Nautilus Minerals has signed a new agreement with Tongling Nonferrous Metals Group for the sale of product extracted from the company’s Solwara 1 deposit in the Bismarck Sea of Papua New Guinea, with first delivery expected in the first half of 2018.
On April 21, 2012, Nautilus and Tongling entered into a heads of agreement (HOA) for the sale of product extracted from the Solwara 1 deposit. Following a series of detailed negotiations focused on achieving a mutually beneficial and workable arrangement, the parties have now finalized the terms of a new take or pay agreement, referred to as the Master Ores Sales and Processing Agreement (MOSPA), which replaces the terms of the HOA.
The terms of the MOSPA offer significant cost savings and reduced business risk to Nautilus over the HOA, whilst giving Tongling the freedom to process the Solwara 1 material in a manner which optimizes its return.
The MOSPA has simplified the arrangements between the parties in many respects and it now operates as a more conventional material sales agreement where Tongling will pay Nautilus for a fixed proportion of copper, gold and silver in the mineralized material.
The copper payment will be for 95% of recoverable copper as determined by locked cycle testwork on samples of shipments. The gold payment is fixed at 50% of the contained gold in the mineralized material which represents a premium payment for gold compared to the HOA. Payment for silver is fixed at 30% of contained silver in the mineralized material.
The Asian international copper concentrate benchmark will still be used as the basis for smelter treatment and refining charges related to the recoverable copper.
From Tongling’s perspective, the MOSPA offers greater flexibility over the design and operation of a concentrator to be built specifically for the processing of Solwara 1 material.
The construction of the concentrator will initially be financed by Tongling with these costs recovered through a fixed plant capital fee payable by Nautilus monthly over the term of the MOSPA. Nautilus shall provide Tongling with a bank guarantee covering 50% of the concentrator capital cost.
Tongling now has the exclusive right to market or process any pyrite concentrates produced from the Solwara 1 material, whereas under the HOA the parties were to jointly market any pyrite concentrates sharing any profit on a 50/50 basis.
Nautilus’ CEO Mike Johnston says, “This new agreement provides improved terms for both Nautilus and Tongling and can be truly described as a win-win outcome.
The MOSPA gives greater flexibility to Tongling with respect to its operations, while providing Nautilus with certainty and an improved Net Smelter Return.
“I am delighted to be continuing our relationship with Tongling as a key business partner supporting the development of the world’s first Seafloor Massive Sulphide mining project.”
Tongling Nonferrous Metals Group vice president Zhan Deguong says, “Tongling Non Ferrous Metals Group has a long history of technological innovation, and is committed to the ‘green economy’ where waste streams are minimized and value is realized on all components of the material.
“Our modern, world-class processing facilities will allow us to extract maximum value making this win-win agreement possible. We are very proud to support Nautilus in the development of Solwara 1, a ground breaking project which signals a new era in the mining industry.”
Meantime, Nautilus has also announced that the Independent State of Papua New Guinea’s nominee, Eda Kopa (Solwara) Limited, the company’s joint venture partner in the Solwara 1 project, has elected not to exercise its option to take up to a further 15% interest in the project.
Nautilus and the state nominee, which maintains a 15% interest, continue to work together to complete the seafloor production system to be used at the project site when mining is planned to commence in quarter one of 2018.