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  • clydecook39 clydecook39 Dec 12, 2012 8:12 AM Flag

    -- CANADIAN NAUTILUS Project in Jeopardy --

    Papua New Guinea sea floor mining project in jeopardy

    Dispute between country and Nautilus Minerals may result in scrapping of plan to mine copper and gold from Bismarck Sea

    Reuters, Wednesday 12 December

    A dispute between Papua New Guinea and Canada's Nautilus Minerals threatens to sink plans to mine gold and other metals for the first time from the ocean floor.

    It could also work against Papua New Guinea's efforts to restore faith in its vast resources potential and entice more foreign companies to follow the likes of Exxon Mobil, Newcrest Mining and Barrick Gold and invest billions of dollars in resource projects.

    In the ground-breaking venture, Nautilus hopes to send robots a mile under water to mine the sea floor near hydrothermal vents that deposit copper, gold and other minerals.

    Hungry for foreign investment, Papua New Guinea, a nation of 7 million spread, agreed in 2011 to pay 30% of the costs to build the Solwara 1 project in the Bismarck Sea, which Nautilus said amounts to $80m so far.

    But in June, the government's investment arm, Petromin, said it was terminating the agreement. Without the funds, Nautilus says it cannot afford to proceed and the matter is now in arbitration in Australia under the United Nations Commission on International Trade Law (Unictral).

    Nautilus' shares have tumbled 60% since it announced in mid-November that it was laying off 60 workers and halting work on the project to save cash. Chief executive Michael Johnston said another round of job losses would follow on Friday unless a resolution could be reached.

    "We don't know where we stand at the moment," said Johnston. "We're optimistic because we have to be, but we just don't know what Petromin is thinking."

    Papua New Guinea has been described as an island of gold floating in a sea of oil, surrounded by gas, but consistently punches below its weight on the global resources stage.

    The impoverished country has a long legacy of mining projects derailed by environmental disasters, landowner uprisings and corruption.

    Mining from vessels is seen as a way of avoiding some of the landowner disputes that have plagued other projects. Still, the project has been criticised for failing to adequately assess environmental risks.

    "No one knows what the impacts of this form of mining will be," said Wences Magun, national co-ordinator for Mas Kagin Tapani, a Papua New Guinea environmental group.

    "Communities want to know what concrete steps the prime minister will now take to ensure we are not being used us as guinea pigs in a sea bed mining experiment."

    Johnston insists international environmental safeguards were applied to the project before a permit was granted in 2009, and that it poses no major threats since all the material mined is used, alleviating harmful waste generation.

    "The deposits are mainly on the surface of the sea floor," he said. "No mountains need to be removed, no trees need to be cleared."

    Petromin was set up five years ago to buy into foreign projects and safeguard revenues earmarked to help local communities. The fund has invested in 17 projects, including a $19bn liquefied natural gas project under construction by Exxon Mobil. It is also working with Shell to identify untapped oil and gas reserves.

    It is allowed to take up to 30% of mining and 22% of oil and gas projects, which it must then help fund.

    Petromin has said little publicly about the Nautilus dispute, other than that the Canadian firm had not met certain undisclosed obligations under its agreement, which entitled it to terminate the pact.

    Petromin did not respond to requests for clarification over its reasons for terminating the agreement and Nautilus said it had no more details surrounding the decision..

    Sentiment: Strong Sell

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    • Pumps ignore and won't discuss. Doesn't square with their promotional goals! LOL

    • BUMPUS.

      Sentiment: Sell

    • Very real negative development in PNG and the "longs" are all in complete denial. Of course the pumpers here are not interested in truth or facts, just hype and spin.

      Sentiment: Strong Sell

    • zimmerbros Dec 12, 2012 10:08 AM Flag

      Land of 1,000 dances! ho ho ho

    • casserta Dec 12, 2012 8:54 AM Flag

      Hello! IOC's partner is Petromin! Same thing "may" happen to IOC.

      Sentiment: Strong Sell

    • Nautilus stops work on Papua New Guinea deep-sea mine --- Another Article

      Mon, 10 Dec 2012 15:48 GMT

      Source: Content Partner // SciDev.Net - Paula Park

      Controversial plans to build the first deep-sea mine in Papua New Guinea (PNG) remain stalled, which has prompted the firm behind them to stop building specialised seabed extraction equipment and lay off staff.

      A dispute with the PNG government over its equity holding in the project has led Nautilus Minerals to suspend operations, says Michael Johnston, its chief executive officer.

      When Nautilus received a licence in March 2011 to mine metal-rich vents called Solwara 1 near New Britain, the government agreed to take a 30 per cent stake in the project and co-finance it.

      But the PNG government convened a legal process in June 2012 to determine whether it was obligated to contribute to funding.

      "We were paying for it all ourselves and it was becoming too costly," Johnston tells SciDev.Net. "We were at an expensive stage of the build. We were spending US$3 million or US$4 million a week. For a company of our size, we couldn't continue to pay for that ourselves."

      Shadrach Himata, deputy secretary of Papua New Guinea's Department of Mineral Policy and Geohazards Management, confirms that the dispute is about the country's equity holding in Nautilus.

      He tells SciDev.Net that he cannot comment further because he does not want to "pre-empt the arbitration".

      According to Colin Filer, an associate professor at the Australian National University, the Papua New Guinea government has a legal right to take out equity in any company that extracts resources, although it is not obliged to do so.

      The previous government, under Prime Minister Michael Somare and acting Prime Minister Sam Abal, preferred to take equity ownership in most projects, he says. The new government, which came to power in August 2011 and retained power after a year-long skirmish with the previous government, has taken a more strategic approach, Filer says.

      "It was probably a bad idea for it to contemplate taking an equity stake in something that was technologically and economically a rather risky venture," Filer tells SciDev.Net.

      The Papua New Guinea government has bigger priorities than deep sea mining, Filer says, adding that its main project focus is to produce liquefied natural gas (LNG) for export to Australia.

      The first large project in Papua New Guinea led by energy firm Exxon Mobil — a floating LNG production and processing plant plus pipelines — is set to start work in 2014. A second Exxon Mobil LNG project is planned after the first scheme is up and running, he says.

      The government cannot pay for all the projects including the mine without seeking credit from other countries, Filer says. Papua New Guinea's mining rules require the government to ensure that money is available to invest in equity and that projects will make a profit.

      The Nautilus project has gained notoriety, prompting questions about its viability and environmental risks and becoming "politically awkward", Filer says. The government is likely to be hoping that "it will go away", he says.

      Nautilus Minerals may have better luck if it explores the seabed in other parts of the Pacific, such as the Cook Islands, where it faces less political opposition, and then return to Papua New Guinea once it can demonstrate a successful track record, Filer says.

      However, PNG's mining rules limit the period that a company can own a mining tract without working it, he says....

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