MAC: Mines and Communities

Nautilus Minerals gets protection order against creditors

Published by MAC on 2019-03-14
Source: Statements, Resource World, Radio NZ (2019-03-14)

Nautilus Minerals has been on the brink of bankruptcy for some time, as it tries to push through its Solwara 1 project in Papua New Guinea against the wishes of local communities (see: Is it 'Game Over' for Nautilus' Deepsea Mining Experiment?).

The company has now filed for protection from its creditors in the Canadian court system.

The protection is there to allow it to restructure, aka sell off any assets it can in order to stay afloat. Whether it can manage that remains to be seen, but without its key assets the question then is what can it do?

Nautilus Seeks Financial Protection

Key players looked after at the expense of small shareholders and Papua New Guinea

Deep Sea Mining Campaign & MiningWatch Canada press release - http://www.deepseaminingoutofourdepth.org/nautilus-seeks-financial-protection/#_ftn2

14 March 2019

On 11 March 2019, Nautilus Minerals Inc. took the next step in its bankruptcy proceedings, seeking court protection from creditors under the Canadian Companies’ Creditors Arrangement Act (CCAA). Having conducted a pre-filing on 21 February, that protection was extended to 28 June at the court ‘Comeback Hearing’.[1]

Andy Whitmore of the Deep Sea Mining Campaign said “For some time, our campaign has been highlighting the precarious nature of Nautilus’ financial situation.[1] The company has been on a drip-feed of loans from its two main shareholders, Russian mining company Metalloinvest and Omani conglomerate MB Holding. Incapable of naming a mining start date, with growing local opposition to its proposed Solwara 1 mine in Papua New Guinea and no operational capacity, Nautilus has failed to deal with its growing debt.”

The CCAA contains an agreed sale and investment solicitation plan (SISP), which primarily lays out a path to sell company assets so that Nautilus can either continue as a smaller business or its creditors will get the best returns if the company goes bankrupt.

Andy Whitmore continued. “This is a ‘distressed fire sale’ of their assets which are primarily the machines that Nautilus built for Solwara 1.[3] These rusting metal hulks are untested in the environment they need to work in, which is specifically to mine hydrothermal vents. This method of deep sea mining seems to be growing more unpopular over time. A recent UK House of Commons report recommended that the UK not engage in mining active hydrothermal vents. Who will be buying these bespoke machines with no support vessel?”[4]

Catherine Coumans of MiningWatch Canada stated, “The pre-court filing lays out a detailed arrangement that essentially protects the interests of a small number of key players. The appointed Court Monitors, PwC, are Nautilus’s auditors, and they are working with the directors and officers of the company to protect their positions and cushion them from their legal and financial liabilities. This is with the agreement of Nautilus’s main shareholders and lenders, Metalloinvest and MB Holding.[5] All of them seem to be negotiating a more lucrative, softer landing for the key players involved – notably the directors and major shareholders – but what about the other creditors and small shareholders, including the Government of Papua New Guinea?”

Andy Whitmore concluded “Nautilus’s continued difficulties highlight the high-risk nature of deep sea mining as an investment, both for investors and host governments. The risks have been acknowledged by deep sea mining companies themselves in a financial workshop preceding the recent International Seabed Authority meeting in Jamaica, where companies highlighted the need for higher returns on investment because of the novel technological risks involved.[6] After all the promises of riches to Papua New Guinea, it appears that the main beneficiaries will be the highly paid executives in Nautilus, and those investors who cashed out early.”

FOR MORE INFORMATION

UNITED KINGDOM
Andy Whitmore, Deep Sea Mining Campaign
whit[at]gn.apc.org, +44 775 439 5597

CANADA
Dr Catherine Coumans, Miningwatch Canada
catherine[at]miningwatch.ca, +1 613-569-3439

[1] Court document confirming Order of Court, 11 March 2019, https://www.pwc.com/ca/en/car/nautilus-minerals/assets/nautilus-minerals-026_031219.pdf

[2] Nautilus kept on life support but for how long?, Deep Sea Mining Campaign, 20 January 2019, http://www.deepseaminingoutofourdepth.org/nautilus-kept-on-life-support-but-for-how-long/

[3] According to Nautilus’ latest (unaudited) financial statements, 30 September 2018 http://www.nautilusminerals.com/irm/PDF/2070_0/InterimFinancialStatementsSeptember302018

[4] UK Parliament House of Commons Environmental Audit Select Committee Report on Sustainable Seas, 17 January 2019, https://publications.parliament.uk/pa/cm201719/cmselect/cmenvaud/980/98010.htm

[5] PwC, Proposed Monitors pre-filing to the Supreme Court of British Columbia, 21 February 2019, https://www.pwc.com/ca/en/car/nautilus-minerals/assets/nautilus-minerals-019_030119.pdf, including points 2.2, 2.4, 4.3.7, 4.4.1, 4.4.4, 5.8, 5.9.3

[6] Report from Financial Working Group, International Seabed Authority meeting on 23 February 2019


"Fight is not over" Call for Nautilus licences to be cancelled in Papua New Guinea

Joint Media release

11 March 2019

On 21 February 2019, Nautilus Minerals Inc. filed for protection from creditors under the Canadian Companies' Creditors Arrangement Act (CCAA).[1] Whilst claiming this as a victory in their decade-long campaign to stop the Nautilus Solwara 1 Project in the Bismarck Sea, local communities and civil society in Papua New Guinea are taking heed that the fight is not over until all Nautilus licences are cancelled.

“This is very welcome news!” stated Jonathan Mesulam, Alliance of Solwara Warriors whose village on the west coast of New Ireland Province is situated only 25km from the Solwara 1 project. “New Irelanders and communities from Provinces across the Bismarck sea have given their undivided support for many years to stop experimental seabed mining.”

“The longer Nautilus is delayed and tied up in protecting itself from bankruptcy the longer they are in debt and not able to get Solwara 1 up and operating, and the closer we are to stopping the project and protecting our livelihoods and seas.”

“The voices of local communities through the Alliance of Solwara Warriors, Churches and civil society in PNG have consistently opposed Nautilus Minerals,” declared Christina Tony, Bismarck Ramu Group. “We strongly believe this unified voice is what is driving Nautilus Minerals out of our country and towards bankruptcy. Other companies thinking of mining the sea floor in PNG or the Pacific should pay attention.”

The court order under CCAA is an agreement between Nautilus and its two main shareholders, MB Holding & Metalloinvest. Nautilus’ auditor the accountancy firm PwC is acting as court monitors to oversee a plan to sell company assets so Nautilus can either continue as a smaller business or those it owes money to will get the best value if the company goes bankrupt. Nowhere in the court order does it mention the PNG Government who owns a 15% in Solwara 1 and the equipment.

“This small group of key interested players will advantage themselves to the detriment of the PNG Government,” alleged Sir Arnold Amet, former Papua New Guinean Attorney General who has repeatedly warned the PNG Government of the financial liabilities of holding a 15% stake in Nautilus Minerals.

“While this is good news for those of us who have been calling for the project not to go ahead, the fight is not over. Not until the PNG Government terminates the Solwara 1 operating licence, as well as all of Nautilus' licences in the Bismarck and Solomon Seas, will we be able to claim victory.”

The court order briefly lists three potential legal cases: contract arbitration with Sichuan Hungua Petroleum equipment; Gunner Cooke over legal fees for MAC and the continuing problems with loss of the support vessel; and threatened legal action by MDL Energy over "alleged misleading public disclosure.

"There appears to be no legal action listed regarding the PNG Government” continued Sir Amet. “Has the PNG Government been 'taken for a ride' by Nautilus? Did they ever really intend to mine at Solwara 1? Our Government should explore recouping its failed investment by suing Nautilus for breach of contract.”

Peter Bosip, Executive Director, Centre for Environmental Law and Community Rights, who are supporting the landmark case bought by coastal communities challenging the Solwara 1 project under Sections 51 and 59 of the PNG Constitution[2] claimed, “We have seen the original company directors and officers of Nautilus Minerals walk away with a lot of money in their pockets to form DeepGreen Metals, a company promising riches to other Pacific Island nations.”

“This is a case of companies mining the market. Whether they have intentions of mining, or not mining the resource, they are cheating the PNG government and its citizens.”


FOR MORE INFORMATION

Sir Arnold Karibone Amet
ametarnold[at]gmail.com, + 675 72539353

Jonathan Mesulam, West Coast Central People of New Ireland
mesulamjonathan[at]gmail.com,+675 70038933

Christina Tony, Bismarck Ramu Group
chrisamoka20[at]gmail.com, +675 70942439

Peter Bosip, Centre for Environmental Law and Community Rights
pbosip[at]gmail.com, +675 3234237


[1] Monitors pre-filing report to the Supreme Court of British Colombia, 21 February 2019, https://www.pwc.com/ca/en/car/nautilus-minerals/assets/nautilus-minerals-019_030119.pdf

[2] ‘World-first mining case launched in PNG’, Lawyers Weekly, 14 December 2017, https://www.lawyersweekly.com.au/wig-chamber/22429-world-first-mining-case-launched-in-png

‘Troubled Papua New Guinea deep-sea mine faces environmental challenge’, The Guardian, 11 December 2017, https://www.theguardian.com/world/2017/dec/12/troubled-papua-new-guinea-deep-sea-mine-faces-environmental-challenge


Deep sea mining firm seeks creditor protection

By Peter Kennedy

Resource World - http://resourceworld.com/index.php/deep-sea-mining-firm-seeks-creditor-protection/

22 February 2019

A Nautilus Minerals seafloor bulk cutter mining machine. Source: Nautilus Minerals Inc.

Nautilus Minerals Inc., 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.


Seabed mining project in PNG moves to sell assets

https://www.radionz.co.nz/international/pacific-news/383392/seabed-mining-project-in-png-moves-to-sell-assets

25 February 2019

A troubled deep sea mining project in Papua New Guinea is selling its assets while it fends off creditors.

Nautilus Minerals was to mine the sea floor between New Ireland and New Britain but has run into financial trouble and local landowner opposition.

Last week, the company obtained a court order from the Supreme Court of British Columbia protecting it from its creditors.

Nautilus said the protection will enable it to "restructure its business and financial affairs".

One of its lenders, Deep Sea Mining Finance, has agreed to loan it a further $US4 million. To date, Nautilus has been loaned $US18 million by the financier.

But the company is also being advertised for sale, including its Solwara 1 project in PNG. PwC are acting as solicitors.

If sold, investors would also have access to its mining licenses elsewhere in PNG and in Tonga.


No Bank Roll for Deep Sea Mining Experiment

Deep Sea Mining Campaign press release

21 January 2019

Nautilus Minerals has edged back from the brink of bankruptcy with an extension to the bridging loans provided by its two main shareholders Russian mining company Metalloinvest and Omani conglomerate MB Holding. They were due for repayment on Tuesday 8th January when Nautilus begged for a one week reprieve, hoping to raise USD 5 million to maintain a holding pattern while it sought a long term funding solution.[1] Unable to attract a lender the floundering company has been thrown a temporary life line once more by its 2 shareholders in the form of a small USD 500,000 loan to be repaid on 8th February.[2]

It looks like 2019 will herald the end of Nautilus's long struggle with its Solwara 1 deep sea prospect in Papua New Guinea.[3] The most recent in the string of bad news stories was the loss of their crucial production support vessel after payments stopped to the shipyard building it.[4] Nautilus's share price has been hovering around a historical low of CAN $0.05.[5]

Andy Whitmore of the Deep Sea Mining Campaign said “How long can Nautilus be kept on life support? And what is the point of extending the loan by one month? The company has no start date penciled in, no operational capacity, and is in no position to repay its growing debt. The high level of opposition within PNG to Solwara 1 is another obstacle Nautilus is yet to address. It's time to euthanize this company.”

Concerned about the impacts the Solwara 1 project will have on marine ecosystems and fisheries based livelihoods.[6] the Alliance of Solwara Warriors has brought legal proceedings to assess whether the Solwara 1 project was approved lawfully.[7] Jonathan Mesulam from the Alliance of Solwara Warriors says, " My village is located in New Ireland province, only 25km from the proposed Solwara 1 project. New Irelanders are now well informed of the potential impacts of Nautilus Minerals experimental seabed mining project. They are giving their undivided support to ensure the project is stopped at all cost.

Sir Arnold Amet, former Papua New Guinean Attorney General stated, " I have repeatedly warned our Government of the financial liabilities of holding a 15% stake in this experimental company. The wisest thing for the PNG Government to do now would be to cut its losses, learn from its very expensive mistake, and terminate the Solwara 1 operating licence. Nautilus clearly shows that deep sea mining is not financially, socially, or environmentally viable for PNG. Our Government should explore recouping its failed investment by suing Nautilus for breach of contract.“

Dr. Helen Rosenbaum of the Deep Sea Mining Campaign added: “This loan extension really changes nothing. The financial, ecological, and social risks associated with the Solwara 1 project continue. Local opposition will grow as long as this perilous project persists.”

For more information
PAPUA NEW GUINEA
Jonathan Mesulam, West Coast Central People of New Ireland
mesulamjonathan[at]gmail.com,+675 70038933

Sir Arnold Karibone Amet
ametarnol[at]gmail.com, + 675 72539353

AUSTRALIA
Dr. Helen Rosenbaum, Deep Sea Mining Campaign,
hrose[at]vic.chariot.net.au, +61 413201793

UNITED KINGDOM
Andy Whitmore, Deep Sea Mining Campaign
whit[at]gn.apc.org, +44 775 439 5597



[1] http://www.nautilusminerals.com/irm/PDF/2074_0/NautilusProvidesCorporateUpdate

[2] http://www.nautilusminerals.com/irm/PDF/2076_0/Nautilusreceivesadditionalloanundersecuredloanfacility

[3] The proposed Solwara 1 site is located in the Bismarck Sea of Papua New Guinea, approximately 25 km from the coastline of New Ireland Province, about 35 km from Duke of York Islands and 60 km from Kokopo township in East New Britain.

[4] GAME OVER! Nautilus' Solwara 1 experiment fails, Deep Sea Mining Campaign, 17 December 2018, http://www.deepseaminingoutofourdepth.org/game-over-nautilus-solwara-1-experiment-fails/; high-profile deep-sea mining company is struggling, The Economist, 6 December 2018, https://www.economist.com/business/2018/12/06/a-high-profile-deep-sea-mining-company-is-struggling

[5] Nautilus website stock information, http://www.nautilusminerals.com/irm/content/stock-information.aspx?RID=269&RedirectCount=1

[6] See Out of our Depth: Mining the Ocean Floor in Papua New Guinea, November 2011 http://www.deepseaminingoutofourdepth.org/wp-content/uploads/Out-Of-Our-Depth-low-res.pdf

Physical Oceanographic Assessment of the Nautilus Environmental Impact Statement for the Solwara 1 Project - An Independent Review, November 2012. http://www.deepseaminingoutofourdepth.org/wpcontent/uploads/EIS-Review-FINAL-low-res.pdf

[7] Troubled Papua New Guinea deep-sea mine faces environmental challenge’, The Guardian, 12 December 2017, https://www.theguardian.com/world/2017/dec/12/troubled-papua-new-guinea-deep-sea-mine-facesenvironmental-challenge

 

 

 

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