Deep sea mining firm seeks creditor protection

By Peter Kennedy

Nautilus Minerals Inc. [NUS-TSX; NUSMF-OTC], a company that was hoping to become the world’s first deep sea mining firm, has sought protection against bankruptcy.

Nautilus said Friday February 22 that it has obtained an order from the British Columbia Supreme Court that provides the company with protection from its creditors under the Companies Creditors Arrangement Act. (CCAA). The move is to enable Nautilus to restructure its business and financial affairs.

Nautilus has said it is the first company to explore the ocean floor for polymetallic seafloor massive sulphide deposits. To achieve its production goals, Nautilus planned to use existing technologies adapted from the offshore oil and gas industry, dredging and mining industries to facilitate the extraction of high-grade seafloor massive sulphide systems, containing copper and gold, on a commercial scale

In January, 2011, the company was granted the first mining lease for such deposits at a prospect known as Solwara 1, in the territorial waters of Papua New Guinea, where it was aiming to produce copper, gold and silver.

The Solwara Seabed Massive Sulphide deposit sits on the seabed at a depth of 1,600 metres and contains a copper grade of 7% as well as gold grades of over 20 grams per tonne. The company hoped to grow its holdings in the exclusive economic zones and territorial waters of Papua New Guinea, Fiji, Tonga and the Solomon Islands, and others.

In April, 2017, the company issued a press release stating that its Seafloor Production Tools had arrived in Papua New Guinea, and would shortly commence submerged trials. It said the submerged trials would occur in an existing facility on Motukea Island, near Port Moresby in PNG.

Aside from its ocean mining aspirations, Nautilus is also known for its powerful shareholders. Major shareholders include Russian iron ore giant, Metallionvest, (19%) and the MB Holding group (30%), which is controlled by Nautilus director Dr. Mohammed Ali Al Barwani. MB Holding is the parent of a number of companies with wide ranging interests in the oil and gas, mining, marine and engineering services. MB Group has operations in over 20 countries and employs over 6,000 employees. Metallionvest is controlled by Alisher Usmanov, Russia’s richest man with a net worth estimated at $15.1 billion.

Nautilus said Friday it is not bankrupt and remains in possession and control of its business, while continuing to receive support in the form of loans from a lender.

On Friday, the shares were trading at 5 cents, leaving the company with a market cap of $34.15 million based on 683.03 million shares outstanding.  The 52-week range is 39 cents and 4.5 cents.

Shortly prior to the company’s application for protection under CCAA, the company said it received a US$750,000 loan from Deep Sea Mining Finance Ltd. The loan was made available under a loan agreement between the company, two of its subsidiaries, and the lender, which provides for a secured structured credit facility of up to US$34 million.

Nautilus said the lender is a private company held equally by each of USM Finance Ltd., a wholly-owned subsidiary of USM Holdings Ltd., an affiliate of Metallionvest Holding (Cyprus) Ltd.; and Mawarid Offshore Mining Ltd., a unit of MB Holding Company LLC.

As the lender is indirectly controlled by affiliates of the company’s two largest shareholders, the lender is a “related party” of the company and the loan transaction constitutes a “related party transaction.” Therefore it is exempt from the formal evaluation of minority shareholder approval requirements.

Nautilus said it has already received US$18.25 million in loans from the lender, which it said has agreed to advance the company up to $4 million to fund its ongoing operations and restructuring. These loans bear interest at 8% annually and are payable bi-annually in arrears. All loans have a maturity date of March 8, 2019.

Nautilus said it continues to seek short and long term solutions while assessing its options, including various restructuring options. It said negotiations with various third parties continue.

Meanwhile, the company said it can offer no assurances that it will be able to successfully negotiate and complete any funder or other transactions. It said any transactions will be subject to all necessary stock exchange, third party and government approvals, as well as compliance with all other regulatory requirements.