Nautilus sinks to fresh lows as PNG elections descend into shambles

Nautilus Minerals  (TSX:NUS)(OTCQX:NUSMF)(AIM:NUS)  dropped 9.7% to $0.93 in late-afternoon trade on Thursday, hurt by news of  violence, kidnapping, vote rigging, delays and incomplete electoral rolls after the first week of general elections in Papua New Guinea.

The Canadian mine developer  has been locked in a dispute  with the government of the South East Asian nation since the start of June over ownership of a seabed mining project located in its territorial waters in the Bismarck Sea.

Radio Australia reports, among many other incidents,  “in one province, police arrested a group dressed as policemen, one of who was armed with a gun, after they tried to remove ballot boxes from a polling station,” while The Australia News Network reports of villages being torched and roads being blocked with heavy machinery and logs.

A leading copper producer before both BHP Billiton and Rio Tinto were forced to abandon two massive mines over land and environmental disputes, PNG is one of the poorest countries in the world. It is the impoverished country’s eighth poll since it gained independence from Australia in 1975 and most observers now expect the balloting to continue beyond the initial deadline of July 6.

Shareholder in Nautilus have seen the value of their investments plummet by more than half since the company initiated the legal battle on June 1 over the copper-gold-silver project.

A week ago Nautilus CEO Stephen Rogers told Reuters that he expects to settle things with PNG’s nominee Petromin PNG Holdings within “months” once the election is over, but that now seems a more remote possibility.

Nautilus says PNG undertook to help fund the Solwara 1 project  – almost half built –  as part of an agreement signed last year that gave the country 30% ownership, but the government appears to be digging in its heals over the issue. In a response last week  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”.

Petromin, about which little information is publicly available,  may simply not have the cash to bring to the table.

Not long ago, the future looked promising for Nautilus, the first company to explore the ocean floor for polymetallic seafloor massive sulphide deposits.

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, but Nautilus is also facing funding problems concerning its German partner building the $160 million surface vessel which is the base for the entire underwater operation.  Nautilus still has some $100 million cash in the bank.

Image by marcovarro / Mudmen warriors clasp their weapons at Goroka Tribal Festival in Goroka, Papua New Guinea on September 16, 2011.

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