Nautilus Minerals

Controversies

Environmental

In 2015, a Nautilus-commissioned environmental and social benchmarking report on the Solwara-1 project was released. In a presentation made to warn Canadian investors about the risks of investing in the company, the report was criticized by a coalition of Canada-based environmental groups such as MiningWatch Canada, for conflicts of interest and a lack of scientific understanding. Nautilus’ claim that the report represented independent research was challenged given that the report was based on information provided by the company. The report was also identified as having ignored issues raised by comprehensive independent reviews of the project’s Environmental Impact Statement (EIS). Further, the hydrothermal vents at the Solwara-1 site were considered rare ecosystem types, and in a BBC segment on the project's progress, David Attenborough called deep sea mining at hydrothermal vents “deeply tragic”. Additionally, the report had assumed no impacts on communities (no affected communities were identified, with no cultural claims) since it was located out to sea. This was despite there having been vocal opposition by coastal residents, who reported seeing dead fish wash up on shore and excessive levels of sediment in the area. Local protest groups that had formed, such as the Alliance of Solwara Warriors, voiced their opposition to the project. Finally, the report’s environmental comparisons to industrial-scale terrestrial mines were challenged given the number of mines planned by Nautilus, and the geographic differences between the projects.

Social

A major issue raised with the project concerned the question of the “social license” — an idea originating from the World Business Council on Sustainable Development — which had become influential in the mining industry since the late 90s. This license was seen as something to be obtained from the community by the company, where receiving it meant gaining the ongoing consent for and widespread support of the company’s operations. Despite the project’s location at sea, it was authorized by the government under laws and policies applying to onshore projects. These laws required hearings to be held in the affected area to provide local “landholders” the opportunity to air their views and to register any objections (although it did not give them veto rights). If no objections were made, the project was permitted to continue. Government officials maintained that the seabed could not have “landholders” apart from the state, and that therefore no special agreements needed to be made to grant the license. Company personnel played a key role in this interpretation of policy, eventually delineating an artificial community consisting of local coastal area from which the company could claim to have obtained a social license. However, no public record of the process of obtaining this license exists.

Financial

Having received permission from the government, the project continued, but ran into financial issues. In 2015, the company reported being targeted by a cyber scam resulting in the erroneous payment of $10m to an unauthorized account, that had been intended for the company’s shipbuilding contractor. The investigation findings of this incident were not disclosed to shareholders, and the company was unable to rule out internal fraud. Unable to resolve payment issues with the contractor and the shipyard the vessel was being constructed at, the half-completed vessel was repurposed by another company. In October 2019, Nautilus declared bankruptcy. The company’s major creditors attempted to gain control of its assets, but legal disputes over mining leases and concerns over environmental impacts complicated the process. Shareholders saw a sharp drop in the value of their investments, and creditors were expected to receive only a portion of what they were owed, including the Papua New Guinea government, which paid PGK 81.5m ($24m) in interest on loans relating to the Solwara-1 project. Prime Minister James Marape said that the country had “burnt almost PGK 300m … on a total failure”, and supported the establishment of a 10-year moratorium on deep-sea mining projects worldwide. Minister of State Owned Enterprises Sasindaran Muthuvel stated that he considered the country’s $120m debt from the project “money sunk into the ocean”. Given the economic and political fallout of the company’s failure, the bankruptcy raised concerns industry-wide about the viability of deep-sea mining operations.