Executive Summary / Key Takeaways

• TMC the metals company is pioneering the extraction of polymetallic nodules from the deep seabed, positioning itself as a potentially lower-impact source of critical metals (nickel, copper, cobalt, manganese) essential for the energy transition, defense, and infrastructure, contrasting with traditional land-based mining.
• Facing persistent delays in the International Seabed Authority (ISA) regulatory process, TMC has strategically pivoted to pursue commercial recovery permits and exploration licenses under the existing U.S. Deep Seabed Hard Mineral Resources Act (DSHMRA) via its U.S. subsidiary, viewing this as a clearer path to commercialization.
• The company has demonstrated key operational and technological milestones, including successful pilot nodule collection (3,000 wet tons lifted) and onshore processing trials (industrial scale smelting with PAMCO), validating its "capital-light" approach leveraging partner assets.
• Financially, TMC remains in the exploration stage, reporting a net loss of $20.6 million in Q1 2025 and utilizing $9.3 million in operating cash, relying on recent financing ($37 million registered direct offering in May 2025) and credit facilities to fund operations and permit applications.
• While pre-revenue, TMC holds significant estimated resource value (NORI-D NPV estimated at $8.5 billion based on 2021 methodology updated for metal prices) and is developing a services business to leverage its expertise, aiming to unlock value ahead of commercial production amidst a competitive landscape dominated by large, established terrestrial miners.

The Deep-Sea Opportunity and TMC's Vision

The global demand for critical metals – nickel, copper, cobalt, and manganese – is projected to surge dramatically in the coming decades, driven by the accelerating energy transition, evolving defense needs, and expanding infrastructure. Traditional land-based mining, while essential, often faces significant environmental and social challenges, including habitat destruction, water usage, waste generation, and community displacement. Against this backdrop, TMC the metals company is advancing a novel approach: sourcing these vital metals from polymetallic nodules found on the deep seabed, particularly within the Clarion Clipperton Zone (CCZ) of the Pacific Ocean.

TMC's vision is rooted in the belief that deep-sea nodules offer a potentially lower-impact alternative. These potato-sized rocks lie unattached on the abyssal plain, containing high concentrations of four key metals in a single ore body. This contrasts with the need for multiple land mines to extract the same suite of metals. The company highlights that its proposed method avoids the need for digging, blasting, or drilling into the seafloor and aims for near-zero solid waste generation during onshore processing, eliminating the need for large, potentially toxic tailings ponds common in terrestrial mining. Furthermore, operating in international waters far offshore means no human communities are displaced.

The company's history reflects a focused effort to prove the technical and environmental viability of this concept. Incorporated in 2019 and becoming publicly traded in 2021, TMC built upon earlier exploration rights held by its subsidiaries, NORI and TOML, under ISA contracts granted in 2011 and 2012, respectively. A foundational step was the publication of SEC-compliant resource statements and an initial assessment for the NORI Area D in early 2021, highlighting a significant estimated resource base.

Technological Edge and Operational Milestones

TMC's strategy is underpinned by developing and deploying specialized technology for deep-sea nodule collection and processing. A core differentiator is its partnership with Allseas, a leading offshore contractor. This collaboration led to the development and testing of a pilot nodule collection system, culminating in a successful trial in 2022. During this test, the system, utilizing a tracked collector vehicle equipped with Coanda nozzles, successfully lifted 3,000 wet tons of nodules to the surface. A key operational detail highlighted by the company is the minimal seafloor disturbance of this technology, impacting only the top 3 centimeters of sediment, a significant improvement compared to the 20-80 centimeters disturbed by systems tested in the 1970s. The company's extensive offshore campaigns, totaling 22 by early 2024, have been crucial for gathering environmental baseline and impact data, which is central to its regulatory applications.

On the processing side, TMC has partnered with PAMCO (5532) in Japan, leveraging existing Rotary Kiln Electric-Arc Furnace (RKEF) facilities. This partnership is critical to TMC's "capital-light" strategy, aiming to minimize upfront capital expenditures by utilizing existing infrastructure rather than building new processing plants from scratch. Processing trials with PAMCO have demonstrated the feasibility of converting nodules into valuable products. By February 2025, TMC and PAMCO successfully smelted 450 tonnes of calcine (derived from 2,000 tonnes of nodules) into 35 tonnes of high-grade nickel-copper-cobalt alloy and 320 tonnes of manganese silicate products. This industrial-scale demonstration validates the process at scale and provides crucial data for future definitive processing agreements. Bench-scale refining trials with SGS (SGSN) have also successfully produced battery-grade nickel and cobalt sulfates from the intermediate products.

The "so what" for investors is that these technological and operational achievements significantly de-risk the project's technical feasibility. The successful pilot collection proves the ability to recover nodules, while the processing trials demonstrate the potential to convert them into marketable metal products using existing infrastructure, reducing the massive capital burden typically associated with new mining projects. This capital-light approach is a key strategic pillar aimed at accelerating the path to production and improving potential return on invested capital, distinguishing TMC from traditional, capital-intensive mining ventures.

The Strategic Pivot to the U.S. Pathway

Despite demonstrating technical viability, TMC has faced significant uncertainty and delays in the regulatory process governed by the International Seabed Authority (ISA). The ISA has been working on developing final exploitation regulations since 2014, missing adoption targets in 2020 and 2023, with continued potential for delay beyond the 2025 target. This regulatory uncertainty has been identified by the company as a major factor depressing its stock valuation.

In response, TMC has undertaken a strategic pivot towards the existing U.S. regulatory framework under the Deep Seabed Hard Mineral Resources Act of 1980 (DSHMRA), administered by the National Oceanic and Atmospheric Administration (NOAA). Leveraging its U.S. subsidiary, TMC USA (established in 2013), the company initiated a formal pre-application consultation process with NOAA in March 2025. This culminated in the submission of applications for a commercial recovery permit and two exploration licenses in April 2025. The commercial recovery permit application covers over 25,000 square kilometers in the CCZ, an area estimated to contain measured and indicated resources. The two exploration license applications cover nearly 200,000 square kilometers, estimated to hold 1.64 billion wet tonnes of nodules with significant metal content (approximately 15.5 million tonnes of nickel, 12.8 million tonnes of copper, 2.0 million tonnes of cobalt, and 345 million tonnes of manganese).

TMC views the U.S. pathway as potentially offering a clearer, more predictable, and legally robust route to commercial production compared to the ISA process, which has been subject to political tensions and delays. The company notes that DSHMRA provides an established framework for U.S. citizens to pursue deep seabed mining in international waters, independent of UNCLOS ratification. Recent U.S. government actions, including an Executive Order in April 2025 directing the Commerce Secretary to expedite permitting under DSHMRA and assessing the use of nodule-derived minerals for the National Defense Stockpile, signal growing political support for this industry in the U.S.

While prioritizing the U.S. pathway, TMC intends to maintain its ISA exploration contracts for the NORI and TOML areas, planning to apply for extensions when due (NORI in 2026, TOML in 2027), viewing this as preserving optionality. The company has consulted with its sponsoring states, Nauru and Tonga, regarding this strategy.

Financial Performance and Liquidity

As an exploration-stage company, TMC currently generates no revenue from commercial operations. Its financial performance is characterized by significant operating losses driven by exploration, evaluation, and general and administrative expenses. For the three months ended March 31, 2025, TMC reported a net loss of $20.6 million, a decrease from the $25.2 million net loss in the same period of 2024. This reduction was primarily due to lower exploration and evaluation expenses ($9.5 million in Q1 2025 vs. $18.1 million in Q1 2024), mainly reflecting decreased spending on mining, technological, and process development compared to the prior year which included costs for nodule transportation and Campaign 8 resource definition. General and administrative expenses increased slightly ($8.5 million in Q1 2025 vs. $6.6 million in Q1 2024), largely due to higher share-based compensation.

Cash flow from operations reflects these losses and ongoing development activities. Net cash used in operating activities amounted to $9.3 million in Q1 2025, an improvement from $11.9 million in Q1 2024, which included higher costs related to Campaign 8. Investing activities were minimal, primarily related to equipment and software purchases ($70 thousand used in Q1 2025).

TMC's liquidity is a critical factor given its pre-revenue status and significant ongoing expenditures. As of March 31, 2025, the company had cash on hand of $2.3 million. Its primary sources of funding have been equity and warrant issuances and credit facilities. In Q1 2025, the company received $5.0 million in final committed funding from a registered direct offering initiated in late 2024 and raised $5.6 million through its At-the-Market (ATM) equity distribution agreement by issuing 2.98 million shares at an average price of $1.93. Financing activities provided $8.3 million in cash during the quarter, offset by a $1.8 million repayment of short-term debt.

Subsequent to the quarter end, in May 2025, TMC significantly bolstered its liquidity through a registered direct offering, selling 12.33 million common shares and accompanying Class C warrants at $3.00 per share, resulting in gross proceeds of $37.0 million ($36.75 million net after fees). This offering, anchored by new and existing strategic investors, is intended to provide sufficient funds to support operations well beyond the expected review process for the commercial recovery permit application.

The company also manages liquidity through credit facilities. As of March 31, 2025, it had drawn $2.5 million from the $44 million unsecured credit facility with Gerard Barron and ERAS Capital LLC (increased from $38 million in March 2025, maturing June 30, 2026). A $7.5 million working capital loan from Allseas Investments was extended to September 30, 2025. The $25 million unsecured credit facility with Argentum Cedit Virtuti GCV (an Allseas affiliate) was cancelled in March 2025 as maturity approached with no outstanding balance.

TMC's accumulated deficit stood at $652.0 million as of March 31, 2025. The company believes its cash balance and available borrowing capacity provide sufficient funds for the next twelve months, but acknowledges the need for additional financing long-term to fund commercialization efforts.

Competitive Landscape and Positioning

The competitive landscape for TMC is complex, involving both large, established terrestrial mining companies and other entities pursuing deep-sea mineral exploration. Major players like Vale (VALE), BHP Group (BHP), Glencore PLC (GLEN), and Rio Tinto Group (RIO) dominate the global production of nickel, copper, cobalt, and manganese through vast land-based operations. These companies benefit from significant scale, established infrastructure, and robust financial performance, reporting billions in revenue, healthy profit margins (e.g., Vale's net margins around 16%, BHP's 14%, Rio Tinto's 22% in 2024), and strong cash flow generation. Their strengths lie in operational efficiency, global supply chains, and market share dominance.

TMC, in contrast, is a pre-revenue explorer with a nascent market share. Its competitive positioning is based on the potential advantages of deep-sea nodule extraction:

• Resource Quality: High grades of four metals in a single deposit, potentially simplifying mining and processing compared to land ores requiring separate mines.
• Environmental Footprint: The potential for a significantly lower environmental and social impact compared to traditional mining, particularly regarding terrestrial habitat destruction, water usage, and solid waste generation. TMC's environmental data and studies aim to quantify this advantage (e.g., lower carbon footprint per ton of metal).
• Capital-Light Approach: Leveraging partner assets (Allseas vessel, PAMCO processing) to reduce upfront capital expenditures compared to building new, large-scale land mines and processing facilities.
• Regulatory Niche: Pursuing the U.S. DSHMRA pathway, potentially offering a distinct and faster route to market compared to the international ISA framework, which other deep-sea exploration contractors are also navigating.

However, TMC faces significant competitive disadvantages:

• Scale and Financial Strength: TMC's operations are currently at a pilot/pre-commercial scale, dwarfed by the massive production volumes and financial resources of major miners. Its reliance on external financing contrasts sharply with competitors' ability to fund development from internal cash flow.
• Operational History: TMC lacks a track record of commercial production, while competitors have decades of experience in large-scale mining and processing.
• Regulatory Uncertainty: While the U.S. pathway is pursued for clarity, it is still an untested route for commercial deep-sea recovery permits, and potential legal challenges or delays remain risks. The ISA process, though slow, represents the established international framework.
• Market Acceptance: Deep-sea mining faces significant environmental opposition and public scrutiny, which could impact market acceptance and demand for nodule-derived metals, potentially requiring TMC to sell at a discount or face market access barriers compared to established sources.

TMC's strategic response involves focusing on its unique value proposition – a potentially lower-impact, capital-light source of critical metals – and actively engaging with regulators and potential customers who prioritize sustainable sourcing and supply chain diversification. The development of a services business, leveraging TMC's expertise in offshore campaigns and environmental studies, represents another strategic move to generate revenue and maintain its team's capabilities while awaiting commercial production permits. This initiative positions TMC not just as a future producer but also as a provider of specialized services to other players in the emerging seafloor resource sector.

Risks and Challenges

Investing in TMC involves significant risks inherent in the exploration and development stage of a novel industry. Key risks include:

• Regulatory Risk: The primary risk remains obtaining the necessary permits for commercial recovery. While the pivot to the U.S. DSHMRA pathway is intended to provide clarity, the NOAA review process is untested for commercial-scale deep-sea mining applications. There is no statutory deadline for review, and the process involves interagency consultation, environmental impact statement preparation, public comment, and potential legal challenges. There is no assurance that NOAA will grant the permits in a timely manner, on commercially viable terms, or at all. Furthermore, maintaining ISA exploration contracts while pursuing the U.S. pathway could create diplomatic or regulatory tensions.
• Financing Risk: TMC is a pre-revenue company with significant future capital requirements for scaling up to commercial production. While recent financing has improved liquidity, the company will need substantial additional funding. There is no guarantee that future financing will be available on favorable terms, in sufficient amounts, or at all, which could force delays or scaling back of operations.
• Operational and Technical Risk: Scaling the nodule collection system and onshore processing facilities to commercial levels involves inherent technical and operational challenges that could lead to cost overruns or delays.
• Environmental and Social Opposition: Deep-sea mining faces strong opposition from environmental groups and some governments, which could lead to increased regulatory hurdles, legal challenges, or negative public perception impacting market demand.
• Commodity Price Volatility: The future profitability of TMC's operations is highly dependent on the market prices of nickel, copper, cobalt, and manganese, which are subject to significant volatility influenced by global supply, demand, and economic conditions.
• Litigation Risk: The company is currently involved in several lawsuits, including putative class actions related to alleged securities law violations and a lawsuit from private placement investors. The outcome of these matters is uncertain and could have a material adverse effect on the company's financial position and results of operations.
• Internal Control Weakness: As disclosed, the company identified a material weakness in its internal controls over financial reporting related to significant non-routine transactions. While remediation efforts are underway, there is no assurance that these controls will be fully effective in preventing or detecting material misstatements in the future.

Outlook and Catalysts

TMC's near-term outlook is heavily focused on advancing its regulatory applications under the U.S. DSHMRA framework and finalizing key project studies. Management anticipates that NOAA will deem its exploration license applications substantially compliant and its commercial recovery permit application complete in the near future, initiating the next stage of technical and environmental review. The company expects to provide a more definitive step-by-step permitting timeline to the market soon after these determinations.

A key catalyst is the expected completion and release of the updated Pre-Feasibility Study (PFS) in the third quarter of 2025. This study will reflect assumptions based on the U.S. regulatory pathway and the capital-light strategy, providing updated project economics for the first commercial recovery area. The company also intends to provide more clarity on the potential valuation of its total estimated resource beyond the initial NORI-D focus.

TMC is actively exploring alternative financing sources, including potential support from U.S. government departments and agencies as directed by the recent Executive Order, as well as strategic partners. The recent $37 million equity raise provides a liquidity runway to pursue these near-term milestones.

Further operational milestones include the finalization of industrial-scale nodule processing trials with PAMCO. The development of the new services business is also a key initiative, with the company already in discussions for potential contracts, aiming to generate revenue and leverage its accumulated expertise in seafloor resource development.

The long-term outlook hinges on successfully obtaining regulatory approval for commercial recovery, securing the necessary funding to scale operations, and demonstrating the economic and environmental viability of deep-sea nodule production at a commercial scale. The company's ability to execute its capital-light strategy and effectively market its metal products, potentially highlighting their lower environmental footprint compared to land-based alternatives, will be crucial for future success.

Conclusion

TMC the metals company stands at a pivotal juncture, seeking to unlock the vast potential of deep-sea polymetallic nodules as a critical metal source for a rapidly electrifying world. The company has demonstrated the technical feasibility of its collection and processing methods through successful pilot operations and industrial-scale trials, validating its innovative, capital-light approach. Facing protracted uncertainty within the ISA regulatory framework, TMC's strategic pivot to the U.S. DSHMRA pathway represents a calculated move to pursue a potentially clearer and more predictable route to commercialization, backed by growing U.S. government interest in securing domestic critical mineral supply chains.

While the company remains in the pre-revenue exploration phase, marked by operating losses and reliance on external financing, recent capital raises have strengthened its near-term liquidity. The investment thesis centers on the successful navigation of the regulatory process, the finalization of project economics through the upcoming PFS, and the ability to secure significant future funding required for commercial-scale operations. The development of a services business offers a potential avenue for value creation and revenue generation ahead of first production. Despite the significant risks inherent in pioneering a new industry and competing with established mining giants, TMC's unique resource, technological advancements, and strategic adaptation position it as a high-potential, albeit speculative, investment in the future of critical metal supply. Investors should closely monitor progress on the U.S. permit applications, the outcome of the PFS, and the company's ability to secure follow-on financing as key indicators of its path towards realizing the estimated value of its deep-sea resource.