DSMC started finance advocacy work in 2017 to encourage divestment from the Nautilus Minerals Solwara 1 project in Papua New Guinea (PNG)’s territorial waters. As the first DSM project to be granted a mining license, Solwara 1 was seen as setting a precedent by companies and governments worldwide.

Our finance advocacy provides investors with resources to safeguard their financial and reputational interests given the Environmental, Social, and Governance (ESG) concerns around deep sea mining (DSM).

Our work aims to warn financiers and insurers of the high risks associated with DSM, hoping they will create specific policies excluding DSM or discouraging direct divestment in higher-risk DSM companies.

DSMC offers the investment and insurance industries a summary of DSM corporate interests to assist in determining exposure to pure-play companies, part-ownership and ancillary manufacturers.

DSM is an experimental industry that carries a high level of technical, financial, environmental and reputational risk. Financial institutions, especially insurers, are rightly concerned about the risks of DSM.

Proponents of the sector claim that DSM is essential to supply the metals required for a global transition to renewable energy. However, existing terrestrial mineral stocks, progress towards the mining of electronic waste, advances towards the development of circular economies, and alternative sources of metals, challenge assertions that the seabed must be mined.

These claims also contradict the accumulated scientific consensus that mining the deep sea for minerals poses a significant risk to ocean ecosystems.

DSM also threatens the deep cultural and spiritual connections of Pacific islanders and maritime communities who have navigated, fished and traded across oceanscapes for thousands of years.

The feasibility and economic benefits of DSM are unsubstantiated. The world’s first licenced deep sea mining project, Solwara 1 in Papua New Guinea (PNG), has had a significant negative economic outcome for that nation. When Nautilus Minerals declared bankruptcy, PNG was burdened by debt, having been persuaded by that company to invest in its failed project.

The commercial viability of DSM is a significant unknown, with only a limited number of companies willing to accept that risk.

Financial institutions are increasingly developing policies that explicitly exclude the provision of financial services for DSM activities to avoid biodiversity loss and further environmental stress on the planet’s oceans.

Due to the risks posed by DSM, the United Nations Environment Programme Finance Initiative – which brings together the UN with banks, insurers and investors to shape the sustainable finance agenda – has concluded that the extraction of seabed deposits cannot be considered sustainable, and urges financial institutions to not support the sector.

In recognition of the risks associated with DSM and the expectations of their stakeholders, a number of financial institutions (see table below) have published policies that explicitly exclude the provision of financial services for DSM activities.

Other financial institutions have also joined a business statement supporting a moratorium.

Banks have been the first to develop policies excluding services to DSM, however, the insurance sector also has a powerful role to play in determining the viability of extractive industry projects. For example, the denial of insurance to fossil fuel projects increasingly hampers their development.

The uncertainties surrounding DSM make it impossible to accurately quantify the associated risks. This is especially concerning for the insurance sector, which would bear the financial burden in the event of failure.

Nautilus Minerals / DSMF

Our early finance campaign focused on persuading Nautilus shareholders to divest and advise banks – identified by our research as possible sources of finance – of the risks associated with the project.

This work coincided with a legal challenge and on-the-ground advocacy in Papua New Guinea.

DSMC achieved major success in 2018 in persuading AngloAmerican to divest from deep sea miner, Nautilus Minerals. Nautilus filed for bankruptcy in early 2019.

While the bankruptcy has damaged the chances of the project proceeding, the two main investors have used the bankruptcy process to create a ‘new Nautilus’ called Deep Sea Mining Finance (DSMF) that has shed its debt at the expense of other shareholders, including the Papua New Guinean Government losing AUD$157m.

We continue to retain a watching brief on DSMF with our local partners in Papua New Guinea.

The Metals Company

The Metals Company (TMC) holds several vast exploration licenses in the Clarion Clipperton Zone of the Pacific Ocean. Established by former senior Nautilus personnel, TMC became a public company via a reverse merger with a Special Purpose Acquisition Company called Sustainable Opportunities Acquisition Corp (SOAC) in September 2021.

During the merger over 90% of warrant holders redeemed rather than invested in the new company, two PIPE investors failed to complete, and the shares initially lost 90% of their share value one year after launch.

DSMC published a shareholder advisory forcing TMC to revise its stated risks with the SEC.

The Pacific Island of Nauru, which sponsor some of TMC’s international leases, has triggered an obscure legal provision called the ‘2-year rule’, that would allow the International Seabed Authority to begin taking applications for commercial deep sea mining projects by July 2023 with whatever rules are in place at that time.

TMC states publicly it intends to start mining in late 2025 or early 2026 in the Pacific Ocean. As a start-up company with limited funds its rush to begin commercial mining is driven by financial imperatives. However, commercial deep sea mining (DSM) can only occur in international waters if approved by the International Seabed Authority (ISA).

DSMC has produced a briefing paper that provides a reality check on the likelihood of TMC being granted a contract by the ISA to mine in the Pacific Ocean. It analyses and clarifies the significant legal, technical and political barriers that are likely to delay, or even completely obstruct TMC recieving a contract and delivering on promises to investors.

We continue to retain a watching brief on TMC with our partners in the Pacific and Internationally.