Solwara output destined for China

NAUTILUS Minerals has struck a binding agreement to export copper, gold and silver concentrates from its Solwara-1 deepsea mining project in offshore PNG to China’s Tongling Nonferrous Metals Group.
Solwara output destined for China Solwara output destined for China Solwara output destined for China Solwara output destined for China Solwara output destined for China

Under the heads of agreement, Tongling will purchase 1.1 million tonnes per annum - give or take 20% as part of the agreed range for production variation - for three years on a take or pay basis.

The offtake is expected to start in line with the expected first production of the project in the last quarter of 2013.

On the payment side of the equation, Nautilus said there was a mechanism where Tongling paid 90% of the price (based on London Metal Exchange markets) upon loading of the export vessel in PNG while the final payment was based on the metal recoveries and other considerations.

There is also a 50:50 profit sharing scheme between the two parties on "incremental by-product revenue realised in China, including gold-bearing pyrite".

"Material from the process can be roasted in China to produce gold and sulfuric acid and the remaining calcine may be sold to cement manufacturers or as iron ore fines," Nautilus said.

"With minimal waste, Tongling's process brings significant benefits consistent with Nautilus' commitment to minimise environmental impacts."

Nautilus will issue a bank guarantee of under $C11.5 million ($A11.32 million) to Tongling as security for half of Tongling's concentrator investment costs - the first order for equipment necessary to process the exported Solwara base and precious metal concentrate.

"We have now closed the value chain on the project, established our first customer for seafloor massive sulfides and look forward to building a long-term relationship with Tongling," Nautilus chief executive officer Stephen Rogers said.

"The quality of this relationship with China's largest importer of copper concentrates provides further evidence that there is considerable interest in the high-grade massive sulfides being found by the emerging seafloor resource production industry."

Construction of the innovative seafloor production tools and support vessel is underway.

Initial seafloor mining at Solwara in the Bismarck Sea is designed to hit a production rate of 1.2 million tonnes per annum of dry ore delivered to Rabaul port, with a ramp-up option to hit 1.8Mtpa.

Using a 2.6% copper cut-off grade, the Solwara 1 project hosts 1.03 million tonnes of indicated resources grading 7.2% copper, 5 grams per tonne gold, 23gpt silver and 0.4% zinc.

By the same cut-off measure, the inferred resources are 1540 tonnes grading 8.1% copper, 6.4gpt gold, 34gpt silver and 0.9% zinc.

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