The Metals Company Inc. (TMC), an explorer of lower-impact battery metals from seafloor polymetallic nodules, provided a corporate update and fourth quarter and full year financial results for the period ending December 31, 2023.

Q4 2023 and FY 2023 Financial Highlights

• $15.2 million cash used in operations for the quarter ended December 31, 2023
• Net loss of $33.5 million and net loss per share of $0.11 for the quarter ended December 31, 2023
• For the full year 2023, a net loss of $73.8 million or $0.26 per share (compared to $171 million and $0.71 per share in 2022)
• Total cash on hand of approximately $6.8 million on December 31, 2023, excluding $9 million received in January 2024 as final payment from the Registered Direct Offering announced in August 2023
• Total pro forma liquidity of approximately $61 million on December 31, 2023, inclusive of:
  • Cash of $6.8 million
  • $9 million of additional gross proceeds received in January 2024 from the final payment in the Registered Direct Offering
  • The undrawn $25 million unsecured credit facility from an affiliate of Allseas Group SA, the maturity date of which has been extended through August 2025
  • An additional $20 million unsecured credit facility with a maturity date of September 22, 2025, provided by TMC’s largest shareholder, ERAS Capital LLC (the family office of TMC director Andrei Karkar), and TMC’s Chairman & CEO, Gerard Barron

Gerard Barron, CEO & Chairman of The Metals Company, commented: “Over the last 12 years, we’ve completed 22 offshore campaigns on the NORI-D area to build a data-driven picture of the marine environment and how it is impacted by nodule collection. NORI’s investment in research by the world’s leading deep-sea research institutions has produced the most comprehensive dataset ever collected in the CCZ and a fair bit of excitement among the researchers. Our latest campaign to assess the state of the ecosystem 12 months after the nodule collection pilot finished earlier this month and the observed state of the seafloor ecosystem was encouraging. We believe we now have sufficient real-world data to address most of the concerns raised by those who oppose the industry, and we look forward to researchers publishing their findings in peer-reviewed literature and NORI submitting its Environmental Impact Statement to the International Seabed Authority (ISA). Perceptions of the environmental peril of nodule collection are starting to be publicly challenged by ocean scientists: it was exciting to see an influential group like the Breakthrough Institute publicly weigh into the debate.

“We are also encouraged by the pace of US initiatives aimed at supporting domestic processing and refining of polymetallic nodules, as well as re-invigorated calls for the US to ratify the Law of the Sea treaty and take advantage of Member State rights that come with the ratification. Meanwhile, two new applications for deep-sea mineral exploration have recently been submitted to the ISA by the government of India. With support for deep-sea minerals growing, I’m happy to provide additional financial flexibility to TMC in the form of a new unsecured credit facility alongside our director and largest shareholder Andrei Karkar, which is in addition to the existing and recently extended Allseas credit facility. As discussions with potential strategic partners continue, these significant sources of liquidity from our three largest shareholders will help ensure that we can deliver a world-class application for an exploitation contract following the July 2024 ISA session.”

Operational Highlights Since Last Corporate Update

• Update to NORI-D Expected Timeline to First Production: TMC is currently focused on preparing its application to submit to the ISA for its first exploitation contract for NORI Area D following the July 2024 meeting of the ISA. TMC now expects to commence production offshore at the end of the first quarter of 2026, assuming an ISA review process of approximately one year from the submission of TMC’s application. This new estimated timeline to first production is based on:
  • Refined assumptions following discussions with TMC’s strategic partner, Allseas, with respect to planned upgrades to the Hidden Gem (including an additional nodule collector vehicle and associated equipment) to increase maximum annual production capacity from 1.3 million wet tons to 3.0 million wet tons of nodules per annum while carefully ramping-up production in manageable increments over a 5-year period based on precautionary principles. These planned upfront upgrades to the Hidden Gem’s capacity, prior to the start of production, will help avoid a situation where the Hidden Gem would need to be taken out of the field to increase its nameplate production capacity from 1.3 to 3 Mtpa.
  • The latest consolidated ISA draft text of the rules, regulations and procedures the “Mining Code”) issued on February 16, 2024, describe an estimated review process on an application for an exploitation contract of 344 days, compared to previous versions which described a review process of 315 days.
• TMC Subsidiary NORI Concludes Key Offshore Research Campaign, Evaluating Seafloor Ecosystem Function a Year Post Nodule Collection Test: In December 2023, TMC announced the completion of one of the two offshore scientific research campaign to assess seafloor impacts and recovery rates twelve months after the pilot nodule collection system test conducted by NORI. NORI’s December offshore scientific research campaign successfully gathered crucial environmental data on ecosystem recovery and functioning to further support TMC’s application for a commercial exploitation contract, and the preliminary qualitative assessments are encouraging.
• NORI Shares Preliminary Findings on Environmental Impacts of Pilot Nodule Collection System Test: In November 2023, TMC began sharing emerging data on the impacts of seafloor sediment plumes, which show that the plume forms a gravity-driven turbidity current that hugs the contours of the seafloor and does not loft up into the water column where it could possibly be transported longer distances by ocean currents. A key component to understanding TMC’s environmental impacts, the data builds upon earlier laboratory predictions and in-field verifications from prior collector tests.
• First Nickel Sulfate Produced from Polymetallic Nodules: In March 2024, NORI produced what is believed to be the first nickel sulfate ever generated from polymetallic nodules. The sulfate, whose quality is indicative of material suitable for battery markets pending confirmation of preliminary assays, was produced in a program testing TMC’s efficient flowsheet design that processes intermediate nickel matte direct to nickel sulfate (without making nickel metal) and produces fertilizer byproducts instead of waste.
• Binding MoU with Pacific Metals Company of Japan (“PAMCO”): In November 2023, TMC signed a binding Memorandum of Understanding (MoU) with PAMCO to process 1.3 million wet tons of nodules when commercial operations commence. PAMCO is planning a commercial sized pilot production run in the second quarter of 2024 in which 2,000 tons of nodules, collected during NORI’s mining test, will be processed at PAMCO’s existing rotary kiln-electric arc furnace (RKEF) plant.

Industry Update

• International Seabed Authority: Part 1 of the ISA’s 29th Session is currently taking place between March 18–29, 2024, where the ISA Council will continue negotiations of the Mining Code. In February 2024, the ISA published a consolidated set of draft regulations for the first time, harmonizing and cleaning up the text. The 225-page text is comprehensive and signals the next phase in the negotiations.
• New ISA Exploration Applications from the government of India: In January 2024, the Government of India submitted two applications to the ISA for approval of two plans of work for exploration in the international seabed area (the Area) of the Indian Ocean. The Government of India already holds two contracts for exploration—one for polymetallic sulphides in the Central Indian Ocean Basin and another for polymetallic nodules in the Indian Ocean Ridge.
• Forthcoming Pentagon Report on Domestic Processing of Seafloor Nodules: In January 2024, TMC welcomed the passage of the 2024 National Defense Authorization Act (NDAA) into law and the inclusion of provisions directing the US Department of Defense to submit a report to the House Armed Services Committee assessing the domestic processing of seafloor polymetallic nodules.
• Thirty-One Members of the US Congress Call Upon Pentagon to Develop Plan for Processing Deep-Sea Polymetallic Nodules: In December 2023, TMC welcomed a letter by thirty-one Members of the US House of Representatives calling upon the US Department of Defense to address the national security implications of deep-sea nodule collection as part of its mandate to ensure the stability and strength of critical minerals used for defense and clean energy technologies like batteries and renewable energy infrastructure.
• ~350 Former US Political and Military Leaders Urge Senate to Ratify the Law of the Sea: In March 2024, an influential group of former US government officials and military officers—including former Secretary of State Hillary Clinton and former Secretary of Defense Leon Panetta—urged US Senators to ratify the Law of the Sea Treaty (UNCLOS), so “The United States can take its seat on the Council of the International Seabed Authority”, and pursue deep sea mining sites “each containing a trillion dollars in value.”
• Responsible Use of Seafloor Resources Act (RUSRA): In March 2024, legislation was introduced in the US House of Representatives calling for the US to “support international governance of seafloor resource exploration and responsible polymetallic nodule collection by allied partners”, and to “provide financial, diplomatic, or other forms of support for seafloor nodule collection, processing and refining.”

Financial Results Overview

On December 31, 2023, TMC held cash of approximately $6.8 million and held no financial debt. TMC believes that its cash on hand, and borrowing availability under its recently amended and extended credit facility with an affiliate of Allseas, and TMC’s recently announced credit facility with ERAS Capital LLC and Mr. Barron, will be sufficient to meet TMC’s working capital and capital expenditure commitments for at least the next twelve months from March, 25, 2024.

TMC reported a net loss of approximately $33.5 million, or $0.11 per share for the quarter ended December 31, 2023, compared to net loss of $109.6 million, or $0.41 per share, for the quarter ended December 31, 2022. Exploration and evaluation expenses during the quarter ended December 31, 2023 were $26.7 million compared to $81.8 million for the quarter ended December 31, 2022. The significant decrease in the exploration and evaluation expenses in the fourth quarter of 2023 reflects a reduction in environmental studies costs as the collector test was completed in 2022, partially offset by the monitoring work in the NORI Area D following the collector test which was carried out in the fourth quarter of 2023, a reduction in the pilot mining test system (PMTS) cost and a reduction in share based compensation cost as the cost of the Long-Term Incentive Plan (“LTIP”) options with specific market capitalization vesting conditions were fully amortized in 2022. In addition, the last quarter of 2022 included a charge of $69.9 million on the fair value of the exercise of the warrant held by Allseas. The reduction in these costs in 2023 was partially offset by an increase in engineering work to advance the NORI project, an increase in exploration labor costs mainly attributable to an increase in headcount and an increase in the cost of prefeasibility work.

General and administrative expenses were $6.6 million for the quarter ended December 31, 2023, compared to $7.0 million for the quarter ended December 31, 2022, reflecting lower share-based compensation in the 2023 period, as LTIP options with specific market capitalization vesting conditions were fully amortized in 2022, partially offset by higher spending on consulting and advisory work.

TMC reported a net loss for the year ended December 31, 2023, of $73.8 million, or $0.26 per share, compared to net loss of $171.0 million, or $0.71 per share, for the year ended December 31, 2022. Exploration and evaluation expenses during the year ended December 31, 2023, were $49.8 million compared to $144.6 million for the year ended December 31, 2022. General and administrative expenses in 2023 were $22.5 million compared to $29.5 million in 2022. For the year ended December 31, 2023, TMC recorded total share-based compensation expenses of $9.2 million ($17.1 million in 2022) of which $5.1 million was recorded in exploration and evaluation expenses ($8.5 million in 2022) and $4.1 million was recorded in general and administrative expenses ($8.6 million in 2022).