MHHC Enterprises Inc (MHHC)

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Man sets sights on sunken riches [The Honolulu Star-Advertiser]
By William Cole, The Honolulu Star-Advertiser McClatchy-Tribune Information Services

Sept. 17--A Maui man thinks there is nearly $3 billion in gold and silver off the coast of the United Kingdom in three passenger and cargo ships sunk by German submarines, or U-boats, during World War I, and he has the company, the research, a salvage team and the government permits to retrieve it.

This treasure-hunting tale involves a gold miner who was kidnapped by Colombian guerrillas in 1990 and now has a stake in buckets-full of emeralds found off the Florida coast, a West Indies-based salvage company, and recovered documents pointing to tons and tons of gold and silver secreted aboard doomed passenger ships.

Mike Johnson of Maui, a financial consultant who is president and CEO of Project X Inc., half of the joint venture seeking the sunken fortune off England and Ireland, said he can't say with certainty that all that gold and silver is down there in what are now rusting hulks of ships.

But he's bet the past year and a half of his life working on the project that it is.

"That's always the million-dollar question," said Johnson, 46. "You talk to the researcher and you can almost get the guarantee. If you are a skeptic or someone like myself you look at all the research, you look at all the data, (and) you can't find a reason why it wouldn't be there."

Scott Heimdal, a longtime treasure hunter who has an operations role in the planned salvage, put the whole thing a little more colorfully.

"It's fully documented. We've got investment bankers out of Canada that are (interested in) funding it. It's a really exciting story," said Heimdal, who lives in Peoria, Ill. "These ships were sending gold to the U.S. and Canada to pay for all the war supplies that the allies needed, and the ships were sunk by German U-boats."

Project X was formed in 2011 and established a 50/50 joint venture with Deep Marine Salvage Inc. out of the West Indies to salvage the three passenger ships.

Earth Dragon Resources, a publicly traded company, acquired the stock of Project X. Johnson also became the president and CEO of Earth Dragon, with Project X as a subsidiary.

"So now, when we go to talk for money, we have the vehicle (Earth Dragon) to actually bring the money in," Johnson said.

He added that "we literally just came out of the gates. We just became public. We're just starting to post some filings."

Project X has launched a website, projectxcorp.com.

"We have interest from a banker in Canada that loves the project," Johnson said, adding that the group is "very capable of financing the entire project."

"The early indications I am getting make me feel confident we can obtain the funding," Johnson said. "The first round will be in the $3.5 million range, which will move the project ahead nicely and also possibly give us a chance to do the next round of financing at higher valuations."

The goal is to be in the water in April and salvage through the season, which runs through September, he said.

The costs are great, but so are the potential rewards.

Odyssey Marine Exploration in July announced that it had recovered 48 tons of silver bullion from the SS Gairsoppa, a 412-foot British cargo ship torpedoed by a U-boat during World War II.

The recovery, from 3 miles deep, represented about 20 percent of the total silver cargo that research indicated may be aboard the ship, Odyssey Marine said.

Reaching the precious metals requires excavation of the rusting vessels via very large claw "grabs" operated from a surface ship and using remotely operated vehicles to see what's going on, according to the group.

The salvage operation costs $3 million a month, Johnson said.

Like Odyssey Marine, Project X's joint venture has contracts with the United Kingdom's Department for Transport to salvage the sunken ships.

Tony Moss, an assistant procurement manager with the transport department, confirmed by email that Deep Marine Salvage, Project X's partner, holds contracts for the three vessels.

"We were able to actually show the British government that these ships and the gold existed, because it was interesting that the government had no idea because when these ships were lost, everything was classified and just forgotten about for 100 years," Heimdal said.

The history of how all that gold and silver supposedly got aboard, and then to the bottom of the sea, is just as fascinating.

During World War I, Great Britain "started calling in gold from all over the empire, because at that time in history, gold was the reserve currency of the world," Heimdal said.

There were no electronic wire transfers in those days, he said. So if, for example, an American company wanted to buy a piece of machinery from Germany, payment would be made to a bank, which would ship an appropriate amount of gold to a receiving bank in Germany, which in turn would then issue payment for the machinery, Heimdal said.

Gold in Great Britain was shipped in huge amounts to the United States and Canada to establish credit for suppliers of weapons, munitions, vehicles and other war goods, he said.

"The Germans just sat off the southern approaches waiting for ships to leave and just picked them off," Heimdal said.

According to history.com, the typical U-boat during World War I was 214 long, carried 35 men and 12 torpedoes, and took a terrible toll on Allied shipping. The website uboat.net said 3,730 U-boat attacks were made on British ships in the war.

The ships to be salvaged are known wrecks in less than 650 feet of water in relatively close proximity, officials said.

What's new is the confirmation, as a result of Deep Marine Salvage research, that tons of gold coins and silver bars were among the ships' cargo, the company said.

"Basically, the ships were lost, many more made it, the war was finally won and life went on and these archives remained forgotten about," Heimdal said.

The wrecks were too deep for the salvage technology of the time, he said.

Project X provided the names of the three ships it plans to salvage, but asked that they not be published. Ranging from 400 to 600 feet in length, all three British vessels were sunk by U-boats in 1915.

"If we name the ships, it will create so many problems for us it could actually jeopardize this (salvage) from ever happening," Heimdal said, citing competing claims that can spring up.

Heimdal remarked on legal trouble experienced by amateur diver Jay Miscovich, with whom Heimdal says he is an adviser and investor, after Miscovich found more than 65,000 raw Colombian emeralds off Florida in 2010.

"It's been tied up in court just by people who have absolutely no claim to it," Heimdal said.

Heimdal, 50, had his own treasure-hunting trouble in 1990 when he was setting up a gold-mining operation in Ecuador on the border with Colombia. Colombian guerrillas captured him and held him for 61 days until a $60,000 ransom -- raised by his hometown -- was paid.

"They ambushed us," Heimdal said. "We were riding in a canoe on a little river, probably not more than 100 feet across, and they raked the canoe with automatic weapons fire, and killed one of my guys and wounded another."

Johnson's past is tame by comparison. The father of four said he has more than 20 years of experience in the public and private capital markets.

Johnson said he helped Heimdal out with one of his public companies, and he's worked full time on Project X for the past year and a half.

Survey dives have positively identified the three sunken ships, the company said. The British government would take up to 50 percent of the gold and silver recovered, Heimdal said.

"We've already been down on these ships. They are already located," Heimdal said. "We had to prove to the (British) government that this gold actually exists before they would even give us the permits. ... A lot of activity is going to start and it's going to be a story that will continue."

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(c)2012 The Honolulu Star-Advertiser

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