The world's first project to mine the seabed for minerals is expected to begin operations in Papua New Guinea in early 2019.
- Nautilus Minerals is seeking to mine copper and gold from the seabed
- The seabed is said to have high-grade metal deposits
- Investors call for a stable political environment in PNG
Nautilus Minerals is the Canadian company in charge of the Solwara 1 project, which will see copper and gold deposits mined from the seafloor at a depth of 1,600 metres, 30 kilometres off PNG's New Ireland Province in the Bismarck Sea.
A few months ago, Nautilus reported funding issues for Solwara 1.
Adam Wright, vice-president of PNG operations for Nautilus, said the global oil and iron ore price had an impact on some shareholders, who have now put in a bridging finance facility for the project.
Speaking at a conference about mining in PNG, he said a big incentive for mining the seabed is the higher concentration — or grade — of the metal deposits.
"The grades of the Solwara 1 deposits [are] 7.2 per cent copper. If you look at the average grades of copper in terrestrial copper mines, it's now less than 0.7 per cent copper," Mr Wright said.
"Yes, you can still find copper on land, but as grades fall you're going to have to clear more land ... relocate more communities, you're going to have to store more tailings, you have to dispose of more waste ... accessing an ever-decreasing resource with ever-increasing costs."
Solwara 1 is being developed in a joint venture with state entity Kumul Minerals Holdings.
The plan to mine the seafloor has raised concerns about the possible effects on the environment.
In July, PNG's former attorney-general Sir Arnold Amet joined the campaign against Solwara 1, calling it a "Papua New Guinea-pig" experiment.
He said the licence was issued even though PNG has no national policy on deep sea mining nor an appropriate legal framework to regulate such operations.
However, Mr Wright from Nautilus said the company submitted an environmental impact study to PNG's Conservation and Environment Protection Authority (CEPA), which was then independently verified.
ABC's Catalyst has previously spoken to environmentalists who have voiced concerns about deep sea mining.
"We don't know when you scrape away 5,000 years of deposit, what influence did that 5,000 years of deposit have on the fluid chemistry and the kinds of animals that might be able to colonise it," Duke University's marine biologist Professor Cindy Lee Van Dover said.
"If mining, if extraction of metal, metals on the seabed takes place, we'd like to know what happens and how quickly the animals come back."
PNG Prime Minister says economy is strong
PNG's Prime Minister Peter O'Neill opened the mining conference in Sydney, saying the fundamentals of his country's economy remain strong.
"Inflation is manageable, government debt is within our legal limits — in fact, much better than many countries around the world — and of course the availability of foreign currency is continuing to improve as export revenues improve," he said.
Other speakers included members from mining companies and financial institutions.
A common theme was concern about falling commodity prices, which led to what economists described as "an extraordinary collapse in revenues" for PNG last year, forcing budget cuts.
Fred Hess, managing director of PanAust, which owns the Frieda River Copper and Gold Project, spoke about the impact of falling copper prices in recent years.
"Notwithstanding the recent jump in copper prices, it still represents a long-term challenge for a project like this as to, 'what will the copper price be in order to support an investment decision?'"
Peter Botten, managing director of OilSearch, was optimistic, despite the company posting an 89 per cent plunge in first-half profit this year.
"The future for PNG is extremely bright in my opinion ... I might have done my exploration, but I'm still extremely optimistic about where this business can go in Papua New Guinea," he said.
The head of the Mineral Resources Authority, Philip Samar, described the mining sector's performance last year as "respectable", considering the drought and low commodity prices.
He, too, had a positive outlook for the next few years.
"We're projecting that in 2016 it'll start to rise, in terms of the export revenues that are coming in," Mr Samar said.
Stephen Gardiner, chief financial officer of OilSearch, warned the fall in commodity prices had effected banks' decision-making when investing.
"Banks are adopting much more conservative oil price assumptions when ... doing their credit work," he said.
"Our downside credit sensitivities we prepared ... a few years ago, are now our long-term base price assumptions — there has been a fundamental shift in the outlook for oil and gas prices over the longer term."
In addition to financing concerns, many also stressed the importance of a stable political environment, as PNG heads to a national election next June.
"When making an investment that's multi-billion dollar, you want to have confidence over those many political cycles that the policy environment is going to remain constant," Fred Hess from PanAust said.
"One that supports investment decisions and basically underpins confidence that we're doing the right thing by investing in PNG and not some other jurisdiction."
Investors call for 'positive government policy'
Greg Evans, a partner at KPMG Deal Advisory, said two key needs for investors in PNG are infrastructure and security, the latter mainly for gold miners.
"So they want positive government policy to encourage investment, to make it easy for them to set up. Companies are prepared to come in and contribute to the local infrastructure," Mr Evans said.
Mr Gardiner also outlined a few potential challenges to doing business in PNG.
"The ratings downgrade to a single B, state deficits which need to be managed, the issues around budget tax measures ... and also issues around how the Mining Act may evolve over the next 12 months as well, focusing lenders' minds on PNG political risk," he said.
Earlier this week, the Prime Minister said the Government would not try to revise the 1992 Mining Act before the election.
PNG Petroleum and Energy Minister Nixon Duban said the Government had a few projects it wanted to have structurally set up ahead of the June elections, including the P'nyang gas field operated by ExxonMobil.
"We want [Exxon] to have clearly-defined conditions spelled out, and also a clear timeline of achievement ... we want them to do a few things, as part of conditions to grant a full Petroleum Development Licence," Mr Duban said.
Mr Duban also said a recent small surge in the oil price was a positive sign for the industry.
"I believe from advice from various conferences I've attended ... [that in] 2021-2022, it'll probably go up to $US60-$80 ($80-$107)," he said.
"We need to be past $US60 ($80) — that's important for PNG so we can make some money for our people. We're very positive that the indicators are good, and the price will improve."