TORONTO (miningweekly.com) – TSX-listed Nautilus Minerals, which proposes to mine copper and gold at the Solwara 1 deep-sea mining project in Papua New Guinea (PNG) territorial waters, on Thursday said an international arbitrator had ruled in its favour, and compelled the PNG government to keep to its end of a joint venture agreement.

Former Chief Justice of the High Court of Australia, the Honourable Murray Gleeson, declared that PNG was in breach of the state equity option agreement, which the parties signed in March 2011, in failing to buy a 30% interest in the project on November 7, 2011.

Gleeson compelled the State to comply with its obligations under the agreement to buy the 30% interest in the project and pay its share of all project expenditure incurred to date within a reasonable time.

Nautilus said it expected a payment of about $118-million, and that it had issued the State with a notice requiring the transaction to be complete by October 23.

The company said it looked forward to bringing the Solwara 1 project into production and that it would work with PNG to move the project forward in light of the arbitrator's award.

Nautilus had initiated a dispute resolution process by filing a notice of arbitration against the PNG government on June 1, 2012, owing to a disagreement about the parties' obligations in the completion of the contract and alleging that the State had not paid its share of project development costs.

But the PNG government countered by asserting that Nautilus had not met certain obligations on which completion of the transaction was dependent, arguing that the company had breached the agreement and that the State was entitled to terminate the agreement.

Nautilus refuted these claims, maintaining that it was the State that had breached the agreement.

The arbitration was conducted in Sydney, Australia, under the United Nations Commission on International Trade Law’s arbitration rules.

The Solwara 1 project seeks to exploit seafloor massive sulphides that form an orebody close to vents at depths of 1 600 m. The high-grade mineralisation has been brought up by the site’s hydrothermal plumes and then deposited on the nearby seabed.

Mining would entail the use of underwater vehicles to cut and crush ore that is then fed as slurry into a pump and lifted to a surface vessel. Here the ore would be disaggregated from the deep-sea water, with output then transferred onto a neighbouring vessel for transport to PNG and further processing.

Effective November 25, 2011, and at a cutoff grade of 2.6% copper, the project had 1.03-million tonnes grading 7.2% copper and 5 g/t gold for 74 160 t copper and 165 600 oz gold indicated. Inferred material contained 124 740 t copper and 316 900 oz gold.