BULL POINTS
• Highly-prospective licence areas
• Seafloor mining is low-cost and high-margin
• Partnered by mining majors
• Shares trade at little more than the cash pile
BEAR POINTS
• The technology is unproven
• Lifting and operating contracts remain outstanding
Is the seafloor the future of mining? Anglo American and Teck Cominco think so - both have invested heavily in sub-sea mining pioneer, Nautilus Minerals. Nautilus is innovating low-cost, high-margin mining of seafloor massive sulphide (SMS) deposits, which often contain higher grades of copper, zinc, gold and silver than land-based deposits. Sub-sea mining at depths of 2km sounds fantastical, but the backing of mining majors confirms this as very real.
Anglo American holds 5.7 per cent of Nautilus and brings sub-sea diamond mining experience through De Beers. Teck Cominco now owns 7.2 per cent of the group and has just started a research programme at its own cost. Epion, owned by Russian oligarch Alisher Usmanov, holds a further 22.4 per cent.
Although Nautilus' proposed mining method is unproven, the technology simply adapts and marries together existing equipment from the hydrocarbon and mining industries. With no mine infrastructure to develop, time to production is drastically cut to two to three years. And being able to sail mining equipment from deposit to deposit makes sub-sea mining even more capital efficient.
Nautilus has 360,000 sq km of licences and applications over some of the most prospective areas of the Pacific. The company can leverage academic and scientific literature on SMS deposits to target exploration and, in December 2007, published the first ever resource indication for an under-sea deposit assessed to an industry standard (NI43-101).
| NAUTILUS MINERALS (NUS) | ||||
|---|---|---|---|---|
| ORD PRICE: | 113p | MARKET VALUE: | £164.9m | |
| TOUCH: | 110-115p | 12-MONTH HIGH /LOW: | 280p | 111p |
| DIVIDEND YIELD: | nil | PE RATIO: | 6 | |
| NET ASSET VALUE: | 219¢ | NET CASH: | $310m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (c) |
|---|---|---|---|---|
| 2007 | nil | -31.3 | -24.0 | nil |
| 2008* | nil | -16.3 | -9.30 | nil |
| 2009* | nil | -20.0 | -11.4 | nil |
| 2010* | nil | -27.7 | -15.8 | nil |
| 2011* | 287 | 68.8 | 39.2 | nil |
| % change | - | - | - | - |
Normal market size: 3,000 Market makers: 4 Beta:1.50 *Numis Securities estimates £1 = $1.987 | ||||
Click for a guide to the terms used in IC results tables.
Nautilus plans to mine its most advanced prospect, Solwara 1 in Papua New Guinea, by late 2010, to be followed by several nearby sites anticipated to contain even higher grades. Port facilities, a mill and a concentrator will be needed, costing roughly $210m (£106m). Nautilus has commissioned two Seafloor Mining Tools costing $66.5m, too. That just leaves the lifting system and operating contracts, which management expect to sign by June. Nautilus also boasts plenty of cash with which to bring Solwara 1 to production, although any overspend might be covered by a partner.
