A decision tool for senior executives and investors, Critical Resource’s LicenseSecure™ model assesses the likely level of political and stakeholder risk (or the health of the ‘socio-political license to operate’) for resource projects. This ratings update provides a rapid, overview of a new or updated asset in the LicenseSecure ratings database, with a focus on projects in the news.
Please note that the ratings below are provisional, based in part on open source analysis and are not from client projects. (Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.)
- In December 2014 Nautilus Minerals – an innovative seafloor mining firm – received a $113m payment from the government of Papua New Guinea (in addition to the $7m already received in April 2014) cementing the two parties’ joint venture in the Bismarck Sea off the north east coast of Papua island.
- In order to mine the Solwara 1 deposit on the floor of the Bismarck Sea, Nautilus will employ a new underwater mining process, not before used on a commercial scale. The process involves excavating the sea bed, collecting and pumping minerals to ships above, then cleaning and returning waste water to the sea floor. Nautlilus has further licences from various Pacific islands where it hopes in future to carry out similar projects.
- Seafloor mining has become increasingly attractive to investors, as complex license-to-operate issues at conventional mining project drive up costs (often relating to impacted communities). However the impact of the seafloor mining process on marine environments will not be fully understood until the technology has been employed on a commercial scale, and therefore the practice is likely to be closely scrutinised by environmental scientists, NGOs and campaign groups.
- The PNG government’s payment to Nautilus Minerals in December demonstrates its continued support and engagement with the project. The parties had endured difficult relations before April 2014 due a long standing dispute over payment for the government’s stake in the project. Given PNG’s volatile political environment, Nautilus should expect further challenges in its relations with the national government in future.
- The key issue historically for extractives companies in PNG has been complex community relations. Nautilus’ limited on-shore footprint provides some protection, but the history of human rights and environmental issues in the country will mean the project is closely scrutinised by national and international civil society groups. Already indigenous peoples groups have actively opposed the project over worries that fishing grounds could be compromised.
- Nautilus has assured critics that it has measures in place to mitigate all such concerns. The company has sought to build a detailed understanding of its potential impacts, and has put in place a range of measures to mitigate them. Nevertheless, as this is the first time the process has been used on this scale, the firm will face considerable suspicion from communities and civil society (potentially similar to stakeholder fears around the impacts of shale gas exploration in Europe). For that reason there is a strong possibility that the project could become the target of an NGO campaign in future – particularly if Nautilus suffers any controversy around its management of social, environmental or biodiversity issues.