A Rare Opportunity to Own Loss Making Stocks (Part 2)

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A Rare Opportunity to Own Loss Making Stocks (Part 1)

Why Do Leaders Hold Nautilus Stocks?

The insatiable demand for precious and industrial metals from countries such as India and China has led to a desperate scramble to access supplies even from the most unusual quarters (Rondeaux, and Morse, 2007). The bases of such high demands are exceptionally broad, covering diverse industrial sectors and socio-cultural trends as well. Major initiatives by scientists to develop new materials will not impact the applications, which gold and copper have enjoyed since the very beginning of organized industrial activities. There are severe limits, in practical terms, to increase production of these metals from existing and operating mines. There are some terrestrial reserves, which are yet to be worked fully, but their combined scope is thought to be inadequate to meet forecast demand levels.

Nautilus has rights to explore some 300 hundred thousand square kilometers of the bed under the Pacific Ocean. This is an area, which geologists believe should be most endowed with workable mineral deposits of all kinds. The company has assembled a strong blend of executive and technological talent, including experts with sterling track records in the specialized field of undersea exploration and mining. Though the company has never made a profit as yet, its exploration and development work is largely on schedule, with important discoveries holding hope of most profitable operations in the foreseeable future. The company is effectively owned and managed by Russian and US entities specialized in developing new sources for minerals.

Downsides and Concerns Are Integral to all Stocks

The world lacks international consensus on how rapidly and far to exploit seabed resources. Investors need not worry about any mines, which Nautilus Minerals is able to develop off New Zealand, but its most interesting fields are closer to the volatile territory of Papua New Guinea. Company stocks are also affected in terms of values by the fact that the company has exploration rights, but is yet to secure future mining operations in unequivocal manner. One cannot rule out therefore, the kind of fate oil majors have suffered in Venezuela!

Working the seabed is so different from mining on land that any major industrial activity under-water at this stage is fraught with significant risks. Nautilus has fortunately not suffered from any major adverse incidents, but negotiations with a major European supplier of key equipment have broken down. Overall, a comprehensive risk analysis is difficult for investors to conduct in such a new field of industrial enterprise: the potential pay-offs for those who invest in such stocks are also commensurate with the uncertainties.

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