Nautilus Minerals Inc.: Solwara 1 Development Project Update

Nautilus Minerals Inc. continues to make significant progress on the development of the Solwara 1 project in the territorial waters of Papua New Guinea (PNG), and is pleased to provide the following update.

Highlights:

Cost-reduction and optimization work progresses;In parallel, engineering and permitting activities continue;Operating costs for the offshore production system expected to be in the range $50 (U.S.) to $65 (U.S.) per tonne;Significant choice exists and lower costs available in today’s vessel market;In discussion with several prospective partners about joining in the Solwara 1 development.

• Cost-reduction and optimization work progresses;
• In parallel, engineering and permitting activities continue;
• Operating costs for the offshore production system expected to be in the range $50 (U.S.) to $65 (U.S.) per tonne;
• Significant choice exists and lower costs available in today’s vessel market;
• In discussion with several prospective partners about joining in the Solwara 1 development.

Nautilus’s chief executive officer, Stephen Rogers, commented: “Significant progress has been made in the last quarter as we seek to maximize the opportunities in the current market. We are excited about the vessel options that are available. The project has been markedly enhanced as a result of the cost-reduction and optimization work completed in the last four months, and this work continues. In parallel, we have had productive discussions with a number of parties that are interested in participating in Solwara 1 development.”

Over the last four months, Nautilus has undertaken a commercial review of its Solwara 1 project to identify potential capital and operating cost savings presented as a result of the current global financial downturn. Furthermore, it is progressing, in parallel with engineering design and vessel sourcing, with an optimization program to identify technical improvements to the system which could realize further cost benefits. Significant advances have been made on vessel sourcing and system optimization.

During this same period, Nautilus has been in discussions with several prospective partners regarding the development of the Bismarck Sea, which includes Solwara 1.

While the Solwara 1 cost-reduction and optimization program is continuing, highlights of the work completed to date include:

Shipping market enquiries have outlined a number of mining support vessel (MSV) options that offer significant savings and technical benefits to the project. Vessel evaluations and discussions are progressing, with the aim of identifying a short list at the end of the second quarter of 2009.In parallel with the vessel enquiry, a more detailed mooring analysis is in progress to further examine the viability of using a single preset deepwater mooring spread to maintain the MSV on station. Now that the traverse requirements of the sea floor mining tool (SMT) and the behaviours of the riser system are better understood, a moored vessel may offer benefits over a dynamically positioned vessel.Technip Inc. has been commissioned to undertake riser optimization and cost-saving analysis. This work will examine riser sizing and equipment sourcing to take advantage of the significant drop in global steel prices. This study is expected to report in the third quarter of 2009, albeit savings have already been identified in the work completed to date. A trial and testing program is in place with Soil Machine Dynamics to proceed with planned quarry and submerged trials of key cutting and gathering components of the SMT, providing valuable operational input to the final design.Discussions are in progress with GE Hydril to finalize a wear-testing program on the subsea slurry lift pump to better plan maintenance and sparing regimes.

• Shipping market enquiries have outlined a number of mining support vessel (MSV) options that offer significant savings and technical benefits to the project. Vessel evaluations and discussions are progressing, with the aim of identifying a short list at the end of the second quarter of 2009.
• In parallel with the vessel enquiry, a more detailed mooring analysis is in progress to further examine the viability of using a single preset deepwater mooring spread to maintain the MSV on station. Now that the traverse requirements of the sea floor mining tool (SMT) and the behaviours of the riser system are better understood, a moored vessel may offer benefits over a dynamically positioned vessel.
• Technip Inc. has been commissioned to undertake riser optimization and cost-saving analysis. This work will examine riser sizing and equipment sourcing to take advantage of the significant drop in global steel prices. This study is expected to report in the third quarter of 2009, albeit savings have already been identified in the work completed to date.
• A trial and testing program is in place with Soil Machine Dynamics to proceed with planned quarry and submerged trials of key cutting and gathering components of the SMT, providing valuable operational input to the final design.
• Discussions are in progress with GE Hydril to finalize a wear-testing program on the subsea slurry lift pump to better plan maintenance and sparing regimes.

Overall subsea system engineering is currently about 80 per cent complete.

Permitting has progressed, with the mining lease wardens hearing completed. An independent review of the environmental impact statement commissioned by the PNG government is nearing completion.

Market engagement with copper concentrate offtake parties has confirmed a strong interest in Solwara 1 copper concentrate as determined by the metallurgical test program supervised by Minerallurgy Ltd. and completed by Ammtec Laboratories in Perth, Western Australia.

Operating costs

Operating costs for the offshore production system are expected to be in the range of $50 (U.S.) to $65 (U.S.) per dry ton of ore to extract and deliver material into a stockpile at the Port of Rabaul. This is based on a targeted production rate of between 1.2 million and 1.6 million tonnes per year. Fuel is 10 per cent of this cost based on an oil price of $60 (U.S.) per barrel, assuming that a dynamically positioned vessel is finally selected by Nautilus in preference to the preset deepwater mooring spread discussed in work highlights.

The operating cost guidance is not an economic evaluation or an economic analysis. The current estimate of indicated and inferred mineral resources (870,000 tonnes of indicated mineral resources with 6.8 per cent copper, 4.8 grams per tonne gold, 23 grams per tonne silver and 0.4 per cent zinc, and 1.3 million tonnes of inferred mineral resources with 7.5 per cent copper, 7.2 grams per tonne gold, 37 grams per tonne silver and 0.8 per cent zinc using a 4-per-cent-copper cut-off grade) does not support a mine life that demonstrates at this time that mining is economically viable. For more information concerning the company’s current mineral resource estimate, please refer to the company’s current annual information form for the year ended Dec. 31, 2008, which can be found under the company’s SEDAR profile.

Conference call details

A conference call and webcast will be held on Wednesday, May 20, 2009, at 9 a.m. Eastern Daylight Time (Toronto) (2 p.m. British Summer Time (London)).

A webcast will also be available.

Dial-in numbers

International dial-in:  61-2-8524-6650

Australia:  1-800-148-258

Canada:  1-866-837-4489

United Kingdom:  08-000-569662

United States:  1-866-586-2813

International dial-in:  61-2-8524-6650

Australia:  1-800-148-258

Canada:  1-866-837-4489

United Kingdom:  08-000-569662

United States:  1-866-586-2813

For those whose country dial-in numbers are not included, please e-mail nmd@nautilusminerals.com.

A presentation to support the conference call will be posted on Nautilus’s for download by 8:30 a.m. Eastern Daylight Time (Toronto) on May 20, 2009.