Canadian underwater miner gets sinking feeling in Papua New Guinea

Tue Dec 11, 2012 2:01pm EST
 

By James Regan

SYDNEY (Reuters) - 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 efforts by the South Pacific country 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.

The groundbreaking undersea venture hopes to use robots operating a mile deep to mine the sea floor near hydrothermal vents that deposit copper, gold and other minerals.

Hungry for foreign investment, Papua New Guinea (PNG), a nation of 7 million spread over an equatorial archipelago the size of California, had agreed in 2011 to pay 30 percent of the costs to build the Solwara 1 project in the Bismark Sea, which Nautilus said amounts to $80 million 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 (UNCITRAL).

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

"We don't know where we stand at the moment," Johnston told Reuters in an interview. "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.   Continued...