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SS Gairsoppa

February 16, 2014 — Leave a comment
sunken silver

SS Gairsoppa

At 10:30pm on February 16, 1941, U-101, captained by Korvetten-Kapitan Ernst Mengersen took up a firing position off the starboard midsection of a lone British freighter slowly making her way through heavy North Atlantic seas. Despite his first spread missing, Mengersen persisted with the attack and fired another torpedo which struck the freighter’s number two hold and caused a massive explosion to rip through the vessel. Less than 20 minutes later the ship slipped beneath the frigid waves of the North Atlantic. Unbeknownst to Mengersen or any of the crew of the U-101, the freighter they had sunk, the SS Gairsoppa, was laden with an incredibly valuable cargo of silver ingots bound from India to the United Kingdom.

Seventy years after the Gairsoppa sinking, an American company, Odyssey Marine Exploration, through a competitive bid was awarded the exclusive salvage contract by the UK government to recover the Gairsoppa’s silver cargo . The UK government’s Ministry of War Transport had paid out a war insurance claim on the silver during World War II and as a result was the legal owner of the silver. Under the contract, which followed standard commercial practices, Odyssey assumed the risk of search and recovery and retained 80% of the net salved value of Gairsoppa silver cargo. During 2012-2013 operations, Odyssey went to work discovering, mapping and recovering the Gairsoppa’s cargo. Over the course of two summers, Odyssey recovered more than 99% of the insured silver bars equaling more than 3.5 million ounces of silver. Although most of the silver was  sent to a UK refinery, investors and shipwreck enthusiasts can purchase 10oz silver ingots and 1/4oz silver Britannias struck by the Royal Mint from silver recovered from the Gairsoppa.

Odyssey Marine

Photo: Odyssey Marine Exploration, Inc.

british destroyer

HMS Edinburgh Firing Sea Dart Missiles
© UK MOD/Crown Copyright 2012

Today the Royal Navy retired the HMS York, its second to last Type 42 destroyer. Its last Type 42, HMS Edinburgh, sailed on its final deployment earlier this week and will be retired upon its return. The Type 42 destroyer class has served the Royal Navy since the 1970s and two were lost in the Falklands War. York and Edinburgh will soon be replaced by new Type 45 destroyers which are among the most powerful and sophisticated anti-aircraft vessels in the world.

During her long career, York sailed 750,000 miles in defense of British interests and saw service in Iraq (2003), Lebanon (2006) and most recently Libya (2011). Her sister ship Edinburgh also served in the 2003 Iraq conflict and has deployed on numerous anti-terrorism and narcotics interdiction missions around the globe. Both ships are currently for sale on the UK MoD’s disposal site and their sale will be used as a diplomatic tool to further relations with another nation(s). Another notable warship sale occurred earlier this year when the US Navy sold for scrap the Sea Shadow, a copy of which appeared in the James Bond film Tomorrow Never Dies.

The last vessel to bear the Edinburgh name was a Town-class cruiser lost in World War 2 in the Arctic Sea. The ship fell prey to Nazi sea and air forces while escorting a convoy from Murmansk, Russia to Great Britain. Aboard the vessel was 465 bars of gold bullion weighing 4.5 tons. Several salvage efforts were launched but it wasn’t until September 1981 that the first bar of gold was recovered. Over the course of two dive seasons, 460 of the 465 bars were successfully recovered. The recovery operations were performed under a contract similar to that between the UK government and Odyssey Marine for the Gairsoppa and Mantola recoveries in 2012.

As this year’s recovery season winds down, noted exploration company Odyssey Marine is wrapping up two deep water recoveries (the SS Gairsoppa and SS Mantola) and currently on hold with the excavation of HMS Victory.  The 2012 season marked several firsts for Odyssey – the completion of a shipwreck salvage under government contract, the validation of their deepwater recovery methods and the beginnings of legitimacy for their role in “academic” archaeology with their efforts on the HMS Victory. What lies ahead for Odyssey is a question of much debate.  Below are five of the most discussed targets for Odyssey along with pros and cons for each.

1.  Merchant Royal – widely believed to be the target of Odyssey’s “Atlas” search, the Merchant Royal went down in a storm off Great Britain in 1641 with a cargo of gold and silver valued around ~1 billion in current dollars. This is the Holy Grail of shipwrecks and would be an incredible find both for the monetary and publicity windfall. Apart from the difficulty involved in locating the wreck, there are no significant cons to recovering the Merchant Royal.

2.  Prins Frederik – sunk in 1890 after a collision with the Marpessa in the Bay of Biscay, this Dutch mail steamer carried 400,000 silver rijksdaalders in its bullion room. Disputes over the actual location of the ship (and thus who was to blame for the collision) have created a wide search area and significantly affect the depth of water it could be located in – 500 feet if where the captain of the Prins Frederik claimed or 6,000 feet if where the captain of the Marpessa claimed. A British company claimed to have found the wreck in shallow water in 1994 which could generate legal issues for Odyssey if it is indeed the Prins Frederik. Odyssey could also face legal claims from insurers who paid out on claims or the Dutch government as the cargo was for payment of colonial forces in Indonesia. The Prins Frederik would be an excellent target for an arrangement similar to the Gairsoppa and Mantola where the Dutch government receives a portion of the proceeds after expenses.

3.  I-52 – re-discovered in 1995 by Paul Tidwell, the I-52 was sunk by American naval forces in 1944 while en route from Japan to Nazi Germany. The I-52 was carrying 2.2 tons of gold and now sits in 17,000 feet of water. While Odyssey’s deepwater recovery methods would enable recovery of the wreck, apart from a multi-party agreement on salvage rights between Tidwell, the Japanese government and Odyssey no recovery is possible. Tidwell has also stated he is pursuing recovery of the sub and it is doubtful Odyssey would be brought in on the deal.

4.  Port Nicholson – a British freighter loaded with $3 billion in platinum, the Port Nicholson was torpedoed off the coast of Massachusetts in 1942 and was located in 2008 by Sub Sea Research.  Sub Sea Research gained title to the ship in 2009 and planned recovery in 2012. No word has emerged on whether or not the group has been successful in their salvage and there are doubts as to whether the platinum even exists onboard.  If Sub Sea is unable to recover the wreck due to a lack of expertise or funding, then a collaboration with Odyssey would benefit both parties and be the most valuable recovery yet, surpassing even Odyssey’s Black Swan recovery (and subsequent loss).

5.  Bonhomme Richard – John Paul Jones’ famous flagship went down after his epic battle with HMS Serapis. The past few years have seen renewed efforts to find the ship, but any recovery would be limited by the doctrine of sovereign immunity. Because the Bonhomme Richard was an American warship it cannot be salvaged without the permission of the US government. An arrangement with the US government similar to that of the HMS Victory one is a possibility, but doubtful because the upside isn’t nearly as high as it is for other wrecks.

There are dozens of other wrecks Odyssey could be pursuing – the company claims to have dozens of high value shipwreck targets in its proprietary database. Based on Odyssey’s stated business model of pursuing high value targets with easily ascertainable legal ownership and inaccessible to normal salvors, Odyssey will most likely pursue deepwater commodity shipwrecks where the cargo can be quickly monetized and not the storied Spanish Galleons of treasure hunting lore.

Disclosure: I am an Odyssey Marine shareholder.

Lost in an Atlantic hurricane in 1857, the SS Central America took with it ~550 passengers and several tons of gold.  For more than a century it remained lost to the sea until an enterprising Ohioan named Tommy Thompson assembled a team to find and recover the ship. Utilizing cutting edge technology Thompson and his team located the wreck in 1987.  The group salvaged approximately $50 – 100 million in gold from the wreck, however, the conclusion of recovery operations was just the beginning of the story for Thompson. Two days ago, nearly 25 years since the discovery of the wreck, Thompson was to appear in a federal district court to reveal the location of millions of dollars from the recovered gold due to a payment dispute filed by former employees. Unfortunately for salvors, lengthy legal proceedings are not unusual in the realm of admiralty law – another recent example is that of Odyssey Marine’s Black Swan epic court battle which involved the US State Department, sunken Spanish treasure, artwork looted by the Nazis and WikiLeaks.

Thompson’s search for the SS Central America was well documented in Gary Kinder’s Ship of Gold in the Deep Blue Sea as well as several television programs. Although an ingot from the SS Central America is expected to garner $140,000 at auction on September 2 and another ingot sold for a record breaking $8.1 million, Forbes reported in 2006 that Thompson’s last known address was a Florida trailer park.