Solwara 1 royalties, tax over K300m

Taxes and royalties from the Solwara 1 Mine Project in PNG waters are estimated to be more than K300 million over the three-year life span of the project.

This is contained in a Preliminary Economic Assessment (PEA) in an independent national technical report for the development of the project.

The PEA details the proposed production system and methodology and provides estimates of operating costs, CAPEX (capital expenditure) to completion, metal production and cash flows.

The PEA models first production to begin in the third quarter of 2019, and also shows that the Project has a high fixed cost component, largely vessel related, and is highly leveraged to metal grade, metal prices, equipment utilisation and production rates.

In a statement Nautilus’ CEO, Mike Johnston, said they are very excited by the results of the PEA.

“Expected C1 operating costs at US$1.36 per pound of copper (lb Cu) for the entire project are in the lower half of the cost curve, and include the 15-month ramp up period.

“Expected ‘steady-state’ C1 operating costs of US$0.80lb Cu sit comfortably in the lower half of the first quartile of the production curve, and highlight the potentially seriously disruptive nature of seafloor mining to the world's mining industry.

“These are very competitive capital and operating costs, and have additional room to move.”

The production systems on which the PEA is based are currently under construction.

Highlights of the PEA include:

  • Solwara 1 is fully permitted
  • PNG Government is a 15 percent partner
  • 15-month ramp up to “steady-state” production (~3,200 t/d)
  • Steady-state payable metal production per quarter ~ 20 kt Cu and 29 koz Au
  • C1 costs*
    • US$1.36/lb Cu for the entire deposit
    • US$0.80/lb Cu when at projected “steady state” (3,200 t/d)
  • Undiscounted post-tax net cash flow of US$179 million
  • Discounted net cash flow, discounting at 15 percent per annum, of US$56 million
  • IRR base case 28 percent*, rising to 40 percent using average forward curve metal prices for copper and gold during the production period (as at the PEA's effective date)
  • ~US$243 million of CAPEX remaining to be raised (subject to financing) and spent until production commences
  • Taxes and royalty payments from Solwara 1 are estimated to be more than USD$100 million over the 3 year project life (including ramp-up)
Cedric Patjole