Costs a game changer for seabed gold and copper mining? – by Harpreet Bhal (Mineweb.com – March 9, 2012)

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Industry analysts reckon seabed mining could transform the mining industry, its attractiveness riding on high ore grades and dwindling metal supplies elsewhere, but see operating costs as a major hurdle.

LONDON (Reuters)  – Touted as the mining world’s next frontier, its attractiveness riding on high ore grades and dwindling metal supplies elsewhere, seabed mining will have to prove it can keep costs low to win over mainstream investors.
 
While the diamond industry has been mining off the Namibian shoreline for years, Toronto-listed Nautilus Minerals is expected to be the first commercial operation to extract metals such as copper and gold from the seabed.
 
Some analysts say the move could transform the mining industry in the way off-shore drilling gave access to new deposits in the oil and gas sector in the 1970s. But keeping operating costs low will be crucial to seabed mining’s success, they warn.
 
Seafloor mining comes at a critical time for the industry. Copper ore grades are declining, forcing firms to mine in riskier areas, costs are rising and new projects have been slow to catch up with demand from emerging economies.
 
A Reuters survey late last year showed long-term price forecasts for copper have jumped by a fifth compared with the previous year on strong demand from emerging markets and rising production costs in a world of tight supply.
 
Long-term, or incentive, price forecasts are used to evaluate the feasibility and potential profitability of future projects.
 
Gold is also seen as lucrative to mine, with spot prices trading up almost 9 percent this year after hitting an all-time high at $1,920.30 an ounce in September 2011.
 
Founded by geologist-turned-journalist Julian Malnic in the late 1990s, Nautilus has permission to explore massive sulphide deposits in the floor of the Bismarck sea off the coast of Papua New Guinea for copper, gold, zinc and silver.
 
The firm is backed by high-profile investors, including global miner Anglo American Plc and Russia’s largest iron ore miner Metalloinvest, controlled by Arsenal football club shareholder Alisher Usmanov.
 
“They (shareholders) recognise that if it works it’s going to be a game changer for the mining industry in many respects because there is a lot of this stuff out there on the ocean floor,” Numis analyst Andy Davidson said.
 
“It’s almost a punt for those guys and I think that’s the way a lot of investors look at this. This is a high-risk, potentially very high-reward speculative play.”
 
COST IS KEY
 
Nautilus aims to start producing at Solwara 1 in the Bismarck sea, at a water depth of some 1,600 metres, in late 2013. It hopes to produce around 80,000 tonnes of copper and 150,000 ounces of gold per year, equivalent to a small mine.
 
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