Let’s try this again boys…Deepwater Digging for Minerals and Ore, take 2.

KALGOORLIE, Australia (Dow Jones)–Nearly a third of the world’s minerals could come from the deep sea using technology similar to that employed by the oil industry, said Nautilus Minerals Inc. (NUS.T), the first commercial company permitted to explore for minerals in international waters.

Paul O’Sullivan, Nautilus’s chief operating officer, said the company hopes to start mining copper and nickel deposits offshore Papua New Guinea in late 2013, using largely off-the-shelf equipment purchased from the likes of General Electric Co. (GE), Caterpillar Inc. (CAT) and Sandvik AB (SAND.SK).

Nautilus hopes to produce 1.2 million metric tons of ore annually from its Papua New Guinea project, estimating it costs around $70/ton-$80/ton to raise this ore from the seabed.

Record commodity prices are reigniting interest in exploring the seabed for future supplies of raw materials like copper for the first time since the 1970s. But it’s a bold bet as technology to mine the sea floor is untried, and it’s hard to quantify risks to the environment.

Complicating matters further is the threat of a fall in raw materials prices as growth in major markets like China slows and bigger onshore mines are built in regions including Africa and South America.

“Our vision is very much like that of the oil and gas industry,” O’Sullivan told Dow Jones Newswires.

“If you go back into the Sixties when they started going offshore in the Gulf of Mexico, 100% of the oil production came from onshore sources. Now 30% of the world’s hydrocarbons come from offshore and looking forward we can’t see any reason why 30% of the world’s minerals can’t do the same.”

Minerals exploration has lagged petroleum in the rush to exploit undersea resources till now. A flurry of projects in the 1970s, focused on manganese-rich nodules scattered on the ocean floor, fell victim to falling commodities prices and technological shortcomings.

But interest in the ocean floor’s potential is rising as emerging countries like China scramble to secure raw materials to support their rapid urbanization and commodity prices surge.

Japanese researchers estimate the Pacific Ocean could hold around 100 billion tons of rare earth metals, according to a paper published last month in the scientific journal Nature Geoscience. Rare earth prices have spiked due to China’s dominance of production and sharply rising demand.

The International Seabed Authority, which regulates activity on the seabed in international waters, granted its first four exploration leases two weeks ago.

Two went to Russian and Chinese state-backed groups seeking to explore the Atlantic and Indian oceans, while the third was taken by Nautilus for exploring waters around 4,500 meters deep near Clipperton Island, around 1,000 miles from Mexico’s Pacific coast.

However, Nautilus will focus on its shallower Solwara 1 project, 1,600 meters below the Bismarck Sea off Papua New Guinea’s northeast coast.

The US$383 million capital costs will be part-funded by Papua New Guinea’s government, which owns 30% of the project and would supply the same proportion of funds, while Nautilus has another US$139 million in cash, said Joe Dowling, vice-president for investor relations.

Nautilus is targeting offtake agreements with potential customers, conventional bank debt and equity funding to cover the difference.

The operation would salvage near-surface ore bodies using underwater diggers commonly used to bury pipelines in offshore oil and gas fields, he said.

-By David Fickling, Dow Jones Newswires

(all images courtesy Nautilus Minerals)