Silver Lining: Odyssey Exploration

From the deck of a hulking 4,000-ton ship, a giant clawlike device plunges into the waves of the North Atlantic. The “grab,” as it’s called, is slowly lowered nearly three miles—a half-mile deeper than the Titanic—to the wreck of the SS Gairsoppa, a British steamship built almost a century ago. A crew member aboard the surface ship peers into a monitor to watch ghostly real-time images while he carefully maneuvers the device in clutching and clearing debris from around the cargo hold.

Once the hold is clear of wreckage, a remotely operated vehicle takes over the work. As in a real-life video game with much higher stakes, the ROV pilot maneuvers its mechanical arm to retrieve what looks like a shoe box-sized brick, then another and another, dropping each into a nearby basket. Eventually, the basket’s contents will be deposited into a Dumpster-sized container that will be painstakingly hauled to the surface.

For cargo that has rested on the ocean floor since a German torpedo tore into the steamship’s hull more than 70 years ago, the 3½-hour ascent to the surface is relatively quick. But for Odyssey Marine Exploration officials, the sight of that mountain of tarnished bars emerging from the North Atlantic must have seemed a long time in coming.

In July, after completing two phases of recovery from the shipwreck, Odyssey officials announced a record haul: 110 tons of silver, representing the deepest and largest precious metal recovery from a shipwreck.

Beyond the financial boon, the Gairsoppa success represented the Tampa-based company’s redemption after a stunning legal loss that called into question its very business model. For five years, the government of Spain had waged the court battle against Odyssey over the rights to $500 million in Colonial-era treasure at another site.

The Gairsoppa recovery, by contrast, was more civil, conducted in partnership with the British government, which agreed to give Odyssey 80 percent of the net revenue. At last summer’s silver prices, the haul was expected to reap a total of $75 million for Odyssey, based on silver prices at the time of recovery.

“This Gairsoppa model clearly illustrates to governments around the world that by taking no risk, by spending no taxpayer money, they can in fact recover significant cultural heritage and generate revenues for their treasury,” Odyssey President Mark Gordon says.

Odyssey CEO and co-founder Greg Stemm pointed out that the complexity of the recovery, because of the extreme depth, resulted in technological advances that will be important in the future. “This technology will be applicable to other modern shipwreck projects currently being scheduled as well as our deep-ocean mineral exploration activities. Our success on the Gairsoppa marks the beginning of a new paradigm for Odyssey in which we expect modern shipwreck projects will complement our archaeological shipwreck
excavations.”

During its almost 20-year history, Odyssey had recorded several important finds, including the HMS Sussex, an English warship lost in 1694; the 2003 discovery of the coin-laden Civil War-era steamship SS Republic; and the “Tortugas” wreck off the Florida Keys, which was the first deep-water remotely operated excavation.

But the literal “X” on the treasure map was a project Odyssey dubbed “The Black Swan.” When Odyssey crew members discovered the site in 2007, they found a debris field with no intact hull or definitive markings that would identify the ship. But what they did find were mounds of silver and gold coins strewn across the seafloor.

With export license in hand, Odyssey crew members brought 17 tons of silver coins, hundreds of gold coins and other artifacts to the United States. The Spanish were livid and claimed the treasure as theirs. The Spanish Guardia Civil forced two of Odyssey’s ships into a Spanish port where they were detained and searched—illegally, a Spanish judge would later rule.

Spanish government officials believed the wreck was la Nuestra Senora de las Mercedes, a warship sunk by the British in 1804. To them, Odyssey had just plundered a national historic site—Spain’s equivalent of the USS Arizona (sunk by the Japanese attack on Pearl Harbor), Spain’s lawyer would argue.

For Odyssey, the stakes went well beyond the potential financial windfall. International salvage rights, says Odyssey’s Gordon, had always favored salvagers who take the financial (and often physical) risks to recover the goods. Odyssey was founded on this premise—in essence, he who recovers the treasure keeps the treasure. The company negotiates with parties that could stake ownership claims, such as insurance companies, governments or shipping lines, to determine who gets what percentage of the profits.

Spain’s contention was that because the Mercedes was a warship, the wreckage and cargo belonged to Spain under the Sunken Military Craft Act. Odyssey argued that even if the cargo were from the Mercedes, historical documents suggested the ship had been conscripted for commercial use, as evidenced by the privately held coins, mail and civilian passengers, including women and children.

But the courts sided with Spain. On Feb. 24, 2012, under the eyes of armed guards and the Spanish ambassador, the Black Swan treasure was loaded into the holds of two C-130 jets, which took off from Tampa’s MacDill Air Force Base for Spain.

What was lost to Odyssey: About $2.6 million spent to retrieve, transport, store and conserve the coins; a few million dollars more in legal expenses, and a literal gold (or maybe silver) rush of new capital. At risk: the confidence of investors. “[The loss] was hugely devastating on our employees’ morale, hugely devastating for our investors,” Gordon recalls.

But Stemm and Gordon had already begun sketching plans for the business’s reinvention. They had reason to worry. A U.S. magistrate had previously sided with Spain in his initial report and recommendation. The morning after that June 2009 ruling, 25 million shares of Odyssey stock traded, and the company lost about half of its value in a single trading session. “The collateral impact of that was long felt,” Gordon says. “Investors started questioning, ‘Wait a minute: Is this whole business model defective?’ ”

Contemplating how to take their best-in-the-world undersea recovery techniques and apply them in new ways, Gordon and Stemm decided two things. First, no more roving the high seas in search of sunken ships. They would instead comb their database of known wrecks now estimated at more than 8,000, and pursue only about 100 of those with these criteria: solid data pinpointing their whereabouts, reliable historical records of high-value cargo (worth at least $50 million), and ownership rights that could be secured in advance.

Second, it was time for Odyssey to diversify. And in changing the way it did business, this out-of-the-ordinary company adopted very mainstream lessons about rebounding, diversifying, streamlining and turning crisis into opportunity.

The United Nations estimates there are some 3 million sunken ships, ranging from pre-Christian merchant vessels to ill-fated passenger liners to cargo ships torpedoed during the world wars. But metals and minerals essential to worldwide industries also lie on the ocean floor. In March, the secretary-general of the International Seabed Authority, Nii A. Odunton, hinted at the rush about to take place: “Although we all know that deep seabed mineral resources can be found in commercially recoverable quantities on the ocean floor, developing these resources has proved elusive…. Over the past two years, the level of interest in deep seabed mining has increased rapidly and significantly after decades of being ‘on hold.’ This is a welcome and positive development.”

Odyssey officials also recognized those opportunities. By some estimates, undersea deposits could be 10 times more concentrated than terrestrial supplies. “Mineral mining on land is becoming problematic. The quality and quantity of what’s available on land is limited,” Gordon says. Much of the world’s phosphate, for example, can be found in Morocco, which is not particularly known for political stability. But “a single [undersea phosphate] deposit could be worth multiple Gairsoppas.”

Odyssey was quick to partner with mineral companies, trading exploration and mapping services for cash, stock and a say in operations. The company serves as majority owner of Oceanica Resources and holds minority stakes in Neptune Minerals and Chatham Rock Phosphate Ltd., three companies controlling exclusive mineral licenses for areas believed to contain mineral deposits.

Even as the company embarked on mineral projects, Odyssey officials continued work on shipwrecks using their new targeted strategy. While planning search operations for the Gairsoppa, Odyssey researchers used the company’s shipwreck database to identify other potential targets within range of the search area. Odyssey’s plans were to look for as many of those wrecks as possible during the time they had chartered a sophisticated research vessel.

One of the targets was the SS Mantola, sunk in 1917 by a German submarine and believed to be carrying 600,000 ounces of silver. Odyssey found the site of the Gairsoppa in about 22 days and then found the Mantola before the charter period ended. With the Gairsoppa and Mantola, ownership rights were already clear—the British government had become the owner of the ships’ silver when it paid claims associated with the losses. For both shipwrecks, the British agreed to let Odyssey keep 80 percent of the proceeds after expenses. The Discovery Channel filmed and aired the finds in a three-part series titled Silver Rush in February 2013.

Odyssey has continued developing partnerships related to other shipwrecks. The company has received project approvals and salvage contracts from ship owners for four deep-ocean wrecks of 20th-century ships carrying commodities worth an estimated $200 million, based on last summer’s commodity prices. Odyssey’s take would be 90 percent of the net recovered cargo value.

Another agreement is with Britain’s Maritime Heritage Foundation for recovery of the HMS Victory, the greatest warship of its day, which sank in 1744 with all aboard. The Victory’s fate was unknown, although it was assumed she smashed into a group of rocks known as the Casquets. History condemned everyone from the light keeper to the navigator to the admiral in command, Sir John Balchin, in spite of his 60-year service to the Royal Navy. When discovered in 2008 about 100 kilometers off the Channel Islands, the location and Odyssey’s further research suggested instead that a massive storm felled the mighty ship, which reportedly had a design flaw that made it susceptible to high winds.

The agreement with the Maritime Heritage Foundation, established by a direct descendent of Adm. Balchin, provides for financing, archaeological survey, excavation and conservation of Victory artifacts, and sets forth key management principles for Odyssey to follow throughout the course of the project. As of last summer, Odyssey was awaiting instructions from the foundation on how to proceed.

Although Odyssey has attracted criticism in the past from archaeologists and historians about its recovery methods and sale of artifacts, company officials say each of their projects is supervised by an archaeologist. They also say their commitment to conservation and education is evidenced by their trove of artifacts (both circulating on display and stored), their preservation lab, virtual lab and tomes of scientific papers. At the time of the Gairsoppa announcement in July, Odyssey’s SHIPWRECK! exhibit was on display at Discovery Times Square in New York; just before that, it’d been featured at the Boston Museum of Science.

While the lure of sunken treasure is undeniable, Stemm has emphasized that money is not the primary motivation. “Shipwrecks are not a way to get rich,” he said in a Discovery Channel News interview promoting the show Treasure Quest. “If we’d gotten into any business in the world and put as much energy and focus into it as we put into this, we would’ve done much better financially… but I don’t think that’s why any of us are in this.

“When you’re looking for satisfaction in life, certainly income is important but, is there anything else in life like being on a mission with a bunch of other people who are passionate about that same mission? I mean, it’s really, really hard to match that.”

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