Canada's Nautilus Minerals (TSX:NUS)(OTCQX:NUSMF)(AIM:NUS) dropped 11.5% on Wednesday after the company announced that Papua New Guinea has responded to its claims concerning a deal that is now the subject of arbitration proceedings.
The PNG government is refusing to pay its share of the development costs of Nautilus' Solwara 1 project, located in its territorial waters in the Bismarck Sea.
Nautilus says PNG undertook to help fund the sea-floor mine as part of an agreement signed last year that gave the country 30% ownership of the project, but the government of the South East Asian nation appears to be digging in its heal over the issue. In its response on Wednesday it alleges that Nautilus is the party that breached the terms of the deal and that the state is "therefore entitled to terminate the agreement".
The company, the first to explore the ocean floor for polymetallic seafloor massive sulphide deposits, initiated the legal battle on June 1, when it warned that the copper-gold-silver project could be delayed or cancelled because of the dispute.
The news prompted a massive sell-off with Nautilus shares listed in Toronto halving over two days of torrid trading. It has since recovered some of the losses but at $247 million today it is still worth 38% less than before the dispute.
Not long ago, the future looked promising for Nautilus. In late April, the company announced it had signed China's Tongling Non-ferrous Metals Group as the first customer for its pioneering Papua New Guinean sea-floor mine. The undersea mine was slated to begin production in the fourth quarter of 2013.