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The world’s largest commodity trader has endorsed speculative undersea mining as a handful of entrepreneurs continue to try to put the industry on the map.
Vancouver-based DeepGreen Resources Inc. has struck a deal with Glencore International Inc. under which the commodity giant agreed to buy 50% of the nickel and copper DeepGreen plans to produce from a seafloor project located west of Mexico.
DeepGreen is a private company founded by David Heydon, the man who built industry leader Nautilus Minerals Inc. and kick-started the underwater mining business. He has planned to take DeepGreen public in Toronto for more than a year, and Glencore’s commitment is a potential catalyst to attract investors to an IPO. The offering has already been delayed because of weak market conditions.
Mr. Heydon views the Glencore deal as evidence that DeepGreen – and seafloor mining as a whole – need to be taken seriously.
“There are hundreds of mining companies on the TSX, but how many of them have offtake agreements with majors? You can draw some conclusions from that,” he said in an interview.
The Glencore news comes just as the seafloor industry hits a major speed bump.
Nautilus was making good progress on its Solwara 1 project until two weeks ago, when it shocked investors with two pieces of bad news: a legal dispute with the government of Papua New Guinea and funding problems related to its main vessel. The stock plunged 50% over the next two trading days, though it has recovered since then.
There are many skeptical investors who have watched this industry with interest, but won’t believe in it until a project comes to fruition. The Nautilus setbacks appeared to confirm many of their fears. Nautilus planned to enter production next year until its recent problems left the timeline up in the air.
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