to have negotiated an amicable resolution of the issues with Papua New Guinea, to which the market responded positively.
 
"This step represents a major vote of confidence in Nautilus and the Solwara-1 project.
 
"Through this joint venture, the state will provide a capital investment and will retain a direct interest in the long-term success of the project.
 
"We look forward to working closely with the state and Petromin on Solwara-1, which will generate economic activity within the state and the country's province of New Ireland."
 
Johnston said he was excited to secure a vessel contract with Dubai-based marine solutions company Marine Assets Corporation (MAC), which will own and provide the marine management of the vessel Nautilus plans to use in its operations.
 
"We appreciate the continued support we have received from Eda Kopa, our joint venture partner, in reaching this milestone and, together with them, look forward to working with MAC and the shipyard in seeing the delivery of our first vessel and making seafloor mining a reality," he added.
 
The vessel will be chartered to Nautilus for a minimum period of five years at a rate of $US199,910 per day, with options to either extend the charter or purchase the vessel at the end of the initial five year charter period.
 
It will serve as the operational base for the Solwara-1 joint venture to be formed by Nautilus and the Papua New Guinea state nominee Eda Kopa (Solwara) Ltd, a subsidiary of state-owned Petromin PNG Holdings Ltd.
 
Under the terms of the arrangement, MAC will enter into a contract with Fujian Mawei Shipbuilding in China to design and construct the vessel in accordance with Nautilus' specifications.
 
The ship building contract is expected to be signed by November 28, with a $US10 million deposit payable by Nautilus to MAC following payment of the first instalment under the shipbuilding contract.
 
The vessel will be 227m long, 40m wide and able to accommodate up to 180 people as well as generate about 31MW of power on board.
 
All the below-deck mining equipment will be installed in the vessel during the build process and the vessel is expected to be delivered by the end of 2017.
 
Nautilus plans to separate the mineralised material from seawater in the Bismarck Sea, targeting an initial mining rate of 1.2-1.3 million tonnes per annum of dry material to produce about 80,000 tonnes per annum of copper and 150,000 ounces per annum of gold.
 
Production at Solwara-1 could start as early as the first quarter of 2018, and Nautilus has an agreement with China's Tongling Nonferrous Metals Group which provides for the purchase by Tongling of 1.1Mtpa (subject to a 20% variation) of Solwara 1 material.
 
In addition, the explorer has plans in place to grow its tenement holdings in the exclusive economic zones and territorial waters of Papua New Guinea, Fiji, Tonga, the Solomon Islands, Vanuatu and New Zealand as well as other areas outside the Western Pacific.
 
While other companies bemoan the end of the mining boom, Nautilus says the site has a great deal of potential.
 
"The current resource on the mining lease at Solwara-1 is around three million tonnes, and we've got potential at another site, Solwara-12," Johnston said.
 
"We completed a 3D seismic survey close to the Solwara-1 site back in 2011 which highlighted a couple of really prospective targets.
 
"We have other targets in the Bismarck Sea and we have a big bank of targets of other mineralised systems in Tonga.
 
"We are in discussion with a number of governments who would like to understand seafloor mining and are interested in seeing what we can do.
 
"There are a lot of massive sulphide systems all over the world which occur around plate boundaries - they are surprisingly common.
 
"Early next year we will restart exploration - that's something we are very focused on.
 
"These systems are relatively small compared to land-based deposits, but they are very, very high grade. The contained metal can be quite significant yet the environmental footprint, by comparison to land, is very small."
 
Johnston said Solwara-1 was capable of producing a similar amount of metal to the Prominent Hill mine in South Australia, on an annual basis, but with the production coming from an area which equated to around 0.1sq.km.
 
"In Papua New Guinea, we'll mine the mineralised material and bring it up to the surface.
 
"We'll transfer it onto Handymax vessels, and the entirety of the material we mine will go to China for processing. There's essentially no waste and no tailings whatsoever in PNG.
 
"Once we get the mineralised material to China, the processing costs and economics in China are so much better than they are in the West and we potentially get maximum utilisation of the resource.
 
"What would be considered tailings in the West actually have a monetary value in China because of the gold content and the iron ore content.
 
"The copper grade is around about 8% and the gold grade is just a shade under six grams [per tonne].
 
"It's the grade and the associated lack of material movement that makes these things so attractive.
 
"Seafloor massive sulphide systems are so high grade that it means the footprint you're chasing on an annual basis is relatively small.
 
"We are very excited about it, and I'm looking forward to actually showing people what production will look like."
 
*A version of this report, first published in the November/December 2014 edition of RESOURCESTOCKS magazine, was commissioned by Nautilus Minerals.