PNG Government To Pay $118 Million To Nautilus Minerals

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State must buy 30% interest, pay 30% of project expenditures

PORT MORESBY, Papua New Guinea (The National, Oct. 7, 2013) – Papua New Guinea’s national government has been ordered to fulfill its commitment to the Solwara-1 deep sea mining project – meaning it has to meet a demand to pay an estimated US$118 million (K307.7 million) to the developer, Nautilus Minerals, by Oct. 23.

Canada-based sea floor miner Nautilus Minerals, said in a statement last Thursday that Sydney-based arbitrator Murray Gleeson had issued an award in the company’s favour in respect of the issues that were the subject of a notice of arbitration initiated by the State of PNG.

Under the applicable arbitration rules, the arbitrator's decision is final and binding. The arbitration began on Aug. 26 and lasted 10 days.

Prime Minister Peter O’Neill has been in Bali, Indonesia, attending the Asia Pacific Economic Cooperation (APEC) meeting. He is expected to issue a statement after his return tomorrow.

Gleeson made a declaration that the State of PNG was in breach of the state equity option agreement signed by the parties in March 2011 in failing to complete the purchase of a 30% interest in the Solwara-1 Project on Nov 7, 2011.

He issued an order that the State was required to comply with its obligations under the agreement to complete the purchase of the 30% interest in the Solwara 1 Project and pay 30% of all project expenditure incurred to date within a reasonable time after the award.

Nautilus, last Thursday, issued the State with a notice requiring completion to occur on Oct 23.

The company estimated that the total amount payable by the State at completion to be approximately US$118 million (including interest).

"Nautilus looks forward to bringing the Solwara 1 Project into production and will work with the State in order to move the project forward in light of the arbitrator’s award," its interim chief executive Michael Johnston said in a statement.

The value of Nautilus stock shot up 50.1% to US$0.55 on the news.

The arbitration decision comes after a prolonged impasse with PNG over its partnership in mining project earlier this year.

The problem, as Johnston told it, was that many of the deeds covering proprietary technology and subsea mining methods, which Nautilus and several partners developed over the years, did not contain clauses allowing for a third party, such as the PNG government, to come on board as an additional partner and owner of the intellectual property rights.

Johnston said negotiations with the company’s partners in the dredging business were conducted to convince them to redraw the deeds to allow the Papua New Guinea government to gain direct 30% ownership of the intellectual property rights.

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