Gold typically comes from the ground, but for Florida-based Odyssey Marine Exploration (NASDAQ:OMEX), that doesn’t necessarily hold true. That’s because Odyssey’s business is recovering artifacts and treasure — including precious metals — from deep-water shipwrecks. 

The company has spent the last few years bringing up a total of 2,792 silver ingots from the SS Gairsoppa, a merchant ship that was torpedoed and sunk en route to the Royal Mint during World War II. Now, however, it seems that Odyssey is switching its focus to gold — the company said on Monday that it recovered almost 1,000 ounces of the yellow metal during an initial reconnaissance dive to the SS Central America shipwreck.

Specifically, it brought back five gold ingots stamped with assayer’s marks and weighing between 96.5 and 313.5 troy ounces, along with two Double Eagle coins. Other items taken to the surface include a bottle and a sample of the shipwreck’s wooden structure, as per the company’s press release. All were visible at the site’s surface, meaning that no excavation was required.

A troubled history

Explaining what happened to the SS Central America, Odyssey notes that after being caught in hurricane, it sank 160 miles off the coast of South Carolina on September 12, 1857. It took with it “a large consignment of gold for commercial parties, mainly in the form of ingots and freshly minted U.S. $20 Double Eagle coins.” Interestingly, states Odyssey, that accident was part of what inspired the Panic of 1857, a financial crisis in the United States during which public confidence in the economy was shaken.

The ship’s location was discovered by Columbus-America Discovery Group back in 1988, and recovery operations were conducted from then until 1991. During that time, more than 2 tons of commercial gold were recovered, including the Eureka gold bar, which Mineweb describes as “the largest Gold Rush relic.”

Unfortunately, those riches attracted many unwanted eyes. As the National Post explains, an order of Catholic monks, a Texas oil millionaire, Columbia University and “scores” of insurance companies all stepped forward to try to lay claim to the gold. The result was that Thomas G. Thompson, the founder of Columbus-America Discovery Group, was unable to raise money to bring up the rest of the gold.

As it turns out, that may have been a good thing. Thompson, it seems, wasn’t running an honest operation. Case in point: in 2000, after insurers had been awarded $5 million in gold, he was finally able to sell the treasure his team had uncovered, making about $52 million; however, his investors got nothing and ultimately sued him in 2005.

Finally, states the National Post, a federal judge ordered Thompson’s arrest in 2012. Sadly, Thompson was one step ahead; by the time federal marshals reached his Florida mansion, he was gone. The publication quotes Liberty P. Casey, the office manager of his last known lawyer, as saying, “[h]e’s incommunicado. We haven’t seen him or been able to track him down.”

Enter Odyssey

Given all the drama surrounding the first attempt to rescue the SS Central America’s gold, it might be hard to believe any company would want to go back for a second try. But as the National Post points out, there’s a good reason to return: Thompson’s investors never got their money. It’s for that reason that Judge Patrick E. Sheeran last year tasked lawyer and businessman Ira Kane with “recover[ing] as much gold as possible for the benefit of creditors and duped investors.”

How much gold is that? A March press release from Odyssey quotes Kane as saying, “experts estimate the shipwreck still holds a commercial shipment of gold that was valued at approximately $93,000 in 1857, as well as a substantial amount of passenger gold valued in 1857 between $250,000 and $1,280,000. The expert we retained to analyze the extensive collection of records and contemporary accounts of the shipwreck places the most likely 1857 face value of the total remaining passenger and commercial gold at $760,000.”

That’s a lot, but  according to the National Post, Mark Gordon, Odyssey’s president and chief operating officer, believes that if sold to collectors, the gold will fetch a whopping $85 million — surely enough to satisfy Thompson’s investors.

Is the gold gone?

While all parties involved in Odyssey’s project are clearly sure there’s enough gold still with the SS Central America to merit moving forward, at least one outsider is convinced there’s not.

That person is Ryan Morris, an activist hedge fund manager who Bloomberg says has shorted Odyssey’s stock. He and Greg Stemm, CEO of Odyssey, have a troubled history, largely due to the fact that Morris has published two reports that lambaste Odyssey. Though Odyssey issued a direct response to Morris’ first report and has brushed off the second,  Morris nevertheless remains convinced that the company’s stock is “worth zero.”

Speaking specifically about the SS Central America, he told Bloomberg, “[t]he only way it is a home run project” is if Odyssey finds 15 tons of “secret army gold” rumored to have been on board the ship. “Otherwise, they are literally picking coins out of the skeletons of 425 dead passengers,” he said.

The upshot

Morris’ claims sound alarming, but only until Odyssey’s financial role in the project is taken into account. As the National Post explains, “Odyssey will absorb the expedition costs if little treasure is recovered.” If “the take is substantial,” the company will receive 80 percent of the treasure until it makes up its costs, then 45 percent after that point. In other words, there appears to be little benefit to Odyssey if there is in fact no treasure.

At the very least, scientists may get a glimpse of deep-sea life — according to Scientific American, Odyssey will also be collecting biological samples from the site.

 

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article. 

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