8-K: TMC the metals company Inc. Announces Fourth Quarter and Full Year 2023 Results, Restates Prior Financials

TMC the metals company Inc. reported its Q4 and full year 2023 results, including a net loss, and announced a restatement of previous financial statements due to an accounting error.

Summary

• TMC the metals company Inc. announced its financial results for the fourth quarter and full year ended December 31, 2023.
• The company reported a net loss of $33.5 million for the fourth quarter, or $0.11 per share, and a net loss of $73.8 million for the full year, or $0.26 per share.
• This compares to a net loss of $109.6 million in Q4 2022 and $171 million for the full year 2022.
• Cash used in operations for the quarter was $15.2 million.
• The company had approximately $6.8 million in cash on hand at the end of 2023, with a pro forma liquidity of approximately $61 million including additional credit facilities.
• TMC also announced a restatement of its previously issued financial statements for the first three quarters of 2023 due to an accounting error related to a royalty agreement with Low Carbon Royalties Inc.
• The company expects to commence production offshore at the end of the first quarter of 2026, assuming a one-year review process by the International Seabed Authority (ISA).

Sentiment

Score: 5

Explanation: The sentiment is neutral to slightly negative due to the restatement of financials and the net loss, but there are positive developments in operational progress and securing additional funding.

Positives

• The company has secured significant additional liquidity through credit facilities.
• TMC has made progress in its operational timeline, with a revised production start date at the end of Q1 2026.
• The company has successfully produced nickel sulfate from polymetallic nodules, a key milestone.
• TMC has a binding agreement with PAMCO for processing nodules.
• There is growing support for deep-sea mineral exploration, including new applications to the ISA and U.S. government initiatives.

Negatives

• The company reported a net loss of $33.5 million for Q4 2023 and $73.8 million for the full year 2023.
• TMC is restating its financial statements for the first three quarters of 2023 due to an accounting error.
• The company's cash on hand is relatively low at $6.8 million.
• The timeline to first production has been pushed back to the end of Q1 2026.

Risks

• The company's ability to obtain exploitation contracts from the ISA is subject to regulatory uncertainties.
• There are risks associated with the environmental impact of polymetallic nodule collection.
• The company's success depends on the development of seafloor polymetallic nodule deposits and processing capabilities.
• TMC is dependent on Allseas Group S.A. for its offshore system.
• The company has a limited operating history and needs additional financing.

Future Outlook

The company expects to commence production offshore at the end of the first quarter of 2026, assuming a one-year review process by the ISA. TMC is focused on preparing its application for an exploitation contract to submit to the ISA following the July 2024 meeting.

Management Comments

• Gerard Barron, CEO & Chairman, stated that the company has sufficient real-world data to address concerns about nodule collection.
• He also highlighted the growing support for deep-sea minerals and the financial flexibility provided by new credit facilities.
• Barron mentioned that the company is focused on delivering a world-class application for an exploitation contract following the July 2024 ISA session.

Industry Context

The announcement comes amid increasing interest in deep-sea mining and the extraction of battery metals from polymetallic nodules. The company is positioning itself to be a key player in this emerging industry, with a focus on environmental responsibility and sustainable practices. The recent submission of new exploration applications to the ISA by the government of India and the U.S. government's initiatives to support domestic processing of polymetallic nodules highlight the growing global interest in this sector.

Comparison to Industry Standards

• TMC's approach to deep-sea mining is unique compared to traditional land-based mining, focusing on lower environmental impact.
• The company's production timeline is comparable to other deep-sea mining projects, which typically have long development cycles.
• The company's financial losses are typical for a pre-revenue exploration company in the mining sector.
• The company's focus on producing nickel sulfate directly from nodules is an innovative approach compared to traditional nickel processing methods.
• The company's partnership with PAMCO for processing nodules is similar to other mining companies that rely on third-party processors.

Related Party Transactions

• The company has a $20 million unsecured credit facility with ERAS Capital LLC, the family office of TMC director Andrei Karkar, and our Chairman & CEO, Gerard Barron.

Stakeholder Impact

• Shareholders will be impacted by the restatement of financial statements and the reported net loss.
• Employees may be impacted by the company's operational timeline and financial performance.
• Customers and suppliers will be impacted by the company's production timeline and partnerships.
• Creditors will be impacted by the company's financial performance and credit facilities.

Next Steps

• TMC will submit its application for an exploitation contract to the ISA following the July 2024 meeting.
• The company will continue discussions with potential strategic partners.
• PAMCO will conduct a commercial-sized pilot production run in the second quarter of 2024.
• TMC will continue to advance the NORI project and prepare for production.

Key Dates

Keywords

polymetallic nodules, deep-sea mining, nickel sulfate, International Seabed Authority, environmental impact, exploration, production, financial results, credit facility, restatement