Treasure of the Sea


July 1998

Precious Metals:News

Treasure of the Sea

A rich gold deposit in coastal waters off Papua New Guinea is poised to become the site of an ocean-mining effort of historical proportion

With gold prices down, news that an Australian-run company gained approval last year to mine exceptionally rich underwater deposits of the precious metal may sound insignificant. In fact, if Nautilus Minerals Corp. succeeds in efficiently mining two 987-square-mile sites in Papua New Guinea's Bismarck Sea, it will make history.

While ocean mining is a routinely discussed alternative to mining on land, it's generally considered costly and inefficient. The last large-scale ocean-mining attempt – a 1970s project to extract manganese, cobalt and nickel – produced a precedent-setting document (the Law of the Sea Treaty), but no minerals. Mining companies lost interest after lengthy legal wrangling, coupled with the discovery of greater quantities of minerals on land.

Nautilus Minerals Corp. – a Papua New Guinea group of Australian business interests working with Australian government scientists – thinks it has now found enough gold and other precious metals under the sea to make ocean mining profitable. Concentrations at the Papua New Guinea sites represent "bonanza figures," according to Ray Binns, the Australian scientist who discovered the sites five years ago. They include one ounce of gold and seven ounces of silver per ton, and high concentrations of zinc (26%), copper (15%) and other precious metals.

Such concentrations "make the prospect of undersea mining look economic," Binns said in a release from the Australian government's Commonwealth Scientific and Industrial Research Organization, an expedition sponsor. Nautilus Corp. estimates the long-term value of the deposits in the billions of dollars.

The two sites are located about a mile below the surface in Papua New Guinea's eastern territorial waters, clustered near underwater volcanic vents called "black smokers." The vents spew a super-hot, mineral-rich liquid which, when contacted by cool ocean water, coalesces into stories-high mineral-laden towers. Towers like these have been known to exist under the earth's oceans since the 1980s, but were never mined.

Nautilus Corp. told the New York Times last year it plans to take preliminary hauls of 10,000 tons each from the two sites in the next two years and larger commercial loads in the next five years.

Before it names a start date, however, the company must show it has a plan in place to curb environmental damage at the sites. It also faces the formidable task of obtaining investment capital for what many industry observers still feel is risky business.

"Ocean mining has never proven economically viable, and I think that's still the case," says Jeffrey Christian, managing director of CPM Group, New York City, a commodities and precious metals market analyst. "There are about 200 years of gold reserves left in terrestrial mines. They are not running out. Also the cost of production in new (land-based) mines is much lower than existing mines, so the average cost of producing gold is falling. Ocean mining wouldn't be competitive."

At the Washington, DC-based Gold Institute, Executive Vice President Paul Bateman also questions the efficacy of ocean mining. "Gold can be found in a lot of places," he says, "but at current prices, is mining the ocean cost-effective? It strikes me there are a lot of hurdles there. I'd shy away from anyone saying this will be the next motherlode."

Such concerns don't seem to bother Nautilus CEO Julian Malnic. He says the samples he saw from the bottom of the Bismarck Sea are "utterly compelling, and the fact that we now have title to the deposits has galvanized the scientists and mining industry into seeing the possibilities."

If the world's investors also see those possibilities, the precious-metals mining industry might be in for a sea change.

– by Richard L. Carter

Copyright © 1998 by Bond Communications.


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