10-Q: TMC Secures $85M Korea Zinc Investment, Advances US Permits

TMC the metals company Inc. significantly boosted its cash reserves and equity through a strategic $85.2 million investment from Korea Zinc and a $37 million direct offering, while making substantial progress on its U.S. deep-sea mineral recovery permit applications.

Summary

• Net loss for the three months ended June 30, 2025, increased to $74.3 million, up from $20.2 million in the same period of 2024.
• Net loss for the six months ended June 30, 2025, was $94.9 million, compared to $45.4 million for the same period in 2024.
• Cash on hand significantly increased to $115.8 million as of June 30, 2025, from $3.5 million at December 31, 2024.
• Total equity shifted from a deficit of $17.1 million at December 31, 2024, to a positive $81.9 million at June 30, 2025.
• Received $85.2 million in gross cash proceeds from a strategic investment by Korea Zinc Company, Ltd., involving the issuance of 19,623,376 common shares and 6,868,181 warrants.
• Completed a registered direct offering, raising $37 million in gross proceeds through the sale of 12,333,333 common shares and accompanying Class C warrants.
• Submitted the first-ever application for a commercial recovery permit (TMC USA-A_2, 25,160 sq km) and two exploration licenses (TMC USA-A and TMC USA-B, 187,017 sq km) to the U.S. National Oceanic and Atmospheric Administration (NOAA) under the Deep Seabed Hard Mineral Resources Act of 1980 (DSHMRA).
• NOAA confirmed substantial compliance for the exploration license applications on May 29, 2025, and full compliance on August 11, 2025, securing priority rights.
• Published a Pre-Feasibility Study (PFS) for NORI Area D and an Initial Assessment (IA) for broader NORI and TOML areas on August 4, 2025, declaring the first Mineral Reserves for a polymetallic nodule project.
• Entered into revised sponsorship agreements with the Republic of Nauru (June 4, 2025) and the Kingdom of Tonga (August 4, 2025), formalizing continued sponsorship and future continuity benefits upon commercial production under the U.S. regime.

Sentiment

Score: 7

Explanation: Despite increased net losses due to non-cash expenses, the company's financial position significantly improved with substantial capital raises from strategic investors and direct offerings. Key regulatory milestones were achieved with NOAA, and the declaration of initial mineral reserves marks a critical step towards commercialization. While still pre-revenue and facing regulatory uncertainties and litigation, the strong cash injection and strategic partnerships provide a more robust foundation for future development.

Positives

• Cash on hand increased substantially to $115.8 million, providing significant liquidity for operations and development.
• Successful strategic investment of $85.2 million from Korea Zinc, a world leader in non-ferrous metal refining, validating the company's long-term potential.
• Completed a $37 million registered direct offering, further strengthening the capital base.
• Achieved a positive total equity of $81.9 million, reversing a previous deficit.
• Significant progress on the U.S. regulatory pathway with the submission of the first-ever commercial recovery permit application and two exploration licenses to NOAA.
• NOAA confirmed substantial and then full compliance for exploration license applications, securing priority rights over key areas.
• Welcomed a U.S. Executive Order to expedite DSHMRA permitting and evaluate offtake of critical minerals from nodules, indicating strong government support.
• Published a Pre-Feasibility Study (PFS) for NORI Area D, marking the first declaration of Mineral Reserves for a polymetallic nodule project, enhancing project credibility.
• Updated sponsorship agreements with Nauru and Tonga ensure continued support for exploration and future commercial activities.
• Operating cash outflow decreased to $20.0 million for the six months ended June 30, 2025, from $24.0 million in the prior year period, indicating improved operational efficiency.

Negatives

• Net loss for the three months ended June 30, 2025, significantly increased to $74.3 million from $20.2 million in the prior year, primarily due to non-cash expenses.
• Incurred a $33.1 million non-recurring Nauru Warrant cost, representing the fair value of warrants issued to the Republic of Nauru.
• The fair value of private warrants liability increased by $16.2 million in Q2 2025, reflecting a significant increase in the company's share price and public warrants, which is a non-cash expense.
• General and administrative expenses increased by $3.6 million in Q2 2025, driven by higher share-based compensation and consulting costs for U.S. regulatory and financing activities.
• Ongoing litigation, including a breach of subscription agreement claim that has moved to the discovery phase, and a class action lawsuit regarding financial statement reclassification, pose potential liabilities.
• Identified a material weakness in internal control over financial reporting related to accounting for significant non-routine transactions, though remediation efforts are underway.

Risks

• Realization of assets and attainment of profitable operations are dependent on securing additional financing, establishing mineable reserves, demonstrating commercial and technical feasibility of collection and processing, and favorable metal prices.
• No assurance that financing will be available on favorable terms, in sufficient amounts, or at all, which could lead to delays or scaling back of operations.
• The U.S. DSHMRA regulatory process for commercial recovery permits is untested, with no statutory deadline for application review, potentially leading to delays.
• No assurance that NOAA will grant exploration licenses or commercial recovery permits on a timely basis, or on commercially viable terms and conditions.
• Uncertainty regarding NOAA's interpretation of direct or simultaneous application for commercial recovery permits, which could delay the commercialization timeline.
• Requirement for U.S. flagged mining and transport vessels and U.S. processing of recovered minerals (unless a waiver is granted), which may pose compliance challenges.
• Exposure to a complex U.S. regulatory system, including environmental laws, NEPA, EIS, public comment, and potential legal challenges by third parties.
• Reliance on third-party technical analyses (PFS, IA) which are based on assumptions and interpretations that may prove inaccurate, affecting resource and reserve estimates.
• Mineral resource and reserve estimates are only estimates, and there is no assurance that indicated levels of metals will be produced or that inferred resources will be upgraded.
• Extended declines in market prices for nickel, manganese, copper, and cobalt could render portions of mineralization uneconomic.
• Material weakness in internal control over financial reporting could lead to material misstatements if not fully remediated.

Future Outlook

The company expects to incur significant expenses and operating losses for the foreseeable future as it advances its NOAA permit applications and prepares for potential commercialization. It anticipates needing additional financing to fund continued operations beyond the next twelve months, which could include public or private equity, debt, or non-dilutive asset-based financings. The company aims to progress its partnership with PAMCO, Glencore, Hatch, and KPM to a definitive tolling agreement in 2025, subject to successful evaluation study outcomes and mutually acceptable commercial terms. It also intends to investigate acquiring a second production vessel to expand capacity and reduce unit costs.

Management Comments

• "These applications reflect our belief that DSHMRA provides a viable and robust regulatory path to commercial production, distinct from the ISA regime under UNCLOS, which has repeatedly delayed the adoption of the Mining Code."
• "We welcomed the recent Executive Order signed by President Trump on April 24, 2025, titled Unleashing Americas Offshore Critical Minerals and Resources, which directs the Commerce Secretary to implement an expedited permitting process under DSHMRA."
• "We do not believe pursuing licenses and permits with NOAA under DSHMRA affects our ISA exploration contracts."
• "Based on our current cash balance, when compared with our forecasted cash expenditures, we believe we will have sufficient funds to meet our obligations that become due within the next twelve months."
• "We will however need and are seeking additional financing to fund our continued operations over time."

Industry Context

The company operates in the nascent deep-sea minerals exploration industry, focusing on polymetallic nodules as a source of critical metals (nickel, copper, cobalt, manganese) essential for battery cathode precursors and steel manufacturing. Its strategy emphasizes the U.S.-based DSHMRA regulatory regime as a viable path to commercial production, distinguishing itself from the International Seabed Authority (ISA) system, which has faced delays in adopting exploitation regulations. This aligns with broader geopolitical trends emphasizing secure domestic supply chains for critical minerals, as highlighted by the recent U.S. Executive Order. The company's partnerships with Allseas (offshore contractor), PAMCO (processing), and Glencore (offtake) position it within a developing ecosystem for deep-sea resource extraction and processing.

Comparison to Industry Standards

• The company's resource definition work indicates that nodules in its contract areas represent the world's largest undeveloped resource of the four critical metals contained in nodules.
• The Pre-Feasibility Study (PFS) for NORI Area D represents the first declaration of Mineral Reserves for a polymetallic nodule project, setting a new benchmark in the deep-sea mining sector.
• The company's near-zero solid waste flowsheet, developed with Hatch Ltd. and Kingston Process Metallurgy Inc., aims to provide an environmentally advanced processing design compared to traditional terrestrial mining methods.
• The strategic investment from Korea Zinc, a world leader in non-ferrous metal refining and pCAM technology, provides a significant vote of confidence and potential for collaboration in advanced material production, comparable to partnerships seen in established mining sectors.

Management Changes

Corporate Governance

Legal Proceedings

• Caper v. TMC The Metals Company Inc. et al.: A putative class action alleging violations of Section 10(b) and 20(a) of the Exchange Act for false/misleading statements. The Court granted the company's motion to dismiss with prejudice on July 9, 2025, and the case is now closed.
• Atalaya Special Purpose Investment Fund II LP et al. v. Sustainable Opportunities Acquisition Corp. n/k/a TMC The Metals Company Inc.: A lawsuit alleging breach of representations and warranties in private placement Subscription Agreements and breach of good faith and fair dealing. The claim for breach of good faith and fair dealing was dismissed, but the breach of Subscription Agreement claim was upheld on appeal in December 2024, moving the case to the discovery phase. Losses cannot be reliably estimated.
• Lin v. TMC The Metals Company Inc. et al.: A putative class action alleging violations of Section 10(b) and 20(a) of the Exchange Act related to the classification of a non-financial asset and derecognition of a capitalized exploration contract, leading to financial statement restatements. The company's motion to dismiss was granted with leave to amend on June 18, 2025. A Second Amended Complaint was filed on July 2, 2025, and the company filed a new motion to dismiss on August 6, 2025. Losses cannot be reliably estimated.

Related Party Transactions

• Allseas and Affiliates: Total amount payable to Allseas and its affiliates was $32.4 million as of June 30, 2025. Allseas and its affiliates owned 14.1% of the company's common shares. The company repaid the entire $7.5 million Working Capital Loan and $0.5 million interest to Allseas Investments in Q2 2025, cancelling the agreement.
• 2024 Credit Facility: The company has an unsecured credit facility with Gerard Barron (CEO & Chairman) and ERAS Capital LLC (family fund of director Andrei Karkar), with a borrowing limit increased to $44 million and maturity extended to June 30, 2026. The company repaid $1.8 million of the drawn amount in H1 2025 and incurred $0.1 million in interest and $1.2 million in underutilization fees. The drawn amount of $2.5 million and $1.3 million in interest/fees were repaid on July 2, 2025.
• Robertsbridge Consultants Limited: A company where one of the company's directors is Chairman, provided $5 thousand in consulting services during Q2 2025.
• 2025 Registered Direct Offering: Included a $10 million participation from one of the company's directors appointed in Q2 2025.
• Consulting Agreements with Directors: Entered into consulting agreements with two directors for services to be compensated in RSUs and stock options, subject to shareholder approval on August 28, 2025.

Stakeholder Impact

• Shareholders: Experienced significant dilution from recent capital raises (Korea Zinc investment, direct offering, ATM sales) but also saw a substantial increase in cash and equity, potentially improving long-term viability. Ongoing litigation could impact shareholder value.
• Employees: Benefit from share-based compensation plans (RSUs, stock options, ESPP), which are a significant component of compensation expenses.
• Customers/Offtakers: Glencore holds offtake rights for 50% of NORI nickel and copper production, indicating future supply potential. The company is evaluating U.S.-based processing options to satisfy DSHMRA requirements, which could impact future customer relationships.
• Suppliers/Creditors: Allseas and its affiliates are significant partners and creditors, with a substantial amount payable. Repayment of the Allseas Working Capital Loan demonstrates commitment to financial obligations.
• Republic of Nauru and Kingdom of Tonga: Benefit from revised sponsorship agreements, guaranteeing existing financial benefits, training, capacity building, and future continuity benefits upon commercial production under the U.S. regulatory regime.

Next Steps

• Continue to advance the U.S. regulatory pathway under DSHMRA, including the NOAA review process for exploration licenses and commercial recovery permit applications.
• Seek shareholder approval on August 28, 2025, for adding 40,000,000 common shares to the Incentive Equity Plan.
• Progress the partnership with Pacific Metals Co. Ltd. (PAMCO), Glencore International AG, Hatch Ltd., and Kingston Process Metallurgy Inc. to a definitive tolling agreement in 2025.
• Investigate acquiring a second production vessel (Samsung 10000) similar to the Hidden Gem to expand production capacity.
• NORI intends to submit an application for a five-year extension of its ISA exploration contract in early 2026.
• TOML intends to submit an application for a five-year extension of its ISA exploration contract in 2026.
• Continue remediation efforts for the material weakness in internal control over financial reporting.
• Defend against the ongoing lawsuit from Atalaya Special Purpose Investment Fund II LP et al. and the Second Amended Complaint in Lin v. TMC The Metals Company Inc.

Key Dates

Recommendation

Despite increased net losses, the company has significantly strengthened its financial position with over $115 million in cash, primarily from a substantial strategic investment by Korea Zinc and a successful direct offering. This capital infusion is critical for a pre-revenue company in a capital-intensive industry. Furthermore, the company has made tangible progress on its U.S. regulatory pathway, including the first-ever commercial recovery permit application and NOAA's confirmation of compliance, which de-risks the regulatory environment. The declaration of initial mineral reserves in NORI Area D is a major technical validation. While risks remain, these developments provide a strong foundation for future commercialization and indicate a positive trajectory for long-term investors with a higher risk tolerance.

Keywords

Deep-sea mining, Polymetallic nodules, Critical minerals, Nickel, Cobalt, Copper, Manganese, SEC, 10-Q, DSHMRA, NOAA, Korea Zinc, Allseas, Nauru, Tonga, Exploration, Commercial recovery, Mineral reserves, Capital raise, Warrants