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January 11, 2013 at 15:54 PM EST
Michael Bailey Open Letter to Nautilus Minerals Inc (TSX:NUS) Shareholders

Dear Fellow Nautilus Minerals Shareholders,

I am a long time follower and shareholder of Nautilus Corporation ("NUS"). To my dismay I have watched this company continue to overpromise and underdeliver. I have completely lost confidence in the management team now led intermittently by Michael Johnston and previously by non executive executive board member Stephen Rogers. The day that Mr. Rogers was appointed President and Chief Operating Officer of NUS four years ago, NUS stock traded at $2.50 per share. In the last 5 days prior to January 9 and our subsequent hostile tender for the shares at $0.97, NUS stock traded at an average of $$0.55 per share. The decline in share price over this four year period represents the clearest indication to us that the management of NUS has failed, and that the company will not succeed without a new management team and a drastically different strategy. As the largest shareholder of NUS are Metalloinvest, Anglo American plc, Mawarid Mining LLC and we are urging to join our tender as we are unwilling to put our trust in the existing board and Mr. Johnston to turn this company around.

We are now offering a clear choice that we view as a win-win for shareholders. Shareholders can win by selling their shares to us in our tender for $1.10. Or, shareholders can win by voting for our slate of directors in our proxy fight to replace the existing board, and implementing a shareholder friendly business strategy – the cornerstone of which is the building of the and eventual spin off of the Solwara 1 Project as a separate publicly traded mining technology company.

We will be releasing our full slate of director nominees before next week's deadline. At this time we are announcing the nomination of Julian Malnic, the former President and CEO of Nautilus, to the new board on our slate of nominees and assisting us in developing an independent strategy to maximize the value of the Solwara 1. Mr. Malnic was President and then CEO of Nautilus until 1997. Mr. Malnic stated in an email to me, "I have been very unhappy with the Board of Nautilus. The problem for instance with the PNG Government has been generated by the Board itself, in my view."

I have made several attempts contact and hold open discussions with Nautilus Minerals Inc and the current CEO via email and the management,since my initial announcement of my intention to launch a hostile offer on Monday, however they have been operating at the same pace at which they operate the company. So I urge you my fellow shareholders to not let this go on any longer, let’s stop the bleeding and unlock share value trapped in the underlying assets by removing the current management and drastically changing the strategy for the company.

Mr. Johnston and Mr. Rogers have been telling shareholders for years that better times are right around the corner and that he has the right people in place to succeed. Yet every year the start up for NUS is one more year away. The "right people" have left or been moved around and newer "right people" have taken their place. We believe that our tender offer and proxy fight provide the opportunity for a victory for shareholders now in the form of two choices: (i) $1.10 in cash or (ii) ownership in both Solwara 1 as a separate public company, and in the remaining NUS, the assets of which will be under a new board focused on increasing shareholder value.

Very truly yours,

/s/ Michael Bailey


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