UPDATE 1-Nautilus halts underwater mine project, shares fall

Tue Nov 13, 2012 11:15am EST
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Nov 13 (Reuters) - Shares of Nautilus Minerals Inc tumbled more than 38 percent on Tuesday after the company said it stopped assembling mining equipment for its underwater copper-gold project and laid off about 60 people.

Nautilus is halting development work on the Solwara 1 copper-gold project in Papua New Guinea's territorial waters to save cash as it works to resolve a dispute with the Pacific nation over the project agreement.

The government of Papua New Guinea exercised its option to take a 30 percent stake in the project in March 2011, but Nautilus said the government has not yet paid its share of development costs, and Nautilus cannot afford to continue financing the project on its own.

The termination of the build program will likely lead to a major delay in first production and could result in project cost increases, the company said.

Solwara 1, planned as the world's first underwater copper-gold mine, was originally expected to start production in late 2013.

Nautilus plans to use technology from the offshore oil and gas industry to get at high-grade metal deposits that it says are easier to reach than typical hard-rock resources, despite lying beneath more than a mile of water

The company's shares dropped 38.2 percent to 44.5 Canadian cents Tuesday morning on the Toronto Stock Exchange. The stock has fallen more than 75 percent this year as Nautilus struggled with political and financing issues. (Reporting by Julie Gordon; Editing by Jeffrey Benkoe)