Key points
- Nautilus Minerals awarded Soil Machine Dynamics Ltd. of Newcastle upon Tyne, U.K., a contract worth approximately 33 million pounds sterling (C$67.5-million) to design and build two seafloor mining tools.
- The seafloor mining tool contract was awarded after a four-month competitive tendering process against other offshore ROV and mining equipment suppliers.
- Nautilus is targeting commissioning of mining operations by the third quarter of 2010, subject to PNG government approval.
- On Dec. 17, 2007, Nautilus granted 4.25 million performance-based stock options to directors, officers and employees at an exercise price of C$5.35, vesting only if mining operations commence in 2010.
NAUTILUS MINERALS INC.: seafloor MINING TOOL CONTRACT AWARD AND PROJECT
DEVELOPMENT UPDATE
Nautilus Minerals Inc. has awarded a contract worth approximately 33 million pounds sterling (equivalent to $67.5-million (Canadian)), to Soil Machine Dynamics Ltd. (SMD) of Newcastle upon Tyne, U.K., for the design and build of two seafloor mining tools (SMT) and to provide a development update for its Solwara 1 project, located in the territorial waters of Papua New Guinea (PNG).
David Heydon, Nautilus’s chief executive officer, said: “The placing of this first order is a historic step in the creation of a new industry and a major milestone for the Nautilus team, who continue to meet the development timelines for the delivery of the Solwara 1 project. Nautilus is on track to commence commissioning for mining operations by the third quarter of 2010, subject to timely PNG government approval.
“Significant steps have been taken in the design and build process for the three key components of the mining system. The SMT contract, which is the first of the three contracts, was awarded after a four-month competitive tendering process that involved several other major offshore remote-operated vehicle (ROV) and mining equipment supply contractors. Nautilus chose SMD for the strength of its design and competitive approach. We look forward to working with the SMD team to deliver the world’s first seafloor massive sulphide (SMS) mining tool.”
Conference call
Nautilus Minerals will hold a conference call on Thursday, Dec. 20, 2007, at 10 a.m. Eastern Time (3 p.m. London time/GMT) to provide an update on the Solwara 1 project development.
Project development update
Nautilus continues to make considerable progress in the delivery of the Solwara 1 project. Over the past three months, the focus has been on the tendering for the provision of the three key mining system components:
Seafloor mining tool;The riser and lifting system (RALS);Mining services, including provision of the mining vessel.
- Seafloor mining tool;
- The riser and lifting system (RALS);
- Mining services, including provision of the mining vessel.
Nautilus’s approach has been to lock down the contracts for the SMT and the RALS first. The mining services contract will then be awarded as the configuration of these subsea systems has bearing on the optimal surface vessel configuration that the mining contractor will be required to provide.
Recently a competitive, paid, front-end engineering design program was launched for the RALS, involving “world’s best” international contractors. This will run for eight weeks and Nautilus expects to select the RALS design and build contractor before the end of January, 2008.
The mining services contract will be finalized in the second quarter of 2008, following a subsequent competitive, paid, front-end engineering design study with several high-calibre international groups. These groups will be short-listed before the current year-end. The objective of the design program will be for contractors to assess the subsea mining equipment, identify the required integration with the proposed vessels and demonstrate that the contractor groups are proposing optimal vessel configurations. Under the mining services agreement, the successful contractor will provide the mining support vessel and manage the daily production operations on a performance incentivised basis.
Following the engineering study and the award of the mining services contract, the company will be in a position to announce its target capital expenditure and operating costs.
Metallurgical testwork continues on a representative 1.2-tonne drill core sample at Ammtec laboratories in Perth, Western Australia. Front-end engineering studies into the required treatment process are advancing and site investigations are in progress in PNG to finalize selection and purchase of a site suitable for storage and treatment.
Please use the following number for the conference call:
Canada: 1-866-837-4489
United Kingdom: 0-800-056-9662United States: 1-866-586-2813Other/international: +61-2-8524-6650
Canada: 1-866-837-4489
United Kingdom: 0-800-056-9662
United States: 1-866-586-2813
Other/international: +61-2-8524-6650
Performance-based options granted
On Dec. 17, 2007, the company granted 4.25 million options to directors and employees as part of the company’s performance-based remuneration policy and as a form of incentive for staff to partake in this historic value creating event. The options were granted under the company’s stock option plan which was approved by shareholders and is limited to 10 per cent of the company’s issued capital. The exercise price for the options is $5.35 and they will only vest upon notice from the company that it has commenced mining operations during 2010. The options will expire on Nov. 30, 2012. If the company does not commence mining operations during 2010 the options will not vest and will be cancelled.
Name Date of grant No. of options Exercise price
Geoff Loudon Dec. 17, 2007 300,000 C$5.35
David Heydon Dec. 17, 2007 200,000 C$5.35
David De Witt Dec. 17, 2007 200,000 C$5.35
Russell Debney Dec. 17, 2007 200,000 C$5.35
John O’Reilly Dec. 17, 2007 200,000 C$5.35
Farhad Moshiri Dec. 17, 2007 200,000 C$5.35
Other employees Dec. 17, 2007 2,950,000 C$5.35
Total granted 4,250,000
Warrants exercised
The company advises that as a result of the exercise of certain warrants, the company has made application for 107,831 common shares to be admitted to Alternative Investment Market and Toronto Stock Exchange. The shares are expected to be admitted to trading on Dec. 19, 2007.
Milestone-based shares
Nautilus has entered into an agreement with a consulting group, which is providing services to the Solwara 1 project, where part of the consideration for services, are the issue of up to 300,000 fully paid common shares in the company in stages subject to the achievement of each of the following project milestones:
Signing of a project development agreement between Nautilus and the Government of PNG — 60,000 common shares;Obtaining unencumbered title to the area of land where Nautilus decides to locate the processing plant — 60,000 common shares;The required agencies of the government of PNG approve the environmental impact statement for the Solwara 1 project — 60,000 common shares;The grant of a mining lease over the Solwara 1 resource within E1196 on terms acceptable to Nautilus Minerals — 60,000 common shares;Commercial completion of the Solwara 1 project which is defined as being the point at which commissioning is complete and the operation has been producing concentrate at a rate of at least 70 per cent scheduled rate for a period of three months — 60,000 common shares.
- Signing of a project development agreement between Nautilus and the Government of PNG — 60,000 common shares;
- Obtaining unencumbered title to the area of land where Nautilus decides to locate the processing plant — 60,000 common shares;
- The required agencies of the government of PNG approve the environmental impact statement for the Solwara 1 project — 60,000 common shares;
- The grant of a mining lease over the Solwara 1 resource within E1196 on terms acceptable to Nautilus Minerals — 60,000 common shares;
- Commercial completion of the Solwara 1 project which is defined as being the point at which commissioning is complete and the operation has been producing concentrate at a rate of at least 70 per cent scheduled rate for a period of three months — 60,000 common shares.
