TMC the Metals Company Inc. is a deep-sea 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 and various industrial applications.
Company History and Exploration Efforts
TMC was incorporated in 2019 as a Cayman Islands company and later continued as a corporation under the laws of British Columbia, Canada in 2021. The company’s journey began with the acquisition of Nauru Ocean Resources Inc. (NORI) in 2011, which holds an exploration contract with the International Seabed Authority (ISA) for an area covering 74,830 square kilometers in the CCZ. In 2020, TMC acquired Tonga Offshore Mining Limited (TOML), which holds a similar exploration contract for an area of 74,710 square kilometers in the CCZ.
In 2013, TMC’s subsidiary DeepGreen Engineering Pte. Ltd. (DGE) entered into an agreement with Marawa Research and Exploration Limited (Marawa), an entity owned and sponsored by the Republic of Kiribati, which granted DGE exclusive rights to manage and carry out all exploration and exploitation in the Marawa Area.
TMC faced several challenges early on, including securing financing and developing the technology required for commercial-scale polymetallic nodule collection and processing. In 2019, the company entered into a strategic alliance with Allseas, a leading global offshore contractor, to develop a system to collect, lift and transport nodules from the seafloor to shore. This partnership was an important milestone, as successful completion of the pilot nodule collection system was a prerequisite for TMC’s application for an exploitation contract with the ISA.
Over the past decade, TMC has conducted extensive exploration and environmental baseline studies in its contract areas, accumulating a vast dataset of over 32,600 benthic and 42,000 pelagic biological occurrences, as well as over 12,000 seafloor images and comprehensive time-series data from three years of monitoring via oceanographic moorings. This comprehensive dataset represents one of the largest deep-sea datasets ever compiled and is a testament to TMC’s commitment to understanding the potential environmental impacts of its operations.
Regulatory Landscape and Exploitation Challenges
The exploration and exploitation of seabed minerals in international waters are regulated by the International Seabed Authority (ISA), an intergovernmental organization established under the United Nations Convention on the Law of the Sea (UNCLOS). The ISA grants exploration and exploitation contracts to sovereign states or private contractors sponsored by a sovereign state.
TMC’s subsidiaries, NORI and TOML, have been granted exploration contracts by the ISA, but the company faces significant regulatory challenges in securing an exploitation contract. The ISA has been working to finalize the Mining Code, a set of rules, regulations, and procedures for the exploitation of deep-sea minerals, but the process has faced delays. The ISA did not meet its initial deadline of July 2023 for the adoption of the Mining Code, and the finalization is now expected by 2025.
In the absence of a finalized Mining Code, TMC’s subsidiary NORI plans to submit an application for an exploitation contract in June 2025, relying on the provisions of UNCLOS and the 1994 Agreement relating to the implementation of Part XI of UNCLOS. However, there is no certainty that the ISA will provisionally approve the application or that such provisional approval will lead to the issuance of an exploitation contract.
Financial Performance and Liquidity
As an exploration-stage company, TMC has not generated any revenue to date. The company has reported net losses in recent years, with a net loss of $73.78 million for the year ended December 31, 2023, and a net loss of $20.52 million for the third quarter of 2024.
TMC’s primary sources of financing have come from private placements, public offerings of common shares and warrants, the issuance of convertible debentures, and credit facilities. As of September 30, 2024, the company had cash on hand of $0.4 million and total liquidity, including available credit facilities, of approximately $63 million.
To fund its ongoing operations and exploration activities, TMC has taken measures to reduce operating expenses, targeting less than $5 million per quarter. The company has also secured additional credit facility capacity, including a $38 million unsecured credit facility from ERAS Capital LLC and Gerard Barron, and a $25 million facility from an Allseas Group SA affiliate, with a total of $33.8 million currently available.
For the first nine months of 2024, TMC reported exploration and evaluation expenses of $42.34 million, compared to $23.17 million in the same period of 2023. This increase was primarily due to higher mining, technological, and process development costs, as well as increased share-based compensation expenses. General and administrative expenses also rose to $22.60 million in the first nine months of 2024, up from $15.96 million in the prior-year period, mainly due to higher share-based compensation and personnel costs.
The company’s net loss for the first nine months of 2024 was $65.88 million, compared to a net loss of $40.32 million in the same period of 2023, reflecting the continued investment in exploration and development activities.
In the third quarter of 2024, TMC reported a net loss of approximately $20.5 million or $0.06 per share, compared to a net loss of $12.5 million or $0.04 per share for the same period in 2023. Exploration and evaluation expenses during Q3 2024 were $11.8 million, compared to $7.9 million for the same period in 2023, while general and administrative expenses were $8.2 million for Q3 2024, compared to $4.6 million for Q3 2023.
TMC’s financial position as of September 30, 2024, shows a cash balance of $360,000. The company has an unsecured credit facility with Argentum Cedit Virtuti GCV, an affiliate of Allseas Group S.A., providing up to $27.5 million in borrowing capacity, which was undrawn as of September 30, 2024. Additionally, TMC has an unsecured credit facility with ERAS Capital LLC and Gerard Barron providing up to $38 million in borrowing capacity, of which $4.3 million was drawn as of September 30, 2024.
The company’s current ratio and quick ratio stand at 0.0512, indicating potential liquidity challenges. However, TMC believes that its current cash on hand, along with the funds raised through the recent registered direct offering and undrawn credit facility, will be sufficient to meet its working capital and capital expenditure requirements for at least the next 12 months.
Strategic Initiatives and Diversification
In addition to its core exploration and exploitation efforts, TMC is pursuing strategic initiatives to diversify its business and leverage its expertise. The company is developing a new services business for seafloor resource development, offering its knowledge and experience in areas such as new exploration plans of work, resource definition, environmental impact assessments, data management, and offshore campaign execution.
This services business aims to capitalize on the growing interest in deep-sea minerals, as the world’s largest economies and industrialized nations are increasingly focused on securing critical raw materials for the energy transition and industrial development. TMC estimates that the addressable market for these services could reach $100 million per year, with the potential for significant growth as the Mining Code is finalized and more contractors seek to advance their projects.
Furthermore, TMC is exploring opportunities to partner with governments and defense organizations to address supply chain vulnerabilities and support the development of domestic refining capacity for nodule-derived metals. The company has an outstanding application for a $9 million grant from the U.S. Department of Defense’s Defense Production Act Title III program to support the feasibility work on a domestic refinery for nodule-derived intermediate products.
Competitive Landscape and Potential Catalysts
TMC’s primary competitors in the deep-sea mining space include other exploration companies with contracts in the CCZ, such as UK Seabed Resources (sponsored by the United Kingdom) and Ocean Minerals (sponsored by Singapore). However, TMC’s extensive exploration data, strategic partnerships, and diversification into services set it apart from its peers.
Potential catalysts for TMC include the finalization of the ISA’s Mining Code, the approval of NORI’s exploitation contract application, the successful development of its commercial-scale nodule collection and processing systems, and the expansion of its services business. Additionally, growing global demand for critical minerals, geopolitical tensions, and increasing focus on sustainable supply chains could drive further interest and support for TMC’s operations.
Risks and Uncertainties
TMC faces a range of risks and uncertainties that could impact its future prospects, including:
Additionally, on January 23, 2023, certain investors in TMC’s 2021 private placement filed a lawsuit against the company alleging breach of contract. The company denies the allegations and has filed a motion to dismiss.
Future Outlook and Guidance
TMC plans to submit NORI’s application for an exploitation contract to the ISA on June 27, 2025, after the ISA clarifies the submission and review process at their March 2025 meetings. The company intends to reduce operating expenses to a target of less than $5 million per quarter going forward.
In terms of capital allocation, TMC plans to delay capital spending related to the preparation of the Hidden Gem vessel until the final regulations are adopted, their application is approved, or other non-dilutive strategic financing is in place. This approach aims to conserve resources while awaiting regulatory clarity.
Conclusion
TMC the Metals Company Inc. is a pioneering deep-sea exploration company with a unique opportunity to unlock the potential of polymetallic nodules as a source of critical minerals for the global economy. Despite the significant regulatory and operational challenges it faces, TMC’s comprehensive dataset, strategic partnerships, and diversification into services position it as a key player in the emerging deep-sea mining industry. As the world increasingly focuses on securing sustainable and reliable supplies of critical raw materials, TMC’s role in this space could become increasingly valuable, presenting both opportunities and risks for investors.
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