FOR: NAUTILUS MINERALS INC.
TSX, AIM SYMBOL: NUS
May 1, 2009
Nautilus Minerals Inc.: Financial Results for First Quarter 2009
TORONTO, ONTARIO--(Marketwire - May 1, 2009) - Nautilus Minerals Inc. (TSX:NUS)(AIM:NUS) (the "Company" or
"Nautilus") announces the release of its unaudited consolidated financial results for the first quarter ended
March 31, 2009 together with Management's Discussion and Analysis. Nautilus will hold an investor update
conference call in mid-May to provide details on our progress.
First quarter 2009 highlights:
- US$215.3 million (equivalent) in cash and cash equivalents held on deposit with major banks as at March 31,
2009
- Teck Cominco confirmed Seafloor Massive Sulphide exploration plans
- Exploration success continued in Tonga
- Mining Warden's Hearing completed
The Company's cash balance at the end of the quarter is in line with management's expectations and reflects a
reduction in creditors during the quarter. Nautilus continues to conserve cash until equipment build restart,
through cost reduction programs and maintaining its cash in currencies that reflect the Company's current and
expected cash outflows, to take advantage of natural hedges. The quarterly cash balance reflects the
revaluation of those currencies in US dollars, resulting in a foreign exchange loss of US$4.0 million.
Stephen Rogers, Nautilus' CEO commented: "The emphasis this quarter has been on reducing costs and
strengthening the Solwara 1 Project. We are seeing significant improvement in our capital and operating costs
from changes in the marine sector. Additionally, we are pleased that the permitting and community consultation
process is progressing to expectation in Papua New Guinea."
The Financial Statements and Management's Discussion and Analysis have been filed on www.sedar.com and are also
available on the Company's website www.nautilusminerals.com.
About Nautilus Minerals Inc.
Nautilus is the first company to commercially explore the ocean floor for gold and copper seafloor massive
sulphide deposits and is currently developing its first project. The Company's main focus is the Solwara 1
Project, which is located in the territorial waters of Papua New Guinea in the western Pacific Ocean. Nautilus
is listed on the TSX and AIM stock exchanges, and has among its largest shareholders two of the world's leading
international resource companies, Teck (6.8%) and Anglo American (11.1%). Metalloinvest, one of the largest and
fastest growing mining and metallurgical holding companies in Russia, beneficially owns 21.0% of its shares
through Gazmetall Holding (Cypress) Limited.
For more information please refer www.nautilusminerals.com.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(US dollars, in accordance with Canadian GAAP)
The following Management Discussion and Analysis ("MD&A") has been prepared as at May 1, 2009 for the three
months ended March 31, 2009. It includes references to United States dollars, Canadian dollars, Papua New
Guinea Kina, United Kingdom pounds Sterling and Euros. All dollar amounts referenced, unless otherwise
indicated, are expressed in United States dollars and the Canadian dollars are referred to as C$, Papua New
Guinea Kina are referred to as PGK, United Kingdom pounds Sterling are referred to as pound sterling and Euros
are referred to as EUR.
The MD&A of Nautilus Minerals Inc. (the "Company", "NMI" or "Nautilus") should be read in conjunction with the
audited consolidated financial statements and related for the year ended December 31, 2008. This section
contains forward-looking statements that involve risks and uncertainties. The Company's actual results may
differ materially from those discussed in forward-looking statements as a result of various factors, including,
but not limited to those described under "Forward-Looking Information".
FORWARD-LOOKING INFORMATION
This MD&A contains certain forward-looking statements and information relating to the Company that are based on
the beliefs of its management as well as assumptions made by management and information currently available to
the Company. When used in this document, the words "anticipate", "believe", "estimate", "expect" and similar
expressions, as they relate to the Company or its management, are intended to identify forward-looking
statements. Such forward-looking statements relate to, among other things, regulatory compliance, the
sufficiency of current working capital, the estimated cost and availability of funding for the continued
exploration of the Company's exploration properties. Such statements reflect the current views of the Company
with respect to future events and are subject to certain risks, uncertainties and assumptions. Many factors
could cause the actual results, performance or achievement of the Company to be materially different from any
future results, performance or achievements that may be expressed or implied by such forward-looking
statements.
OUR BUSINESS
Overview
Nautilus is the first company to commercially explore the ocean floor for copper, gold, silver and zinc
seafloor massive sulphide ("SMS") deposits, and is well positioned to develop the world's first seafloor
massive sulphide system. The Company's main focus for 2009 is the Solwara 1 Project which is located in the
territorial waters of Papua New Guinea ("PNG") in the western Pacific Ocean. The proposed operations of the
Company, subject to permitting and financing, will be the exploration for and the mining of SMS deposits for
copper, zinc, gold and silver where there are economically viable discoveries.
History and Corporate Structure
The Company, as it is currently structured, was formed on May 8, 2006 when the Company acquired all of the
issued and outstanding shares of Nautilus Minerals Niugini Limited ("NMN") (formerly Nautilus Minerals
Corporation) and Nautilus Minerals Oceania Limited ("NMO"), by issuing 30,519,541 common shares to the
shareholders of NMN and NMO. Since the shareholders of NMN and NMO acquired in excess of 90% of the outstanding
common shares of Nautilus, the transaction was accounted for as a reverse take-over ("RTO").
FIRST QUARTER 2009 HIGHLIGHTS
- $215.3 million (equivalent) in cash and cash equivalents held on deposit with major banks as at March 31,
2009
- Teck Cominco Confirmed Seafloor Massive Sulphide Exploration Plans
- Exploration Success Continued in Tonga
- Mining Warden's Hearing Completed
$215.3 Million (equivalent) in Cash and Cash Equivalents Held on Deposit with Major Banks
Nautilus is in a strong financial position with $215.3 million (equivalent) in cash and cash equivalents held
on deposit with banks holding an S&P rating of A+ or better, as at March 31, 2009.
Teck Cominco Confirmed Seafloor Massive Sulphide Exploration Plans
On February 17, 2009 Teck Cominco Limited ("Teck") confirmed its exploration expenditure in Papua New Guinea
("PNG") and Tonga during 2008 to be US$14.8 million. This exceeded the minimum expenditure required for Teck to
earn the right to form a joint venture with Nautilus in the countries of PNG and Tonga which was set at US$12
million. Despite this expenditure in 2008, Teck elected not to participate further in PNG and Tonga where it
would have been required to meet a US$25 million expenditure commitment in each country over the next two
years.
Teck also advised that it wished to retain the right to joint venture with Nautilus in Fiji, New Zealand, Japan
and Northern Marianas, subject to grant of title.
Exploration Success Continued in Tonga
On February 18, 2009 Nautilus announced a summary of its exploration results in Tonga for 2008, Nautilus' first
commercial deepwater exploration program in the Kingdom of Tonga's exclusive economic zone.
During 2008, the combined exploration programs identified ten new Seafloor Massive Sulphide ("SMS") systems in
Tonga. Six of these SMS discoveries were mapped by Nautilus itself during the program completed from MV Norsky
in mid December 2008. A further six previously known SMS systems were also characterised during this work
program. These results were in addition to the four new systems discovered by Teck as part of its contribution
under the agreement with Nautilus. The results attest both to the strong resource upside on Nautilus' tenements
and the efficiency of Nautilus' target generation and target testing methods.
/T/
Table 1 - Summary of MV Norsky 2008 sampling program in Tonga - Average
Assay Results for Massive Sulphide and Semi-Massive Sulphide Samples by
Prospect.
----------------------------------------------------------------------------
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No. of
Ave. Ave. Ave. Ave. Ave. sam-
Zn% Cu% Pb% Ag Au ples Easting Northing Depth
Name (1) (1) (1) g/t g/t (2) (3) (3) mbsl
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tahi Moana 1 31.2 1.6 0.2 180 4.2 9 585035 7712635 2206
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tahi Moana 2 7.6 0.3 0.8 129 2.8 5 547880 7574650 1845
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tahi Moana 4
(Telve) 1.7 0.0 1.0 509 12.9 1 539480 7549305 1636
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tahi Moana 5
(Misiteli) 12.8 1.5 2.7 700 20.7 7 530520 7513790 2031
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Tahi Moana 6
(Si'i Si'i) 27.2 0.4 1.1 239 7.5 3 538070 7535020 1895
----------------------------------------------------------------------------
----------------------------------------------------------------------------
White Church 19.3 0.6 0.4 87 3.0 6 552085 7583560 1907
----------------------------------------------------------------------------
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NVFR Site 2 23.7 0.7 0.2 128 5.7 4 549895 7579705 1796
----------------------------------------------------------------------------
----------------------------------------------------------------------------
NVFR Site 3 22.5 1.8 0.4 115 3.3 12 547185 7572570 1843
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Mariner 24.0 3.7 0.3 80 3.8 3 541060 7547080 1907
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Hine Hina 1 22.5 6.4 0.1 177 5.8 9 529150 7507810 1828
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----------------------------------------------------------------------------
Tui Malila 1 21.8 0.9 0.5 84 4.1 5 544625 7568460 1834
----------------------------------------------------------------------------
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(1) Average analyses from laboratory
(2) Semi-massive and massive sulphide material only
(3) UTM South Zone 1 coordinates, WGS 1984 datum.
Note - Tahi Moana 3 - no sulphide sample collected, Abe - no samples
collected
/T/
Nautilus Minerals' MV Norsky 2008 exploration cruise to Tonga was focused on rapid evaluation of SMS targets
using a Remotely Operated Vehicle ("ROV"). Features indicative of SMS mineralisation were identified from real-
time video observations and were confirmed by geological logging and analysis of recovered samples. Geological
observations and geophysical data collected during the ROV dives, is being processed to identify further
potential.
Mining Warden's Hearing Completed
On February 23, 2009 Nautilus received notification from the Papua New Guinea Registrar of Mining, of the
Warden's Hearing date, for the Solwara 1 Mining Lease ("ML"). The notification stated that the ML application
met the requirements of section 101 the Mining Act, and set the Warden's Hearing date for Thursday, April 2,
2009, in Kavieng, New Ireland Province, Papua New Guinea ("PNG").
The Mining Warden's Hearing is required under the PNG Mining Act as part of the approval process for the grant
of a ML. Nautilus' Solwara 1 ML application, MLA154, covers an area of 59.1 square kilometres and a period of
25 years. The Warden's Hearing is part of the formal consultation process for a ML, and allows interested
stakeholders the opportunity to voice their opinions about the project. Similar public hearings have already
been held for the Company's Environmental Impact Statement, which supports the ML application.
On April 2, 2009 the Mining Warden's hearing for the Solwara 1 mining lease (MLA154) was successfully held in
accordance with section 108 of the Papua New Guinea Mining Act, in Kavieng, New Ireland Province, Papua New
Guinea ("PNG").
The Mining Warden will now prepare his formal report on the submissions made at the hearing, and report to the
Mining Advisory Board.
SUMMARY OF QUARTERLY RESULTS (unaudited)
The following table sets out selected unaudited quarterly financial information of Nautilus and is derived from
unaudited quarterly consolidated financial statements prepared by management. The Company's interim
consolidated financial statements are prepared in accordance with Canadian generally accepted accounting
principles and expressed in US dollars.
/T/
Income
(Loss) and
Comprehensive
Income Diluted
(Loss) for Basic Income Income
Revenues the Period (Loss) (Loss)
Period (in millions) (in millions) per Share per Share
---------------------------------------------------------------------------
1st Quarter 2009 Nil $ (8.0) $ (0.05) $ (0.05)
4th Quarter 2008 Nil $ (35.2) $ (0.24) $ (0.24)
3rd Quarter 2008 Nil $ (38.4) $ (0.26) $ (0.26)
2nd Quarter 2008 Nil $ (8.8) $ (0.06) $ (0.06)
1st Quarter 2008 Nil $ 0.8 $ 0.01 $ 0.01
4th Quarter 2007 Nil $ (10.0) $ (0.07) $ (0.07)
3rd Quarter 2007 Nil $ (12.4) $ (0.10) $ (0.10)
2nd Quarter 2007 Nil $ (6.2) $ (0.05) $ (0.05)
/T/
RESULTS OF OPERATIONS
The following discussion provides an analysis of the financial results of Nautilus:
For the three months ended March 31, 2009
Income for the period
Net income
For the three months ended March 31, 2009, the Company recorded a loss of $8.0 million ($0.05 loss per share)
as compared to a profit of $0.8 million ($0.01 profit per share) for the same period in 2007.
Exploration expense
Exploration expense reduced to $1.6 million (2008 - $2.3 million) due to the timing of exploration programs
planned for 2009.
Interest income
Interest income earned on cash and cash equivalents held during the period was $0.6 million (2008 - $3.3
million). The decrease was attributable to the decrease in interest rates and decrease in cash held during the
period. The Company maintains its cash and cash equivalents with banks with an S&P rating of A+ or better.
Non-cash stock based compensation
A total of $1.0 million in non-cash stock based compensation was expensed during the period (2008 - $2.2
million). The decrease is attributable to the increase in the number of options that expired over the period.
Foreign exchange gains and losses
A foreign exchange loss of $4.0 million was recorded during the period (2008 -gain of $3.7 million). The
foreign exchange loss consists of realised and unrealised gains and losses on actual cash transactions during
the period and revaluations of cash denominated in different currencies at balance date.
Depreciation expense
Depreciation expense increased to $0.3 million (2008 - $0.1 million) due to an increase in property, plant and
equipment acquired.
Other general and administrative costs
There has been an overall decrease in other general and administrative expenses since the deferral of the
equipment build announced in December 2008 as the Company focuses its attention on planning for the exploration
program scheduled for later in the year and continuing engineering studies.
Other general and administrative expenses consist of:
- management fees and salaries of $0.3 million (2008 - $0.5 million), a decrease of $0.2 million as a result of
higher allocation of salaries being included in wages and salaries over the period;
- wages and salaries of $0.8 million (2007 - $0.3 million), an increase of $0.5 million due to less salaries
costs being attributed to exploration costs;
- general administrative expenses remained consistent at $0.3 million (2008 - $0.3 million)
- shareholder information expenses of $0.03 million (2008 - $0.1 million), a decrease from the same period in
the previous year due the timing of shareholder information being produced during the quarter;
- travel expenses of $0.06 million (2008 - $0.08 million);
- professional fees of $0.1 million (2008 - $0.2 million); and
- listing and filing fees of $0.1 million (2008 - $0.1 million).
Overall, Nautilus' expenses increased to $8.6 million for the period ended March 31, 2009, up from $2.5 million
for the same period in 2008 which is largely attributable to the timing of the planned exploration programs for
2008 and the foreign exchange gains/losses. When foreign exchange gains/losses are excluded there has been an
overall decrease in all other expenses of US$1.7 million when compared to the same period in 2008. Engineering
work directly related to the purchase of equipment has been included as assets under construction and is
detailed below under Investing activities.
Cash flows
Operating activities
Cash used in operating activities for the three month period ended March 31, 2009 was $15.3 million as compared
to cash flows from operating activities of $1.4 million for the period ended March 31, 2008. The increase in
cash used in operating activities is attributable to the decrease in accounts payable and accrued liabilities
and the increase in the foreign exchange loss over the same period.
Investing activities
Cash used in investing activities for the three month period ended March 31, 2009 was $0.5 million as compared
to $0.6 million for the three month period ended March 31, 2008.
Financing activities
Cash from financing activities for the three month period ended March 31, 2009 was $Nil as compared to $0.04
million for the three month period ended March 31, 2008.
LIQUIDITY AND CAPITAL RESOURCES
The Company's financial objective is to ensure that it has sufficient liquidity in the form of cash and/or debt
capacity. Nautilus' goal is to finance its ongoing requirements to support the Company's strategy the first
company to commercially extract gold, copper, silver and zinc from the seafloor.
Key financial measures
The Company uses the following key financial measures to assess its financial condition and liquidity:
/T/
March 31 December 31
2009 2008
Debt to Equity Nil Nil
Current Ratio 46.8 to 1 16.7 to 1
Working Capital $211.2 million $218.5 million
Cash and Cash Equivalents $215.3 million $231.1 million
/T/
Under the Company's Investment Policy, cash cannot be invested for more than 90 days and must be held on
deposit with banks with an S&P credit rating of A+ or better.
Outlook and capital requirements
The Company's known contractual obligations at March 31, 2009, are quantified in the table below:
/T/
March 31
2009
$
a) Non-cancellable operating leases
Not later than 1 year 185,471
Later than 1 year and not later than 2 years 86,890
Later than 2 years and not later than 3 years 33,574
Later than 3 years and not later than 4 years 4,158
Later than 4 years and not later than 5 years -
Later than 5 years -
--------------
310,093
--------------
b) Non-cancellable consulting agreements
Not later than 1 year 31,203
--------------
31,203
--------------
Total Commitments 341,296
--------------
--------------
/T/
The Company is involved in mineral exploration which is a high risk activity and relies on results from each
exploration program to determine if areas justify any further exploration and the extent and method of
appropriate exploration to be conducted.
The Company has budgeted to spend approximately $13 million for exploration work in 2009 on the Solwara 1
Project and other regional exploration programs. If exploration results and engineering studies are positive,
the Company may consider committing additional funds to finance further engineering and exploration studies. In
addition, the Company may consider further increases in staffing levels.
In order to maintain the exploration leases, licenses and permits in which the Company is involved, the Company
is expected to fulfill the minimum annual expenditure conditions under which the tenements are granted. These
obligations may be varied from time to time, subject to approval, and are expected to be fulfilled in the
normal course of operations of the Company. The exploration commitments are based on those exploration
tenements that have been granted and may increase or decrease depending on whether additional applications are
granted, relinquished or form joint ventures in the future.
On December 17, 2008 the Company announced it had decided to adopt a more cautious strategy and to preserve its
cash position by delaying the construction of the equipment for the Solwara 1 mining system. As a result all
contracts relating to the Solwara 1 mining system have been terminated or suspended, depending on their
criticality to the revised development program. All of the supplier agreements contained provisions for
termination without penalty.
The contracts that have been suspended will not incur any additional costs, unless instructed by the Company to
continue with engineering studies, until those contracts are reactivated. The value of the suspended contracts
is $81.6 million. The suspended contracts also contain provisions allowing the Company to cancel at any time.
The vessel agreements with North Sea Shipping Holding AS ("North Sea Shipping") to provide a mining services
vessel was also terminated.
A letter of credit of $1.5 million is held by Australia and New Zealand Banking Group in favour of Technip Inc.
("Technip"). Technip is only entitled to have recourse to the Nautilus issued letter of credit if Nautilus does
not pay an amount due and owing under the contract and subject to receiving written notice from Technip.
A letter of credit of $2.55 million is held by Australia and New Zealand Banking Group in favour of North Sea
Shipping. North Sea Shipping is only entitled to have recourse to the Nautilus issued letter of credit if
Nautilus does not pay an amount due and owing under the contract and subject to receiving written notice from
North Sea Shipping. The Letter of Credit expires on June 30, 2010.
The Company will need to obtain significant additional capital to develop any of its exploration properties,
including Solwara 1, and debt financing may not be obtainable for a project such as that contemplated. The
Company may need to rely on the equity markets for future financing of the Company's development of Solwara 1
in the form of joint ventures, leasing options and offtake agreements which may not be obtainable for the
project as contemplated.
Nautilus expects that the cash and cash equivalents will be sufficient to pay for the continued budgeted
exploration, capital expenditure and general and administrative costs of the Solwara 1 Project for the next 12
months. Depending upon future events, the rate of expenditures and other general and administrative costs could
increase or decrease. Other than as disclosed above, the Company has not formally sought to secure sources of
additional financing to fund future expenditures.
Nautilus' opinion concerning liquidity and its ability to avail itself in the future of the financing options
mentioned in the above forward-looking statements are based on currently available information. To the extent
that this information proves to be inaccurate, future availability of financing may be adversely affected.
Factors that could affect the availability of financing include Nautilus' performance (as measured by various
factors including the progress and results of its exploration work), the state of international debt and equity
markets, investor perceptions and expectations of past and future performance, the global financial climate,
metal and commodity prices political events in the south Pacific, obtaining approvals from the PNG government
for the Solwara 1 Project, drilling and metallurgical testing results, results from environmental studies,
engineering studies and detailed design of equipment.
Foreign currency exchange rate risk
The Company's operations are located in several different countries, including Canada, Australia, PNG, Tonga,
Solomon Islands, Fiji and New Zealand and require equipment to be purchased from several different countries.
Nautilus has entered into key contracts in United States dollars, British Pounds sterling and Euros. Nautilus'
future profitability could be affected by fluctuations in foreign currencies relative to these countries'
currencies. The Company has not entered into any foreign currency contracts or other derivatives to establish a
foreign currency protection program but may consider such transactions in the future.
Foreign exchange risk is mitigated by the Company maintaining its cash in a "basket" of currencies that reflect
its current and expected cash outflows to take advantage of natural hedges.
As at March 31, 2009 the Company held its cash in the following currencies:
/T/
Currency % of total cash in
Denomination US$ terms held
USD 67
Euro 8
CAD 3
GBP 17
AUD 5
------------------
100
------------------
------------------
/T/
Interest rate risk
The Company holds cash and cash equivalents which earn interest at variable rates as determined by financial
institutions.
For the year ending March 31, 2008, with other variables unchanged, a 1% increase (decrease) in the interest
rate would have increased (decreased) our net earnings by $0.6 million. There would be no significant effect on
other comprehensive income.
Credit risk
The Company places its cash only with banks with an S&P credit rating of A+ or better.
Our maximum exposure to credit risk at the reporting date is the carrying value of cash and cash equivalents
and other receivables.
Liquidity risk
The Company manages liquidity by maintaining adequate cash and short-term investment balances.
In addition, the Company regularly monitors and reviews both actual and forecasted cash flows.
The exposure of the Company to liquidity risk is considered to be minimal.
CRITICAL ACCOUNTING POLICIES
The details of the Company's accounting policies are presented in Note 2 of the audited consolidated financial
statements for the year ended December 31, 2008. The following policies are considered by management to be
essential to understanding the processes and reasoning that go into the preparation of the Company's financial
statements and the uncertainties that could have a bearing on its financial results:
Resource properties
Acquisition and exploration costs are expensed as incurred since the Company is in the process of exploring its
mineral tenements and has not yet determined whether these properties contain ore reserves that are
economically recoverable. If and when the Company's management determines that economically extractable
resource have been established, the subsequent costs incurred to develop such property, including costs to
further delineate the ore body will be capitalised.
Adoption of new accounting standards
The Canadian Institute of Chartered Accountants ("CICA") has issued one new standard which affect the financial
disclosures and results of operations of the Company for interim and annual periods beginning January 1, 2009.
The Company adopted the requirements commencing in the three month period ended March 31, 2009. The adoption of
this new standard has not had any material impact on the Company's financial results.
Section 3064 - Goodwill and Intangible Assets
This Section establishes revised standards for the recognition, measurement, presentation and disclosure of
goodwill and intangible assets.
Future Accounting Pronouncements
International Financial Reporting Standards ("IFRS")
In February, 2008 the Canadian Accounting Standards Board confirmed that International Financial Reporting
Standards will replace Canada's current generally accepted accounting principles for publicly accountable
profit oriented enterprises effective January 1, 2011. The transition date of January 1, 2011 will require the
restatement, for comparative purposes, of amounts reported for the year ended December 31, 2010. The Company is
presently evaluating the effect these standards will have on its consolidated financial statements.
Sections 1582, Business Combinations, 1601 Consolidated Financial Statements and 1602 Non-controlling interests
Sections 1582, Business Combinations, 1601 Consolidated Financial Statements and 1602 Non-controlling interests
will replace the former Sections 1581 Business Combinations, 1600 Consolidated Financial Statements and
establish a new section for accounting for a non-controlling interest in a subsidiary. Section 1582 is
effective for business combinations for which the acquisition date is on or after January 1, 2011 and Sections
1601 and 1602 apply to consolidated financial statements relating to years beginning on or after January 1,
2011.
OUTSTANDING SHARE DATA
The following is a summary of the Company's outstanding share data as of May 1, 2009.
Common shares
A total of 155,558,884 common shares are outstanding.
Convertible securities
The Company now has 13,046,167 options and 3,257,907 warrants outstanding.
Stock Options
A total of 13,046,167 stock options are issued and outstanding, with expiry dates ranging from May 8, 2009
through to November 30, 2012. The weighted average exercise price for all stock options is C$3.75. All stock
options entitle the holders to purchase common shares of the Company.
Warrants
A total of 3,257,907 warrants are issued and outstanding, with each warrant entitling the holder to purchase
one common share of the Company with an expiry date of November 26, 2009 at a price of C$3.80.
INTERNAL CONTROLS
Internal control over financial reporting
The Company's management is responsible for establishing and maintaining adequate internal control over
financial reporting. Any system of internal control over financial reporting, no matter how well designed, has
inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable
assurance with respect to financial statement preparation and presentation.
There have been no changes in the Company's internal control over financial reporting during the period ended
March 31, 2009 that have materially affected, or are reasonably likely to materially affect, internal control
over financial reporting.
ADDITIONAL SOURCES OF INFORMATION
Additional sources of information regarding Nautilus Minerals Inc. are on SEDAR at www.sedar.com and is on the
Company's website www.nautilusminerals.com.
/T/
Nautilus Minerals Inc.
(an exploration stage company)
Interim Consolidated Balance Sheets
(expressed in U.S. dollars)
(unaudited)
---------------------------------------------------------------------------
March 31 December 31
2009 2008
$ $
----------------------------
Assets
Current assets
Cash and cash equivalents 215,314,905 231,143,802
Prepaid expenses and advances 521,970 1,230,705
----------------------------
215,836,875 232,374,507
Restricted cash (note 5) 4,403,126 4,398,936
Property, plant and equipment (note 6) 21,236,103 20,996,536
Mineral properties (note 7) 12,213,367 12,213,367
----------------------------
253,689,471 269,983,346
----------------------------
----------------------------
Liabilities
Current liabilities
Accounts payable and accrued liabilities 4,615,167 13,891,578
----------------------------
Non-controlling interest (note 10) 222,861 243,134
----------------------------
Shareholders' Equity
Share capital (note 9a) 343,598,701 343,598,701
Contributed surplus (note 9b) 37,172,890 36,144,187
Deficit (131,920,148) (123,894,254)
----------------------------
248,851,443 255,848,634
----------------------------
253,689,471 269,983,346
----------------------------
----------------------------
Commitments and contingencies (note 12)
Subsequent events (note 13)
On behalf of the Board:
Signed: "Russell Debney"
Signed: "Stephen Rogers"
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
Nautilus Minerals Inc.
(an exploration stage company)
Interim Consolidated Balance Sheets
(expressed in U.S. dollars)
(unaudited)
---------------------------------------------------------------------------
Three months Three months
ended ended
March 31 March 31
2009 2008
$ $
----------------------------
Expenses
Exploration costs (note 7) 1,604,770 2,320,290
Stock-based compensation 1,028,703 2,171,735
Wages and salaries 802,008 283,742
Management fees and salaries 340,466 515,317
General administrative 303,486 342,025
Professional fees 97,298 216,422
Depreciation 251,521 141,629
Travel 57,568 77,554
Shareholder information 25,317 84,458
Listing and filing fees 79,763 102,395
Foreign exchange loss (gain) 4,036,857 (3,730,057)
----------------------------
8,627,757 2,525,510
----------------------------
Other Income (Loss)
Interest income 573,986 3,277,906
Rent and other income 7,604 10,009
----------------------------
581,590 3,287,915
----------------------------
Income (Loss) and comprehensive income
(loss) before non-controlling interest (8,046,167) 762,405
Non-controlling interest 20,273 -
----------------------------
Income (Loss) and comprehensive income
(loss) (8,025,894) 762,405
Deficit - Beginning of period 123,894,254 42,304,765
----------------------------
Deficit - End of period 131,920,148 41,542,360
----------------------------
----------------------------
Income (Loss) per share - basic and diluted (0.05) 0.01
----------------------------
----------------------------
Weighted average number of shares
outstanding - basic and diluted 155,558,884 145,925,625
----------------------------
----------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
Nautilus Minerals Inc.
(an exploration stage company)
Notes to Interim Consolidated Financial Statements
March 31, 2009
(expressed in U.S. dollars)
(unaudited)
---------------------------------------------------------------------------
Three months Three months
ended ended
March 31 March 31
2009 2008
$ $
----------------------------
Cash flows used in operating activities
Income (Loss) for the period (8,025,894) 762,405
Items not affecting cash
Stock-based compensation 1,028,703 2,171,735
Non-controlling interest (20,273) -
Depreciation 251,521 141,629
Change in non-cash working capital items
Prepaid expenses and advances 708,735 397,308
Accounts payable and accrued liabilities (9,276,412) (4,864,079)
----------------------------
(15,333,619) (1,391,002)
----------------------------
Cash flows from financing activities
Share capital issued, net of share issuance
costs - 43,033
----------------------------
Cash flows used in investing activities
Restricted cash (4,190) (69,070)
Purchase of equipment (491,088) (574,389)
----------------------------
(495,278) (643,459)
----------------------------
Increase (decrease) in cash and cash
equivalents (15,828,897) (1,991,428)
Cash and cash equivalents - Beginning of
period 231,143,802 309,969,145
----------------------------
Cash and cash equivalents - End of period 215,314,905 307,977,717
----------------------------
----------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS
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Nautilus Minerals Inc.
(an exploration stage company)
Interim Consolidated Statements of Loss and Comprehensive Loss and Deficit
(expressed in U.S. dollars)
(unaudited)
1. Basis of Presentation, Operations and Subsidiaries
Basis of Presentation
These consolidated financial statements have been prepared in accordance with Canadian Generally Accepted
Accounting Principles ("Canadian GAAP").
These consolidated financial statements are presented in United States Dollars ("USD"), the functional and
presentational currency of the Company.
Nature of Operations
Nautilus Minerals Inc. (the "Company", "Nautilus" or "NMI") is engaged in the exploration of the ocean floor
for gold and copper seafloor massive sulphide deposits. The Company is an enterprise in the exploration stage.
The exploration activity involves exploration of underwater gold and copper seafloor massive sulphide deposits
in the western Pacific Ocean. The Company's main focus for 2009 is the Solwara 1 Project in Papua New Guinea in
the western Pacific Ocean. The proposed principal operations of the Company subject to permitting will be the
mining of copper, zinc, gold and silver deposits where there are economically viable discoveries.
Subsidiaries
Subsidiaries, which are those entities in which the Company has an interest of more than one half of the voting
rights or otherwise has power to govern the financial and operating policies, are consolidated. The existence
and effect of potential voting rights that are presently exercisable or presently convertible are considered
when assessing whether the Company controls another entity.
Intercompany transactions, balances, income and expenses are eliminated on consolidation.
These consolidated financial statements include the accounts of the Company (Canada) and all of its
subsidiaries. The significant subsidiaries include Nautilus Minerals Niugini Limited (Papua New Guinea),
Nautilus Minerals Oceania Limited (Vanuatu), Nautilus Minerals Pacific Proprietary Limited (Australia),
Nautilus Minerals (Tonga) #1 Limited (Tonga), Nautilus Minerals Solomon Islands Limited (Solomon Islands),
Nautilus Minerals Singapore Limited (Singapore) and United Nickel Inc. (Canada).
2. Significant Accounting Policies
Basis of Presentation
These unaudited interim consolidated financial statements have been prepared in accordance with accounting
principles generally accepted in Canada and follow the same accounting policies and methods of their
application as the most recent annual financial statements, except as noted below. As these unaudited interim
financial statements do not contain all the disclosures required by Canadian GAAP, they should be read in
conjunction with the audited consolidated financial statements as at December 31, 2008.
3. New Accounting Pronouncements
The CICA has issued new standards which are effective for the Company for interim and annual periods beginning
January 1, 2009. The adoption of these new standards has not had any material impact on the Company's financial
results.
Section 3064 - Goodwill and Intangible Assets
This Section establishes revised standards for the recognition, measurement, presentation and disclosure of
goodwill and intangible assets.
Future Accounting Pronouncements
International Financial Reporting Standards ("IFRS")
In February, 2008 the Canadian Accounting Standards Board confirmed that International Financial Reporting
Standards will replace Canada's current generally accepted accounting principles for publicly accountable
profit oriented enterprises effective January 1, 2011. The transition date of January 1, 2011 will require the
restatement, for comparative purposes, of amounts reported for the year ended December 31, 2010. The Company is
presently evaluating the effect these standards will have on its consolidated financial statements.
Sections 1582, Business Combinations, 1601 Consolidated Financial Statements and 1602 Non-controlling interests
Sections 1582, Business Combinations, 1601 Consolidated Financial Statements and 1602 Non-controlling interests
will replace the former Sections 1581 Business Combinations, 1600 Consolidated Financial Statements and
establish a new section for accounting for a non-controlling interest in a subsidiary. Section 1582 is
effective for business combinations for which the acquisition date is on or after January 1, 2011 and Sections
1601 and 1602 apply to consolidated financial statements relating to years beginning on or after January 1,
2011.
4. Financial Instruments - Disclosures
Interest rate risk
The Company holds cash and cash equivalents which earn interest at variable rates as determined by financial
institutions.
For the period ending March 31, 2009, with other variables unchanged, a 1% increase (decrease) in the interest
rate would have increased (decreased) our net earnings by $0.6 million. There would be no significant effect on
other comprehensive income.
Foreign exchange risk
All of the Company's activities are located in several different countries, including Canada, Australia, Papua
New Guinea, Tonga and Singapore and requires equipment to be purchased from several different countries and
currencies. Nautilus has entered into key contracts in United States dollars, British Pounds sterling and
Euros. Nautilus' future profitability could be affected by fluctuations in foreign currencies. The Company has
not entered into any foreign currency contracts or other derivatives to establish a foreign currency protection
program.
Foreign exchange risk is mitigated by the Company maintaining its cash in a "basket" of currencies that reflect
its current and expected cash outflows. As at March 31, 2009 the Company held its cash in the following
currencies:
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Currency % of total cash in
Denomination US$ terms held
USD 67
GBP 17
EUR 8
AUD 5
CAD 3
------------------
100
------------------
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5. Restricted Cash
$4,403,126 (December 31, 2008 - $4,398,936) has been provided as security for leases, tenements held in Papua
New Guinea, letters of credit, superannuation bank accounts held on behalf of employees, and electricity and
information technology deposits.
6. Property, Plant and Equipment
Details are as follows:
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March 31, 2009 December 31, 2008
Accum- Accum-
ulated ulated
Amorti- Net Book Amorti- Net Book
Cost zation Value Cost zation Value
$ $ $ $ $ $
Leasehold
improvements 595,649 413,080 182,569 595,649 331,946 263,703
Plant and
equipment 651,428 78,191 573,237 651,428 60,209 591,219
Office
equipment 261,725 38,100 223,625 259,466 31,038 228,428
Computer
hardware 679,226 320,014 359,212 665,269 264,088 401,181
Computer
software 903,117 383,045 520,072 887,418 296,087 591,331
Tradeshow
display
equipment 3,876 3,612 264 3,876 3,590 286
Motor
vehicle 72,202 7,122 65,080 69,017 4,686 64,331
Land 30,101 - 30,101 30,101 - 30,101
Subsea
equipment
under
constr-
uction 19,281,943 - 19,281,943 18,825,956 - 18,825,956
------------------------------- -------------------------------
22,479,267 1,243,164 21,236,103 21,988,180 991,644 20,996,536
------------------------------- -------------------------------
------------------------------- -------------------------------
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7. Mineral Properties
The Company has titles granted and applications lodged that provide the Company with rights to explore for
minerals in offshore Papua New Guinea, Tonga and Solomon Islands. In addition, the Company has lodged
exploration or prospecting applications in the exclusive economic zones of Fiji and New Zealand.
Acquisition of Mineral Properties
In 2006, the Company entered into an agreement with Barrick Gold Inc., following its acquisition of Placer
Dome, to terminate the farm-in agreement and convert its joint venture interest into an equity interest in the
Company. Pursuant to the terms of this termination agreement, Nautilus Minerals Niugini Ltd. acquired the
remaining interest which Barrick held in the PNG Licences in return for Barrick being issued with Common Shares
in the Company. The Company thereby secured a 100% interest in all the PNG Licences. In addition, pursuant to
the terms of the termination arrangements, Barrick transferred all of Placer Dome's expertise, intellectual
property and know-how in relation to the farm-in, together with, access to key consultants and relevant
business relationships to the Company, allowing the Company to itself thereafter manage and operate the Solwara
Projects. The value of the shares issued to Barrick was $12,213,367, which was capitalized as mineral property
acquisition costs in 2006.
Exploration Expenditures
/T/
Three months Three months
ended ended
March 31 March 31
2009 2008
$ $
-----------------------------
Assaying and sampling 26,622 101,226
Boat charters and fuel 136,294 101,225
Engineering services 45,485 204,120
Environmental consulting 115,004 121,699
General 270,240 451,890
Geological and field expenses 44,013 82,044
Maps, reports and data 6,213 4,982
Mineral property fees 254,883 4,497
Supplies 21,688 45,738
Travel 103,734 237,837
Wages and salaries 580,594 965,032
-----------------------------
1,604,770 2,320,290
-----------------------------
-----------------------------
/T/
In order to maintain the exploration leases, licenses and permits in which the Company is involved, the Company
is expected to fulfil the minimum annual expenditure conditions under which the tenements are granted. These
obligations may be varied from time to time, subject to approval, and are expected to be fulfilled in the
normal course of operations of the Company. The exploration commitments are based on those exploration
tenements that have been granted and may increase or decrease depending on whether additional applications are
granted, relinquished or form joint ventures in the future. Based on tenements granted at March 31, 2009, total
rental commitments are $3.6 million and total expenditure commitments are $21.7 million over the life of the
licenses which extend to a maximum of two years.
8. Related Party Transactions
Related party transactions for the three month period ended March 31, 2009 are as follows:
a) Included in management fees is $nil (2008 - $16,407) for management fees paid to a company controlled by a
director.
b) Included in accounts payable and accrued liabilities is $nil (2008 - $7,761) for amounts owed to a company
controlled by a director of the Company for management and consulting.
These transactions are in the normal course of operations and are measured at the exchange amount, which is the
amount of consideration established and agreed between the related parties.
9. Share Capital
a) Details of share capital
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Authorized:
Unlimited common shares without par value
Shares Amount
$
Issued and allotted
Balance - December 31, 2008 and March 31,
2009 155,558,884 343,598,701
--------------------------
--------------------------
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b) Details of contributed surplus
/T/
Amount
$
Balance - December 31, 2008 36,144,187
Fair value of stock-based compensation 1,028,703
----------
Balance - March 31, 2009 37,172,890
----------
----------
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c) Share purchase options
The Company has established a share purchase option plan whereby the board of directors may, from time to time,
grant options to directors, officers, employees or consultants. Options granted must be exercised no later than
five years from the date of grant or such lesser period as determined by the Company's board of directors. The
exercise price of an option must be determined in accordance with the share purchase option plan. The board of
directors must determine the vesting period in accordance with the share purchase option plan.
The changes in share purchase options outstanding are as follows:
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Contractual
weighted
Weighted average
average remaining
Number of options exercise price life
C$ (years)
Balance - December 31, 2008 14,012,306 3.92 2.2
Granted 750,000 1.03
Exercised - -
Expired/cancelled (200,000) 5.06
----------------------------------
Balance - March 31, 2009 14,562,306 3.75 2.0
----------------------------------------------
----------------------------------------------
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The following table summarizes information about stock options as at March 31, 2009:
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Total options outstanding Exercisable options
------------------------------------------------------ -------------------
------------------------------------------------------ -------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise contractual exercisable exercise
price Shares life price Shares price
C$ (years) C$ C$
------------------------------------------------------ -------------------
0.00 - 0.99 550,000 2.8 0.99 - -
1.00 - 1.99 826,667 2.6 1.49 - -
2.00 - 2.99 3,887,000 0.8 2.39 2,921,600 2.28
3.00 - 3.99 2,345,000 1.5 3.20 1,964,500 3.20
4.00 - 4.99 2,183,639 1.3 4.69 1,434,332 4.72
5.00 - 5.99 4,380,000 3.5 5.33 180,000 5.12
6.00 - 6.99 390,000 1.2 6.38 208,000 6.38
---------- ---------
14,562,306 2.0 3.75 6,708,432 3.27
---------- ---------
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The fair value of the options granted is estimated on the date of grant using the Black-Scholes option pricing
model with the following weighted average assumptions:
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Options Issued
In 2009
--------------
Expected dividend yield Nil
Expected stock price volatility 77.81%
Risk-free interest rate 1.39%
Expected life of options in years 3
--------------
/T/
The weighted average fair value of the options granted was C$0.51.
Option pricing models require the input of highly subjective assumptions including the estimate of the share
price volatility. Changes in the subjective input assumptions can materially affect the fair value estimate,
and therefore, the existing models do not necessarily provide a reliable single measure of the fair value of
the Company's stock options.
d) Warrants
As at March 31, 2009, the following share purchase warrants were outstanding:
/T/
Number Price per Share Expiry Date
----------------------------------------------------------------------------
3,257,907 C$3.80 November 26, 2009
---------
3,257,907
---------
---------
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The changes in share purchase warrants outstanding are as follows:
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Contractual
Weighted weighted
average average
exercise remaining
Number of price life
warrants (in C$) (in years)
----------------------------------------------
Balance - December 31, 2008 14,898,086 5.12 0.3
Expired/cancelled (11,640,179) 5.49
---------------------------------
Balance - March 31, 2009 3,257,907 3.80 0.7
----------------------------------------------
----------------------------------------------
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10. Non-controlling Interest
On May 18, 2008 the Company acquired a 51% equity interest in United Nickel Inc. (UNI), a company associated
with David Heydon, formerly director and CEO of the Company, with a $1.3 million seed capital investment.
11. Segmented Information
The Company has one operating segment, being exploration. Details on a geographical basis are as follows:
/T/
Australasia North America Total
$ $ $
------------------------------------------
March 31, 2009
Total assets 184,590,652 69,098,819 253,689,471
(Income) Loss for the three
months ended
March 31, 2009 6,146,645 1,879,249 8,025,894
March 31, 2008
Total assets 167,763,458 157,445,656 325,209,114
(Income) Loss for the three
months ended
March 31, 2008 1,674,464 (2,436,869) (762,405)
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12. Commitments and Contingencies
/T/
March 31 March 31
2009 2008
$ $
c) Non-cancellable operating leases
Not later than 1 year 185,471 580,936
Later than 1 year and not later than 2 years 86,890 288,580
Later than 2 years and not later than 3 years 33,574 109,452
Later than 3 years and not later than 4 years 4,158 40,139
Later than 4 years and not later than 5 years - 2,101
Later than 5 years - -
-------------------------
310,093 1,021,208
-------------------------
d) Non-cancellable consulting agreements
Not later than 1 year 31,203 371,641
-------------------------
31,203 371,641
-------------------------
Total Commitments 341,296 1,392,849
-------------------------
-------------------------
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In order to maintain the exploration leases, licenses and permits in which the Company is involved, the Company
is committed to fulfil the minimum annual expenditure conditions under which the tenements are granted. These
obligations may be varied from time to time, subject to approval, and are expected to be fulfilled in the
normal course of operations of the Company. The exploration commitments are based on those exploration
tenements that have been granted and may increase if applications are granted in the future.
On December 17, 2008 the Company announced it had decided to adopt a more cautious strategy and to preserve its
cash position by delaying the construction of the equipment for the Solwara 1 mining system. As a result all
contracts relating to the Solwara 1 mining system have been terminated or suspended, depending on their
criticality to the revised development program. All of the supplier agreements contained provisions for
termination without penalty.
The contracts that have been suspended will not incur any additional costs, unless instructed by the Company to
continue with engineering studies, until those contracts are reactivated. The value of the suspended contracts
is US $81.6 million. The suspended contracts also contain provisions allowing the Company to cancel at any
time. The vessel agreements with North Sea Shipping to provide a mining services vessel were also terminated.
The occurrence of settlement amounts in relation to these contracts is not yet determinable and an amount
cannot be reasonably estimated at this time.
Contingencies
CSIRO
In addition to the above, the Company is a party to a contract with the Commonwealth Scientific and Industrial
Research Organisation ("CSIRO") whereby the Company would pay A$500,000 when its Net Income first exceeds A$10
million; and a further A$500,000 when Net Income first exceeds A$20 million.
Milestone based shares
Nautilus has entered into an agreement with a consulting group, who are providing services to the Solwara 1
Project, where part of the consideration for services, are the issue of up to 300,000 fully paid common shares
in the Company in stages subject to the achievement of each of the following project milestones:
i) Signing of a project development agreement between Nautilus and the Government of PNG - 60,000 common
shares;
ii) Obtaining unencumbered title to the area of land where Nautilus decides to locate the processing plant -
60,000 common shares;
iii) The required agencies of the government of PNG approve the Environmental Impact Statement for the Solwara
1 Project - 60,000 common shares;
iv) The grant of a mining lease over the Solwara 1 resource within E1196 on terms acceptable to Nautilus
Minerals - 60,000 common shares; and
v) Commercial Completion of the Solwara 1 Project which is defined as being the point at which commissioning is
complete and the operation has been producing concentrate at a rate of at least 70% scheduled rate for a period
of 3 months - 60,000 common shares.
Letters of Credit
A letter of credit of $1.5 million is held by Australia and New Zealand Banking Group in favour of Technip Inc.
("Technip"). Technip is only entitled to have recourse to the Nautilus issued letter of credit if Nautilus does
not pay an amount due and owing under the contract and subject to receiving written notice from Technip.
A letter of credit of $2.55 million is held by Australia and New Zealand Banking Group in favour of North Sea
Shipping. North Sea Shipping is only entitled to have recourse to the Nautilus issued letter of credit if
Nautilus does not pay an amount due and owing under the contract and subject to receiving written notice from
North Sea Shipping. The Letter of Credit expires on June 30, 2010.
13. Subsequent Events
On April 21, 2009, the Company was advised that it was released from all liabilities and obligations under its
letter of credit of $2.55 million held by Australia and New Zealand Banking Group in favour of North Sea
Shipping.
On April 21, 2009, Nautilus Minerals entered into a sponsorship agreement with Australian National University
for a total of A$2.5 million to cover costs associated with a marine scientific research campaign to be
undertaken by them in 2009.
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FOR FURTHER INFORMATION PLEASE CONTACT:
Nautilus Minerals Inc. (Toronto)
Investor Relations
+1 (416) 551 1100
Email: investor@nautilusminerals.com
www.nautilusminerals.com
OR
Nautilus Minerals Inc.
Australian Project Office
+61 (7) 3318 5555
OR
Numis Securities Limited
Nominated adviser: John Harrison
Corporate broking: James Black
+ 44(0) 20 7260 1000
Neither the TSX nor the London Stock Exchange accept responsibility for the adequacy or accuracy of this press
release.
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Nautilus Minerals Inc.