Nautilus Minerals Inc.

April 14, 2011 02:00 ET

Nautilus Forms Strategic Partnership and Secures Vessel



April 13, 2011

Nautilus Forms Strategic Partnership and Secures Vessel

TORONTO, ONTARIO--(Marketwire - April 13, 2011) - Nautilus Minerals' (TSX:NUS)(AIM:NUS) plan to open a new

frontier of seafloor resource production has taken a major step forward, with the formation of a strategic

partnership with German shipping company Harren & Partner ("Harren").

A joint venture company (the "Vessel JV") is to be formed to own and operate a production support vessel which

will serve as the operational base for Nautilus to produce high grade copper and gold ore at its first

development project, Solwara 1, in the Bismarck Sea of Papua New Guinea ("PNG").

The vessel will be the floating platform for the mobilisation and remote operation of production machinery

operating on the seafloor at water depths of approximately 1600 metres. The seafloor production tools will cut

and gather ore which will be pumped in slurry form to the Production Support Vessel, where it will be processed

through a dewatering plant before transfer to barges for transport and subsequent treatment.

Under the terms of the strategic partnership, Harren will design and construct the vessel at a cost of

approximately EUR127 million (US$167 million), with delivery scheduled for the first half of 2013.

On delivery, the vessel will be sold to the Vessel JV in which Harren will hold a 50.01% interest. The

remaining 49.99% of the Vessel JV will be controlled by Nautilus through a holding company in which the PNG

government owns a 5% stake through its wholly owned company Petromin PNG Holdings Ltd ("Petromin").

The Vessel JV will charter the vessel to the mining joint venture (the "Mining JV"), in which Nautilus holds a

70% stake and Petromin holds a 30% stake, to carry out its seafloor production operations, for a period of

eight years, at an average daily rate of US$70,000. Harren will provide crewing, logistics and ship management

services to the Vessel JV which will be on charged at a daily rate of US$10,000 to the Mining JV. The Mining JV

will provide a charterer's guarantee to the Vessel JV for an initial value of US$10 million reducing over a

five year period to US$2.5 million.

Funding for the Vessel JV will include approximately EUR75 million (US$99 million) in bank debt to be procured

by Harren, which also will contribute EUR16 million (US$21 million) in equity and loans. Nautilus will

contribute approximately EUR32 million (US$42 million) in equity and loans, and Petromin will contribute the

remaining EUR4 million (US$5 million).

"This transaction is a major step forward in the development of the seafloor resources industry," said Nautilus

CEO Stephen Rogers.

"Through this joint venture with Harren, we will secure a state of the art vessel to operate on this ground-

breaking project. This will ensure that we have the best available equipment and the greatest operational

efficiency and flexibility in bringing Solwara 1 into production."

"It brings to the project the extensive shipping expertise and experience of Harren, which operates a fleet of

56 vessels around the world. In addition, an important aspect of the transaction is that it provides access to

bank funding through the joint venture vehicle, enhancing capital flexibility for the project," he said.

Harren Chairman, Peter Harren said the company was very familiar with international strategic partnerships,

which have been a foundation of its business during its 20 years of operation. "During the course of our

negotiations with Nautilus, we have built a strong relationship and believe that working together we can make a

major contribution to this exciting project in Papua New Guinea," he said.

Harren has completed preliminary design for the vessel, a multi-purpose dry cargo ship classed by Germanischer

Lloyd. It has a length of 208m, beam of 40m, a deadweight capacity of approximately 18,800 tonnes and a speed

of 17 knots. (See links 1 and 2 below for pictures of the vessel).

The vessel will house generator sets producing 30MW of power for the vessel, seafloor production tools and

associated pumping machinery, and will have on-board accomodation for up to 160 people, including 30 maritime

crew. The vessel is to be built at a German shipyard.

In addition to the Production Support Vessel, the other major pieces of equipment to be built prior to the

start of operations include:

1.  The Seafloor Production Tools. Three remotely operated machines - an
    auxiliary cutter, a bulk cutter, and a collecting machine - are in the
    final stages of design by UK company Soil Machine Dynamics. The design
    of these machines is based on technologies that are tried and proven in
    the oil and gas, trenching, marine dredging and mining industries. Key
    contracts are now in place for cutting heads, tracks and the launch and
    recovery system.
2.  The Riser and Lifting System, which pumps the slurry from the seafloor
    to the Production Support Vessel. The design, being carried out by a US
    subsidiary of French group Technip, is close to finalisation with
    component testing now under way.

These items of equipment are scheduled for delivery in early 2013 and will be wholly-owned by the Mining JV.

Total capital cost estimate to complete the offshore production system for the Solwara 1 project have been

reviewed in light of the Harren transaction. The total capital cost for the extraction of ore from the seafloor

and delivery to the Port of Rabaul is now estimated to be approximately US$407 million. The US$167 million cost

of the Production Support Vessel is treated as a capital cost of the Vessel JV and not as part of the capital

cost of the Solwara 1 project.

In conjunction with entering into the Harren transaction Nautilus has decided to charter, rather than purchase,

ore transport barges, resulting in an associated reduction of capital costs for these items to the project

capital cost estimate and an associated addition to project operating costs of barge charter costs.

This has resulted in Nautilus' estimated vessel charter costs (including both the support vessel and the

barges) increasing by 33% above the respective cost estimates used in the Cost Study. Charter costs represented

34% of the total estimated operating costs per tonne under the Cost Study. (See the Cautionary Statement

Regarding the Cost Study at the end of this news release regarding risks associated with the information in the

Cost Study.) Nautilus will indirectly recover certain of these costs in the form of charterparty fees through

its interest in the Vessel JV. There have been no changes to the basic equipment configurations outlined in the

Cost Study and the anticipated daily production rate remains at an average 3710 tonnes (1.35Mtpa) excluding

site initiation and shutdown.

These changes to costs have been compiled under the supervision of Nautilus Minerals Project Manager -

Offshore, Michael Howitt. Mr Howitt is a qualified Chartered Engineer and a Member of the Institute of Marine

Engineering, Science and Technology (MIMarEST). Mr Howitt has reviewed and approved the disclosure regarding

costs contained in this news release.

Conditions Precedent

Completion of the Harren transaction is conditional on Harren securing a debt funding package for the Vessel

JV, and the project sanction by the Nautilus Board of Directors.

The Nautilus Board has approved the revised Solwara 1 project plan, together with the cost information relating

to the project, and is aiming to provide full sanction of the project upon securing appropriate financing.

Harren & Partner

Harren & Partner, based in Bremen, Germany, has been in operation for more than 20 years. The company was

formed in 1989 by Captain Peter Harren, and now operates 56 vessels of between 4,000 tdw and 70,000 tdw

including tankers, container feeder vessels, bulk and heavy lift carriers and dock ships.

The company provides comprehensive ship management services including fleet management, ship building project

management, ship inspection, crewing, purchasing of new and second hand tonnage, ship maintenance and repair,

safety management, registration, finance and insurance.

The company employs 145 staff on shore, has 1800 regular crew members, and has successfully managed more than

20 ship funds - all with positive rates of return.

Nautilus Minerals Inc.

Nautilus is the first company to commercially explore the ocean floor for polymetallic seafloor massive

sulphide deposits and is currently developing its first project. The Company's main focus is the Solwara 1

project, which is located in the territorial waters of Papua New Guinea in the western Pacific Ocean.

Nautilus is listed on the TSX and AIM stock exchanges, and has among its largest shareholders two of the

world's leading international resource companies Anglo American (11.1%) and Teck Resources (6.8%), as well as

Metalloinvest, one of the largest and fastest growing mining and metallurgical holding companies in Russia,

which beneficially owns 21% of the Company's issued shares through Gazmetall Holding (Cyprus) Limited.

For the purposes of this release, an exchange rate of 1.32 USD and C$1.27 to 1 EUR has been applied.


Link 1: Vessel:

Link 2: Vessel:

Link 3: Solwara 1 Offshore Production System Definition and Cost Study of June 2010:


Certain of the statements made in this news release may contain forward-looking statements within the meaning

of the United States Securities Exchange Act of 1934 and forward-looking information within the meaning of

applicable Canadian securities law. Forward-looking statements and forward-looking information include, but are

not limited to statements or information with respect to the dates of delivery of the support vessel, the

seafloor production tool and the riser and lifter system, the date of commencement of production and the annual

rate of production from the Solwara 1 project, estimated capital costs and operational costs, and the amount of

copper and gold to be derived therefrom, the features and performance of the support vessel, the funding

contributions of the participating companies and the estimated resource. We have made numerous assumptions

about the material forward-looking statements and information contained herein, including among other things,

that the planned annual rate of production will be achieved within the disclosed time period, delivery of the

vessel in the first half of 2013 for $167M, and the maintenance of a successful joint venture partnership with

Harren. Even though our management believes that the assumptions made and the expectations represented by such

statements or information are reasonable, there can be no assurance that the forward-looking statement or

information will prove to be accurate.

Forward-looking statements and information by their nature involve known and unknown risks, uncertainties and

other factors which may cause the actual results to be materially different from any future results expressed

or implied by such forward-looking statements or information. Such risks, uncertainties and other factors

include, among others, Harren or Nautilus failing to secure debt funding, default by a partner, the Nautilus

Board of Directors failing to sanction the project, late delivery of the vessel or other equipment, variations

to the price of the vessel, the cost of fuel, other inflationary factors and the charter rate for the Company's

vessels including the ore-transport barges, the proposed mine plan and assumptions regarding exchange rates.

Should one or more of these risks, uncertainties or other factors materialize, or should underlying assumptions

prove incorrect, actual results may vary materially from those described in forward-looking statements and

information. Although we have attempted to identify factors that would cause actual results to differ

materially from those described in forward-looking statements and information, there may be other factors that

cause actual results, performances, achievements or events to not be as anticipated, estimated or intended.

Also, many of the factors are beyond our control. There can be no assurance that forward-looking statements or

information will prove to be accurate, as actual results and future events could differ materially from those

anticipated in such statements. Accordingly you should not place undue reliance on forward-looking statements

or information. Except as required by law, we do not expect to update forward-looking statements and

information as conditions change and you are referred to the full discussion of the Company's business

contained in the Company's reports filed with the securities regulatory authorities in Canada.

Cautionary Statement Regarding Cost Study

Investors are cautioned that the Cost Study is not an economic assessment of the Solwara 1 Project as a whole

and does not confirm the Project's economic viability. Investors are cautioned not to use the Cost Study for

that purpose and that a study of all costs, rates of recovery and reasonable revenue projections is necessary

before any assessment of economic viability can be made.

The Cost Study was developed from a preliminary mine plan that includes inferred mineral resources. Investors

are cautioned that inferred resources are considered too speculative geologically to have the economic

considerations applied to them that would enable them to be categorised as mineral reserves, and there is no

certainty that the costs relating to the Offshore Production System set forth in the Cost Study will be

realised. In addition, the indicated mineral resources included in the mine plan are not mineral reserves and

do not have demonstrated economic viability.



Nautilus Minerals Inc. (Toronto)

Investor Relations

+1 (416) 551 1100


Nautilus Minerals Inc.

Joe Dowling

Vice President Investor Relations and Communications

+61 (7) 3318 5544 or Cell: +61 431 365 741


Numis Securities Limited

John Harrison

Nominated adviser

+ 44(0) 20 7260 1000


Numis Securities Limited

James Black

Corporate broking

+ 44(0) 20 7260 1000

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