A London-listed company's plans to create the world's first underwater goldmine on the Pacific seabed have hit the rocks. Nautilus Minerals' problems come as China and Russia's duel for riches at the bottom of the ocean intensifies.

Nautilus was planning to mine gold, copper and silver under the Pacific Ocean but has run into conflict with its partner, the government of Papua New Guinea, about the cost of the project.

The company, part-owned by the Anglo American mining group, has put its Solwara 1 prospect on ice, laid off staff and postponed equipment orders, and is looking at taking its subsea mineral operations elsewhere.

State-owned Chinese and Japanese firms, meanwhile, have unveiled plans to search for cobalt-rich ferromanganese "crusts" in the western Pacific, and Russia has signed a 15-year contract to prospect for metallic sulphides in the Atlantic, where volcanic hot springs create mineral-rich rock formations.

Last month international lawyers met in Beijing to try to hammer out details of a seabed mining code to prevent conflict over deepwater resources.

The sudden interest in this sector has been fed by the boom in commodity prices as well as soaring costs and environmental opposition to many large onshore mining projects. There have been growing tensions over mineral and seabed rights, with China in dispute with the Philippines, Vietnam and other countries over areas of the South China Sea.

Nautilus, listed on London's Aim junior stock market and owned 11% by Anglo and 21% by Russia's huge iron ore producer Metalloinvest, claims to be the first company to properly explore the ocean floor for polymetallic sulphide deposits.

It was granted the first mining lease at Solwara, in territorial waters off New Guinea, but also holds more than half a million square kilometres of highly prospective acreage in the western Pacific.

An Anglo American spokesman said the group, which operates onshore mines in South Africa and elsewhere, saw its investment in Nautilus as speculative. "We are a shareholder because we think [seabed mining] may prove interesting in future."

De Beers, the diamond producer that was brought under sole Anglo American control last year, already does a limited "hoovering" of likely mineral deposits from the seabed off Namibia in south-west Africa.

But Solwara 1 in the Bismarck Sea, which borrows techniques from the offshore oil and gas industry, is a much more ambitious project that could involve upfront capital costs of nearly $400m to bring ore from the seabed to the shore.

The Papua New Guinea government took a 30% stake in the scheme but has since questioned whether it should be legally obliged to contribute to funding, running at $4m a week.

Ministers have since switched their attention to an ExxonMobil project to produce liquefied natural gas for export to Australia, leaving Nautilus look for other funders or a change in location.

Solwara 1 – there were also to be 2 and 3 – has also attracted considerable opposition from environmentalists worried about the impact of seabed mining on biodiversity.

But Nautilus has not given up. Mike Johnston, its chief executive, told shareholders toward the end of last year: "Despite this [funding] setback, the company remains committed to maximising shareholder value by achieving its objective of developing the world's first commercial sea-floor copper-gold project and launching the deep water sea-floor resource production industry, while maintaining an environmentally and socially responsible approach."

Exploration outside normal 200-mile territorial waters can only be undertaken through application for a licence from the International Seabed Authority established under the United Nations law of the sea convention.

Two new applications for exploration were filed last summer for areas in the west Pacific Ocean, one from the China Ocean Mineral Resources Research and Development Association and another from the Japan Oil, Gas and Metals National Corporation.