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Pivotal Year Ahead

4Q23 results highlight careful cash management. TMC reported 4Q23 results, including a significant decline in Y/Y Exportation and Evaluation expenses, which benefited from the non-recurrence of a 2022 pilot project collection campaign, as well as lower SG&A expenses ($6.5 million versus $7 million in the year-ago period). Use of cash for operating activities also declined from $19.8 million to $15.2 million and overall quarterly operating loss was narrowed from $111.3 million in 4Q22 to $33.2 million in the reported quarter, demonstrating management’s careful use of cash and a steady SG&A burn rate. Capital position improved. Despite significant cash use during 2023, with the cash balance declining $40 million from the end of 2022, leaving the company with $6.8 million in cash on hand at the end of 2023, an additional $9 million has come in from an earlier funding round, while TMC’s top two shareholders provided $20 million of additional borrowing capacity through an unsecured loan. At the same time, another shareholder and partner, Allseas, extended its $25 million term loan through August 2025, providing TMC with added flexibility as it seeks to secure asset-level financing through a strategic partnership. Combined with the $30 million ATM program (undrawn at this time), the company has more than $60 million in cash and borrowing capacity, sufficient to continue to fund its operating and capex expenses for the next 12 months. Political winds are turning. Opposition, or at least ambivalence by some governments when it comes to deep-sea mining activities, has begun to reverse, as even the US administration and Congress are now in the process of evaluating polymetallic seafloor nodules as an alternative to China and Indonesia dominated battery metals production. Furthermore, with China, India, Norway, and other governments taking a more active approach to seabed mining, the ISA’s Secretary General acknowledged that the international mining code the organization is working on is a matter of when, not if and the “when” may happen sooner than some may anticipate. The ISA’s issuance of a consolidated regulatory text in February marks an important transition to the final phase of mining code development, raising the probability that the agency will finally deliver on its mandate and issue the mining code this year, if not at its July 2024 meetings. PAMCO large-scale pilot program gets underway. TMC’s on-land processing partner plans to conduct a large-scale pilot test, processing 2,000 wet metric tons of nodules TMC collected in 4Q22 through PAMCO’s existing RKEF facility. With TMC’s demonstrated ability to process the resulting Ni-Co-Cu alloy into battery material, nickel sulfate, with near-zero waste stream, should materially derisk yet another aspect of the company’s process flowsheet and confirm its potential as a supplier (and eventual processor) of critical battery materials for domestic market, lessening the US’ dependence on Chinese, DRC and Indonesian metal supply, potentially making North America self-sufficient when it comes to battery metals. Work continues in anticipation of application filing. TMC is working with Allseas to expand the capacity of Project Zero from 1.3M wet metric tons per annum to 3M wet metric tons per annum, an increase of 130% versus the previous target. The reconfiguration of the collection system will delay TMC’s expected time to production from the end of 4Q25 to the end of 1Q26.