Nautilus Minerals and Papua New Guinea have signed an agreement enabling the Solwara 1 project  to move forward toward production with the full support of the PNG state. Under the agreement, PNG will take an initial 15% interest in the project. The state has the option to take up to a further 15% interest within 12 months of the agreement becoming unconditional and has paid Nautilus a non-refundable deposit for its initial 15% interest of $7 million.
The agreement is conditional upon the state, (through a subsidiary of Petromin PNG Holdings), securing by July 31 2014, funding for its 15% share of the capital required to complete the development phase of the project up to first production, being $113 million (excluding the deposit). These funds will be placed in escrow until Nautilus satisfies the conditions for their release. The funds will be released to Nautilus, and an unincorporated joint venture between the parties for the ongoing operation of the project will be formed, if within six months of the funds being transferred, Nautilus secures the charter of a Production Support Vessel and secures for the PNG state certain intellectual property rights. After first production, Petromin’s subsidiary will contribute funds in proportion to its interest.

If the conditions of the agreement are satisfied and the state completes the purchase of its 15% interest in the project, then the arbitration concerning Nautilus’ claim for damages related to the termination of the State Equity Option Agreement from 2011 will be dismissed. If the PNG state does not complete the purchase, then the position the parties were in prior to signing the agreement will be reinstated.

Nautilus’ CEO, Mike Johnston, said the company was pleased to have achieved an amicable resolution of its issues with PNG. “This step represents a major vote of confidence in Nautilus Minerals and the Solwara 1 project. Through this joint venture, the state will provide a significant capital investment and will retain a direct interest in the long term success of the project. We look forward to working closely with the state and Petromin on Solwara 1, which will generate significant economic activity within the state and the province of New Ireland,” he said. The company is now focusing its attention on securing a suitable vessel arrangement and is continuing its discussions with potential vessel partners while also undertaking a tender process with shipyards experienced in building offshore construction vessels. Nautilus intends to have a vessel solution in place before the end of the year.

Also recently announced by Nautilus is the completion of the assembly of the Bulk Cutter (BC), the first of the Seafloor Production Tools (SPTs). Subsea vehicle designer and manufacturer, Soil Machine Dynamics (SMD) of Newcastle upon Tyne in the UK, is the company responsible for building the SPTs for Nautilus. SMD are experts in the “marinisation” of mechanical, hydraulic, electric and electronic equipment for use in a subsea environment (water and pressure immersion). SMD uses this skill set as the basis of much of its existing product line in remotely operated vehicles and subsea trenchers. The BC is the heaviest of the three SPTs, weighing 310 t when fully assembled. It is designed to be the high productivity machine responsible for the bulk of production.