Green Minerals AS (GEM) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to this second quarter presentation for Green Minerals. My name is Stale Rodahl. I'm Executive Chairman of the company, and I'm here with Oivind Dahl-Stamnes, our CEO. We'll find a disclaimer on Page 2. And then on the financial highlights for the first half, the main item here is one of negative cash flow from operating activities of NOK 2.8 million. EBITDA of close to NOK 2 million. And in the main, the difference there is linked to the incentive program for employees. Also, it's worthwhile commenting on cash, which you will find at NOK 5.45 million. This cash number does not include the Bitcoin acquired by the company by the end of the quarter. On the EBITDA level, I think the number of main interest here is the second quarter EBITDA, which was down to NOK 0.58 million negative. And with that, the company has almost, or we could say, delivered already in the second quarter, delivered on the ambition to cut costs by 80% from 2024 levels. So we're pleased with the speed of the cost reductions there. When it comes to other highlights for the quarter in the market environment around us, I think number one, the U.S. executive order signed by the U.S. President in April 2025, really underpins the global momentum that we've seen in Deepsea Mining over the last few months. And what's interesting here is that it's really sovereign states that are now taking the lead with the International Seabed Authority, more or less having placed itself a little bit on the sidelines here with its very slow-moving approach in the opening process here. Norway, of course, is one of these sovereign states. On the Norwegian authorities, preparations for or towards the first license round in Norway are continuing. NOK 150 million was allocated to exploration in the 2025 government budget. I think it's worth noting that this is up 5x versus previous years, and additional data from this has already been released, and Green Minerals is implementing this data into our models as soon as we get them. New discoveries are being made, and we expect license awards in the second quarter of 2026. Importantly, the company in the first half secured optionality for our shareholders through a significant runway extension with the help of a significant contribution from the founders. This includes the before mentioned cost cuts of 20% and also a guaranteed rights issue that was carried through in March. We are very pleased to see that we have been able to maintain competency in the organization while reducing capacity, which was really the aim that we set out with here, going into the year. At the end of the quarter, the company announced that it had adopted a Bitcoin treasury strategy. Importantly, and as the press release states, this strategy has been adopted to support the operational strategy of the company. I'll get back to that a little bit later in the presentation. The cost of the initial purchase was close to $106,000 per Bitcoin. And the P&L for the strategy, this is a mark-to-market P&L. You don't find it in the accounting numbers that we have presented, but the mark-to-market P&L is NOK 0.42 million as of yesterday's close for Bitcoin. Now we are pleased to see that a number of new shareholders have joined us over the last few months. And to the benefit of these, we are going to make a rather thorough presentation of the main background for the company, our goals, ambitions, and strategies. We are going to take you through the development of licensing on the Norwegian Continental Shelf. We're going to take you through the main parts of the technology development that have taken place in Green Minerals. And we're also going to look at some key numbers for our project, which we find really, really exciting, and we hope you will do too. To start with, the background here has to do with a lack of critical minerals. Green Minerals is really at the center of one of the most important geopolitical developments going on in our time, and that has to do with China's control of a number of critical minerals and a critical need, really for countries outside of China and in particular, the West, to secure additional sourcing of these minerals. When it comes to copper, which is the main mineral, then for Green Minerals. I think the chart to the right on this page explains well what is going on. What you see here is the link, or call it, the lack of link between the rapid increase in exploration budgets over the last 2 decades, in combination with the lack of results from those budgets, into results from copper exploration. So you see that new fines are going down, while exploration budgets have increased a lot. And this is really at the heart of why we find this world-class resource that we have come across on the Norwegian continental shelf particularly interesting. Another few interesting points have to do with the regulatory environment and so on in Norway and Norway's sovereign role on the Norwegian Continental Shelf, which we will get back to. But really, the copper market, the balance in the copper market itself, is of key importance to understand our strategy here. And another point, I think, is that the copper market is large. Not all of these minerals markets, these critical minerals markets, are large enough actually to take on significant supply in the amounts that we're talking about from the deep sea, but the copper market is. So we're very comfortable with that. I mentioned the geopolitics of advanced energy. And Green Minerals, of course, finds itself to the left in this chart, engaged in mining and eventually also processing, although that has not taken a decision on exactly how that will happen. But mining and processing are the key areas for Green Minerals. And what you will see, just glancing at this graph for a second, is that there is one particular country that has really taken a corner position in processing, and that is China. So the rest of the world is now at China's mercy when it comes to access to finished products, finished processed products of a number of these critical minerals. And with China now using its strong position here, to also banned exports of some of these critical minerals at times. This has happened a number of times over the last few years, then the situation has become untenable for particular countries in the West. Remember, many of these minerals are key to the production of arms and ammunition. So this goes directly into not only the national economies of some of the largest countries in the world, but it also goes into the core of the national security for a number of these countries, notably, for example, the U.S. So securing or building supply chains outside of China is really a key importance for these countries. And Green Minerals, with the position that we have on the Norwegian continental shelf, really sits in the middle of this geopolitical tension, and we'll be able to open up for Norway to provide at least a part solution to the issues at hand here. And with that, I hand it over to Oivind for a rundown on the Norwegian Continental shelf. Oivind, please.

Thank you, Stale. This is also a slide that we have presented several times to you, new shareholders. This slide, in many ways, demonstrates and summarizes the Green Minerals' ambition on the Norwegian continental shelf. To the right, there is a map of the Norwegian Sea. Within the yellow area is the area that was opened by the Norwegian, starting in January 2024, for Marine Minerals activity. And to the left, the table reflects the Shelf Directorate's latest estimate of resources. And this table is for the seafloor massive sulfides only. And these types of deposits are mainly found in areas 3, 4, and 5 along the Mohns and Knipovich Ridges, a distance between Yan9 up to Spitsbergen that's over 1,000 kilometers long. And this table truly demonstrates that we have a world-class resource on the Norwegian continental shelf. The estimate for copper, which is the most valuable and also, as Stale said, the focus for Green Minerals, is close to 40 million tonnes or twice the annual global production. And in addition, there are substantial amounts of zinc, cobalt, gold, silver, and other metals. And also, I'd like to emphasize that this table is for the Seafloor Massive Sulphides only. The Shelf Directorate has also presented an estimate for crusts where copper is about 50% of the SMS resources, and zinc is even higher than for the Seafloor Massive sulphides. And I think it's very important to note that this resource estimate is strongly supported by several very copper-rich discoveries that have been made on scientific cruises by the Shelf Directorate and the universities over the recent years. And many of these are shown on the next slide. Next slide, please, Stale. The figure represents a 3D perspective of the Seafloor between Yan9 to the Southwest and Spitsbergen to the north in the picture along the ridges Mohns Ridge and the Knipovich Ridge. The names or the blue are the deeper areas with the water depths down to 3,000-plus meters. And the warmer colors represent the flank areas where we also find most of the discoveries made. These areas have water depths between 1,000 and 2,000 meters. Along the ridge, you can find many of the names of the discoveries that have already been made. Deep Insight, a little bit northeast of Yan Mine in the lower left corner, was discovered in 2023. It sits at a 1,100-meter water depth. It has an estimated tonnage of 10 million to 15 million tonnes of ore and has very high copper content. And next to Deep Insight, there are strong indications of another deposit, only 2 kilometers away from Deep Insight. It has been named Grontua. And this supports the cluster theory, which says that where you find one or where you make one discovery, the conditions are favorable, and you will also make other new discoveries in the vicinity. To the very north, you can see the Jj til discovery. Next to the J til discovery, a new discovery was made late last year, announced early this year by the Shelf Directorate. It has been named Yigra. And initial measurements of copper in this discovery are between 2% to 30% copper. It's very rich in a mineral called Atacamite, a very, very copper-rich mineral. And again, the proximity to Jj til supports the cluster theory. It's important to keep in mind that these discoveries are located literally on the Seafloor. They're not buried. They can be discovered by bathymetric mapping and also by visual inspection. And compared to oil and gas, and also traditional and conventional land mining, these are easier to find and also at a lower cost. Next, please. As regards to first round, as Stale mentioned, we expect the round to be announced around year-end, late this year, very early next year, with awards in the second quarter of 2026. The map shows the area in a dark bold color, the area that was opened by the Norwegian authorities in January '24. And the yellow blocks are the 386 blocks that were suggested for announcement in the first round. And we are very pleased that all our first priority blocks, in the nomination process, were included within the yellow areas. And as Stale mentioned earlier, the authorities are preparing for the first round. The mapping activity by the Norwegian authorities has been stepped up 5x compared to previous years, and it's now in 2025 at a level of about $15 million. And all these data that are collected, geological and environmental data, are made available to the industry for free. Green Minerals is ready to file an application as soon as the round has been announced. Okay. Stale, I'll leave it to you again.

Thank you. So, to take you through our strategy around building the company, we have announced our partnership for responsible production with a number of world-class partners, notably Oil States from the U.S., with Risotec, and also Soil Machine Dynamics when it comes to the mining machines on the. There are also a couple of other partners whose names will be unnamed until at a later stage. We're really pleased with the consortium, and we have together developed a production concept, which looks like this. And to the best of our knowledge, this is the only concept that has been developed for the Norwegian Continental Shelf at this point. And it really, I think, puts Green Minerals in a really good position when it comes to licensing discussions. So what you see here is a system based on a semisubmersible as the production unit. It is a purpose-built bulk carrier with a disconnectable turret system. And you see the riser there between 1,000 and 3,000 meters with really fast deployment, 10 hours for 3,000 meters. You see the pressure exchange chamber close to the bottom there, and then the mining units on the seabed. And in the following, I will show you an animation of how this concept would work there. [Presentation]

All right. So what you saw is a semi-closed loop production system, which has been designed particularly for the harsh environment on the Norwegian continental shelf. I think it's important to note, as you saw from the video, there's no noise in the system at any point in the system over and above what you find in the natural environment around it. And the only emission from the system is then seawater that is being pumped back to where it came from. So I think with this, my understanding is that we have put to rest many of the concerns, at least from the NGOs, regarding how this would look. I'm going to take you through few numbers on this, just to put it in perspective and also put it in perspective to traditional terrestrial mining. So, what you will understand from the system is that it has a number of advantages compared to traditional copper mining. And these advantages result in key economic metrics that really are disruptive to the economics of traditional copper mining. Number one is that there are no infrastructure investments needed. For those of you familiar with terrestrial mining, you will know that these infrastructure investments can run into the billions of dollars and take several years. We are talking about infrastructure investments that, in many cases, are larger than the entire investment for the entire system that we have. So our CapEx is between $1 billion and $1.2 billion, and it should be put in that perspective. The CapEx per tonne, if you just look at the equipment as such, is about 1/3 lower for us than for traditional copper mining. And thirdly, which is really important, is the opportunity to optimize production in deep-sea mining compared to terrestrial mining. The reason is that we have a zero-sum cost in the mine. We simply pick up the equipment and leave for the next site whenever we feel that a better ore grade could be had at a different point. So, where that cutoff will be, we haven't communicated yet, and we wouldn't know until we're there producing. But if that cutoff is 2% or 1% on the copper, the point here is that we have the flexibility to decide, and just at a very small cost to move on and start producing at what we regard as being the optimum grade. Also, we have a cost advantage in terms of CapEx or the business model itself, where we will introduce an oil and gas services business model, which is asset-light and which bodes well for the capital efficiency of the project. When it comes to the environmental part of this, I would say up until 2 years ago, most of the questions we got around what we're doing here were around environmental and biological factors. And it's interesting to see that over the last few months, this has now changed. Most of the questions that we are getting are around technoeconomic factors. And of course, that speaks well for the work that has been done by the authorities and by the industry also in putting to rest some of the main concerns that have been raised here. And on that point, then, as I said, I just showed you a semi-closed loop harsh environment, deep-sea mining system, and how that would work. There is no mid-water plume, return water is transported to the sea floor, and there are no pumps creating noise along the riser system. Also, we will see a sharply reduced overburden because of the efficiency of the ore, which means less waste and less tailings. And just want to add here, I don't remember if Oivind brought that up, but of course, the ore grade, the average ore grade that we are looking at for this resource looks to be somewhere between 5%, 6% or thereabouts. Oivind mentioned that tests have been taken showing up to 30% copper. We wouldn't expect that on average, but a number around 5% to 6% seems to be reasonable. This is compared to new fines terrestrially that are at 0.6% and lower. So please see our excitement over this resource in that light. The following graph shows you what the numbers would look like on a company level for Green Minerals with one harsh environment deep-sea mining system at work. So this cash flow profile shows you our numbers up to date, that's 2025, and then assumes that the company will bear the future exploration costs after having been granted a license on its own account. That is no certainty that that would happen. Our ambition is to bring partners in, which would make this cash profile or the low point of the cash flow profile significantly better, to the tune of around $25 million compared to the number you see here of minus $35 million in 2028. Then, when the system starts producing, cash will build rapidly, as you can see. So on the fifth year of full production, we're up to $700 million in net cash on a company level with around $176 million on current copper prices in annual EBITDA. Peer Mining group multiple is around 6x to 9x. And we certainly with what we've shown you here, given the advantages of deep sea mining, the efficiency of the ore and also, I think, lower environmental footprint than terrestrial mining, we would expect a multiple for a mining company like this to be in the very high end, if not somewhat above what you see for the mining sector at large. Again, this is on the company level. So if we were to look at these numbers on the project level, we are talking about EBITDA of around $500 million per year. We will then also look at the CapEx of between $1 billion to $1.2 billion to get the system going. But again, really solid cash return on investment, as you understand. We've been getting a number of questions regarding our ability to undertake the rather large projects we've been involved in, given the limited funding for the company. So on that note, we have put together the following slide, which shows you the projects we've been involved in and the funding from Green Minerals directly into this project. Half of the table has been concluded already. That is, 3 of these are done already. One is ongoing, and that is the exploration data. And then half the table, or the bottom half, is in progress or pending license award. But I think it's interesting to note here that we said at the outset that we will base ourselves on an extensive partnership thinking and a partnership model, and providing green minerals competency in these partnerships is really what we're all about. So far, we have succeeded well with this. The production concept that I showed you is significant. CapEx has been going on for some time, meaning years, and involved a lot of people, and the cash funding from Green Minerals has been 0. Of course, the in-kind funding and contribution to the project through our personnel has been significant. We participated in 2 research cruises on the Atlantic Mid-Ocean Ridge, where we, amongst others, gained access to SMS material that has been key to conducting world-first studies in co-processing with terrestrial ore. So significant CapEx to the tune of $10 million to $50 million per cruise, and the cash funding from Green Minerals has been almost negligible. It has been very, very low indeed. So this is something we're very pleased with. When it comes to exploration data, this is really built on the public-private partnership model that you find in Norway, where the authorities are fronting the industry ahead of decisions to open up and beyond, until licensing basically. And that means that we or the industry have been getting access to. And that means that Green Minerals has also been getting access to baseline exploration data of more than $50 million that has been implemented in our models, and you've seen some of it today from Oivind. And we continue to receive the data from the authorities this year, as we said, to the tune of $15 million. So by the end of this year, we will have more than $65 million technically, not on our balance sheet, but if we were operating in any other country and for example, compared to the Knipovich, where we're also involved, we would have had to fund $65 million ourselves to get access to this data. So this is something, or one of the reasons that we really favor the Norwegian Continental Shelf for starting up our activities. And needless to say, our funding, our cash funding into this has been 0. Implementing these into our models, of course, is at our own cost, and that is being done by our own personnel. I mentioned access to SMS material. This enabled the world's first blendability project that we ran and together with the geological survey of Finland. And the results were really good. So really happy to see that we will be able to co-process ore from the deep sea together with similar ore from onshore Scandinavia. And the funding from Green Minerals also here has been really low. CapEx is admittedly low for the project, but almost negligible funding from our side. And then we have 4 projects ongoing or and/or pending license award. And that's our Deep Mine X. It's a project together with SMD. It's our exploration CapEx that I touched upon, which, of course, is significant, which we aim to take together with our partners. And it's also the production system. And then we're talking about the CapEx in the tune of $1 billion or above, where we also see our partnership model helping us. Now, there's one thing worth mentioning actually, both on the CapEx and the production system, and that is that the implementation of our Bitcoin treasury strategy may change the Green Minerals funding share. But if the strategy proves itself able to grow to such an extent, we believe that would be a major positive for our shareholders, and it would improve Green Minerals' position ahead of licensing and through licensing significantly on the Norwegian continental shelf. So this is something where we really see BTS being able to contribute to the company's operations in a significant way. Okay. So, on the Bitcoin treasury strategy, the backdrop here is one of us seeing a real inflation risk versus a significant future capital expenditure for the company, and that capital expenditure being some years out. Bitcoin has the advantage of being decentralized and showing non-inflationary properties. It's an attractive alternative to traditional fiat in an era of monetary expansion that we have certainly been in for some time. And a main point for us when adopting this has been the broad institutional support and approval Bitcoin, in particular, has been getting over the last few years. Notably, the SEC also put its approved mark on it here a couple of years ago. The long-term project horizon in our operations makes DTS particularly well-suited for us. As I said, we see real inflation risk versus our future capital expenditure. We want and have long wanted to hedge against the fiat basement. And also the long project horizon reduces the volatility risk, meaning that the long-term view essentially that we have on acquiring Bitcoin flattens out the volatility risk or reduces the volatility component of the price movement in Bitcoin, which is a prerequisite for us to do this. Now, when it comes to the project CapEx, of course, in itself, it guides a certain significance in the BTS ambition for the company. Each harsh environment deep-sea mining system CapEx is to the tune of $1 billion to $1.2 billion. The company expects more than one of these systems to be employed on the Norwegian Continental Shelf. And certainly, with us having the only known production concept for the NCS, we certainly have an ambition to be involved in more than one as well. Each system is to be financed through a mix of debt and equity, as anyone involved in this type of business would understand, and anyone who has followed Green Minerals for some time would understand. This means that not all of the system will be financed by equity, which means that not all of the system will be funded by acquiring Bitcoins. But the BTS ambition is there to part-finance the equity portion. That would be the correct way to understand this. And further, I think it's important to say also that there is no guarantee that capital will be available to fund our BTS ambition. But with the background I've just given you, you understand that this strategy makes particularly good sense for a company with projects like we do and the project horizon that we do. And we will certainly do our best to execute on the strategy. And then we'll just see as we go along what the results will be. We started shortly after announcing the strategy by acquiring 4 Bitcoins. This was at the end of or in the latter part of June. And we have done so, and we have said that we will, of course, maintain a fair amount of fiat cash in the company. And at any point in time, you will see the company holding more than 1 year of operating expenses in Fiat cash. And this goes back to what I just said about the volatility risk, and we don't want to see any negative impact for our shareholders from such volatility risk, thereby the fiat cash part of the strategy. With this acquisition, the company holds 0.2 Bitcoin per million shares. The cost basis for the first purchase was close to $106,000. And the mark-to-market P&L as of close yesterday was NOK 0.42 million in the Bitcoin strategy. This, of course, mark-to-market profit has not been reported and is not a part of the results that we have reported today. It is in our balance sheet at cost. So in summary, what we have done in the first half of 2025 following the adverse move by the labor party in securing the 2025 budget, highly surprising, I would say, on the 1st of December last year, delaying the first licensing round with around 1 year is that we have set out, as we said, to build value while increasing our runway. And looking back at the first half, we are pleased to see that we have been able to do exactly what we said. And just to take a step back, on the 9th of January, 2024, the Norwegian government opened up for deep-sea mining in Norway. This was with an 80% majority. And that decision alone derisked Green Minerals as a business case. Green Minerals nominated areas of interest in the second quarter of 2024, and we're pleased to see that all our areas have been adopted in the first licensing round. We believe that Green Minerals is in pole position for a license win, or should I say more than one license win. And we believe that our Bitcoin treasury strategy may leverage this strong position further, and we will seek to develop it the best we can there. The production concept has been developed together with globally leading partners, each in their field, and is ready. The world's first blendability study that we did with VMS and SMS confirms our business plan, and it adds significant value to not only us and our project, but to the entire industry, we believe. The mining infrastructure in the Nordics has been well developed, and we expect offtake agreements to be announced closer to first ore. The deep-sea mining metrics are superior to traditional terrestrial mining. We've taken you through the business model. We've taken you through the economics. And we also talked a little bit about the environmental issues here, where we can certainly say that there's been a perception of what this would mean, but a lot of that has been put to rest by excellent work by the authorities, and also contributions from the industry. So the investment case for the project that Green Minerals is involved in is unusually strong financially. We talk about the pretax cash return on investment of more than 300% per annum. We're talking about the pretax cash payback time of 4 months on the company level. In the first half, we secured long-term optionality for our shareholders. This was secured through a significant in-kind commitment from the founders of the company and a guaranteed rights issue where the shareholders with significant support from our shareholders. The long-term project horizon that we have provides strong incentives for and gives a potential significant leverage through our Bitcoin treasury strategy. So with that, we believe we've been delivering well on the strategy, and the company is now ready for the next step. Just finally, a reminder, Green Minerals is primarily a copper play. We didn't talk so much about it today, but in the world's first processing study that we did, copper was the main area of interest. We have an ambition to be able to process also cobalt. That would add significantly to the numbers you have seen today. I should underline, these are numbers only for copper. If we were to include the second round processing successfully with cobalt, it would add significantly in the hundreds of millions of dollars on the project level to this project. But in any case, Green Minerals should be seen that would be a bonus, I think, if we are successful in doing that. Until then, Green Minerals should be seen primarily as a copper play, and the MOU that we have in the Knipovich zone on the license there provides upside on other key battery metals longer term. And with that, I think it concludes our prepared presentation for today. And with that, I hand it over to Oivind for Q&A.