VANCOUVER — There’s an ocean of opportunity for aspiring seafloor miner Nautilus Minerals (TSX: NUS; US-OTC: NUSMF) at its wholly owned, polymetallic nodule project within the Clarion-Clipperton fracture zone (CCZ) in the central Pacific Ocean.
The CCZ, which measures 750 km wide and 4,500 km long, is the largest and highest-grade copper-nickel-cobalt nodule deposit in the world, according to the company.
“There are a lot of untapped resources sitting on the seafloor, and the project is just the tip of the iceberg,” Michael Johnston, president and CEO, tells The Northern Miner from the company’s headquarters in Toronto. “The size of the CCZ is about the size of Canada. You can drive a camera from one end to the other and there’s nothing but nodules for the entire trip. It’s enormous.”
Nautilus recently upgraded copper-nickel-cobalt resources across six of its exploration areas that cover 2.2% of the CCZ, or 74,700 sq. km, reaching 6 km below sea level.
Resources stand at 2.6 million wet tonnes of 1.3% nickel, 1.1% copper and 0.2% cobalt as measured; 68.1 million wet tonnes of 1.4% nickel, 1.2% copper and 0.2% cobalt as indicated; and 685.3 million wet tonnes of 1.3% nickel, 1.1% copper and 0.2% cobalt as inferred.
The CCZ is a breeding ground for polymetallic nodules, as it resides near a divergent tectonic-plate boundary where volcanism spews metal-rich fluids into the seawater.
The nodules form when the metals latch onto “seeds” such as coral, older broken nodules or even shark teeth, and can grow up to 10 cm or more in size.
Elsewhere in the world, it could take a million years for nodules to grow one to 10 millimetres in diametre, whereas in the CCZ, it takes only 1,000 years because of favourable conditions.
The company says the deposits are similar to nickel laterites, but are typically higher grade and aren’t prone to liquefaction. Liquefaction occurs when ore crumbles and behaves like a fluid, which can make a vessel unstable during transport.
“Exploring for these types of deposits is different than drilling for a porphyry copper on land,” Johnston says. “The nodules are sitting on the seafloor in mud, so we sample them using free-fall box corers from a ship and calculate the abundance and grade of the nodules that are brought up to surface.”
The 2013 resource estimate for the project designated samples spaced at 20 km for inferred resources, 7 km for indicated and up to 3.5 km for measured.
In the upcoming months, Johnston says the company will proceed with environmental and engineering studies in preparation for a preliminary economic study.
Meanwhile, Nautilus is forging ahead on plans to break ground 1.6 km below sea level at its Solwara 1 seafloor massive sulphide (SMS) deposit, 30 km off the coast of Papua New Guinea.
Johnston says the company expects to begin production by the first quarter of 2018.
“The critical item that determines our schedule is building the vessel, which is our mining platform,” he says. “We’ll assemble the various blocks in the next couple of weeks, so by mid-2017 we expect to float the vessel and have it outfitted with our mining equipment.”
SMS deposits are different from polymetallic nodule deposits, Johnston adds. They’re the modern analogues of volcanogenic massive sulphide deposits — a major source of the world’s terrestrial copper, gold, zinc and silver.
The mound-shaped orebodies are clustered around submarine volcanic arcs, where metal-rich fluids are exhaled from hydrothermal vents, or “black smokers,” and form layers of massive sulphide on the seabed.
Solwara 1 has 1.03 million indicated tonnes of 7.2% copper, 5 grams gold per tonne, 23 grams silver per tonne, 0.4% zinc for 74,160 tonnes copper and 165,600 oz. gold. Inferred resources add 1.5 million tonnes of 8.1% copper, 6.4 grams gold, 34 grams silver, 0.9% zinc for 124,740 tonnes copper and 316,900 oz. gold. Both calculations assume a 2.6% copper equivalent cut-off.
“We like to think of seafloor mining as having the same potential as offshore oil and gas. It has the same parallel,” he adds. “The industry started going offshore in the 1960s, and now a large percentage of oil and gas comes from offshore reserves.”
Nautilus plans to mine the top 10 metres of the deposit at a rate between 2,200 and 4,320 tonnes per day for 1.4 million tonnes per year at a US$64-per-tonne operating cost.
Johnston says the company received its three seafloor production tools in January: an auxiliary cutter, a bulk cutter and a collecting machine.
He explains the auxiliary cutter would work with the bulk cutter to excavate the ore, while the collecting machine would harvest the slurry and pump it to the ship via a riser system.
“There are no explosives, and the footprint is really small because we don’t have waste dumps or tailings ponds like they do on land,” Johnston says. “Once the ore is harvested we ship it directly to China and they use all of it, so it’s quite unique in that sense compared to other mining projects — you have no long-term liabilities.”
Capital expenses for the “floating mine” run US$383 million, but Nautilus’ chief financial officer, Shontel Norgate, said in an email that “costs have increased since the PNG dispute,” and the company still needs between US$200 million and US$225 million to complete the construction.
(The company suspended development of Solwara 1 in early 2013 when a dispute arose with the PNG government over its partnership agreement. The company negotiated a deal in May 2014, and received a US$113-million payment in December 2014, which gave the PNG government a 15% stake in the project.)
To help offset the costs, Nautilus raised $28.3 million in a rights offering in April, which represented 27% of the total shares on offer.
“We’re in discussions with groups about getting additional capital,” Johnston says. “In terms of capital intensity, mining the seafloor is actually quite low compared to land-based projects. We’re not building roads, power plants or tailings dams — it’s all on the vessel, compact, reusable and mobile. So we’ll mine our first deposit, then go mine a whole series of these deposits.”
He notes the underwater mining tools for the Solwara 1 project are rated to work up to 2,500 metres deep underwater, so Nautilus will require a different approach to mine nodules off the seafloor in the CCZ.
“Nothing is stopping us from using the current vessel and riser system for the nodules,” he says. “But you don’t need to cut the nodules, just collect them, so we’ll be looking at a way to harvest the material that’s cheaper and simpler than the one used at Solwara 1.”