Nautilus Minerals Inc. announces it has decided to preserve its cash position by terminating the construction of the equipment for its Seafloor Production System.
Nautilus announced on June 1, 2012 that it was in dispute with the Independent State of Papua New Guinea as to the parties’ obligations to complete the Agreement entered into in March 2011. A further announcement was made on June 20, 2012 confirming that the State had issued a Notice of Arbitration to the Company.
Nautilus considers that the State has a contractual obligation to pay an amount of approximately $23.5 million in respect of costs incurred in the development of the Solwara 1 Project up to January 2011, and to make pro-rata capital contributions in respect of subsequent Project development costs which, at the end of September 2012 totalled approximately $51.5 million (excluding interest). The State disputes that it is required to meet such obligations at this time. In order to continue the construction of the Seafloor Production System, Nautilus has been forced to carry the State’s share of Project development costs to date.
It has been Nautilus’ preference to resolve the dispute with the State by agreement and with that aim Nautilus has taken steps to meet with senior representatives of the State, including discussions with National Executive Council Ministers. Unfortunately, to date, an agreed commercial resolution with the State has not been achieved and Nautilus believes the avenues for achieving such a resolution within the timeframe that Nautilus could reasonably continue to carry the total development costs for the Project have now been exhausted. Accordingly, in order to preserve capital, Management and the Board of Directors of Nautilus have decided to terminate construction of its Seafloor Production System. All of the relevant supplier agreements contain provisions for termination without penalty. The Company has also been forced to reduce staff numbers with approximately 60 positions to be made redundant.
Nautilus’ CEO, Mike Johnston , commented: “While terminating the equipment build for the Seafloor Production System and reducing staff numbers to this extent was a difficult decision, it was appropriate. Nautilus has a highly prospective ground position, which includes 19 identified prospects in Tonga, including the recent high grade discoveries in the NE Lau Basin and a 410 million tonne Inferred Mineral Resource in the Central Pacific. Despite this setback, the Company remains committed to maximizing shareholder value by achieving its objective of developing the world’s first commercial seafloor copper-gold project and launching the deep water seafloor resource production industry, whilst maintaining an environmentally and socially responsible approach.”
Terminating the equipment build for the Seafloor Production System includes discontinuing discussions regarding an alternative vessel and associated funding solution. This means there will be a considerable delay in any commencement of production operations and it may also result in an increase in the Project cost.
[mappress]
Press Release, November 13, 2012