TMC The Metals Co Inc: Financial and Strategic Update – November 14, 2024
TMC The Metals Co Inc (NASDAQ: TMC) continues to push forward with its ambitious plans in seafloor resource development, despite some financial challenges. The company’s latest updates highlight both positive strides and areas of concern, offering a comprehensive view of its performance and strategic direction.
Positive Developments
TMC has announced a registered direct offering, led by its largest non-affiliate institutional shareholder, aimed at strengthening its financial resilience. This move is expected to support the company’s ongoing operations and future growth initiatives.
One of the key milestones in TMC’s roadmap is the submission of Nori’s application for an exploitation contract, scheduled for June 27, 2025. This represents a critical step in unlocking the potential value of the company’s seafloor resource projects, particularly in the Clarion Clipperton Zone (CCZ), where it has focused much of its exploration efforts.
In addition, TMC is making significant strides in expanding its business model. The company is developing a new services division dedicated to seafloor resource development. By leveraging its expertise in exploration and environmental impact assessments, TMC aims to provide services to other contractors operating in the offshore mining industry. This strategic move is expected to tap into a growing market, where contractors currently invest approximately $100 million annually—a figure TMC believes could grow significantly once the mining code is fully established.
Moreover, TMC has completed a prefeasibility study for a capital-light strategy, which is designed to minimize the need for preproduction capital expenditures. This approach aligns with the company’s ongoing efforts to optimize costs and maximize returns on its projects.
In terms of financial stability, TMC has secured over $60 million in credit facility capacity from its largest shareholders, reinforcing the company’s position to weather financial challenges and fund its long-term initiatives.
Challenges and Financial Losses
Despite the positive developments, TMC is facing some financial hurdles. The company reported a net loss of approximately $20.5 million in Q3 2024, which represents an increase from the $12.5 million loss in the same period of 2023. This increase is partly attributed to rising exploration and evaluation expenses, which grew to $11.8 million in Q3 2024 from $7.9 million in Q3 2023. These expenses were largely driven by higher share-based compensation.
Additionally, general and administrative expenses also saw an uptick, rising to $8.2 million in Q3 2024 from $4.6 million in Q3 2023. This increase was primarily due to higher personnel costs and legal expenses, reflecting the growing complexity of TMC’s operations as it advances toward its strategic goals.
Investor sentiment has been affected by these financial losses. TMC’s market capitalization has fallen below the total capital raised to date, which signals investor concerns over the company’s regulatory challenges and relatively low cash reserves. This is reflected in the company’s share price, which has significantly decreased from its initial public offering price of $10 per share to around $1 per share currently.
Key Q&A Highlights
During the earnings call, TMC’s CEO, Jared Baron, provided additional insights into the company’s new services business and its potential for growth.
Q: Can you provide more details on the potential of the new services business and its revenue model?
A: Jared Baron, CEO: “We are excited about leveraging our expertise in offshore campaigns and resource definition. Other contractors currently spend about $100 million annually, and this could increase tenfold once the mining code is in place. Our services business will capitalize on this without requiring significant investment, as it will utilize our existing talent and expertise.”
Q: Will the services business focus solely on the Clarion Clipperton Zone, or will it extend to other areas?
A: Jared Baron, CEO: “While our primary focus is the CCZ, our services can extend to territorial waters and other regions. We have already engaged in discussions regarding these opportunities.”
Q: How advanced are discussions with potential contractors for the services business?
A: Jared Baron, CEO: “Discussions are quite advanced, with RFPS already out in the market. We hope to have contracts secured by our next conference call.”
Q: Can you provide more information on the $9 million government funding for domestic refining capacity?
A: Craig Ssy, CFO: “We have identified potential sites and have been planning this for a long time. The application process takes time, but we expect to know more in the coming quarters. This funding is more about gaining explicit government support, which can encourage further investment.”
Q: Can you assure investors that the application date for the exploitation contract will not be delayed beyond June 2025?
A: Craig Ssy, CFO: “We are committed to the June 2025 date, which aligns with our strategic timeline and ensures clarity from the ISA on the application review process. There is every incentive to meet this deadline.”
Outlook for TMC The Metals Co
TMC remains focused on advancing its projects and exploring new business opportunities, particularly in the growing offshore mining sector. While the company faces financial challenges and investor concerns, its strategic efforts to diversify revenue streams, secure funding, and meet key milestones could position it for long-term success. The upcoming submission of Nori’s exploitation contract application in 2025 will be a critical moment for the company, as it looks to unlock the value of its seafloor resource projects and expand its services business.
Investors will continue to monitor TMC’s progress, especially in terms of managing costs, securing contracts, and achieving the strategic objectives outlined for the coming years.
