Tuesday, March 01, 2005

 

Gold Rush

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Fortune
By Brian O'Reilly
March 01, 2005

Odyssey Marine Exploration intends to turn treasure exploration into a business with a revenue stream as predictable as Exxon's.


(Photo: Nathaniel Welch)

JACKSONVILLE—We're 50 miles off Florida's Atlantic coast, and things aren't going well. A deep-sea recovery device the size of a Hummer is floating in the water alongside its 250-foot-long mother ship, the Odyssey Explorer. In a few days the contraption is supposed to descend to a shipwreck some 1,700 feet below the surface and perhaps retrieve up to $75 million in gold coins from a site that has yielded at least that much already.

But the submersible, a remotely operated vehicle (ROV), refuses to sink because its new foam flotation collar is too buoyant. Crew members haul the ROV out of the water, attach around eight 40-pound lead weights, and try again. No luck. The ROV bobs like a cork. They add all their remaining lead and try again. Still not enough. Finally one of the technicians has an idea: A half-dozen crewmen race below, return with big round iron weights from the barbell sets in the ship's crude gymnasium, and wire them in place. The ROV is lowered overboard yet again. Its electric motors spin, and it sinks gently into the deep. "It worked!" declares Andrew Craig, 31, the short, thin, perpetually worried-looking Irishman heading the exploration.

There is something to be said for spending 12 years searching for a sunken treasure. For one thing, it gives you lots of time to think. Time to come up with clever solutions for a million unpredictable setbacks, like diving machines that don't sink. Even better, time to imagine what you'll do with all that loot the day it arrives, wet and glistening, from the ocean floor.

And while most of us would spend that dozen years dreaming of nonstop parties, mansions, and sports cars, the two guys who started Odyssey Marine Exploration did something far less obvious, particularly in the swashbuckling world of treasure hunting. Greg Stemm and John Morris devised a business plan.

Essentially, Stemm and Morris have set out to build a predictable, sustainable, and (dare we say) corporate business in an industry traditionally dominated by maverick wildcatters. They want Odyssey to be a company that finds gold as routinely as Exxon finds oil. "When we show that these [discoveries are] repeatable, the image of this business will change," Stemm says. "The oil companies were exploration companies when they started, but once they got big enough and predictable enough, that changed."

When he began, Stemm's biggest fear was winding up like Mel Fisher and Tommy Thompson. Both explorers found fabulous wrecks in the 1980s, then spent a decade snared in costly legal battles with governments or with insurance companies that had covered the original loss when the ships went down and were entitled to a share of the finds. "We decided early on that we'd only pursue wrecks without disputed claims or strike a clean deal with the owners right away," says Stemm.

So they raised venture capital, sold shares to the public (Amex symbol: OMR), and started methodically combing archives for likely wrecks and striking deals with insurance companies and governments that held title to their cargo. It wasn't hard to figure out how to do it right, says Stemm, 47, a bearded, hyperkinetic former PR executive who wears flannel shirts and dungarees and carries a Civil War-era gold coin worth $10,000 in his wallet. "We just watched all the mistakes other explorers made."

In late 2003 their planning began to pay off. At a site 100 miles off the coast of Georgia, Odyssey crews hauled up thousands of gold and silver coins, ingots, bottles, jars, and decorative porcelain from the S.S. Republic, a paddle-wheel steamer that went down in a hurricane back in 1865 en route from New York City to New Orleans. When it sank in 1,700 feet of water, the Republic reportedly carried some $400,000 in coins earmarked for the reconstruction of the South. But those coins, especially the gold ones, are now worth far more than their face value. A single gold piece can fetch anywhere from $3,000 to over half a million dollars, depending on its rarity and condition.


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