10-Q: TMC The Metals Company Reports Third Quarter 2024 Results, Advances Towards Exploitation Contract

TMC The Metals Company reported a net loss of $20.5 million for the third quarter of 2024, while progressing on key project milestones and regulatory approvals.

Summary

• TMC The Metals Company reported a net loss of $20.5 million for the third quarter of 2024, compared to a net loss of $12.5 million for the same period in 2023.
• The company's exploration and evaluation expenses increased to $11.8 million in Q3 2024, up from $7.9 million in Q3 2023, driven by increased share-based compensation, engineering work, and personnel costs.
• General and administrative expenses also rose to $8.1 million in Q3 2024, compared to $4.6 million in Q3 2023, due to higher share-based compensation, legal and consulting costs, and personnel expenses.
• The company's net loss for the first nine months of 2024 was $65.9 million, compared to $40.3 million for the same period in 2023.
• TMC is focused on preparing its application for a plan of work to the ISA for its first exploitation contract for the NORI contract area, with a submission expected on June 27, 2025.
• The company successfully produced calcine from polymetallic nodules at PAMCO's facility in Japan, marking a significant step in commercial-scale processing.
• TMC has secured additional financing through a registered direct offering of $17.5 million and an increase in its credit facility with ERAS Capital LLC and Gerard Barron to $38 million.
• The company terminated its services agreement with Marawa Research and Exploration Limited, effective January 14, 2025.

Sentiment

Score: 5

Explanation: The document presents a mixed picture. While there is progress in technology and partnerships, the increasing losses, regulatory uncertainties, and ongoing litigation create significant risks. The company's reliance on additional financing also adds to the uncertainty.

Positives

• TMC successfully produced calcine from polymetallic nodules at PAMCO's facility, demonstrating progress in commercial-scale processing.
• The company is actively preparing its application for an exploitation contract with the ISA, with a submission expected in June 2025.
• TMC secured additional funding through a registered direct offering and an increased credit facility, strengthening its financial position.
• The company is working with PAMCO to complete a feasibility study for processing nodules at its existing facilities.

Negatives

• TMC's net loss increased to $20.5 million in Q3 2024, compared to $12.5 million in Q3 2023.
• Exploration and evaluation expenses increased significantly to $11.8 million in Q3 2024.
• General and administrative expenses also rose substantially to $8.1 million in Q3 2024.
• The company has an accumulated deficit of approximately $614.8 million from inception through September 30, 2024.
• The company's disclosure controls and procedures were not effective as of September 30, 2024, due to a material weakness in internal control over financial reporting.

Risks

• The finalization of ISA regulations for commercial exploitation of seafloor resources remains uncertain, with potential delays or unfavorable terms.
• There is no guarantee that the ISA will approve TMC's application for an exploitation contract or that such approval would lead to the issuance of an exploitation contract.
• The company is involved in ongoing litigation, which could result in significant costs and liabilities.
• TMC is dependent on its strategic alliances, particularly with Allseas, and any disruption to these relationships could impact its operations.
• The company's ability to continue as a going concern is dependent on securing additional financing.
• The company has a material weakness in its internal control over financial reporting, which could lead to misstatements in its financial statements.

Future Outlook

TMC is focused on preparing its application for an exploitation contract with the ISA, expected to be submitted on June 27, 2025. The company anticipates completing a feasibility study with PAMCO in the first half of 2025 and expects to progress to a definitive tolling agreement. TMC also expects to incur significant expenses and operating losses for the foreseeable future as it advances towards potential commercialization.

Management Comments

• The company is focused on preparing its application for a plan of work to the ISA for its first exploitation contract for the NORI contract area.
• The company is working with PAMCO to complete a feasibility study for processing nodules at its existing facilities.
• The company believes it will have sufficient funds to meet its obligations that become due within the next twelve months.

Industry Context

The document highlights TMC's efforts to secure a position in the emerging deep-sea mining industry, which is still subject to regulatory uncertainty and technological challenges. The company's partnerships with Allseas and PAMCO are crucial for its development, and the successful production of calcine is a significant milestone. The company is also navigating the complex regulatory landscape of the ISA, which is still in the process of finalizing its mining code.

Comparison to Industry Standards

• TMC's approach to deep-sea mining is unique, focusing on polymetallic nodules as a source of battery metals, unlike traditional land-based mining companies.
• The company's partnership with Allseas for nodule collection and PAMCO for processing is a novel approach compared to other deep-sea mining projects.
• The company's focus on a near-zero solid waste flowsheet for processing is a differentiator in the industry, aiming for a more sustainable approach.
• The company's financial results are typical for an exploration-stage company, with significant losses and reliance on external funding.
• The company's progress in obtaining regulatory approvals and advancing its technology is comparable to other companies in the deep-sea mining sector, but the timeline for commercialization remains uncertain.

Legal Proceedings

• The company is involved in a lawsuit filed by investors in the 2021 private placement, alleging breach of contract and breach of good faith.
• The company is involved in a class action lawsuit alleging false and misleading statements about its operations and prospects.
• The company is involved in litigation against two investors who failed to fund their commitments in the 2021 private placement.
• A new class action lawsuit was filed against the company and certain executives alleging false and misleading statements regarding the classification of a non-financial asset.

Related Party Transactions

• The company has a consulting agreement with SSCS Pte. Ltd., where a director of DGE is employed.
• The company has consulting agreements with Stonehaven Campaigns Limited and Robertsbridge Consultants Limited, where a director of the company is the Chairman.
• The company received funding from ERAS Capital LLC, the investment fund of one of the company's directors.
• The company has a credit facility with Gerard Barron, the company's CEO and Chairman, and ERAS Capital LLC.
• The company has a working capital loan agreement with Allseas Investments SA, a company related to Allseas.

Stakeholder Impact

• Shareholders are impacted by the company's increasing losses and the uncertainty surrounding regulatory approvals and litigation.
• Employees are impacted by the company's ongoing operations and the need for additional financing.
• Customers are impacted by the company's progress in developing its technology and securing an exploitation contract.
• Suppliers are impacted by the company's financial position and its ability to pay for goods and services.
• Creditors are impacted by the company's debt obligations and its ability to repay its loans.

Next Steps

• TMC will submit its application for an exploitation contract for the NORI contract area to the ISA on June 27, 2025.
• The company will continue to work with PAMCO to complete a feasibility study for processing nodules.
• TMC will continue to develop its commercial offshore nodule collection system.
• The company will continue to assess the environmental and social impacts of offshore nodule collection.
• TMC will continue to develop onshore technology to process collected polymetallic nodules.

Key Dates

Keywords

polymetallic nodules, deep-sea mining, International Seabed Authority, exploitation contract, NORI, Allseas, PAMCO, battery metals, exploration, mining, environmental impact, financial results