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Investor alert: Deep sea mining project in last-ditch search for capital

Banks and other investors warned to steer clear

Nijmegen, Netherlands and Brisbane, Australia, 25 October 2017

In a last ditch bid to rescue its experimental deep sea mining project ”Solwara 1”, the two largest shareholders of Nautilus Minerals Inc, Russian mining company Metalloinvest and Omani conglomerate MB Holdings, have formed a new company whose sole job is to secure funding for the project by October 31st [1].

It is expected that the first call will be on existing financiers of Nautilus, Metalloinvest and MB Holdings. These include HSBC (United Kingdom), ING Group (Netherlands), BNP Paribas and Société Générale (France); ABN Amro (Netherlands), and Unicredit (Italy) [2].

The Deep Sea Mining Campaign (DSMC) and BankTrack are calling on the banks to publicly distance themselves from this financially and ecologically risky project.

Canada-based Nautilus Minerals has staked its reputation on the Solwara 1 project, which if successful would become the world’s first deep sea mining operation [3]. However the wannabe deep sea miner has so far failed to inspire investors with confidence. Nautilus’ financing strategy for Solwara 1 has been spectacularly unsuccessful. Commercial operation has been delayed year after year since it received its licence to mine the floor of Papua New Guinea’s Bismarck sea in 2011.

The Solwara 1 project is deeply opposed by local communities, churches and wider civil society in Papua New Guinea. Most recently, PNG’s former Attorney General and Governor of Madang Province issued a warning to potential investors of the high level of financial and environmental risk inherent in the project.

Dr. Helen Rosenbaum of the Deep Sea Mining campaign said, “Deep Sea Mining is risky business as both the environmental impacts and the returns are complete unknowns. Nautilus’ Annual Information Form, lodged with Canadian securities, emphasizes the experimental nature of the Solwara 1 project [4]. This level of risk has scared off responsible investors who weigh up the likely exposure to social and environmental risks and the value erosion that goes with that. In regards to Nautilus, they have voted with their wallets.  We urge banks and other financiers to do the same.”

Coastal Communities in Papua New Guinea have formally requested that the PNG Government make public key documents relating to the licensing and the environmental impacts of the Solwara 1 deep sea mining project or face legal proceedings.

Johan Frijns, BankTrack Director, commented, “Experience with other mining projects shows us that local opposition often results in legal and public relations disasters for companies and their financiers.  The costs of community resistance to mining projects has been well documented [5].  Banks receiving proposals from Metalloinvest and MB Holdings to rescue Nautilus would be well advised to conduct a rigorous risk analysis.”

For further inquiries, please contact:
AUSTRALIA: Helen Rosenbaum, Deep Sea Mining Campaign, hrose@vic.chariot.net.au,  +61 413201793

EUROPE: Johan Frijns, BankTrack, johan@banktrack.org; +31 24 3249220

 

NOTES

[1] Nautilus announced on 11 October the formation of Deep Sea Mining Finance Ltd. (“DSMF”) which will seek to leverage the international expertise and financial relationships of Nautilus’ two major shareholders to assist in advancing the development of the Company’s Solwara 1 Project.

[2] Research commissioned by the DSM Campaign indicates that these banks provide both loans and bond issuances. See Annex 1 for more details.

[3] If it proceeds, the Solwara 1 mine will be 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. See BankTrack’s Dodgy Deal profile for more details on the project.

[4]  See sections on Risk factors in Annual information forms for financial years 2015 and 2016. For example:

“Our operations are speculative due to the high-risk nature of business related to the exploration and acquisition of rights to potential mineable deposits of metals. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward-looking statements relating to our Company.” (FY 2016, p 52)

“… Performance, availability, reliability, maintenance, wear and life of equipment are unknown. There can be no guarantee that sub-sea engineering and recovery systems can be developed or if developed, will be employable in a commercially-viable manner.”  (FY 2015, p54)

“… while Company studies have indicated a low likelihood of risk to the aquatic environment from mining activities, the actual impact of any SMS [seafloor massive sulphide] mining operations on the environment has yet to be determined.” (FY 2015, p61)

“Nautilus has not completed and does not intend to complete a preliminary economic assessment, pre-feasibility study or feasibility study before completing the construction and first deployment of the Seafloor Production System at the Solwara 1 Project.”

“No independent Qualified Person has confirmed the amount of these costs or recommended that these costs be incurred. There is significant risk with this approach and no assurance can be given that the Seafloor Production System, if fully funded and completed for deployment at the Solwara 1 Project, will successfully demonstrate that seafloor resource development is commercially viable.” (FY 15, p52)

[5] For example: Davis, Rachel and Daniel M. Franks. 2014. “Costs of Company-Community Conflict in the Extractive Sector.” Corporate Social Responsibility Initiative Report No. 66. Cambridge, MA: Harvard Kennedy School.

 

MEDIA RELEASE

Thursday 19 October 2017

 

Former Attorney General of Papua New Guinea warns potential investors – Nautilus is a risky deal!

PAPUA NEW GUINEA | Sir Arnold Amet, former Attorney General and Minister for Justice of PNG has joined the growing opposition against Nautilus Minerals Solwara 1 deep sea mining project in the Bismarck Sea.

“It is understandable that Nautilus shareholders want to protect their own financial interests but new investors should beware – the Solwara 1 project is very high risk” said Sir Amet.

“The muddy puddle at the so-called test site at Motukea Island is not fit for purpose. It will not provide any evidence that these machines won’t malfunction at the intended operating depth of 1.6 km. The hulks are already deteriorating in our tropical conditions.”

Canadian company Nautilus is still desperately seeking funds for its flagship Solwara 1 deep sea mining project. Commercial operation has been delayed year after year since it received its licence to mine the floor of the Bismarck sea in 2011.

In a last ditch bid to finance Solwara 1, Nautilus’s two largest shareholders have now formed a new company whose sole job is to secure funding for the Solwara 1 project [1].

“Nautilus is not a professional outfit” stated Sir Amet.

“I am concerned that the Papua New Guinean Government has bought a 15% share in a dodgy project, any operating disasters by Nautilus Minerals will quickly translate into an environmental catastrophe for the Bismarck Sea and its communities. The associated financial liabilities will be huge.”

In recent statements the machine operators for the Solwara 1 project voiced their fears about the safety of operating the equipment 1.6 km under the surface and only 25 km off the coast of New Ireland Province [2].

In their Annual information forms lodged with Canadian Securities, Nautilus describes Solwara 1 as an experiment – both the environmental impacts and profits are complete unknown [3]. Nautilus has declined to conduct a preliminary economic assessment, pre-feasibility study or feasibility study – as per conventional industry practice.

“With this high level of environmental and financial risk, The PNG Government should never have issued Nautilus with its licence. It was issued even though PNG has no legal framework to regulate such a mine and we have no capacity to monitor its impacts. The legal context for the licensing Solwara 1 is highly questionable” continued Sir Amet.

Coastal communities in Papua New Guinea are holding the PNG Government to account. Formal letters have been submitted to the Ministry of Mining and Ministry of Environment and Conservation requesting that key documents relating to the licensing of the Solwara 1 project be made public. They have given the PNG Government until October 18 to respond or face the prospect of legal proceedings [4].

 

For further information:

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

Peter Bosip, Centre for Environmental Law and Community Rights (CELCoR)
pbosip[at]gmail.com, +675 3234509

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

Lucielle Paru, Central Province Pressure Group, NCD and Central Province
lucielle[at]mediterraneanpng.com, +675 70858690

Notes

[1] Nautilus signs funding mandate with major shareholders, Nautilus Minerals press release, October 11 2017, http://www.nautilusminerals.com/irm/PDF/1929_0/Nautilussignsfundingmandatewithmajorshareholders

[2] PNGeans to pioneer new mining technology, Post Courier, 28 September 2017, http://postcourier.com.pg/pngeans-pioneer-new-mining-technology/

[3] See sections on Risk factors in Annual information forms for financial years 2015 and 2016. For example:

“Our operations are speculative due to the high-risk nature of business related to the exploration and acquisition of rights to potential mineable deposits of metals. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward-looking statements relating to our Company.” (FY 2016, p 52)

“… Performance, availability, reliability, maintenance, wear and life of equipment are unknown. There can be no guarantee that sub-sea engineering and recovery systems can be developed or if developed, will be employable in a commercially-viable manner.” (FY 2015, p54)

“… while Company studies have indicated a low likelihood of risk to the aquatic environment from mining activities, the actual impact of any SMS [seafloor massive sulphide] mining operations on the environment has yet to be determined.” (FY 2015, p61)

“Nautilus has not completed and does not intend to complete a preliminary economic assessment, pre-feasibility study or feasibility study before completing the construction and first deployment of the Seafloor Production System at the Solwara 1 Project.”

“No independent Qualified Person has confirmed the amount of these costs or recommended that these costs be incurred. There is significant risk with this approach and no assurance can be given that the Seafloor Production System, if fully funded and completed for deployment at the Solwara 1 Project, will successfully demonstrate that seafloor resource development is commercially viable.”

(FY 15, p52)

[4] Constitutional Right to Key Documents on Experimental Seabed Mining, Centre for Environmental Law and Community Rights (CELCoR) and Alliance of Solwara Warriors media release, 3 October 2017, http://www.deepseaminingoutofourdepth.org/constitutional-right-to-key-documents-on-experimental-seabed-mining/

MEDIA RELEASE

Tuesday 3rd October 2017

Constitutional Right to Key Documents on Experimental Seabed Mining

PAPUA NEW GUINEA | Coastal Communities in Papua New Guinea have formally requested that the PNG Government make public key documents relating to the licensing and the environmental impacts of the Solwara 1 deep sea mining project by October 18 or face the prospect of legal proceedings.  

Letters were lodged with the Ministry of Mining and Ministry of Environment and Conservation on September 5, 2017, signed by representatives of four communities across the Bismarck Sea and PNG. The letters note that Section 51 of the PNG Constitution provides the right of reasonable access to official documents for every citizen of Papua New Guinea.

“Very little information about the Solwara 1 project has been disclosed by PNG Government or the project developer, Nautilus Minerals”, stated Peter Bosip, Executive Director, Centre for Environmental Law and Community Rights (CELCoR).

“Papua New Guineans have the constitutional right to see this information especially as their Government has invested heavily as a shareholder in this project [1]. In the interest of transparency and informed debate, PNG Government should release the information requested,” added Mr Bosip.

Lucielle Paru, Central Province Pressure Group said, “There is a high level of community concern across PNG about experimental seabed mining. This is the world’s first venture. As a national issue, there should be an equally high level of transparency from both the PNG government and Nautilus Minerals.”

According to Jonathan Mesulam from the West Coast of New Ireland Province, civil society in Papua New Guinea has been requesting this information for many years [2], “Why is the Government keeping secrets from its people? Communities on the west coast of New Ireland Province live only 25km from the proposed location in the Bismarck Sea. We are on the front line of Solwara 1 mine and if it goes ahead it will impact our lives and livelihoods [3].

“We will exercise our legal rights to be fully informed. We have the right to know the whole truth about Solwara 1. The Government must release the documents we have requested”

Pastor Matei Ibak, Karkar Island Community in Madang said, “Nautilus and PNG Government do not have the consent of local communities to go ahead with this mining experiment [4].”

“Our people chased Nautilus away from our waters, now the people of New Ireland and East New Britain face pollution in their traditional waters if Solwara 1 goes ahead. Instead of protecting Papua New Guineans the Government is protecting the interest of the company.”

“We are giving the Government of PNG until October 18 to provide the licensing and environmental impact documents, or legal proceedings will be filed against the Government,” continued Mr Mesulam.

 

For more information:

Peter Bosip, Centre for Environmental Law and Community Rights (CELCoR)
pbosip@gmail.com, +675 3234509

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

Lucielle Paru, Central Province Pressure Group, NCD and Central Province
lucielle@mediterraneanpng.com, +675 70858690

_____

NOTES

[1] Nautilus Minerals Inc.: PNG Government Confirms Investment in Solwara 1, MarketWired, March 29, 2011, http://www.marketwired.com/press-release/nautilus-minerals-inc-png-government-confirms-investment-in-solwara-1-aim-nus-1419007.htm

[2] For example, in 2012 the Deep Sea Mining campaign and Mas Kagin Tapani sent a letter to PNG PM Peter O’Neill requesting the release of key documents relating to the Solwara 1 seabed mining project. No response was received and those documents are still not in the public domain, http://www.deepseaminingoutofourdepth.org/letter-to-png-pm/

[3] Reports produced by the Deep Sea Mining campaign highlighting the economic, social and environmental concerns of Nautilus Minerals Solwara 1 deep sea mining project:

[4] Landowners remain unimpressed with Nautilus, Loop PNG News, 1 October, 2017, http://www.looppng.com/png-news/landowners-remain-unimpressed-nautilus-67338

 

 

 


MEDIA RELEASE

Friday 29 September, 2017

Seeing is Believing: Nautilus Giant Seabed Mining Machines Will Wreak Havoc and Destruction

PAPUA NEW GUINEA | Canadian company Nautilus is busy showing off its seabed mining machinery to a small select group of people from New Ireland and East New Britain – landowners and community leaders are unimpressed.

Coastal communities across the Bismarck Sea under the umbrella of the Alliance of Solwara Warriors claim that Nautilus and the PNG Government do not have their consent to go ahead with experimental seabed mining in the Bismarck Sea.

“Who are these leaders from New Ireland province that Nautilus has hand selected?”, said Jonathan Mesulam of the Alliance of Solwara Warriors. “I am from the West Coast of New Ireland Province and I hear my people’s concerns. Landowners on the west coast of New Ireland Province live only 25km from the Solwara 1 seabed mining site.”

“In June this year, more than 300 hundred people attended forums held in Namatanai and Kokopo hosted by Caritas Kavieng and the Archbishop of Rabaul. Papua New Guineans are worried about the impacts of this Canadian company’s experiment”, claimed Mr. Mesulam. “There are too many unknowns and challenges in operating this equipment in our precious oceans. These are giant instruments of torture for our marine environment that is already stressed by pollution, overfishing and rising sea levels. Why is our Government burdening our island and coastal communities with extra problems?”

Lucielle Paru of the Central Province Pressure Group said “My community lives near the testing site at Motukea Island. We do not support the development of this equipment. The dockyard on Motukea Island is nothing like the conditions on the sea floor where the mining tools will be used. These trials will not provide any evidence that the equipment is safe to use. Did the Government do any due diligence checks before it used the money of Papua New Guineans to purchase a 15% share in such a high-risk project?”

“It is foreign to Melanesian culture to become so excited about giant machinery. Our traditions protect community and nature. This foreign company is pushing their values for their own financial gain at the expense of our people. Once they try out their destructive equipment in the Bismarck sea they plan to take it to mine all around the PNG coastline. No one living next to the sea will be safe.”

Dr. Helen Rosenbaum of the Deep Sea Mining Campaign said, “Nautilus is showing off its equipment to a small select group of people from New Ireland and East New Britain to try and buy support for Solwara 1. They know local communities strongly oppose this project. Nautilus is also desperately trying to convince investors that they are making progress. The company is struggling financially because Solwara 1 is very risky economically as well as environmentally [1][2].

“This level of risk has scared off responsible investors who refuse to gamble with people’s lives and futures.”

 

For more info:

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

Lucielle Paru, Central Province Pressure Group, NCD and Central Province
lucielle@mediterraneanpng.com, +675 70858690

Dr Helen Rosenbaum, Deep Sea Mining campaign
hrose@vic.chariot.net.au, +61 413201793 or +61 421226200

 

NOTES

[1] See sections on Risk factors in Annual information forms for financial years 2015 and 2016. For example:

“Our operations are speculative due to the high-risk nature of business related to the exploration and acquisition of rights to potential mineable deposits of metals. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward-looking statements relating to our Company.” (FY 2016, p 52)

“… Performance, availability, reliability, maintenance, wear and life of equipment are unknown. There can be no guarantee that sub-sea engineering and recovery systems can be developed or if developed, will be employable in a commercially-viable manner.”  (FY 2015, p54)

“… while Company studies have indicated a low likelihood of risk to the aquatic environment from mining activities, the actual impact of any SMS [seafloor massive sulphide] mining operations on the environment has yet to be determined.” (FY 2015, p61)

“Nautilus has not completed and does not intend to complete a preliminary economic assessment, pre-feasibility study or feasibility study before completing the construction and first deployment of the Seafloor Production System at the Solwara 1 Project.”

 “No independent Qualified Person has confirmed the amount of these costs or recommended that these costs be incurred. There is significant risk with this approach and no assurance can be given that the Seafloor Production System, if fully funded and completed for deployment at the Solwara 1 Project, will successfully demonstrate that seafloor resource development is commercially viable.”
(FY 15, p52)

[2] Reports produced by the Deep Sea Mining campaign highlighting the economic, social and environmental concerns of Nautilus Minerals Solwara 1 deep sea mining project:

 

Seabed Mining Forum, Namatanai, New Ireland Province, PNG. June 8th 2017

 

MEDIA RELEASE

Wednesday 28 June, 2017

NAUTILUS AGM: Solwara 1 Deep Sea Mining Venture Remains a Speculative Pipe Dream

At its annual general meeting in Vancouver last week, wannabe deep sea miner Nautilus Inc failed to inspire shareholders with confidence in its Solwara 1 venture in Papua New Guinea[1].

Without sufficient funds to complete its equipment build, Nautilus’ 2019 mining start date for its flagship Solwara 1 project is unlikely to be met.  Its financing strategy has been spectacularly unsuccessful with commercial operation delayed year after year since 2011.

Investors and local PNG communities have raised serious doubts about the company’s credibility.  Nautilus CEO Mike Johnston was put on the defensive by questions posed at the AGM regarding investment risk.

At the AGM, the Deep Sea Mining Campaign and the Vancouver-based Mining Justice Alliance reminded shareholders that Nautilus’ Annual information forms for financial years 2015 and 2016 describe serious environmental and economic risks that render its Solwara 1 project a purely speculative venture[2].

The Forms describe Solwara 1 as an experiment as both the environmental impacts and profits are complete unknowns. Nautilus has declined to conduct a preliminary economic assessment, pre-feasibility study or feasibility study – as per conventional industry practice.

“This level of risk has scared off responsible investors. More importantly in terms of risk, the Solwara 1 project is opposed by local communities who are deeply concerned that the project will pollute the marine environment and ruin their livelihoods, health, and culture, all of which are strongly linked to the sea.  The cost of conflict to mining projects has been well documented”[3] says Dr. Helen Rosenbaum of the Deep Sea Mining Campaign.

According to Kate Murray of the Mining Justice Alliance, “experience with other mining projects shows us that local opposition often results in legal and/or public relations disasters for companies. In the case of Solwara 1, local opposition appears to be mounting.”  She also posed the following questions to CEO Mike Johnston at the AGM:

  • “Is it true that without the normal economic and feasibility studies, the economic viability of Solwara 1 is unknown?
  • Is it true that the risk to shareholders of losing their entire investment in Nautilus is high and the potential returns promoted by Nautilus are purely speculative?
  • Is this why Nautilus is struggling to obtain the investment it requires to complete the construction of its vessel and equipment?”

Johnston declined to have his responses recorded and evaded providing clear answers. However, he did affirm the accuracy of the description of the Solwara 1 project in the Annual Information Forms as a “high” and “significant” risk. “

For more info:

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

CANADA
Jamie Kneen, jamie[at]miningwatch.ca, +613 5693439

  

NOTES

[1] If it proceeds the Solwara 1 mine will be 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.   

[2] See sections on Risk factors in Annual information forms for financial years 2015 and 2016. For example:

“Our operations are speculative due to the high-risk nature of business related to the exploration and acquisition of rights to potential mineable deposits of metals. These risk factors could materially affect the Company’s future results and could cause actual events to differ materially from those described in forward-looking statements relating to our Company.” (FY 2016, p 52)

“… Performance, availability, reliability, maintenance, wear and life of equipment are unknown. There can be no guarantee that sub-sea engineering and recovery systems can be developed or if developed, will be employable in a commercially-viable manner.”  (FY 2015, p54)

“… while Company studies have indicated a low likelihood of risk to the aquatic environment from mining activities, the actual impact of any SMS [seafloor massive sulphide] mining operations on the environment has yet to be determined.” (FY 2015, p61)

“Nautilus has not completed and does not intend to complete a preliminary economic assessment, pre-feasibility study or feasibility study before completing the construction and first deployment of the Seafloor Production System at the Solwara 1 Project.”  

 “No independent Qualified Person has confirmed the amount of these costs or recommended that these costs be incurred. There is significant risk with this approach and no assurance can be given that the Seafloor Production System, if fully funded and completed for deployment at the Solwara 1 Project, will successfully demonstrate that seafloor resource development is commercially viable.” (FY 15, p52)

[3] For example:  Davis, Rachel and Daniel M. Franks. 2014. “Costs of Company-Community Conflict in the Extractive Sector.” Corporate Social Responsibility Initiative Report No. 66. Cambridge, MA: Harvard Kennedy School.

 

Caritas Papua New Guinea

Justice, Peace, Relief & Development Agency of the Catholic Bishops’ Conference in PNG

We are prophets of a future not our own – Archbishop Romero               

______________________________________________                  

Representing the Diocese of Kavieng and speaking on behalf of His Lordship, Bishop Ambrose Kiapseni MSC DD and all the Catholic faithful of the Diocese of Kavieng, Vicar General, Fr Vincent Takin thereby; voicing out the objective of the Commission for Social Concerns, which Caritas Png is part and partial of, strongly emphasized that the “responsibility for the environment, the common heritage of mankind, extends not only to present needs but also to those of the future.”[1]

Fr Vincent further added that, “In order, for any development to take place, it is the people who must be the object of development and not subject to it in so far as they must have the absolute clear and transparent necessary background information on whatever development that will come about with all its impact on their; social, cultural, traditional, physical and spiritual aspects of their lives therefore giving their consent.”
IMAGE: Fr Vincent Takin the Parish Priest of St Martin of Tours Namatanai Parish speaking at the Seabed Mining Forum, Namatanai, New Ireland Province. June 8th, 2017.

 

 

 

 

“Seabed Mining is a totally new thing to our people and the world as a whole and why come and exploit our people and its beautiful environment? This year, the Universal Church has chosen its theme as the Year of the Children? Our decisions and activities today must be based on the common good of our future children and their children’s children”

“New Ireland has two (2) Gold mines with high grade gold, has logging activities with copra, oil palm and cocoa as the main commodities to its provincial resources’ income so why are we opening ourselves to something never tested nor proven which we never gave consent to but the government of the day did that without even having all the necessary information and knowledge as to whatever impact it will bear upon our people and our environment. Why exhaust all our natural resources at once when we have more than enough now? what about our future generation?”

“Therefore, for the sake of ourselves and our future generation, STOP USING US AND OUR ENVIRONMENT AS GUINEA PIGS”!!! HALT THE  SOLWARA 1 PROJECT!!! BAN SEABED MINING IN NEW IRELAND!”

 

Compiled by John Momori
Caritas PNG Parish Coordinator
St Martin of Tours Namatanai Parish

 

[1] Pontifical Council for Justice and Peace, Compendium of the Social Doctrine of the Church (Mumbai: Pauline Publications, 2004), 285.