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The latest in our short series about everyone’s favorite TV Treasure Hunters looks at Odyssey Marine Exploration’s most recent financial filing to the US Securities and Exchange Commission and examines the implications of OME’s declared financial position for the HMS Victory 1744 Project


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Financial analysts, Odyssey watchers and not least the long suffering small shareholders, some of whom might still hope against hope for a big payday from their investments in commercial treasure hunters Odyssey Marine Exploration, always look forward to Odyssey’s quarterly filings to the US Securities and Exchange Commission [SEC].  They were not disappointed with the number of questions begged by the latest 10Q filing on 30 June [the analysts at least, the small shareholders were probably deeply disappointed, but that is not unusual].  In headline figures Odyssey Marine Exploration (OME or the Company) reported a $6.1 million loss for the second quarter of 2015 to 30th June bringing the loss for the first 6 months of 2015 to an eye watering $15.8 million. Accumulated losses on the balance sheet now amount to $218 million [or if you like the alleged cost to a Russian Oligarch of the 300 year old Park Place mansion in Henley, Berkshire, one of the world’s twenty most expensive houses, which comes complete with two golf courses, a helipad, spa complex and indoor cinema:  unlike most OME investors, some people can live the dream]. Unrestricted cash at 30th June was $5.6 million after receiving a $14.75 million loan earlier in the quarter from its potential new investor the Mexican mining company MINOSA.  All of which brings the future of the company into question and also casts a large fiscally shaped shadow over OME’s principle project in the UK Economic Zone, the HMS Victory 1744 Project, where the Florida based company is contractor to the Maritime Heritage Foundation.  A charity chaired by senior Conservative Peer, policy advisor and associate of Michael Fallon and David Cameron, Sir Robert Balchin (Lord Lingfield).


A signal of what might be the immediate crisis facing the company came in answer to a question during the post filing conference call asked of the Chief Financial Officer of OME, Philip Devine, where Mr Devine confirmed that the monthly cash outflow from the company to, it must be assumed, its employees and creditors, the so called “cash burn” is running at a little under $2 million.


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Mike Malouf, Craig-Hallum Capital Group:   Philip, not to interrupt, but I understand all that, but where are you right now? Just looking out for the next six months, where are you on a monthly cash burn?

Philip Devine, Odyssey Marine Exploration, Inc:   If you look at — I’m not going to give you specific month-by-month. If you look at the trend we’re having this year, we’re at a — you can do the quick calculations. We’re below $2 million operating cash burn. But there are several things that we’re still doing in terms of financing activities and investing activities which will change the net cash on a monthly basis.


Mike Malouf, Craig-Hallum Capital Group:  Right. So on a cash burn, you’re at about — a little under $2 million per month. Is that the way to be looking at it?

Philip Devine, Odyssey Marine Exploration, Inc:    Correct.


Effectively this means that even costs stripped to the bone, no perceived activity on the part of the company’s primary asset, Odyssey Explorer since June and with other assets such as the company conservation facility disposed of, without further substantial injection of cash there is a danger that the Company could run out of cash as soon as the end of September 2015.


In assessing OME’s financial health, vulnerability and future viability there are only a certain number of potential sources of cash inflow to consider.



The MINOSA Equity Deal

Penelope Mining, a wholly owned subsidiary of MINOSA – a large Mexican mining company, has the contractual right to invest up to $144 million in OME subject to certain conditions being satisfied. The most important condition, which is still to be satisfied, is approval by the Mexican Government of the Environmental Impact Assessment (EIA) submitted by OME’s 54% owned subsidiary, Oceanica Resources, so that it can start mining [actually dredging] its “Don Diego” offshore phosphate resource. However in order to extend the time for the EIA to be considered by newly elected politicians and by government, the original EIA submitted in 2014 has been withdrawn and the OME press release on 22nd June said that they proposed to submit a new EIA in the weeks following that announcement. Following an attempt to get the EIA withheld on commercial grounds, the document was published on the website of SEMARNAT, the Mexican Government body overseeing the licence process on 27 August.
Consideration of a new EIA is likely to be a lengthy process extending well into the winter of 2015/2016 and so it is most unlikely that the Penelope investment can take place before OME’s cash might run out.

Whether or not MINOSA will be prepared to make further interim financing available to OME will most likely depend on the anticipated outcome of the EIA application and given the local opposition to the “Don Diego” project on environmental grounds, the area is frequented by local fisherman and is on the migratory path for Whales, let alone the likely opposition of major environmental NGO’s and campaigning bodies, a favourable outcome is far from a foregone conclusion.



SS Central America

In 2014 Odyssey undertook the salvage of material from the wreck of the paddle steamer Central America, lost in a hurricane in September 1857 while carrying passengers and cargo back from the goldfields of California. The contract was in the service of a court appointed receiver attempting to clear up the legal and financial mess left by adventurer and pioneer of the deep sea, commercial recovery model now used by OME, Tommy Thompson.  Mr Thompson first attempted to salvage the vessel in 1988, but the whole project unravelled when investors accused Thompson of withholding profits and a number of insurance companies also claimed percentages of the value of the recovery having paid out on the original loss.  Ultimately Mr Thompson absconded before facing a Judge in 2012 and vanished off grid until his arrest earlier this year.  With the fate of Mr Thompson’s company and the investors in the hands of the courts and receiver facilitated through the Recovery Limited Partnership,[RLP], the remaining step at District Court level is a ruling on the  ownership of the cargo, or salvage award for RLP with whom OME have their contract.

When RLP’s rights have been finalised, OME will be able to execute their monetization plans of the recovered cargo. However, an initial attempt to have the recovery declared a find was rejected by the court and the court will now adjudicate the final ownership according to salvage law.  Potentially this could allow other parties who can submit a claim for material on the Central America to take a piece of the financial pie.  Certainly the time taken to settle the new action will also lead to further delay in OME receiving any cash from its contract.  But even that settlement would not mean an instant pay day for OME. Once the court cases are finally settled and ownership of the Central America recovery is clarified, the initial proceeds of any sales of coins will have to be used to pay off OME’s bank loan secured on the project of $7.7m.  realistically, no cash is likely to come from this source for some time and even then much less than the headline figures of the recovery.



Commodity Wrecks.

In the company’s one significant announcement this year relating to potential future recovery projects, OME announced on 2 June that it had visited a cluster of five commodity wrecks “believed to be carrying significant cargoes of gold and silver” when they sank and was considering its options for their salvage. [ ]This fits an established pattern of OME announcing jam tomorrow for potential investors.  However, after what is likely to have been a single crew rotation during which various sites were visited some analysts argue simply to justify the announcement, OME’s sole known recovery vessel, the Odyssey Explorer, has remained tied up alongside in the port of Cork in Ireland.  With no sign of movement on the part of the ship, no known cash to charter other vessels and with senior seagoing personnel apparently on shore or reportedly working on other non OME projects, it is most unlikely that there will be any income from commodity wrecks in the near future.  That is if the wrecks concerned are even commercially viable.  Sources in the marine salvage community report considerable scepticism about OME’s alleged commodity wrecks and suggest that they may well have been known sites which have been visited previously by other salvage companies and which have proved not to be worth exploiting for various reasons.


HMS Victory 1744

Having had permission to work the HMS Victory site rescinded by the Ministry of Defence in March 2015 in the face of multiple allegations about the lawfulness of the process of granting permission contained in a threatened Judicial Review, OME announced in its quarterly filing that the Maritime Heritage Foundation (MHF) is awaiting a Marine Management Organisation [MMO] marine licence and a new permission from MoD.  However, the company could not predict when offshore work would begin.

At the same time the Company has not indicated how it expects to receive any cash inflow from the Victory project.  A significant omission since, in spite of awarding OME a commercial salvage contract, the MHF appears to have no money to pay its contractor and no access to significant project funding streams like the National Lottery funds because, for example, Heritage Lottery Grants must comply with Government Policy, International Conventions, and the Museums Association Ethics Code, which, according to critics, the published HMS Victory Project Design and salvage contract do not.  It follows that short of a multi-million pound donation from an outside source[s], or OME working Pro Bono,  even if the MHF does receive licences and permissions that comply with Government policy, it is difficult to see how there could be any significant cash inflow from this project.

It is also the case that even if permission were to be granted in the immediate future there is very little prospect of any work on the HMS Victory wreck site during the northern European Autumn/Winter and the only possibility of a financial return would be a payment by MHF (if it had any money) under its salvage agreement with OME related to the known bronze cannon present on the site, the administration of which could take months.  These are factors which at the most optimistic projection would see OME gaining nothing from any HMS Victory recovery for at least a year if not more [see below].


Comment from CEO Mark Gordon

During the post filing conference call, in answer to the question:

“Do you have enough cash to get through to the equity closing?”

CEO Mark Gordon replied:

“Between cash on hand, expected cash inflows and other of our assets which can be leveraged to produce cash combined with the disciplined cash management, I and Philip [Philip Devine, CFO] have now mentioned several times on this call, we believe we have sufficient funding to carry us through to the equity closing.”


However stock market investors in OME may not have been fully convinced by Mr Gordon because the shares in the Company fell a further 4% to their 10 year low of $0.33 on substantial volume following the conference call.  Having started the year at just over $1.00, the current share price is $0.35 having recently reached as low as $0.26.


The conclusion may be drawn that the best chance of OME being saved from running out of cash is the closing of the equity deal with MINOSA and Penelope Mining. This seems unlikely to happen by the end of September 2015 when on current projections OME could simply run out of cash. In that event OME could find itself dependent on the goodwill of MINOSA to supply further interim financing while it continues to seek approval for the “Don Diego” project.

If not the company could be forced to file for bankruptcy and its assets, including the salvage contract for HMS Victory 1744, could find themselves in a fire sale to asset strippers with the creditors [and the MHF, the UK Government and the archaeological community] watching from the sidelines.

Of course archaeologists will be most concerned about the fate of the HMS Victory Project and the impact of OME’s apparent financial fragility on that project could be far reaching.



Potential impact on HMS Victory 1744 project.


CEO Mark Gordon made an important statement during the conference call:


“As I stated before, we don’t plan to abandon our shipwreck roots and in keeping with our pledge to bring more financial discipline to our business, we’re developing a potential multi-year shipwreck program utilizing external project level funding that improves our risks and reward profile, while still allowing our investors to benefit from our large portfolio of attractive shipwreck projects. This slight shift in our investment philosophy will [enable] us to focus more of our capital on the development of the mineral exploration side of our business, where one successful mineral asset can be worth many multiples of even the most valuable shipwreck project.”


This new policy on the part of the OME Board now implies that OME might no longer provide all the funding for the HMS Victory 1744 project and instead might seek external partners.  This is significant because the idea that such a project could be funded entirely from the private sector had been one of the strongest selling points to the Government, as was pointed out to the DCMS by Lord Lingfield, the Chair of the Maritime Heritage foundation, the UK charity fronting the recovery.  It is also the case that, as discussed above, the only viable source of such funds would be a private donor because most public funds would be inaccessible due to the overtly commercial nature of Odyssey’s contract and the failure of the project to comply with Government policy and international conventions as described above.


As a result of this uncertainty over the future funding of a significant maritime heritage site, many in the Maritime Archaeology sector will now be asking the Maritime Heritage Foundation to make clear, both to the Ministry of Defence Expert Panel for HMS Victory and publicly


  1. how it will finance its proposed HMS Victory project,
  2. whether Odyssey Marine Exploration will be providing its recovery services and,
  3. if so, how OME will be remunerated by the MHF.


These questions are particularly urgent because, given the recent report on Odyssey’s financial position coming from the company itself, it is also clear that the “financial bond”, apparently provided to the MoD to guarantee the financing of the work on the Victory project, would appear to be of little value.  Unless of course the parties have just recycled the bond placed for the now dormant, if not defunct, project to recover the alleged cargo of bullion from HMS Sussex [which many now think is not actually HMS Sussex].


Oh and by the way, if the British Government has not yet taken steps to recover the $4.9 million alleged to have been inappropriately withheld from the proceeds of the sale of silver from SS Gairsoppa, they might only have weeks to do it.  Of course, if they are successful that might just be enough to finally torpedo Odyssey below the financial waterline which would solve one problem, the row over permissions for HMS Victory, but such a turn of events would present a whole new set of problems for the UK Government.  For a start, who would end up owning that salvage contract with MHF and how would that help the research and conservation of a very significant 18th century wreck site owned by a charity with no financial or archaeological resources, no contractor and, having put all its eggs in the OME basket, no credibility?



DISCLAIMER:  This article is journalism, fair comment and satire-  not financial advice.  Readers are also reminded  that the value of investments can go down as well as up-  in the case of Odyssey Marine Exploration, usually down.

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thePipeLine is an independent news publication that investigates the place that heritage, politics, and money meet.

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