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NAFTA Decision Nearing as Industry Acceptance Accelerates Pointing to OMEX Value Creation

We hosted a fireside chat with CEO and Chairman of the Board of Directors Mark D. Gordon on June 13, 2024. This report contains a transcript of the conversation, which can be accessed on demand. Link is accessible in our full report. Getting current with SEC. Changing auditors in mid-2023 resulted in the re-evaluation of certain items, such as the accounting treatment of NAFTA litigation-related expenses that necessitated restatements of the balance sheet and caused OMEX to delay its 3Q23, 10K, and 1Q24 SEC filings. However, with the restatement work completed, the company has caught up on its 10-K and 1Q24 10-Q filings with the SEC. Importantly, the nature of restatements did not affect OMEX’s operations or capital position. Shipwreck provides needed room. In May 2024, OMEX received a payment of ~$9.4 million arising from its residual economic interest in a shipwreck project and intends to use the funds to repay maturing debt, as well as to fund company operations. Earlier this month, management was notified by the NAFTA arbitration tribunal that a decision in its case versus Mexico had been reached. An announcement is likely to come by the end of June, possibly slipping into early July, depending on the time it takes to translate the decision documents. OMEX believes current cash on hand is sufficient to sustain the company through 3Q24, i.e. provide sufficient room for the NAFTA decision to be publicized and evaluated by management. NAFTA decision can expand performance horizons. OMEX continues to believe in the strong merits of its case as it relates to Mexico’s refusal to grant the company and its partner the environmental license to proceed with the development of one of the largest known phosphate deposits. While OMEX is considering a wide range of potential outcomes of the NAFTA tribunal’s decision, a monetary damages award would substantially improve its capital position, allowing it to fund internal growth and expansion, provide capital to support its current portfolio companies, and potentially add new projects to the portfolio, as well as potentially return capital to shareholders through a special dividend or share repurchases, depending on the size of the award. There may also be an opportunity for OMEX to proceed with or monetize its investment in the offshore phosphate resource in question depending on the outcome. Cook Islands’ EEZ progress continues. OML, one of two license holders in the Cook Islands’ EEZ that OMEX has an investment in, spent 2023 conducting substantial exploration and environmental sampling programs in its license area, fully mapping the resource using an OMEX-provided ROV and collecting five tonnes of polymetallic nodules. It is in the process of preparing a JORC compliant statement that would provide a more definitive resource valuation model, as well as the environmental data for the Cook Islands Seabed Minerals Authority as part of its exploration license. The statement is expected to be issued by the end of 2024 and would provide a more solid basis for valuing OML and OMEX’s share of it. Ocean mineral industry’s acceptance growing. With Norway, Japan, and China looking to begin ocean mineral exploration and the US government looking to develop domestic capabilities to process seafloor polymetallic nodules, the ocean mineral industry is finally getting positive media and policymakers’ attention, and OMEX appears well positioned to grow with the industry to help the world obtain the materials it needs.