Investors take a plunge, to the bottom of the sea

HENRY NEWRICK is an unlikely treasure hunter. He wears a sober suit, does not own a parrot and has the air of the solid New Zealand business publisher he is. But if Caribbean Marine Recovery, the company of which he is chairman, successfully dredges enough goodies from the seabed, he will become one of the big players in a fast-growing and exotic industry.

CMR hopes to raise up to pounds 6.5m when it floats on London's Alternative Investment Market next month. Its first task, as the world's first quoted treasure- hunting company, will be to raise wrecks around the islands of Antigua and Barbuda. The islands' government has given it a five-year concession, following three years' work during which the company identified 20 wreck sites. Early prospects include a pirate vessel, two Spanish naos (early galleons), an English slave ship and HMS Griffin - all sunk in the 17th or 18th centuries.

Although an archaeologist will be aboard the recovery vessel, investors will be interested in one thing only - the value of the wrecks and their cargo. One of the naos is believed to have been carrying gold and silver, while the slaver probably has gold that would have been used to pay chiefs in Africa. But, Mr Newrick points out, almost any artefact has some value - cannon balls would make excellent doorstops, he suggests.

The potential wealth lying at the bottom of the ocean is immense. The shallow waters of the Caribbean are particularly attractive. "There are 3,000 wrecks around the Bahamas and 700 around Cuba," Mr Newrick says. The trading routes of south-east Asia are also rich hunting grounds. The most valuable single wreck, the early 16th-century Flor de la Mar, is reputed to have a cargo worth between between $1bn (pounds 630m) and $9bn. It is somewhere on the seabed of the Straits of Malacca.

Before a salvage company can start looking for such treasures, it has to be given a concession by the government, which typically takes 25 per cent of whatever is raised. CMR is unusual in having a long concession, which is also why it is able to float. But the lifeblood of the industry is the wealthy individual investor. Henley-on-Thames-based Venture Capital Report, a marriage bureau for business angels and entrepreneurs, has been involved in four marine salvage schemes in the last year. Three are "non-treasure" - but VCR is also helping raise pounds 300,000-plus as part of a pounds 2m project to raise the Blessing of Burntisland. It sank in the Firth of Forth in 1633, while carrying the silver plate and other items for Charles I's coronation in Scotland. Investors are being invited to buy into the scheme with pounds 5,000 shares.

They are also being told there is no guarantee of success. Salvage is a business that appeals to people who can afford to lose a few thousand, or even a hundred thousand. "Our investors have typically made their own money, and now want to invest in a high- risk, high-reward project," says James Mallinson, project director of VCR. "But unlike many businesses, the risks are pretty clear cut - and then there is the romance of treasure hunting."

There are many more stories of failure than success. In 1980, Mr Newrick raised pounds 500,000 to salvage HMS Lutine, the warship that sank off Holland in 1799 and triggered Lloyd's first payout (as well as giving it its famous bell). "One guy invested pounds 65,000," he says. "He said he didn't mind if he lost the money because he made 10 such investments a year, and needed only one to come off to make money." This was not his lucky investment. "We had the worst weather in 40 years, and we failed," Mr Newrick says.

But it is the stories of triumph that keep the money pouring in. Keith Jessop, a British diver, recovered pounds 40m of gold bullion from the cruiser HMS Edinburgh off the north Russian coast. He became a millionaire as a result.

In March this year, 24,000 pieces of Chinese porcelain were sold by Christies for pounds 2.2m. The porcelain was recovered from the wreck of the Diana, an East Indiaman that sank off the coast of Malaya in 1817. Dorian Ball, a Leicester-born South African, spent 800 days searching 28 miles of seabed to find it.

The chances of success are improving all the time, though, as technology develops. Jacques Cousteau's invention of the aqualung during the Second World War was critical. So was the development of sophisticated magnetometers, which can now even differentiate between different types of metal. Another invention, from about 1970, is the "mailbox", a machine that blasts a jet of water at the seabed to uncover remains.

Most of the wrecks now being investigated are in shallow coastal waters, but there is increasing interest in the deep oceans. The Portuguese government has given concessions for salvors to search around the Azores. "You're talking tens of millions for this sort of operation," Mr Newrick says. "They will be using robots and mini-submarines."

But the industry hangs out one big warning sign to potential investors. Treasure hunting is the modern equivalent of gold-prospecting, and thus has more than its share of conmen ready to play on the gullibility of those swept along by its romance. Many people have been impressed by a presentation and have decided to invest - only to find that the "salvors" then become as difficult to find as the treasure they had promised.