Toronto-based company Nautilus Minerals has terminated Papua New Guinea's 30 per cent share in a deep water mining project, because the government has not paid millions of dollars it owes.

Nautilus is exploring for minerals at the bottom of the Bismark Sea, off the north coast of Papua New Guinea.

The company plans to extract copper, silver and gold from 1.6 kilometres below the surface using robotic diggers.

Nautilus stopped production of its underwater equipment in 2012 because the PNG Government failed to pay its share.

Last year an international arbitrator said Papua New Guinea had until October to pay $130 million owed for its agreed stake in the Solwara 1 Project.

But Port Moresby failed to pay the money it owed.

Nautilus says it has now terminated the agreement with the government relating to the 30 per cent share and will claim damages.

The PNG Government is yet to comment publicly on the development.