Nautilus Minerals placing will help bankroll its undersea odyssey

AIM and Toronto-listed Nautilus Minerals (LON:NUS, TSE:NUS) said it has raised C$27.6 million via a private placement of shares. It is part of a much larger cash call to bring in more than C$98 million before expenses.

This injection of funds will help bankroll the development of Nautilus’ seafloor resource production system.

This will be deployed at the company's first deepwater copper and gold project at Solwara-1, in the Bismarck Sea of Papua New Guinea. 

The company is targeting massive sulphide deposits that are cousins of onshore volcanic anomalies seen mainly in Canada.

Nautilus plans to spend around C$400 million between now and the back end of 2013 developing this first underwater open-cast mine at Solwara.

It will require a suite of remote-controlled sea-floor production units to cut and crush the rock into a thick sludge, which will then be pumped to a production support vessel 1,600 metres above the site.

It is a neat process that will see cold water piped back down to the sea floor to minimise the ecological damage, and the dried sludge shipped by barge to shore for processing.

The price-tag of the project may seem excessive but is a fraction of the cost of an onshore mine, and analysts predict it could produce annual revenues of C$1 billion (£610 million) if metal prices remain at their current sky-high levels.

There is a space-age feel to everything the company has done to date.

Yet the technology it has deployed – from the C$10 million (£6 million) remote-controlled vehicles that have been used to explore the ocean bed for gold and copper to the devices deployed to detect the geochemical signatures given off by the precious metals – has been borrowed from the offshore oil industry.

In fact, the riser system, a 300 millimetres wide pipe that will be used in the production phase to get the ore out of the sea, and the state-of-the-art boat it will be shipped aboard, are derivatives of the kit used by oil support companies.

Nautilus has targeted Solwara because of the unusually high concentrations of base metals.

The first project is small by industry standards, both in terms of the size of the resource and the time it will take to exhaust the gold, copper and ancillary metals.

However, the beauty of the Nautilus system is that the vessel and equipment are portable, and can be deployed on a new target with a comparatively short turn-around time.