A Mining Play That Shouldn't Sink?

Despite silver falling to around $23 an ounce, and gold going below $1,400, now might be the time to invest in Odyssey Marine Exploration (NASDAQ: OMEX  ) , the treasure-hunting shipwreck finder whose own stock is down by a third from its 52-week high.

That might seem an incongruous comparison, but there's a fairly loose correlation between how Odyssey Marine's stock performs and the price of precious metals. Although the historical value of the sunken ships that the company locates holds some interest, it's really the treasure in the ship's holds that investors seek.

Compare Odyssey's price to that of SPDR Gold Shares and the iShares Silver Trust, and you can see that the three don't necessarily walk lockstep; but they do seem to follow similar patterns.

OMEX Chart

OMEX data by YCharts

Avast, ye mateys!
Yet, sovereign nations remain grasping, and often times, they pirate any gold, silver, or riches that Odyssey and other treasure hunters bring to the surface, increasing the risks to an already risky business.

Last August, Odyssey was forced by U.S. courts to turn over to Spain some $500 million worth of silver and gold coins recovered from the 1804 wreck of the Nuestra Senora de las Mercedes. Despite never determining if Spain ever legally owned the treasure, the courts said that Odyssey was obligated to turn it over to the country. Now Spain is suing Odyssey for more than $3.2 million in court costs.

Animal, vegetable, mineral
While partnering with nations to salvage shipwrecks helps mitigate the chance that a country will turn on Odyssey and seize the riches found --treasure that likely would have remained sunken were it not for the efforts of the company and other salvagers -- it's become apparent that other avenues of growth are necessary if Odyssey wants to grow.

That's why the treasure hunter has partnered with exploration firms like Chatham Rock Phosphate and Neptune Minerals to recover mineral deposits on the ocean floor. Odyssey has taken equity positions in both companies and has acquired a majority interest in Oceanica, a Panamanian company with exclusive permits to explore potentially mineral-rich regions.

In particular, it will be pursuing three significant seabed minerals: seafloor massive sulphides, or SMS, which contain copper, zinc, gold, and silver; phosphorites for their phosphates; and polymetallic nodules, which consists primarily of manganese and iron.

Sail the seven seas
Because precious metals prices are depressed, and onshore mining companies find themselves in a deep hole, Odyssey's ability to generate profits in the future will be dependent upon its success in recovering and monetizing shipwrecks, and generating income from its new mineral exploration expeditions. 

Relatively recent discoveries like the Gairsoppa and Mantola should allow it to fund future explorations as well as finance its mineral ventures, as well. In fact, Odyssey will be exhibiting the Gairsoppa's silver treasure in New York next month, displaying part of the 48-tons worth of silver it recovered from the ocean floor.

Two for the price of one
Odyssey Marine Exploration may turn out to be not only a unique precious metals play, but also a minerals play that can provide investors with a taste of high seas adventure, to boot. With sovereign financials a shambles, I expect gold and silver prices will recover, suggesting Odyssey's price will, too. And we might one day see deep sea mining as exciting as deep sea drilling is for the oil and gas industry.

This may be one stock you want to put on your watchlist as a bet on a recovery in both of those sectors.

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Editor's note: A previous version of this article incorrectly stated that Spain is suing Odyssey for more than $32 million -- the appropriate amount is more than $3.2 million. The Fool regrets the error. 


Read/Post Comments (5) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On April 19, 2013, at 10:25 AM, subseasam wrote:

    The amount of the legal costs

    Spain is suing for should be 3.2 million.

  • Report this Comment On April 19, 2013, at 12:09 PM, usarugby wrote:

    To the author:

    The following statement is erroneous: "Now Spain is suing Odyssey for more than $32 million in court costs."

    Spain is SUING FOR $3.2 million, NOT $32 million.

  • Report this Comment On April 19, 2013, at 1:19 PM, XMFSharona wrote:

    @subseasam & @usarugby: Thanks for your feedback. We've made the fix and regret the error. Fool on! --Sharon Yep, Fool.com editor

  • Report this Comment On April 19, 2013, at 2:02 PM, Rambo135 wrote:

    The extreme carelessness of Motley fool has really hurt the shareprice of Odyssey today!

  • Report this Comment On April 03, 2014, at 9:31 AM, OdysseyFacts wrote:

    Greg Stemm, the co-founder and current CEO of Odyssey Marine Exploration, and John C. Morris, the co-founder of Odyssey Marine Exploration, were both sued by the Securities and Exchange Commission.

    It appears that Neptune Minerals is insolvent. Oceanica is extremely unlikely to get an environmental permit. Oceanica’s cofounding shareholder, DNA Ltd, Inc, is tied to a Panamanian entity whose principal members are connected to a number of alleged financial crimes – why did Odyssey Marine Exploration structure it this way?

    Isn’t it weird that Odyssey Marine Exploration has been unable to address any of the serious questions posed by concerned shareholders? It’s concerning that John Morris, the founder of Odyssey Marine, is currently being sued by members of Seagrass Recovery. Odyssey Marine Exploration and Neptune Minerals have been tied to brokerage firms with many FINRA sanctions, this is very alarming – would you invest in this company? Buyer beware.

    Odyssey Marine Exploration has disappointed 100% of the time on its estimated project recoveries, can you trust anything they say? Why does Odyssey Marine Exploration have opaque and unexplained offshore subsidiaries in the Bahamas and Panama? These are completely unnecessary for Odyssey’s operations.

    Based on its current cash reserves and negative cash flow Odyssey Marine Exploration could very well go bankrupt in 2014. Odyssey Marine Exploration was held in contempt of court after it lost the Blackswan case. World-class phosphate mining companies have previously evaluated and passed on the Oceanica asset – Odyssey is the only company interested in this uneconomic asset.

    Didn’t Odyssey’s chairman Brad Baker get exposed for signing on both sides of a deal? Why does Odyssey Marine Exploration use an auditor that has been sanctioned multiple times by the Public Company Accounting Oversight Board? Based on accurate historical records, there was never any secret army gold aboard the SS Central America.

    It’s alarming that Odyssey Marine Exploration started as a shell purchased by Timothy Brasel, who was later cited by an SEC civil action for stock manipulation. It’s shocking that the predecessor of Odyssey Marine Exploration, Seahawk, went bankrupt – but it’s even more shocking that every other reverse merger treasure hunting company (six in total!) have also gone bankrupt.

    It’s alarming that Odyssey Marine Exploration has lost nearly $200,000,000 of shareholder capital while insiders have personally made millions – how much longer can this continue?

    Isn’t it ironic that Odyssey Marine Exploration has posted enormous financial losses but CEO Greg Stemm makes enough money to afford five houses for himself and his family? That doesn’t seem fair at all. Why does Odyssey host closed conference calls in which only their investment bankers get to ask questions? Why won’t Odyssey answer questions from other shareholders? Are they hiding something?

    http://www.omextruth.com

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