The verdict has arrived much to the joy of investors.
Deep-sea mineral explorer Nautilus Minerals (TSX: NUS) has announced the arbitrator, the Honourable Murray Gleeson, has concluded that the Papua New Guinea (PNG) government did not hold its end of the deal for the company’s Solwara 1 copper-gold project. The news sent Nautilus’ shares climbing 51% to 55¢, its highest close in nearly eight months.
The government — intrigued by the potential of the project located 30 km from its coastline and in its territorial waters — signed an option to buy 30% of Solwara 1 in March 2011. In exchange, the State agreed to cover 30% of the project’s costs up to that date as well as 30% of any future costs.
In mid-2012 Nautilus revealed that it had not received any funds from the PNG government and initiated a dispute resolution process. The government claimed that the company failed to meet certain requirements in the option agreement, so was not required to fulfill its obligation. But, Nautilus argued otherwise. This led the parties to enter arbitration.
After much anticipation, Gleeson, a former Chief Justice of the High Court of Australia, declared that the PNG government breached the 2011 equity option agreement by not purchasing a 30% interest in the Solwara 1 project. Gleeson urged the State to complete the purchase by paying 30% of all the costs incurred to date “within a reasonable time.”
The company says it has sent a notice to the government to fulfill its obligations under the 2011 option agreement by Oct. 23, 2013. Nautilus estimates that the State owes it roughly US$118 million, including interest, to buy 30% of its flagship project.
Following the dispute with the government, Nautilus halted the project’s development late last year, explaining it could not fund the project on its own. However, the arbitrator’s award may help the company resume construction.
The Solwara 1 project lies 1,600 metres below the Bismarck Sea and hosts an indicated resource of 1.03 million tonnes grading 7.2% copper, 5 grams gold per tonne, 23 grams silver and 0.4% zinc. It has another 1.54 million tonnes of 8.1% copper, 6.4 grams gold, 34 grams silver and 0.9% zinc in inferred.