The following Management Discussion and Analysis (“MD&A”) has been prepared as at August

10, 2010 for the six months ended June 30, 2010. It includes references to United States dollars,

Canadian dollars, Papua New Guinea Kina, United Kingdom pounds Sterling and Euros. All

dollar amounts referenced, unless otherwise indicated, are expressed in United States dollars

and the Canadian dollars are referred to as C$, Papua New Guinea Kina are referred to as PGK,

United Kingdom pounds Sterling are referred to as £ and Euros are referred to as €.

The MD&A of Nautilus Minerals Inc. (the “Company”, “NMI” or “Nautilus”) should be read in

conjunction with the audited consolidated financial statements for the year ended December 31,

2009. This section contains forward-looking statements that involve risks and uncertainties. The

Company’s actual results may differ materially from those discussed in forward-looking

statements as a result of various factors, including, but not limited to those described under

“Forward-Looking Information.”

This MD&A contains certain forward-looking statements and information relating to the Company

that are based on the beliefs of its management as well as assumptions made by management

and information currently available to the Company. When used in this document, the words

“anticipate”, “believe”, “estimate”, “expect” and similar expressions, as they relate to the Company

or its management, are intended to identify forward-looking statements. Such forward-looking

statements relate to, among other things, regulatory compliance, the sufficiency of current

working capital, the estimated cost and availability of funding for the continued exploration of the

Company’s exploration properties. Such statements reflect the current views of the Company

with respect to future events and are subject to certain risks, uncertainties and assumptions.

Many factors could cause the actual results, performance or achievement of the Company to be

materially different from any future results, performance or achievements that may be expressed

or implied by such forward-looking statements.

Nautilus is the first company to commercially explore the ocean floor for copper, gold, silver and

zinc seafloor massive sulphide (“SMS”) deposits, and is well positioned to develop the world’s

first seafloor massive sulphide system. The Company’s main focus for 2010 is the Solwara 1

Project which is located in the territorial waters of Papua New Guinea (“PNG”) in the western

Pacific Ocean. The proposed operations of the Company, subject to permitting and financing, will

be the exploration for and the mining of SMS deposits for copper, zinc, gold and silver where

there are economically viable discoveries.

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Nautilus is in a strong financial position with $184.7 million (equivalent) in cash and cash

equivalents held on deposit with banks holding an S&P rating of A+ or better, as at June 30,

2010.

On June 10, 2010 Nautilus signed a contract with the TSMarine Group of Companies

("TSMarine") under which TSMarine agreed to provide drilling services in the territorial waters of

Papua New Guinea starting in October 2010. The drilling program will focus on improving the

resource and geotechnical understanding at Solwara 1 as well as scout drilling at other prospects

on the Company's 100% owned tenements in the Bismarck Sea.

TSMarine will provide the vessel, operating crew, remotely operated vehicles and drilling

equipment. The contract has a minimum value of approximately US$7.5 million, with options to

extend based on success. TSMarine will use Rovdrill 3, a second generation seafloor drilling

system, with the ability to drill 70mm core wireline holes up to 80 metres deep.

On June 23, 2010 Nautilus released the results of an independent definition and cost study (the

"Study") for its proposed offshore production system (the "Offshore Production System") to be

deployed in the territorial waters of Papua New Guinea ("PNG").

The Study provides definition and cost estimates to extract material from the seafloor mineral

resources at the Company's Solwara 1 site (the "Project"), to raise it to the support vessel,

dewater it and deliver it to the Port of Rabaul, PNG.

The key conclusions of the Study are as follows:

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it proceeds with the completion of the equipment build and commencement of production at the

Solwara 1 Project. Management considers the Company's best interests are served by first

demonstrating that existing offshore technologies can be adapted to cut and recover high grade

seafloor massive sulphides from the deep ocean.

The Study

The Study was undertaken to obtain an independently confirmed summary of the components

and an associated estimate of the offshore production costs only. Detailed information concerning

the cost estimates and the basis for the estimates can be found in the Study.

The estimated operating costs set out in the Study do not include the cost of stockpiling material

in Rabaul, reclaim from the stockpile, shipment to a treatment facility or any other downstream

processing, transportation and sales costs including, but not limited to concentration, treatment

and refining charges, cost of sales and any statutory royalties or production taxes. These costs

are significant. The estimated operating costs also exclude the capital and financing costs

associated with establishing the Offshore Production System.

In preparing the operating cost estimate, a heavy fuel oil price of US$523 per tonne and a

production support vessel charter rate of US$75,000 per day (being a portion of the estimated

daily costs of US$144,796 for the production support vessel) were assumed based on recent

competitive market quotes. These two key assumptions account for approximately 40% of the

estimated operating costs. Fuel costs will be subject to fluctuations in the market price of oil. The

Study assumes that the production support vessel for the Project will be chartered. As Nautilus

has not yet entered into a charter for the vessel, the price used in the estimate may not be

realized.

Investors are cautioned that the Study is not an economic assessment of the Solwara 1 Project

as a whole and does not confirm the Project's economic viability. Investors are cautioned not to

use the Study for that purpose and that a study of all costs, rates of recovery and reasonable

revenue projections is necessary before any assessment of economic viability can be made.

The Study was developed from a preliminary mine plan that includes inferred mineral resources.

Investors are cautioned that inferred resources are considered too speculative geologically to

have the economic considerations applied to them that would enable them to be categorized as

mineral reserves, and there is no certainty that the costs relating to the Offshore Production

System set forth in the Study will be realized. In addition, the indicated mineral resources

included in the mine plan are not mineral reserves and do not have demonstrated economic

viability.

The Study addresses the entire proposed Offshore Production System, including barging to a

land-based stockpile at Rabaul in Papua New Guinea. The principal operations involve:

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with rough terrain and creates benches for the other machines to work. It will operate on tracks

with spud assistance and has a boom mounted cutting head for flexibility. The second machine,

the Bulk Miner, has higher cutting capacity but will be limited to working benches created by the

Auxiliary Miner. Both machines would leave cut material on the seafloor for collection by the

Gathering Machine. The Gathering Machine, also a large robotic vehicle, will collect the cut

material by drawing it in as a seawater slurry through internal pumps. The slurry will exit the

Gathering Machine through a flexible pipe and would then be transferred to the Riser and Lift

System (RALS).

The proposed RALS system comprises a large pump and rigid riser pipe hanging from a vessel

which delivers the slurry to the surface. The proposed pump is a positive displacement type,

designed and built by GE Hydril (Houston, TX). The pump would hang from a solid vertical riser

pipe suspended beneath the support vessel. The pipe would be deployed to the seabed by a

large derrick and draw works system on board the vessel.

On deck of the production support vessel (PSV), the slurry would pass through a dewatering

plant. The dewatered material would be discharged to a transportation barge moored alongside.

Used seawater would be pumped back to the seafloor through the riser pipes and would provide

the hydraulic power to operate the RALS pump. Discharge of the return water at the seafloor

would avoid impacts to the warm surface seawaters, minimizing the environmental impact of the

operation.

The transportation barges will haul the material a short voyage of approximately 50 kms from the

Solwara 1 site to a stockpile location in the Port of Rabaul. Definition and costs for barge

unloading and all subsequent activities are not included in the scope of the Study.

The Study, which is titled "Offshore Production System Definition and Cost Study" and dated

June 21, 2010, was prepared by Phil Jankowski, Erich Heymann and John Blackburn of SRK

(Australia) Pty Ltd. in Perth and includes information prepared by Peter Chwastiak of Clough

Limited, Peter Munro of Mineralurgy Pty Ltd, Andrew See of Ausenco Services Pty. Ltd and Ian

Lipton of Golder Associates Pty. Ltd (collectively, the "Qualified Persons").

Issue of Variation Order

The Offshore Production System described in the Study requires the build of three subsea

deepwater machines for cutting and gathering, being the Auxiliary Miner, Bulk Miner and

Gathering Machine.

Nautilus also finalised and issued a variation order to Soil Machine Dynamics Ltd ("SMD") to

modify the existing design-build contract for the provision of two integrated machines and one

handling system to three specialist machines and the associated launch and recovery systems.

The variation order, valued at approximately £19 million (US$28 million or C$29 million

equivalent)

(1)

At the Company’s AGM on June 23, 2010, Ms Cynthia Patricia Thomas (age 49) was appointed

to the Nautilus Board.

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Cynthia Thomas has 28 years of banking and mine finance experience, and currently acts as

Principal of Conseil Advisory Services Inc. ("Conseil"), an independent financial advisory firm

specialising in the natural resource industry which she founded in 2000. Prior to founding Conseil,

Ms. Thomas worked with Bank of Montreal, Scotiabank and ScotiaMcLeod in the corporate and

investment banking divisions. Ms. Thomas holds a Bachelor of Commerce degree from the

University of Toronto and a Masters in Business Administration from the University of Western

Ontario. Ms. Thomas was formerly a Director of PolyMet Mining Corp. and is currently a Director

and Chair of Victory Nickel Inc., Director of KWG Resources Inc. and a Director and Chair of the

Audit Committee for Ferrinov Inc., a private corporation.

The following table sets out selected unaudited quarterly financial information of Nautilus and is

derived from unaudited quarterly consolidated financial statements prepared by management.

The Company’s interim consolidated financial statements are prepared in accordance with

Canadian generally accepted accounting principles and expressed in US dollars.

Period

Revenues

(in millions)

Income (Loss) and

Comprehensive Income

(Loss) for the Period

(in millions)

Basic Income

(Loss) per

Share

Diluted Income

(Loss) per Share

2

The following discussion provides an analysis of the financial results of Nautilus: