TMC the Metals Company Inc. (TMCWW) is a deep-sea minerals exploration company focused on the collection, processing, and refining of polymetallic nodules found on the seafloor in international waters of the Clarion Clipperton Zone (CCZ) in the Pacific Ocean. These nodules contain high concentrations of critical metals such as nickel, copper, cobalt, and manganese, which are essential for the transition to a low-carbon economy.

Business Overview

TMC was incorporated in 2019 and continued as a corporation under the laws of British Columbia, Canada, in 2021. The company holds exclusive exploration and commercial rights to three polymetallic nodule contract areas in the CCZ through its subsidiaries Nauru Ocean Resources Inc. (NORI) and Tonga Offshore Mining Limited (TOML), sponsored by the Republic of Nauru and the Kingdom of Tonga, respectively, as well as an arrangement with Marawa Research and Exploration Limited, a company owned and sponsored by the Republic of Kiribati.

TMC's mission is to build a carefully managed, shared stock of metal (a "metal commons") that can be used, recovered, and reused for generations to come. The company's resource definition work to date shows that nodules in its contract areas represent the world's largest estimated undeveloped source of critical battery metals. If TMC is able to collect polymetallic nodules from the seafloor on a commercial scale, it plans to use such nodules to produce three types of metal products: (i) feedstock for battery cathode precursors, (ii) copper cathode, and (iii) manganese silicate.

TMC has key strategic alliances with Allseas, a leading global offshore contractor, which developed and tested a pilot collection system, and Glencore, which holds offtake rights to 50% of the NORI nickel and copper production. The company has also worked with engineering firms Hatch Ltd. and Kingston Process Metallurgy Inc. to develop a near-zero solid waste flowsheet for the processing of polymetallic nodules.

Financials

For the fiscal year ended December 31, 2023, TMC reported an annual net loss of $73,781,000, with no revenue generated. The company's annual operating cash flow was -$59,573,000, and its annual free cash flow was -$60,151,000. These financial results reflect TMC's status as an exploration-stage company, with significant investments in research and development, as well as the ongoing development of its offshore collection and onshore processing technologies.

In the first quarter of 2024, TMC reported a net loss of $25,194,000, compared to a net loss of $13,748,000 in the same period of 2023. Exploration and evaluation expenses increased by $10,954,000, primarily due to an increase in mining, technological, and process development costs, as well as higher personnel expenses. General and administrative expenses increased by $345,000, mainly due to higher amortization of share-based compensation and consulting fees, partially offset by lower legal costs.

The company's net cash used in operating activities in the first quarter of 2024 was $11,852,000, compared to $23,484,000 in the same period of 2023. Free cash flow for the first quarter of 2024 was -$12,192,000, compared to -$23,484,000 in the first quarter of 2023.

Liquidity

As of March 31, 2024, TMC had $4,000,000 in cash on hand. The company has sufficient liquidity on hand, including available capacity under its credit facilities, to continue to meet its working capital and capital expenditure requirements for at least the next 12 months.

TMC has adopted a "capital-light" strategy, focusing on removing any allocation of funds to capital expenditures that are not deemed necessary to support the submission of an application for an exploitation contract for the NORI Area D. The company has also negotiated the settlement of program expenditures with its equity whenever possible.

To fund its continued operations, TMC has obtained financing through private placements and public offerings of common shares and warrants, the issuance of convertible debentures, and credit facilities. The company filed a registration statement on Form S-3 in September 2022 to sell up to $100 million of securities, and an additional $100 million registration statement in November 2023. TMC also entered into an At-the-Market Equity Distribution Agreement in December 2022, allowing it to issue and sell common shares with an aggregate offering price of up to $30 million.

Recent Developments

TMC is currently focused on preparing its application to the International Seabed Authority (ISA) for its first exploitation contract for the NORI Area D contract area, following the July 2024 meetings of the ISA. The company expects to commence production offshore at the end of the first quarter of 2026, assuming an ISA application review and approval process of approximately one year.

In February 2024, the ISA published a consolidated set of draft regulations for the first time, harmonizing and cleaning up the text thereof. This signals the next phase in the negotiations to finalize the regulations. During the ISA's 29th Session in March 2024, the ISA Council commenced negotiations on the new consolidated text and identified a number of issues for negotiation inter-sessionally.

In April 2024, TMC announced that it had successfully produced the world's first nickel sulfate derived exclusively from seafloor polymetallic nodules during pilot-scale nodule processing. This milestone demonstrates the company's progress in developing efficient processing technologies for its nodule resources.

Additionally, in May 2024, TMC's subsidiary NORI made a second submission of key environmental data from all prior environmental baseline campaigns conducted in the NORI-D exploration area up to January 2022 to DeepData, an open database of contractor data managed by the ISA. This submission of extensive environmental data further strengthens TMC's position as it prepares its exploitation contract application.

Outlook

TMC faces competition from other deep-sea mineral exploration companies, as well as land-based mining operations for the same critical metals found in its polymetallic nodules. However, the company believes its resource represents the world's largest estimated undeveloped source of critical battery metals, with a nickel equivalent grade over 3% and four key metals in one resource.

The company is also encouraged by the increasing interest and support from various countries, including China, France, and the United States, for the development of deep-sea mineral resources. In March 2024, legislation was introduced in the U.S. House of Representatives calling for the U.S. to support international governance of seafloor resource exploration and responsible polymetallic nodule collection by allied partners.

Looking ahead, TMC remains focused on advancing its application for an exploitation contract, developing its offshore collection and onshore processing technologies, and securing strategic partnerships to support its commercial production plans. The company's capital-light strategy and the progress made in addressing environmental concerns through its extensive data collection and analysis efforts position it well to capitalize on the growing demand for critical metals required for the energy transition.

Risks and Challenges

TMC faces several risks and challenges, including the finalization of ISA regulations to allow for commercial exploitation, approval of its application for the ISA exploitation contract, development of environmental regulations associated with its business, and the development of its technologies to collect and process polymetallic nodules. The company also faces competition from land-based mining operations and other deep-sea mineral exploration companies.

Additionally, TMC is an exploration-stage company with no revenue to date and a significant accumulated deficit. The realization of the company's assets and attainment of profitable operations is dependent on many factors, including the development of a commercial nodule collection system, the establishment of mineable reserves, the demonstration of the commercial and technical feasibility of seafloor polymetallic nodule collection and processing, metal prices, and regulatory approvals and environmental permitting for commercial operations.

Conclusion

TMC the Metals Company Inc. (TMCWW) is a pioneering deep-sea minerals exploration company with a unique opportunity to unlock the potential of polymetallic nodules found on the seafloor of the Clarion Clipperton Zone. With its strategic alliances, progress in addressing environmental concerns, and the growing global interest in securing critical mineral supplies, TMC is well-positioned to play a significant role in the transition to a low-carbon economy. However, the company faces several risks and challenges, and its success will depend on its ability to navigate the regulatory landscape, develop its technologies, and secure the necessary financing and partnerships to bring its nodule resources to commercial production.