The international consulting group AMC Consultants Pty Ltd has prepared a preliminary economic assessment (PEA) for the Solwara-1 seafloor massive sulphides project in the Bismarck Sea of Papua New Guinea.
The PEA, which contains an independent National Instrument 43-101 technical report for the Canadian bourse was for project developer Nautilus Minerals Inc (TSX: NUS; OTC: NUSMF) – a company developed more than two decades ago with a strong New Zealand and Australian involvement.
Nautilus has the PNG Government as a 15% partner in Solwara-1 which contains a series of minerals, including zones of high grade copper, gold and zinc.
AMC’s PEA details the proposed production system and methodology (which are now well advanced), and provides estimates of operating costs, CAPEX to completion, metal production, and cash flows.
- Solwara 1 is fully permitted.
- A 15 month ramp up to “steady state” production (About 3,200 tonnes/month).
- Steady-state payable metal production per quarter (20,000t Copper and 29,000 oz gold.
- C1 costs, taking in projected $US0.80/lb Cu at projected steady state output.
- Undiscounted post-tax net cash flow of $US179 M.
- Discounted net cash flow, discounting at 15% pa, of US$56 M.
- An internal rate of return base case of 28%, rising to 40% using average forward curve metal prices for copper and gold in the production period.
- $US243 M of CAPEX remaining to be raised (subject to financing) and spent until production commences.
- Taxes and royalty payments from Solwara 1 estimated to be more than $US$100 M over the three years project life.
Nautilus said the PEA models first production starting in the third quarter of 2019, and shows Solwara-1 has a high fixed cost component (52%), largely vessel related, and is highly leveraged to metal grade, metal prices, equipment utilisation and production rates.
The maximum capacity of the production system is designed at about 6,000t/day. AMC believes that if a steady-state output rate of 4,500t/day is achieved, then C1 costs would be expected to be lowered to around $US0.63/lb Cu (net of by-products), well in the lower half of the first quartile of the world copper production curve.
Nautilus chief executive Mike Johnston said: “We are very excited by the results of the PEA.”
Projected costs, he said, sit comfortably in the lower half of the first quartile of the production curve, and highlight the potentially seriously disruptive nature of seafloor mining to the world's mining industry.
He said the Nautilus business model is based on using the capital, IP, and know how that Nautilus has developed for Solwara 1, and applying it to future discoveries at minimal additional CAPEX cost, and with a much reduced “ramp up curve” for subsequent projects.
Johnston said the oceans have significant potential to provide key minerals such as copper, gold, silver, zinc, nickel, cobalt and manganese for the world, as it transitions to a low carbon future based on electric vehicles and batteries.