Legal, Insurance, Marine Battles Don’t Deter Treasure Hunters

Treasure-hunter Bob Evans has spent half his life dreaming about the SS Central America, a pre-Civil War steamship decaying in the lightless depths off South Carolina. Now he’s returning to the shipwreck after 23 years.

Evans, 60, set out this week with deep-ocean explorer Odyssey Marine Exploration Inc. to revisit the remains of the 19th-century sidewheel steamer, which sank in 1857 with the loss of 425 lives and an undetermined amount of gold. Despite recovery efforts in 1989 through 1991 that netted more than two tons of the precious metal, Odyssey says there may still be $86 million of gold lying more than a mile below the surface of the Atlantic.

“This is the greatest lost treasure in United States history,” Evans, who was chief scientist on the earlier expeditions, said in a phone interview before the ship sailed.

Even with the plunge in gold last year, the metal is still more than triple its price in the early 1990s, when previous recovery efforts were suspended because of legal battles over rights to the treasure. And the rare coins that have been found at the site are selling for much more than their weight in gold.

For Odyssey, the Central America shipwreck offers another chance to show the potential gains from deep-sea salvaging. While the Tampa-based company had its biggest profit in the fourth quarter and has recovered tons of treasure in past projects, some chronicled in the Discovery Channel series “Treasure Quest,” it’s failed at others and hasn’t posted an annual profit in eight years.

Odyssey is a “very atypical company in an atypical industry,” Mark Argento, a Minneapolis-based analyst at Lake Street Capital Markets, said by phone. “It’s more like a biotech company: Not every biotech company gets every drug approved.”

Ryan Morris of hedge fund Meson Capital Partners LLC says it’s unlikely Odyssey will find any easily recoverable gold. He’s shorting Odyssey’s stock and vowed to give any personal profit to charity.

Odyssey is undeterred. The company cites a court-appointed expert for its estimate of how much gold may still be at the wreck site, assuming that the bullion is in the form of 19th- century U.S. coins called Double Eagles.

“Our research department and the court-appointed experts all believe there is enough gold remaining at the SS Central America to warrant the expense of conducting an expedition,” Odyssey President Mark Gordon said last month in an e-mail.

In 1857, the quickest way to get from San Francisco to New York was to take a steamship to Panama, cross the isthmus by train and then sail up the coast via Havana. The Central America, which ran the Atlantic leg, was on its 44th round trip when it sank on Sept. 12 after being caught in a hurricane. Only about 150 passengers were saved.

The ship was carrying, among other things, a large consignment of gold for businesses, including ingots and coins, from California’s Gold Rush, according to the 1998 book “Ship of Gold in the Deep Blue Sea.”

Based on information in “Ship of Gold” and other references, there may be an additional cargo, often referred to as the army-guarded gold. The company wasn’t counting on finding any of that in its cost calculations, Gordon said on a March 17 earnings conference call.

The shipwreck site was located in 1988 by a group led by explorer Tommy Thompson, who raised financing for and led a series of expeditions beginning in the 1980s. Evans, a geologist, began working with Thompson, his former neighbor, in 1983.

“It’s essentially a four-story collapsed building at the bottom of the sea,” said Evans, who was one of a handful of people in the ship’s control room who watched the deep-water discoveries via video transmissions from a camera aboard a remotely operated robot called Nemo.

Using the robot, which can withstand deep-sea pressures of 4,000 pounds per square inch, the expeditions found gold flakes, coins and bars over the following three years, according to Thompson’s 1998 book “America’s Lost Treasure.”

Thompson’s operations were cut short by legal battles, beginning with lawsuits filed by insurance companies, banks and underwriters. Thompson’s group eventually successfully defended the right to 92.5 percent of the artifacts it recovered and the right as salvor to recover what remained at the wreck.

The salvaged gold was sold in a series of auctions and private sales. Today, you can bid on a so-called $20 Double Eagle from the Central America on EBay Inc.’s website priced at about $11,000.

Still, the legal disputes dragged on when investors didn’t receive any money from the expeditions, according to Ira Owen Kane, who was appointed by a court to manage Thompson’s companies for the benefit of the investors and their creditors.

An arrest warrant was issued for Thompson in August 2012 after he failed to appear at a hearing before U.S. District Court Judge Edmund A. Sargus.

Avonte Campinha-Bacote, a lawyer in Columbus, Ohio, who represented Thompson from 2012 to 2013, said he was unable to provide current contact details for Thompson.

Odyssey, which was selected for the Central America project by Kane, said it will receive 80 percent of recovery proceeds until a fixed fee and a negotiated day rate are paid, without disclosing those amounts. After that, Odyssey will receive 45 percent of the proceeds.

Meson Capital’s Morris said in a March phone interview he believes Thompson probably would have tried to retrieve any remaining gold “if there was really stuff worth finding.”

Odyssey discounts the possibility that anyone has been able to access the site since 1991.

One of many impediments is the depth of the wreck, Odyssey said. Though not as deep as the RMS Titanic, discovered in about 12,500 feet (3,810 meters) of water, Odyssey said the site of Central America at about 7,200 feet would make it inaccessible to most groups.

An expert retained by the court estimated that the gold remaining on the ship was probably worth $343,000 to $1.37 million in 1857, according to Odyssey. Using the low end of the estimate, there would be at least 17,150 coins still at the site if the gold was in the form of Double Eagles, Gordon said March 17.

Using a conservative average price per coin of $5,000, the potential cargo would now have a value of $85.8 million, Gordon said, in what he described as a hypothetical exercise. The value would be reduced if some of the bullion is in ingots, bars or gold dust. Gold for immediate delivery rose 0.7 percent to $1,302.55 an ounce at 9:16 p.m. in London.

Evans, who will represent the original investors and act as a scientific adviser, says he’s sure the Odyssey expedition will more than pay for itself — though he won’t be more specific.

“I publish and I teach about what we did recover and the history of the site,” Evans said. “But all along I’ve known what it still holds.”