TORONTO Oct 19, 2015 (Thomson StreetEvents) -- Edited Transcript of Nautilus Minerals Inc earnings conference call or presentation Thursday, August 13, 2015 at 2:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Mike Johnston Nautilus Minerals Inc. - President, CEO * Shontel Norgate Nautilus Minerals Inc. - CFO ================================================================================ Conference Call Participants ================================================================================ * John Reynolds - Private Investor * Frank Rango Purchase Capital Management - Analyst ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Thank you for standing by and welcome to the Nautilus Minerals teleconference. (Operator Instructions) I must advise you that this conference is being recorded today. I'd now like to hand the conference over to your speaker today, Mike Johnston. Please go ahead, Mr. Johnston. -------------------------------------------------------------------------------- Mike Johnston, Nautilus Minerals Inc. - President, CEO [2] -------------------------------------------------------------------------------- Thank you, Gemma, and welcome. Good morning, good afternoon, or good evening depending on what time zone you're in, and welcome to the Nautilus Minerals investor update for Q2 2015. If we move to slide 2 and note our disclaimer, you can read that at your own leisure. It's a pretty standard disclaimer. Moving on to slide 3, it's been another exciting three months for us. We'll just be dealing with the highlights since the April update, but we've got a real sense of things taking shape and I hope you get that same sense as well. We've got equipment coming on nicely; we've got milestones being ticked off. And for me the theme continues to be just the methodical delivery of our project: it's on time and running to budget. So, highlights for this quarter. We've continued to advance the Solwara 1 Project. Contracts have been awarded by MAC and the shipyard to Siemens for the supply of the entire electrical installation for the production support vessel. We've awarded a contract to DRA Group for the vessel dewatering plant detailed design. We've progressed our modest exploration programs using vessels of opportunity in the regions that cover some of the license areas which we have. We were also named to the 2015 OTCQX Best 50. The OTCQX Best 50 is the first-ever annual ranking of US and institutional companies traded on the OTCQX marketplace. The ranking was based on share price performance and daily volume growth, with equal weighting applied to both. So it's very pleasing to get recognized by the market as one of the leaders there. We also released our Earth Economics independent Environmental and Social Benchmarking Analysis of the Solwara 1 Project and seafloor mining in general. Seafloor mining offers significant environmental and social advantages; those are clearly highlighted in the Earth Economics report. There is significantly less impacts to ecosystem services and then in comparison to most land mines, and particularly copper mines. And this gives seafloor mining a real advantage, a competitive advantage, especially when people are looking at carbon footprints and waste management, which are major, major issues for land-based mining. We also granted the State Nominee an extension of its option exercise date. That's been pushed out to early December this year. We finished the quarter with $84.6 million in cash and cash equivalents. So all in all, very pleasing results. As I've said a number of times before, we don't like surprises in our Company, and we know our investors don't like surprises either. We're looking to deliver according to the plans which we outlined, and we're always available to take questions from any investors as we go forward as well. If we move to the next slide, slide 4, the status of the seafloor production tools, the factory acceptance testing is continuing with the bolt cutter, the collection machine, and the AC machine. We're still expecting delivery of these by the end of Q4 this year. Wet testing is planned for early next year. The umbilical winches for the three seafloor production tools -- the factory acceptance testing's completed on those, and installation of the umbilical cables currently underway on all three, and they'll be dispatched to the shipyard. Also during this quarter, SMD have advised that they are completing the evaluation of the shipping contract bids for the transportation of the equipment from Newcastle. And we'll get a copy of that evaluation for our endorsement shortly. We're also continuing to progress site selection for the wet testing and will advise people of that in due course. If we move to the next slide, slide 5, the status of the riser and lifter system, the other key pieces of equipment which we've been keeping -- kept the construction moving on during the dispute process. The riser and ancillary equipment is more than 50% complete. Welding of the connectors commenced in January of this year, and it's roughly about 50% complete. Delivery is expected for the riser part by the end of the year. The subsea slurry and lift pump, which is being built by GE Hydro, that also is about 50% complete. GE has advised the assembly of the subsea lift pump has commenced, and delivery of that pump is scheduled for around mid-2016. Like the seafloor production tools, the riser and lifting system are not on the critical path for the project. The critical path, as you will recall, runs through the build of the vessel; and all of this equipment is really not needed in the yard in China until around about mid-2017, or early 2017 at the earliest. So we're tracking quite well there. If we move to the next slide, slide 6, the production support vessel as I indicated is where the critical path for the project lies at the moment. We have now got all the long lead-time contracts have been let; they're listed on the slide here. We've got the cranes with MacGregor; got the cargo handling equipment with Bedeschi; the engines and thruster packages with Rolls Royce. During the quarter, we let the electric package to Siemens. And then this morning you'll have seen that we've just let the integrated vessel control system to Kongsberg Marine in Norway; that's to cover the dynamic positioning, marine automation, information management, and navigation systems. To me it's a pretty impressive list of names. Anyone involved in shipping will recognize just about every single name on that list. So that's really pleasing that we been able to get basically best-in-class in all of those key systems. Making sure these contractors perform is very important to us, as the delivery of the required equipment is essential for us achieving the schedule for the PSV. We're working with the yard and the design consultants to ensure delivery is on time and looking to expedite vendor supplies, as this is one of the main risks to the schedule. We've also recently, as you will have seen if you've been following our press releases, we've recently let DRA the contract for detailed design of the dewatering plant, which will then be integrated onto the vessel. Module fabrication and prequalification packages have been sent to a significant number of potential bidders. It's good to see there's a lot more competitiveness in the mining and offshore markets at the moment. Everybody seems to be looking for it, which is good for us. We should hopefully get some good responses to that prequalification. The teams also hold regular workshops with vendor suppliers, contractors, etc., to work through the design and integration items for the various bits of kit which are about to go on to the vessel and to make sure that those are going to perform as required for our mine plan. So all of that work's going really well and we're looking to have basically as seamless a handover at the integration as possible. As the design work has been progressing for the vessel, the team, the yard has been submitting designs to ABS as we go to ensure that we also have as effortless a Class approval as we can get as well. So everything is being managed to try and keep us onto a very tight schedule and if possible bring that schedule forward. Moving to the next slide, slide 7, we have commenced some modest exploration programs. They're not a focus for us at this stage, but will become a focus. We've been doing measured low-cost programs using vessels of opportunity when they become available in jurisdictions where we have licenses. In the last quarter, we completed a small program in the Solomon Islands using hull-mounted multibeam echo sounder and plume-hunting techniques, looking for SMS targets, SMS systems. That provides an initial screening of our tenement package, which will allow us to then consolidate the package and develop plans for the testing of those systems which we hope to find. We've also commenced a small program in the Clarion Clipperton Zone utilizing the Russian Academy of Science's vessel. That program involves sampling, seabed photography, acoustic surveying, and environmental studies. That will allow us to upgrade a reasonable portion of our currently inferred mineral resource into the indicated category, which will then allow us to aid -- which will aid our mine planning and sequencing plans for recovery of that resource -- very large resource. If we move to the next slide, slide 8, another of the highlights in the last quarter was related to the Earth Economics report. This report -- we commissioned it, but it's an independent Environmental and Social Benchmarking Analysis by the Earth Economics group. They are a Washington-based group who do significant work in the space of ecosystem management and ecosystem services. The result -- the goal of the report was to measure the environmental and social impacts of the proposed Solwara 1 Project. We get a lot of people ask about the project when we're traveling. There is a lot of information; there is a lot of misinformation out there about our project. And it was a good opportunity for us to get this world-renowned group to compile those social and environmental impacts and then put them into a format which is easily discernible for people. The result from the report was that the Environmental and Social Benchmarking study demonstrates very clear benefits of developing the first deep seabed copper mine. We have had a very, very good response to that report from regulators and government agencies, particularly in Papua New Guinea and elsewhere in the Pacific where we've made the report available. The International Seabed Authority has a copy of the report, and we gave a presentation at their recent assembly meeting. Like I say, very, very well received; overwhelmingly positive response. It also, from our point of view, it allows for sensible, intelligent debate on the expected impacts and benefits of seafloor mining and allows you to have an intelligent discussion with people. We've also during the quarter continued to have good support for the project, very strong support for the project from our partner, Petromin. Also the PNG government at all levels of government have continued to support the project. And Nautilus sees our community social responsibility programs in the West Coast and New Ireland and East New Britain being well received by the local people and the local government. So all in all, very pleasing results here. Moving on to slide 9, things -- as I said, milestones, looking out for the next couple of years, the key milestones that we'll be tracking the Company too. Things are continuing to track to plan. We're expecting delivery of the seafloor production machine, as I said, in the end of Q4 this year. Riser and ancillary equipment the end of the year as well. Neither of those two pieces of equipment on the critical path for the project. The state's first 5% option, that comes up in December of this year. Basic vessel design will be completed by the second -- early in the second half of 2015, so that's this year. Vessel steel cutting will happen in the second half of 2015, which isn't too far off. We're getting ready for that. We will commence wet testing of the seafloor production tools in the first half of 2016. Detailed vessel design will be completed at around about the same period; and then the keel laying will occur in the first half of 2016. Delivery of the subsea pump, that will be toward the end of the first half of 2016. Once again, that's not on our critical path, and there is plenty of float that we can tolerate on that one. Vessel launch is scheduled for the first half of 2017 with vessel delivery -- contract delivery date is the end of December 2017; but we're looking to do better than that. And first production remains on target for Q1 2018. And we turn to the last slide, that's a quick summary of the last quarter, and Shontel and I are now available to take questions from anyone. Thank you. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) [John Reynolds], private investor. -------------------------------------------------------------------------------- John Reynolds, - Private Investor [2] -------------------------------------------------------------------------------- Yes, good morning. Thanks for the opportunity to let me speak today. My question circled around the funding with the PNG government and what was the circumstances around extending the options for investment. And as a corollary follow-up, do we have any plans, tentative or in the works, to bring in outside investors or additional partners? Thank you. -------------------------------------------------------------------------------- Mike Johnston, Nautilus Minerals Inc. - President, CEO [3] -------------------------------------------------------------------------------- Thanks, John. With regards to the PNG government, we've been talking with people in government. The government has, like most resource-based countries, has suffered from plunging commodity prices. The government's very supportive of the project. We've been talking about how they may exercise their options, and those discussions are continuing. Then with regard to looking to bring in other funding partners, there's a lot of interest in what we're doing. We've had discussions with parties, and we are continuing to have discussions with parties going forward who've expressed an interest. But we are very clear in all of our discussions that we do not want to see any sort of arrangements which detrimental to our existing shareholder base. That's always been our line in discussions. So we'll continue discussions. What I'm seeing and Shontel has been seeing as well is that as we advance the project and continue delivery of the equipment and the vessel, people are actually seeing that this is real. It's now tracking to a well-defined series of milestones which people can tick off, and that's giving people a lot of comfort that this is going to happen. -------------------------------------------------------------------------------- Operator [4] -------------------------------------------------------------------------------- Frank Rango, Purchase Capital. -------------------------------------------------------------------------------- Frank Rango, Purchase Capital Management - Analyst [5] -------------------------------------------------------------------------------- Yes, hi. Do you have updated capital budgeting forecast for the balance of 2015, 2016, and 2017? -------------------------------------------------------------------------------- Shontel Norgate, Nautilus Minerals Inc. - CFO [6] -------------------------------------------------------------------------------- Thanks, Frank. It's Shontel here. We're currently working on our capital estimates and our operating cost estimates at the moment. In relation to our capital requirements we've still got a couple of key contracts that we don't yet have indicative pricing for, particularly around the dewatering plant -- and we'll get a better idea of that as we start to move the detailed design forward -- and also around the integration of the vessel, which is obviously going to be a key component for us as well. But we are expecting to be in a position before the end of the year where we'll be able to come to the market with both capital and operating cost estimates. -------------------------------------------------------------------------------- Frank Rango, Purchase Capital Management - Analyst [7] -------------------------------------------------------------------------------- Okay. Well, given that, I guess my next question is going to be kind of difficult to answer. I was going to ask about all-in sustaining costs and forecasts. When we met, I guess last year in New York, you mentioned that you thought you'd be in a third quartile of costs worldwide for copper. I was wondering if that had changed at all. Or give us an update on that. -------------------------------------------------------------------------------- Mike Johnston, Nautilus Minerals Inc. - President, CEO [8] -------------------------------------------------------------------------------- At our last discussion, Frank, we have always put ourselves in the midpoint. But we have to review -- as I said, we'll put out those capital and operating costs, but we'll also obviously have to get updated cost curves too, because those are moving with the market as well. But we should have all that well before the end of the year. -------------------------------------------------------------------------------- Frank Rango, Purchase Capital Management - Analyst [9] -------------------------------------------------------------------------------- Okay, got it. Thank you. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- (Operator Instructions) Mr. Johnston, there appears to be no further questions from the phones. -------------------------------------------------------------------------------- Mike Johnston, Nautilus Minerals Inc. - President, CEO [11] -------------------------------------------------------------------------------- Thanks. Thank you, Gemma. With that being the end of the questions, we'll wrap up and thank people for their time. We look forward to continuing the positive news flows that are going to come from the next quarter; and our next update will be towards the end of the year. Thank you very much. -------------------------------------------------------------------------------- Operator [12] -------------------------------------------------------------------------------- That does conclude today's call. Thank you for your participation. You may all disconnect.
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