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Nautilus Minerals SWOT Analysis: Mining the Ocean Floor

March 27, 2014 | About:
Karen Rogers

Karen Rogers

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Nautilus Minerals (TSX:NUS) is engaged in the undersea exploration and mining of gold, silver, copper and zinc in Australasia. The company is headquartered in Toronto, Ontario, Canada, and has overseas offices in Milton Queensland, Australia, Port Moresby, Papua New Guinea and Nuku'alofa, Tonga.

Strengths

  • Operates the largest ocean floor mining operation.
  • High barriers to entry.
  • Has secured exploration licenses from Fiji, Tonga, Solomon Islands, New Guinea and Vanuatu. The company recently filed for an exploration license from New Zealand.
  • Strong financials with 53,954,109 in cash and cash equivalents, $288,400,894 in total assets and only $41,524,699 in total liabilities as of September 2013.

Weaknesses

  • No source of income from mining operations.
  • High operating costs.
  • Filed lawsuit against Papua, New Guinea for failing to abide by the State Equity Option Agreement signed in March 2011.
  • Must comply with foreign environmental sea floor drilling and mining regulations.
  • Local environmental groups oppose ocean floor mining.

Opportunities

  • Increased world demand for gold, copper, silver and zinc
  • Ongoing sea floor mining operations
  • Filing new applications for exploration and mining permits
  • Has an existing customer base

Threats

  • Foreign governments may revoke exploration permits.
  • Nautilus may run out of cash before finding an ore mineral deposit.
  • High risk of accident, injury or death to mining personnel.
  • Strong competition from large-cap companies like BP Petroleum that conduct ocean floor mining activities.

Nautilus Minerals has focused its resources on the Solwara 1 Project, a gold and copper exploration endeavor off the coast of Papua New Guinea. To facilitate the project, the company has technical agreements with Soil Machine Dynamics, Ocean Floor Geophysics and GE Oil & Gas to purchase and operate production equipment and vessels. Robotic mining equipment will drill on the sea floor and extract the raw ore. It is then transported directly to the awaiting ships on the surface for processing.

On Feb. 14, 2014, Nautilus Minerals terminated the State Equity Option Agreement with the New Guinea government for not completing a 30% purchase interest in the Solwara 1 Project. Nautilus Minerals has claimed damages from the termination and is pursuing a resolution with the government.

As of September 2013, Nautilus Minerals has a market cap of $88.15 million and has 433,897,865 common shares outstanding. Nautilus Minerals has three significant shareholders that own more than 50% of the company’s stock. Mawarid Mining LLC owns 28%, Metalloinvest Holding (Cyprus) Limited owns 20.75% and Anglo American Plc owns 5.95% of the common shares.


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