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

Thanks, Kevin. I want to remind everyone that some of what we say on this call will be forward-looking, resting on management's beliefs and assumptions and on information we have right now. Those statements carry known and unknown risks and uncertainties, and a lot of them sit outside our control, so the company's actual results could differ materially from what we anticipate. Other than where the law requires it, we have no obligation to update any forward-looking statement. Today's remarks may also include non-GAAP financial measures, and you can find more detail on those measures, including reconciliations to the most directly comparable GAAP measures, in the slide deck we're using for this call. You're welcome to follow along with that deck, or if you're on the phone, you can access it at any time at investors.metals.co. At this point I'd like to hand the call to our Chairman and CEO, Gerard Barron. Gerard, over to you.

Right, thank you, Craig, and I appreciate everyone being with us today. Before we get started, I want to take a moment to welcome Liam Mallon, who is our newest board member. Liam served previously as President of ExxonMobil Upstream, and he is joining at a really exciting moment for us as we get ready to shift from exploration into commercial operations. Liam comes to us with over 40 years of experience in global energy and offshore operations, and he led ExxonMobil's upstream business worldwide, where he oversaw $20 billion-$30 billion in annual capital investment. His involvement was pivotal in several major shifts within the energy sector, from ExxonMobil's breakthrough deepwater venture in Guyana through to its $60 billion purchase of Pioneer Natural Resources. From the moment he joined us in September, his know-how in bringing intricate and first-of-their-kind offshore projects into production has been a real asset to our company. Liam will take the Chair role on our Sustainability and Innovation Committee, and his mandate will involve assisting our project and environmental teams in enhancing project economics and handling environmental effects. Both my team and I anticipate what he will add moving forward. Moving to the agenda, we'll start with U.S. permitting, where our USA-A consolidated application is currently before NOAA, along with the milestones that lie ahead. For the offshore side, we'll go through a revised plan developed jointly with Allseas that keeps us on schedule while reducing by nearly $500 million the capital needed to get to first production. On land, we'll update you on Brownsville, where Mariana Minerals is heading up feasibility-level engineering and where U.S. government funding agencies are now coordinating on our nodule city plan. We'll also discuss a capital-light path that begins with toll processing our nodules in Japan. Regarding the environment, we'll present our newly peer-reviewed papers drawn from our deep-sea dataset, released in advance of the environmental impact statement, and explain how the research community is using that open data. Next we'll go over our partnerships, then finish with the financial highlights and liquidity. We'll start with permitting, focusing on the consolidated application we filed for the USA-A area. After that application was published in the Federal Register, which we reported last quarter, NOAA launched the first of multiple public comment windows to gather input from the public on our application. That comment window ended on October 19, and NOAA is currently reviewing the comments as part of its review of the application. A lot of you were expecting certification in October, and as I mentioned earlier this week, NOAA informed us by letter that it now anticipates making a certification decision by mid-December. This is taking more time than we would have liked. However, ours is the first consolidated application submitted under DSHMRA and NOAA's new review process, and the regulator is correctly working through the statute one step at a time. Importantly, NOAA has not found any problems or deficiencies in our application. So what does certification mean? It is NOAA's formal determination that TMC possesses the financing and access to technology needed to commercially collect nodules, as well as a detailed plan for conducting those operations in accordance with the Deep Seabed Hard Mineral Resources Act. Certification also sets the size and location of our activity area and signals the move into the final environmental review phase before the commercial recovery permit is granted. If the certification decision is favorable around mid-December, then the application proceeds to the environmental review stage. NOAA would then issue a notice of intent for that process, along with a draft environmental impact statement, the draft terms, conditions, and restrictions, plus the mandated public comment periods, all before the agency makes its final determination. This slide shows what remains ahead for the USA-A consolidated application. Since our August report, NOAA has published the consolidated application in the Federal Register and, as I noted, has completed the first of multiple 60-day public comment periods and online webinars. In the end, the rigor of this review bolsters how well the permit can withstand legal challenge in the decades ahead. It also helps ensure that newer applicants—who have completed far less work than TMC, its subsidiaries, and our world-class partners—don’t get rubber-stamped; we have some exciting updates about our offshore system to share. We’ve been collaborating intensively with Allseas on a revised offshore development plan, with a clear goal: safeguard our timeline, reduce system risk, and transition rapidly to first production after our commercial recovery permit is granted. Instead of launching the full 3 million tons per annum system, we’ll start at 1 million tons per annum with an upgraded version of our proven pilot system. That cuts down on the complexity of engineering, procurement, and integration, brings down the upfront capital required for both TMC and Allseas, and allows us to start commercial production as quickly as possible once our permit is granted in the current administration. After that, we'll phase the major investments in step with the production ramp-up, which puts less capital at risk during the early stages. Operating the system in sustained production builds up operating experience, proves reliability, and reduces the risk of scaling to full capacity. The outcome is a quicker, more streamlined start that remains near our original five-year ramp-up and gets the system on the water sooner. That benefits TMC and Allseas, and in the end benefits our shareholders. At the core of this plan sits a streamlined operating setup with reduced logistics expense, and it extends the systems we proved out successfully during the six-month offshore pilot we ran in 2022. Most of the direct CapEx savings stem from making the current pilot production system simpler and better while doing away with the transfer vessel. That step additionally allows us to remove nearly all long lead time items, which helps de-risk the schedule to first production, on top of lowering upfront CapEx. Taken together, the adjustments we have made to the system's scope bring down the estimated upfront capital needed to achieve first production from about $800 million under our earlier plan, with TMC's portion at roughly $500 million, to approximately $300 million, shared by the parties. A large part of the remaining investment is being pushed into later development phases. The simpler operating setup and reduced logistics expense also enhance the economics of the initial operations, giving us the possibility of achieving positive EBITDA even at the lower output levels we are targeting in the first two years. So what does that mean in practice? By upgrading and expanding the production system that was proven in our offshore pilot, we are able to reuse equipment we already have and run this upgraded system through the first two years of commercial production, postponing the full capacity equipment packages and the more complex transfer interfaces until they are required, all while keeping our original ramp-up targets; our plan is to upgrade the existing six-meter-wide pilot collector to 9 m, and to defer the new collectors until we are confident we can sustain production over extended periods. At the lower production rates expected in the early years, we can do away with the need for a dedicated transfer vessel and instead load our nodules straight onto bulk carriers. By transshipping on the U.S. West Coast before shipping them onward to Japan, we can also pair nodule transport with regular offshore logistics, cutting the number of dedicated supply vessels needed. Bear in mind that both Allseas and TMC know this technology very well, and it will go through additional optimization and testing in Allseas' upcoming Japan pilot program. So in short, it is the ideal proven foundation for beginning commercial operations. Instead of deploying the full 3 million-ton system from the start, this upgraded pilot collection system will aim for approximately 1 million tons annually, with room to rise to as much as 1.5 million in year two. This fits with the production ramp-up plan we already have, and the aim there is to keep the yearly output profile on track as we work toward 12 million tons using four production vessels. Following the pilot we ran successfully in 2022, and with more optimization and testing that Allseas is set to carry out in the Japan pilot program coming up, we plan to upgrade the collector we have now, keep the first round of modifications limited to the Hidden Gem, and make offshore transport and logistics more efficient. Those adjustments bring down complexity along with both capital and operating costs. At this point I'd like to pass things to Craig, who will go through our onshore partnerships, along with the environmental work we've done most recently and our financials.

Thanks, Gerard. Onshore, once more, what we're mainly aiming for stays the same: getting a greenfield processing and refining plant built in Brownsville, Texas. Yet having that plant operational soon enough to take the initial nodules from our offshore work could prove difficult, in light of the permitting schedule we expect; that's the point where we might rely on, as we mentioned, the five-year partnership we have with PAMCO and the processing facility they already run in Hachinohe, Japan, where nickel laterites have been processed by them for many decades, and where we ran a successful industrial-scale pilot from 2024 to 2025. PAMCO's facility will need certain modifications before it can accept the initial nodules, and this week our people, together with engineering consultants from outside the company, have been working in Hachinohe to go over those plans—mainly to make sure the timelines are consistent. To put this in context, PAMCO has been smelting nickel laterite ores since as far back as the 1960s, and over that time it has built up considerable processing infrastructure, including three furnaces spread across the existing site. Although our shared track record is a bit briefer, we've still accomplished a great deal over the last five years—including pilot processing at industrial scale, demonstrating that the process works technically within the current architecture, and a feasibility study confirming economic viability using their 80 MW furnace. Even so, we understand what needs to happen for the facility to meet spec before nodules arrive. Suffice it to say, our discussions with the U.S. government include the prospect of exercising this attractive option right when production begins. As it happens, U.S. government officials are currently in Japan, talking about the expanding seafloor minerals sector. You may have noticed that only moments ago the U.S. The Japanese and U.S. governments released a joint statement that puts seabed minerals right at the heart of their strategies for broadening mineral supply sources and backing their industrial bases. The State Department's release contains two lines that really stand out: building trusted commercial partnerships and locking in processing capacity with trusted partners. PAMCO fits that description to a T. That said, our eyes remain fixed on ultimately moving nodule processing onto American soil. As a reminder, TMC USA possesses an exclusive right to negotiate a lease option for land at the Port of Brownsville. That site gives direct access to the Brownsville shipping channel, along with sufficient land to evaluate an integrated processing and refining ecosystem that would serve TMC USA and perhaps, over time, other American operators. Nothing has been decided on the investment front, and as we've noted repeatedly before, committing any capital down the road will remain tied to backing from the U.S. government. We've started putting that groundwork in place so we're ready for the day when bulk carriers whose holds are full of nodules can begin reaching American shores. Before any possible U.S. government backing, feasibility studies specific to a site are required, and we're pleased to say that this work is now far along. The Brownsville region being looked at covers close to 1,500 acres across two parcels — 735 acres along the shipping channel plus an adjoining 731 acres. Engineering at the pre-feasibility level is almost finished, and as we noted before, feasibility-level work on the first smelting stage is now moving forward together with leadership from Mariana Minerals as part of TMC's owners team. The engineering group is likewise examining how the berth, ship elevators, conveyors, stockpiles, processing facilities, utilities, and supporting infrastructure connect with one another, in addition to material flows, constructability, and chances to phase later development. Late in October, our project team at TMC USA and our executive team spent four days in San Francisco alongside our partners from Mariana Minerals, hosted at their San Francisco Bridge facility. The partnership has moved fast since we signed an MOU back in April of last year — we then signed a strategic partnership in March and a master service agreement in July. Mariana plays a key role on our owners team for Nodule City, our proposed industrial park at the Port of Brownsville in Texas. During the San Francisco visit, the teams reviewed the engineering work completed to date and focused on three areas. First, fine-tuning the plant's process flows, including the controls required to satisfy stringent U.S. environmental requirements. Second, finding ways to reduce CapEx and OpEx. Third, getting aligned on a permitting strategy for the Brownsville site. That effort feeds directly into the next development phase. We'd also like to spend a moment highlighting some exciting developments involving our royalty holder, TMCR, in whose stock The Metals Company holds a 20% equity interest. On September 28, Mesabi Metallics announced plans at the White House for a $15 billion steel complex in Iowa, which was described as the largest in U.S. history. In addition to its 2% royalty on our NORI area, TMCR holds a 2% gross production royalty on Mesabi's Minnesota mine, though it has no interest in the Iowa complex. We'd like to commend the teams at both Mesabi and The Metals Royalty Company on this significant step forward in rebuilding America's domestic steel supply chain. Naturally, everyone understands that producing steel calls for manganese in addition to iron ore, and for America to re-industrialize it will need dependable access to all four of the metals contained in nodules—manganese, nickel, copper, and cobalt. Turning to a few updates on the environmental side of our work: the enormous deep-sea environmental dataset we hold, easily the biggest in the industry, keeps yielding results as an expanding share of its contents appears in peer-reviewed journals. Today I want to call attention to several recent papers. The initial paper, which came out this week in the Journal of Marine Science and Engineering, offers the first modeling of sediment plumes at commercial scale. It demonstrates that most of the disturbed sediment—the vast majority—resettles within ten meters of where the collector tracks pass, and that plumes break up within two to five days after operations stop. A second paper, now in press and due out soon in the same journal, records TMC's environmental monitoring of an integrated collection system trial—the first effort of its kind anywhere—conducted in near real time, along with the technical know-how and coordination needed to collect the empirical data that is essential for informing modeling at commercial scale. With these latest papers, the total number of peer-reviewed studies drawing on our dataset now stands at 46, and other researchers have cited it almost 220 times; we are really only beginning to tap its potential. At one petabyte, our dataset ranks among the biggest ever assembled for a single project, exceeding the Hubble Space Telescope archive, the 1000 Genomes database, and the Sloan Digital Sky Survey put together. It will keep generating fresh insights, and we expect hundreds of papers over the months and years ahead, especially as we move toward commercial operations that are intensely monitored — pardon me. The sheer size and scope of the research effort we have sustained for more than a decade, and the dataset it produced, were fully evident this week at the Underwater Minerals Conference in Japan, which we were glad to attend; a good number of our team members were present for the first time, as were many people from elsewhere in the industry and many who have been publishing work built on TMC data. Indeed, about half of all environmental research presented, in either talk or poster form, drew on data gathered during our offshore campaigns, which confirms how much our substantial investment in scientific research is worth. That investment has now passed $250 million.

Our team members and research partners alike offered perspectives across a wide range of subjects, covering evaluations of benthic effects and recovery after test mining, the dynamics and monitoring of sediment plumes, and how dissolved metals are distributed spatially. Our onshore colleagues also gave a presentation about how our near-zero solid waste flow sheet is being developed. The conference finishes up this week, and from our vantage point, it was deeply rewarding to witness directly how the results we've generated are helping to shape this emerging industry. So moving on to the financials, liquidity, and valuation. As all of you surely know, industry valuation metrics have fallen sharply since August. Nickel and copper developers were valued at roughly 58% of NAV only three months back, yet that same measure has now dropped to 34%. On the producers' side, it has fallen from around 100% of NAV to 80%. Sadly for TMC, we are valued at merely 4% of the underlying net asset value according to our SEC-compliant technical reports. The bottom line is that these valuations are swinging, in our opinion, because of short-term technical and political factors rather than the long-term realities for these metals, which remain critical to the global economy. Rest assured, Gerard and I will be on the road frequently in the months ahead, talking with both new and current investors about this opportunity, which we believe is deeply undervalued. Now to liquidity. At September 30, 2026, TMC's liquidity — which we define as cash plus borrowing capacity — stood at $123 million, including $44 million available under our undrawn credit facility. For the third quarter of 2026, TMC reported a net loss of roughly $28.4 million, or $0.06 per share, compared with a net loss of $185 million, or $0.46 per share, in the same period of 2025. For the third quarter of 2026, the net loss contained $23.5 million in exploration and evaluation expenses, compared with $9.6 million in Q3 2025; G&A came to $9.5 million against $45.7 million in Q3 2025; and other non-operating items produced a gain of $4.6 million, versus the $125 million loss recorded a year earlier in the third quarter of 2025. Exploration and evaluation costs were up $13.9 million in Q3 2026 compared with the same quarter of 2025, driven primarily by increased costs needed to recognize the full charge of ongoing development, operating, and vessel costs. The rise additionally mirrors larger share-based compensation, elevated feasibility and pre-feasibility study costs, and greater legal and professional expenses connected with the project. For the third quarter of 2026, G&A costs came in $36 million lower year over year. That drop reflects a $33 million reduction in share-based compensation expense as well as lower legal fees. Several other non-operating items appear in Q3 2026. First, the NORI royalty liability declined by $5 million, which was caused by a higher risk-free rate used in valuing that liability; in a comparable quarter, by contrast, the royalty liability increased by $131 million. Equity-accounted investments were also up $4.4 million, reflecting higher share-based compensation at TMCR together with changes in the fair value of derivative instruments and other financing costs. Looking at Q3 2026, we used $19.4 million of net cash in operating activities, compared with $11.5 million used in Q3 2025. That bigger outflow in Q3 2026 is mainly driven by higher costs associated with scaling up the nodule collection system — including $7.7 million of cash payments to Allseas, payroll, pre-feasibility work, stakeholder engagement, and legal and consulting fees. Free cash outflow for Q3 2026 was negative $19.4 million, versus negative $11.5 million for Q3 2025. Free cash flow is a non-GAAP measure, so please refer to the non-GAAP reconciliation table at the end of the slide deck. We feel confident that our current cash position will be sufficient to fund working capital needs and CapEx obligations for a minimum of the next twelve months. Investment balances rose $18 million, primarily driven by $26.9 million of dilution gains on investments, partially offset by $9.2 million representing our portion of losses on the TMCR investment. The warrant liability decreased after all outstanding private warrants expired during Q3, while the royalty liability was reduced by $5 million, which resulted from the higher risk-free rate used in valuing that liability, as we mentioned earlier. With that said, operator, we'd now like to briefly open the call for questions from the audience.

Hi Gerard, hi Craig. Thanks for taking my questions, guys. I hope you're both doing well.

Hey, thanks.

Thanks.

Let's spend a moment on the latest U.S. election outcomes. Could you shed some light on whether any strategic shifts have come about after the recent midterms? I'd imagine that's where investor questions have been centered. Perhaps you could share what they've been asking and how you've been responding. And on top of that, is there anything you feel the market may be overlooking that you could expand on during this call?

Sure. Regarding the election, I'd say it's worth keeping in mind that our permitting route runs through DSHMRA, which of course sits in statute. That gives us a dependable framework for our applications. Critical minerals, naturally, are a bipartisan matter, and we feel the timing is ideal. On one hand, I'm currently in Japan, and this week I've been at the flagship conference for the underwater mineral sector, where our team presented the huge quantity of environmental data now coming available, which really brings into focus the concerns some people previously raised about what the environmental impacts might be. I think our very substantial investment in first-class environmental research, aided by leading institutions across the globe, now comes together with all of this. I believe we currently have 47 papers, peer-reviewed papers, either already published or on the verge of publication. What that shows is that the environmental impacts are entirely manageable, and that they are a fraction of what people once assumed. They're mostly confined to the extraction area. Naturally, I think this helps make it a bipartisan matter, since critical minerals are essential to how the U.S. economy functions and to its security. The only thing that ever gave anyone pause was really the environmental side, yet we've consistently held that the environment is in fact the biggest positive for developing this resource, given the lower environmental impacts and the lower impacts on humans. So I'm quite confident we'll be spending plenty of time in D.C. There are many new representatives and senators whose understanding we need to, I suppose, raise regarding how important this resource is. We're feeling fairly good about it.

Yes, and I’ll add a little more context on that. As Jared mentioned at the start, NOAA sits within the Commerce Department. It’s an executive branch agency. We’ve been moving through this process one step at a time under the implementing regulations for DSHMRA, which is the law that gave NOAA regulatory authority over this industry back in the 1980s. So this rests with the executive branch. On the funding side, too, I think many other companies—Heiko, you cover a lot of names, not only TMC but others as well—have seen shifts back and forth depending on political winds. But the money available here, much of which has not yet been deployed, is generally dedicated to certain cabinet departments and agencies through a reconciliation process and budgeting that has already been approved. Those funds are earmarked for how these various cabinet departments want to spend them, and many of those departments are now working together. We’re glad to report on the nodule city potential. That funding is really already committed to them, and it isn’t something where you would necessarily see those funds put at risk or removed. Now, over time, could there be effects in future years on appropriations, on the reconciliation process, on what is available to deploy? Sure. But the money already allocated—in fact, there’s a good article from mining.com this week in which they interviewed Clark Street Associates on exactly this point. So on both the funding side and the permitting side, we believe we’re in a very good position despite some of the narrative out there in the market. Again, though, this isn’t about an executive order; it’s about a clear regulatory statute that we are following step by step.

Yeah. That's a really fair and quite thorough answer, and I think it probably calms a few of the worries I've heard about over the phone, and I appreciate the detail. Then just a quick one. You mentioned the lower CapEx Hidden Gem, and how you plan to convert it in year three while it's in production. I'm just trying to work out how exactly that's meant to work. How do you expect to keep the assets running while you add capacity there?

No, that would be a swap out. Basically, as custodians of your capital, we're very conscious of restoring value to the equity. Naturally, we have confidence in this. As we demonstrate the shift into commercial production, the key priority is simply to begin — since it's broadly recognized that this resource's size and quality are exceptional. To be specific, we've defined 1.6 billion tons, and we believe there's an additional 300 million to 400 million tons within the area we've applied for. So we're talking about 2 billion tons of high-grade nickel, copper, cobalt, and manganese. When you combine the copper with copper equivalents, that comes to roughly 7% or more — 2 billion tons at 7%-plus copper and copper equivalents. There simply isn't another resource anywhere on the planet that measures up. We decided that holding to the timeline mattered most, and that getting into production was simply necessary. After that, naturally, we expect capital to become more broadly accessible; already folks are approaching us with strong financing concepts for new vessels, along with operators eager to deploy vessels and providers willing to supply funding so we can add more boats on the water. That allows us to push back that investment until, in our judgment, more fitting and suitable value has returned to the equity. We'd keep that first boat in production until the timing made sense, and after that we'd bring the second boat over to the area, followed by the third and the fourth.