TMC the metals company Inc. (TMC) Earnings Call Transcript & Summary

Good afternoon, everyone, and thank you for participating in The Metals Company's Third Quarter 2021 Corporate Update Conference Call. Joining us today are The Metals Company's Executive Chairman and Chief Executive Officer, Gerard Barron; and Chief Financial Officer, Craig Shesky. Following their remarks, we'll open the call for your questions. I would now like to turn the call over to CFO, Craig Shesky, as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements. Craig, please go ahead.

Thank you. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information currently available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in the safe harbor provisions for forward-looking statements that can be found at the end of our third quarter 2021 corporate update press release. Such statements may also be found in our Form 10-Q when it's available and in other reports filed with the SEC. I'll then provide further details about the risks related to our business. Additionally, please note that the company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statements. And this slide deck is available on our website at investors.metals.co. I'm now happy to turn it over to Gerard Barron, The Metals Company's Chairman and Chief Executive Officer. Gerard, please go ahead.

Thank you, Craig, and good afternoon, and thank you all for joining us today for our third quarter corporate update conference call. You are welcome to follow along with our slide deck or if joining us by phone, you can access it at any time at www.metals.co. So today, we'll be reviewing our recently completed business combination, our financial and project development highlights, and expected upcoming milestones for the company. I'd like to begin with a recap on recent market developments and how we believe The Metals Company could fit into the big picture. So the green future is metallic. At COP26, the world's governments are committing to a rapid transformation of energy and transport. What's catching people by surprise is that this transition starts and ends with metals. Last year, the World Bank pointed out that we will need to extract 2 billion to 3 billion tonnes of metal by 2050, fivefold increase in production. And a couple of months back, the International Energy Agency ran an analysis of their own and arrived at the conclusion that, to hit net zero globally by 2050, would require 6x more mineral inputs in 2040 than today. So in an attempt to get the message across, an industry analyst firm, WoodMac, in October did not mince words: "The energy transition starts and ends with metals." And to hit the 1.5-degree Celsius target, a fivefold increase in base metal supply would be needed, requiring an investment of $2 trillion. So meeting demands could be mission impossible. As we hurry to get out of one extracted industry in fossil fuels, the fact that the whole enterprise depends on scaling up another extracted industry in metals is understandably a hard pill to swallow. But we cannot afford to ignore it because you can't build your gigafactories in renewable power out of thin air. If you look at the U.S., it's been a dizzying few months. To electrify U.S. car sales, you need about 1.2 terawatt in battery cell production capacity. And in August, President Biden outlined the target of 50% EV sales share in 2030. And this announcement was followed by a flurry of industry announcements to construct gigafactories in the U.S., but not much detail around how these gigafactories will be supplied with raw materials. And they do need to worry about this now because it takes on average about a decade to turn it and develop a new mine, even longer in the U.S. So 2030 is already yesterday with respect to the United States domestic capability to meet the expected demand. So where will the battery levels come from? Let's imagine that the U.S. implements mining permitting reform and moves as quickly as China. In that scenario, we think the U.S. might be able to solve copper and maybe find some more lithium, but we don't think we can solve nickel, cobalt and manganese because the resources aren't there. The plot thickens when you look at the current supply chain, from mining to processing and refining and cathode material production. It's a 50,000-mile supply chain controlled by China. The United States spend so much effort to achieve energy independence only to find itself headed for metal dependence. Metal is the new oil, and China is more powerful than OPEC. The Biden administration understands this, and nickel has finally been elevated to most critical status and was mentioned 146 times in the 100-Day Supply Chain Review. Building nickel refinery in the U.S. was framed as the highest short- to medium-term priority in that document. And it so happens that there is a potential solution off the western seaboard of the United States. This realization is slowly percolating through the system. Over the summer, the Wilson Center, a key nonpartisan policy forum in the U.S., held a dialogue with key level groups of stakeholders, trying to find solutions to the troubling scenario faced by the United States when it comes to the supply chain for critical minerals. Their report acknowledged the significant domestic opportunity to get the nickel, cobalt and manganese from polymetallic nodules in the Clarion-Clipperton Zone. And developing the nodule resource offers a 1,500-mile supply chain and an opportunity to re-shore processing and refining in the U.S. So here is what a polymetallic nodule field looks like. And these images were taken at 4.3-kilometer depth, and the view is about 1.2 meters above the seafloor, and you can see continuous nodule coverage. A nodule is formed by precipitating metals that are in solution in ocean water and the sediment [indiscernible]. And these are loose rocks with approximately 95% of nodule mass exposed on top of the seafloor mud. And we are using lighting here for visibility. But otherwise, it's a dark, cold, [ dreadful ] place. And limited food means limited life. Indeed, it's one of the lowest biomass places on the planet compared to deserts on land and ice-free Artic and Antarctic, and most likely is bacterial. Once in a while, you can spot a worm or a sponge or a sea star. And in general, animals tend to be small. Four centimeters is a giant in this world. It's a fascinating slow-changing world that must be protected. And as a precaution, more area is already under protection here than under exploration. And protected areas account for about 34% of the total Clarion-Clipperton Zone, already exceeding, at least without ceasing there, the global push to protect 30% of the issuance. In addition to the relative proximity to the U.S. and the option to process and refine these nodules in the U.S., this resource has several other advantages. It's abundant. It's the largest estimated source of battery metals on the planet. Our portfolio alone has sufficient estimated in situ quantities of these metals to electrify around 280 million EVs or the entire U.S. passenger fleet. And it's high-grade. On land, you would possibly need 3 different mines to obtain these metals and the grades are falling. Nodules contain high grades of 4 metals in a single resource. On average, we need to process several times less mass to get at the same amount of metal. And security, these nodules sit in international waters and are regulated by an intergovernmental organization, the International Seabed Authority, or ISA, comprised of 160 member states and the EU. Decisions are subject to intense scrutiny, and consensus takes time, but they cannot be changed on the whim of a single government. And low production costs. At potential steady-state production, we expect to be the second lowest-cost nickel producer on the planet, largely due to the high-grade, multi-metal nature of the resource. And low ESG cost. We expect between 70% and 99% reduction of lifecycle ESG impacts. No child labor, no social displacement or no deforestation. Onshore, our production will generate near 0 solid waste. We should be able to compress CO2 equivalent emissions by up to 90%. And this is all using conventional technology, but we're pushing to do better than that. We believe it is much better than the alternatives. But it isn't America, we would be impacting deep sea environment. And a lot of care is going into making sure that we characterize and mitigate our impacts on biodiversity. So what do you take to get to production? It all starts with the resource. We have secured exclusive exploration rights to 3 areas sponsored by 3 Pacific Island nations. Next, we have to figure out how much is there and of what quality. We have resource estimates on 2 of our exploration areas. And to move from exploration to exploitation, we need to secure an ISA exploitation contract. How do we pick up nodules from 4-kilometer depths? Well, the basic technology was successfully demonstrated back in the 1970s. But we have to design and test our own system, and we're doing this in partnership with Allseas. What are the environmental impacts of nodule collection and how do we mitigate them? Here, we have a much higher bar than those projects on land. First, we must baseline the marine environment from seafloor to surface, then we must run our pilot system and monitor and measure its environmental impacts. The deliverable here is an environmental impact statement that is an important part of our application to the ISA for an exploitation contract. Once you have the nodules, how do you turn them into metals? While we invested effort in developing 2 different flowsheets and chose to go with a lower risk option for our development and operational plans, it uses conventional equipment and we expect to generate nearly 0 solid waste. We have to model it, then test at lab and pilot scale. Before any production, we need to make sure our project is economically viable. So we go through a sequence of studies with increasing levels of confidence on project economics. We started with an initial assessment, but we are now in the middle of our pre-feasibility study, followed by a bankable feasibility study. We currently have sufficient level of cash to fund the milestones highlighted in blue. And we believe that the foremost important are: firstly, to complete our onshore pilot plan program to process and refine polymetallic nodules into critical metals; secondly, to build and deploy our pilot collection system to lift nodules to the surface with a dual focus on operational performance and environmental impact mitigation. And thirdly, to complete the offshore environmental impact statement of future production of NORI-D. And then finally, submit an application to the ISA for an exploitation contract for the NORI-D area. So where do we stand at the end of Q3 2021? As mentioned previously, our business combination with sustainable opportunity acquisition corps was completed on September 9, 2021. The company renamed to TMC The Metals Company. And on September 10, 2021, recommenced trading on NASDAQ. TMC received approximately $137 million in cash prior to transaction fees, including approximately $27 million from the SOAC trust account after accounting for redemptions. As we've noted previously, SOAC entered into subscription agreements for a $330 million pipe, but only $110 million of the pipe funding has been received to date. SOAC and TMC continued to seek to enforce the funding obligations. Two lawsuits have been filed against the nonperforming investors in New York State Court. So with cash in the bank of approximately $113 million at September 30, we have maintained our expectations of funding our operations through the key milestone of submitting our application for an exploration -- exploitation contract to the [ ISA ] in Q3 2023. In terms of project development, it's been a record-setting 9 months. You can see the highlights on this slide, but I'd like to [ take care ] some of these in more detail. To date, our technical resource statements were done in compliance with a stringent Canadian 43-101 standard. To become a U.S.-listed entity, we had to comply with the SEC Regulation SK 1300 standards. And accordingly, AMC Consultants reissued technical resource statements on NORI and TOML areas, reconfirming our total estimated resource of 1.6 billion wet tonnes of nodules in situ resource of nickel, copper, cobalt and manganese, equivalent to the requirements for 280 million electric vehicles. One way to understand the significance of this resource is to compare it to other undeveloped and producing projects. Nickel is a key metal for us, representing almost half of our expected future revenues. And as you can see on the left side of this page, our estimated resource is significantly larger than other known undeveloped nickel projects. And earlier this year, MINING.COM ranked just our NORI-D asset as the largest undeveloped nickel project on the planet. And if you convert all the metal content into a nickel equivalent grade, at 3.2%, no other undeveloped or producing project comes first. Resource quality translates into attractive economics. And back in March, AMC Consultants issued a SEC Regulation SK 1300 compliant initial assessment of project economics for the NORI-D area. This area represents about 22% of our total estimated portfolio and is expected to have a net present value of $6.8 billion using very conservative commodity prices. And as you may know, the prices of most of our metals have reached multiyear highs. At current prices, the net present value would nearly double. And Q3 saw an important milestone on the regulatory side, for us to move from exploration to exploitation, the International Seabed Authority needs to complete the adoption of the exploitation regime. And the work on this regime started already back in 2011, but completion was targeted July 2020 was disrupted by COVID. So to increase regulatory certainty at the end of June, the Republic of Nauru, the sponsoring state of the NORI area, exercised its sovereign rights under Section 1, Paragraph 15 of the 1994 agreement relating to the implementation of Part XI of the United Nations Convention of the Law of the Sea, UNCLOS, by submitting a 2-year notice. This notice was obliged the ISA to complete the adoption of exploitation regulations within 2 years of the request made by the member state. And in response, the ISA has put together a work program to meet the deadline. The outcome we are hoping for is that the ISA to deliver on their work program and complete the adoption of the regulations with the consensus of the 167 nations and the EU behind them. However, the 1994 implementation agreement does lay out what happens if this does not materialize. If the ISA has not completed the adoption of such regulations within the prescribed time and an application for approval of a plan of work for exploitation is pending before the ISA. The ISA shall nonetheless consider and provisionally approve such plan of work. So we expect that our subsidiary NORI will have submitted its plan of work for exploitation within the prescribed time frame. Once we submitted application, we expect the ISA to take at least 315 days to review it and decide. As no changes are requested and the application is approved, we can expect to start production in Q3 2024, subject to our ability to fund the development of Project Zero. Putting together an application is a multiyear effort that includes a comprehensive Environmental Impact Statement, or EIS. The foundation of the EIS is collecting baseline data on the environment. And we need to understand the pre-impact state so we can compare it to what happens after nodule collection. While we started doing environmental data collection campaigns several years ago, this has been a [ record year ] for us with 4 campaigns and 148 days spent at sea in the first 9 months of this year, all completed safely, with all the data collection goals accomplished by our research partners and under superb management of our vessel operation partner Maersk Supply Services. The last completed campaign, 5C, had researchers from the University of Hawaii, Texas A&M and the Japan Agency for Marine-Earth Science and Technology, or JAMSTEC. One of the campaign achievements was sampling pelagic biodata at depths down to 4,000 meters, marking what we believe was the world's first deep MOCNESS net tow in the Eastern Tropical Pacific Ocean. And I've just returned from San Diego, where we are mobilizing for the fifth campaign this year and the final of our baseline data collection campaigns. Baseline data will have been collected by the end of 2021, but the analysis will take some time. And in parallel, together with our offshore partner, Allseas, we've been building a pilot collection system in the Netherlands. The system consists of a surface production vessel, seafloor collective robot and an airlift riser system. The Hidden Gem, a former drillship acquired by Allseas last year, is in Rotterdam undergoing conversion into the surface production vessel. It is expected to be the first ship classified as a subsea mining vessel by the American Bureau of Shipping. And the red launch and recovery system that you can see in the middle, used to lower and retrieve collective robots, has already been installed. The collective robot has been assembled as well, and you can see the current state of our collector on the right-hand side picture. And these images were taken at the end of October when we invited key stakeholders to Rotterdam to review progress on the conversion of the Hidden Gem and the assembly of our collective robot. We are targeting system completion at the end of this year, followed by wet collector drive test in the North Sea and full pilot system trial in the NORI-D area in the Pacific next year. Even a pilot trial requires an Environmental Impact Statement of its own, and our subsidiary NORI submitted the EIS for the upcoming pilot trial to the ISA in July '21. We are planning a 12-week trial with about 260 hours of system operation, and the directly impacted area is small. It's 0.5 of 1 square kilometer. One of the high-profile issues addressed in the EIS is the potential environmental impact of plumes. Plumes are essentially suspended seafloor mud particles. And early speculations about plumes suggested giant clouds of mud would be traveling to thousands of kilometers, either staying suspended for long periods of time or falling out and suffocating organisms in protected areas. We believe these initial speculations are proving to be wildly exaggerated. Modeling by a third-party expert, DHI, using metocean data collected from the NORI-D and using NORI-D sediment properties supports predictions that plumes from the pilot system will be limited and localized. And although the pilot system is similar to production system, we believe it is representative of the relative order of magnitude of the impacts that we can expect from the production system. Results from DHI are consistent with the work published by MIT on seafloor and midwater plumes. And furthermore, for seafloor plumes, our results are consistent with field observations by the German contractor BGR and the Belgian contractor GSR, who did a seafloor-collected test in the CCZ earlier this year, and we look forward to having our own field observations next year. While our work offshore gets a lot of coverage, I personally get as excited about what we've been able to achieve onshore. For anyone wondering whether we can turn nodules into valuable critical metals, the answer now is a resounding yes. First, our pilot program turned nodules into a manganese silica product that can go directly into manganese alloy production and a nickel, copper, cobalt alloy, an intermediate product that can be used as feedstock in some of the existing smelting and refining operations. And I'll just held up what our alloy looks like. Then we have been able to convert the nickel, copper, cobalt ally into matte, a further intermediate product that could go into most nickel refineries. And here is what matte looks like. So we have started on the final part of our pilot plan program, and that is turning matte into nickel sulfate, cobalt sulfate and copper cathode. So looking forward, here is an overview of what we are focusing on next. It will be an equally intense 6 to 9 months for us. Firstly, securing funding to get into production in 2024 is my #1 priority. To that end, we are working on multiple fronts, securing bankable offtakes through Project Zero production, finalizing Project Zero economics with Allseas and securing an onshore partnership and site. In parallel, we are in active discussions with strategic parties who can help us get to full-scale production, ideally in the United States. And they include carmakers, cathode material manufacturers, mining majors, oil and gas majors and EPC companies. Offshore. The pilot trial of our offshore collection system is a major event. And while there have been a collective robot test on the seafloor, a full system test including the riser has not been done since the 1970s. So a digital twin system for a nodule collection operation has never been developed and operated either. So this is another exciting development for us. And onshore, we anticipate that we will complete our pilot plan program going from nodules to battery cathode precursor materials and copper cathode. So with that, I turn it over to Craig to speak on TMC's recent third quarter and year-to-date financial statements.

Thank you very much, Gerard. Before we get into the results, I do want to draw your attention to certain restatements to our first quarter and second quarter 2021 financials, which were included in our recent press release. Now the restatements resulted from; a, certain invoices for exploration expenses not being appropriately accrued as of June 30, 2021; and b, expensing of options granted in the first quarter of 2021 based on the grantee's historical startup date with the company rather than the grant date of the options on March 4, 2021. More information is provided in the accompanying press release as well as our soon-to-be filed 10-Q. Now in terms of the financial results for the third quarter of 2021. The company reported a net loss of $36.7 million or $0.18 per share compared to TMC's net loss of $6.8 million or $0.04 per share for the third quarter of 2020. The higher net loss was mainly attributable to $12.9 million in milestone payments accrued under the amended pilot mining test system agreement with Allseas and a $2.8 million increase in offshore campaign expense given increased offshore activity versus the prior year period. Exploration expenses during the third quarter of 2021 were $23.8 million compared to $4.6 million for the third quarter of 2020, also explained by the Allseas' milestone payments and increased offshore expense. General and administrative expenses were $13.3 million for the third quarter of 2021 compared to $2.2 million in the third quarter of 2020, mainly driven by higher noncash stock-based comp expense and overall higher costs as a result of being a public company. Now excluding direct transaction costs related to the business combination. Free cash flow for the third quarter of 2021 was negative $9.8 million compared to negative $3.8 million in the third quarter of 2020. And for the 9 months ended September 30, 2021, the company reported a net loss of $121.5 million compared to $39.5 million in the prior year period. Exploration expenses increased from $35.7 million to $80.2 million and G&A expenses increased from $3.8 million to $41 million during the first 9 months of 2021. The large increases both in exploration expenses and G&A expenses were stock options for DeepGreen employees and contractors in the first quarter of 2021 before the business combination was finalized. This represents the catch-up equity awards for key employees who have been progressing the project over the last several years. And of course, retaining our key employees is a very high priority for us. Excluding nonrecurring items, free cash flow for the first 9 months of 2021 was negative $23.8 million compared to negative $21.4 million in the first 9 months of 2020. With that, I will turn it back over to Gerard for some final comments.

Thanks, Craig. So before we get to questions, let me address the recent short report. Clearly, this report was written by someone who doesn't know much of our resource economics. Resource quality drives the value of exploration contracts, not the fee you paid or applied for the contract. We acquired the TOML asset of $32 million from a third party who had no relation to any of the shareholders or executives of TMC or DeepGreen. And by the time of the acquisition in 2020, TOML had conducted several resource definition campaigns and had a 43-101 compliant resource of 756 million tonnes of wet nodules. For comparison, NORI-D has a 43-101 compliant resource of 356 million tonnes, so less than half of the TOML resource. It also has an SEC SK 1300 compliant initial assessment signed off by independent experts with an NPV of $6.8 billion. And if we use today's commodity prices, that NPV would exceed $12 billion. So I think a $32 million acquisition of the TOML asset was an outstanding deal by any measure. It's also worth noting that in our opinion, that nearly all of the good ground has already been claimed in the CCZ. So if the short seller believes getting an exploration contract for an area with high-quality resource and sponsorship from a sovereign nation as easy as paying $250,000 contract application fee, well, we should go ahead and try. The report also suggests that we overstated our exploration expenses for NORI. And that is also incorrect. As part of the business combination, we were required to adjust our accounting from IFRS to U.S. GAAP. And that meant we needed to fair value the shares we paid to Maersk, resulting in the increase from $14.9 million to $35.4 million. TMC is a SEC-regulated company. We take our compliance very seriously. But more importantly, we're a company that values transparency. Nothing in this agenda-driven report causes me any concern. And we have purposely not commented on this report because the assertations were so unserious. They did not warrant a reply. But given that retail investors have asked me to, however, here it is. So the energy transition stops and ends with metals. Gigafactories can't make batteries out of thin air, and TMC is developing a massive resource that can truly move the needle in terms of metal feedstock for gigafactories. And while also shortening supply chains, compressing ESG impacts and helping to ensure mineral independence for the United States, we have made an incredible amount of progress on the project this year, onshore, offshore and environmental. And we're just getting warmed up. And with that, we'll turn it back to the operator for some questions.

[Operator Instructions] The first question is from the line of Daniel Ives with Wedbush.

So can we just first talk about how conversations maybe have changed, whether it's strategic partners or within the auto food chain over the last, call it, 3, 6 months. I mean is there a discernible change just given more and more of the acceleration of the EVs' need for lithium?

Yes. Dan, absolutely, there has been a discernible change. And of course, we -- while there is lithium in our nodules, we don't focus on it as a product. And I think automakers have historically been a very dominant party when it comes to supply chain. And obviously, with the semiconductor experience in the past year, it's highlighted how raw materials can really disrupt the business. Now the whole transition to electric vehicles has really sped up, I guess, since COVID came. And obviously, the stimulus packages being announced by President Biden and others means that everyone wants to catch up and go electric. And so all of a sudden, while historically, they have pushed those conversations under the supply chain, now it is not that easy. Now they realize that they have to get control of supply. Availability, price sustainability are the key drivers for those automakers. And yes, we're having very different conversations with them today compared to even 6 months ago.

Great. Okay. Can we -- so can we just go -- I mean obviously, you've gone through in the slides, but when we think about 2022, what are like -- let's call it like the 3 top priorities in terms of -- from an exploration or from a, we'll call it, a strategic perspective that we want to be at a year from now as you look ahead? Can you kind of just detail those again?

Sure. Well, from the project perspective, the priorities are, this time next year, we will have completed our offshore pilot mining trial, pilot collecting trial. And that will be the full end-to-end system. And as I mentioned earlier, there has been a trial earlier by the Belgium contractor of the collected vehicle. It was very successful. And -- but this is different. In February last year, Allseas, our partner, acquired the Hidden Gem. It's a 228 million -- 228-meter production vessel, formerly a drillship that would be -- I think its ticket price was $700 million 10 years ago, and they bought it for low tens of millions of dollars. And so we're busy -- they're obviously converting that now. In fact, I looked at the seats, there was around 240 people at Allseas working on that conversion last month. And so by this time next year, we will have successfully -- we will have been to the license area. We will have conducted that harvesting trial and observed it. And that's an important part of the permitting process because we have to demonstrate and we have to report on the impacts. The same with onshore, we have already completed our pyrometallurgical pilot plant processing work. And we're in the early phases of our hydro network. But as I mentioned, the hydro net is very low risk. It's we're adopting a process that is carried out by many other refiners all around the world. So we see that as very low risk. I guess -- the really exciting thing will be more environmental papers being published, more environmental results because, of course, that's what everyone wants to know, what are the impacts. And as I reported on the plume, our estimation is that the plume will travel 5 to 6 meters above the ocean floor, and that is consistent with the MIT published papers. They put out 2 papers this year. And the GSR published release or BGR news that they released earlier this year from their actual trials in the CCZ, which is an area very near us. So more of that environmental data being released is something we're really looking forward to. And then on the strategic side, we are talking, as I said, with companies from the resources sector, the mining sector as we know it, from the oil and gas sector and also with customers and intermediate players. And I think the thing that will really get this opportunity alive will be consumer-facing brands engaging. So I think the consumer-facing brands will come as a result of more environmental evidence supporting the lower impact of making battery metals from our nodules compared to land-based ores. But some of the other players, the resource companies, there's no doubt they'll move faster, in my opinion, and because you just don't find ore bodies around the world of this size and this quality.

The next question is from the line of Subash Chandra with Benchmark.

Yes. So I'm looking at, I think, Slide 11. A lot of stuff going on. It doesn't seem like there's been any sort of changes to the to-do list despite the failure of a couple of those hedge funds or whoever that came up short on their pipe commitments or private equity funds. So curious what adjustments do you have to make and how -- at what point do you think in some of these things you're working on, bankable offtakes, negotiating with Allseas or strategic partnerships for Project One and beyond. At what point, what's the event do you think that, I guess, give the market confidence in the liquidity to get to our full production and get through Project Zero?

Sure. Thanks for the question, Subash. Well, there's no doubt we were disappointed to raise less money than we had anticipated. And we always plan to take more money because it would fund us all the way through the production. In fact, it would have funded us through until 2025. But as you pointed out on Slide 11, there's still a lot of work to be done. So fortunately, we have sufficient capital to do the really value-adding stuff at the moment, which is the offshore pilot, the onshore pilot processing work, all of the Environmental Impact Studies and, of course, be ready to submit our application in Q3 of 2023. What we don't have money for is to fund that first production, what we call Project Zero. However, one of the great advantages of the partners that we have chosen is that Allseas acquired that production vessel in 2021 -- sorry, 2020, February. And so that production vessel is being fitted out for the pilot trials. In fact, it came out of dry dock some weeks ago. We had a crew of people on it, inspecting it a couple of weeks ago, stakeholder day. And so it will be in the Atlantic doing trials straight after Christmas. And so we will be busy figuring out through the -- all of the strategics that I mentioned during my presentation about what those funding options will be to get us into that first production, but we had a lot of choices there. For example, even on the production vessel, there is -- you've seen the numbers, there's margin in this orebody. And so if we had to sacrifice some OpEx for CapEx, then that's an option that's always available to us. But I remain confident that based on the size and quality of the resource that we will have solved that funding issue before it starts impacting production on 2024.

Yes. And I may just add in there, too. One of the big takeaways from the event in Rotterdam a couple of weeks ago was it was just great to be able to share with a lot of stakeholders, whether potential investors or strategics, et cetera, the tangibility of that progress because they know about the size of the resource, they know how attractive it is. But as we continue to hit these milestones over the next 2 years with the cash that we have on hand, that will just increase the certainty and continue to derisk. So obviously, we are disappointed in the situation with the pipe, but it did refocus us on making sure we get the boat on the water. We showed the successful collector test. We showed that we can convert these nodules into usable metal, which we're making great strides on. And that will put us in an even better position when it comes to raising the additional capital.

Okay. Great. And so maybe a little help there. Two years, a long time, and it certainly seems like the macro trends are in your favor and your options should solidify, if not improve. But when -- at what point do we sort of need to solve Project Zero capital question?

Yes. We need to solve that by Q1 2023.

Okay. Great. A follow-up here, maybe my second follow-up. I think you talked about the public comment period. I think for Nauru, I think for the pilot test in the CCZ. And it might be on the website, but I haven't checked. Any color on what the initial comments look like and what they might be concerned about or how excited they might be about the CCZ mining pilot?

Subash, would you just repeat the first part of that question, the comments about what, was it about the environmental?

Yes. So I think -- no -- yes. So I think the -- there's a public comment period for the CPZ mining pilot. And I thought the public commentary has already opened and if you had any color on what some of those initial comments have been focusing on?

Sorry, I understand now. Yes. Look, it's an open period now, and we're engaging with all of those stakeholders through a stakeholder engagement program. And I think the feedback we've been receiving from the extensive paper that we lodged and that's available on the -- on our website and also the ISA website has been very complementary to the range of the scope of that study. And so we don't certainly don't see any showstoppers in it.

[Operator Instructions] The next question is from the line of [ Malcolm MacDonald ] with Bank of America.

Quick question. Why does it take 315 days for the ISA to make a decision?

Yes. No, that's a process that they have laid out. It goes to the legal and technical commission. And it's a big document. There'll be wheelbarrows to carry it in there. And so that's just a process that they have laid out. And it's encouraging to see how the ISA is preparing for that as well. They are recruiting heavily, they are bringing lots of expertise to be able to make these assessments and also to become the regulator. And so it's a pretty reliable time frame from our perspective. I think the one point I would highlight about the approval process that we have. And we often talk about the ISA, as a regulator, why we're very happy with them. I mean the ISA was set up in 1994. And it was set up to govern the high seas and to put in place a regulatory framework to allow the development of this resource. And with land-based applications, if I just use them as a comparison, what you end up finding, of course, changes. You might find governments who get voted out because of their position or their approval. You might find native title claims and so on. And of course, we don't have those issues. And so we don't see the delays that some land-based projects that are located in a certain jurisdiction would be subjected to. We don't -- we just don't have those.

Would it be possible for the ISA to make a decision sooner than the 315 days that are allotted?

We hope so. And we'll be doing everything to encourage it, but we're not banking on it at the moment. And by the way, what happens when we get the boat back? Well, when Allseas bring the boat back from the pilot, it goes straight back into dry dock to have some more modifications made to make it ready for Project Zero production. And so we're using the time pretty effectively. We would clearly like to bring this resource into production as soon as possible. But I think that's a good time frame. And keep in mind, I made the point during the presentation that permitting process on land is becoming more and more challenging. And I think that getting anything approved in a developed country or a developing country does not have a lot of certainty around it in this day and age. [ I think we're in a good place there ].

Just a quick follow-up there. So given Macron's statement the other week or the other day at COP26, have they been in touch with you guys regarding any sort of offtake? And just a follow-up on that. Where is China relative to TMC?

Well, let me first address Macron. Firstly, thank you, President Macron, for making those comments because for those that weren't across it, he gave an update on his 2030 plan and made the pitch that for France's future, they need to reindustrialize. They need to develop secure supply lines. They need to create local jobs. And that means they're going to need a lot of metals. And France is a very large ocean economic zone holder. They also have a license in the same area that we do. And he said polymetallic nodules look like being the solution to that. And so they have allocated some billions of dollars for the development of that. And I think that's significant to have a G7 leader, a European leader come out and support. Of course, we have the leaders from other developing nations, and we have China and Japan and Korea. But to have a president so vocally supporting that was good news. In regard to China, there is no doubt they have 3 licenses, 2 of them in -- very close to us. We were in Changsha before COVID struck and my team and I, and we visited China [ main ] metals onshore processing pilot plant. They have been processing nodules for 20 years. The same nodules that we're picking up, they have been processing for 20 years. We also inspected their harvesting system, and we understand they've been doing more trials, but not in the CPZ, more in their territorial waters. So I think it's safe to assume that China is moving. We know they have an insatiable appetite for these important base metals. And so -- and we always thought it was a good thing that China was involved. And so -- but I still remain confident that we'll be the first out of the gate.

And certainly, just to expand on that a little bit. As more and more focus has come on this topic over the last year, the more focus from policymakers not just in Europe and Asia, but more so in North America as well. When there was the news earlier this year that China was doing some deepwater testing for their collector system, there are a lot of inbound calls and e-mails asking what the implications were. So certainly, we don't shy away from any competition. And in fact, nothing validates the business model in the company more than other people looking at this resource as well.

One just one more...

If China are collecting nodules to make battery metals, then hopefully, that means they're going to be destroying less carbon sinks, less rain forest, less biodiversity. Because if you look at the only growth avenue for nickel is from nickel laterites and we know what they form. They form in some of the most biodiverse carbon sinks on our planet. So that's the real enemy here.

Awesome. And just one more kind of follow-up on what you just mentioned. Would you -- when you go into production, start generating revenue, would you guys consider taking it one more step further in regards to the race to net zero and actually allocate a percentage possibly of your revenue to maybe even reforestation or becoming a leader in terms of ESG and electrifying the world and decarbonization?

Well, there's no doubt we want to take that leadership role. And of course, there are a lot of economic benefits that flow from this project not only to our sponsoring nations, the nations that have impacted climate change least yet are in the front row to be impacted by the effects of climate change through rising sea levels. And so once we're in production, this will deliver them royalties that will provide jobs, training opportunities and have a meaningful impact on their GDP. And of course, a much bigger royalty gets paid into the International Seabed Authority. And UNCLOS was very prescriptive about what should happen to those royalties. They should be, after paying for the cost of the regulator, they should be distributed to the developing nations of the world, particularly the landlocked nations. So there is a -- we are building this on an ESG platform. There is no doubt about it. And so I guess you can expect us to strive the gold standard when it comes to all of those ESG metrics.

There are no additional questions waiting at this time. I would like to pass the conference back to Craig Shesky for any closing remarks.

And I'll pass that way back to Gerard Barron, our CEO.

Well, to conclude, our recent accomplishments have been significant, and our strategic priorities remain on track to achieve 4 key milestones by the end of the third quarter 2023 when we expect to submit our application to the International Seabed Authority for an exploitation contract for our NORI-D area. So thank you for taking the time to join us on the conference call today. It's our first earnings call. So we've been very much looking forward to it. And we look forward to speaking to you on our fourth quarter corporate update call in not so many months. Thank you.

That concludes The Metals Company's Third Quarter 2021 Corporate Update Conference Call. I hope you all enjoy the rest of your day. You may now disconnect your lines.