UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 2.02. | Results of Operations and Financial Condition. |
On March 25, 2024, TMC the metals company Inc. (the “Company”) issued a press release announcing its results for the fourth quarter and full year ended December 31, 2023 and providing a business update. A copy of the press release is furnished as Exhibit 99.1 hereto. In addition, the Company will hold a conference call on March 25, 2024 at 4:30 p.m. EDT to discuss these results and the business update.
The information in this Current Report on Form 8-K (including Exhibit 99.1) shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as expressly set forth by specific reference in such a filing.
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in the press release attached as an exhibit hereto, the press release contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the press release regarding these forward-looking statements.
| Item 4.02. | Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review |
(a) On March 22, 2024, the Audit Committee (the “Audit Committee”) of the Board of Directors (the “Board”) of the Company and the Board, after discussions with Ernst & Young LLP, the Company’s independent registered public accounting firm, and the Company’s legal advisors, concluded that the Company’s previously issued financial statements (i) for the three months ended March 31, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended March 31, 2023 as filed with the Securities and Exchange Commission (the “SEC”) on May 11, 2023, (ii) the six months ended June 30, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2023 as filed with SEC on August 14, 2023 and (iii) the nine months ended September 30, 2023 contained in its Quarterly Report on Form 10-Q for the quarter ended September 30, 2023 as filed with SEC on November 9, 2023 (the “Previous Financial Statements”) should be restated and, accordingly, should no longer be relied upon.
In February 2023, the Company and its wholly-owned subsidiary, Nauru Ocean Resources Inc. (“NORI”), entered into a strategic partnership with Low Carbon Royalties Inc. (“LCR”), a private corporation formed under the laws of British Columbia, Canada to finance low carbon emitting energy production and technologies (natural gas, nuclear, renewables), transition metals and minerals required for energy storage and electrification (Cu, Li, Ni, Co, Mn), and the evolving environmental markets. The Company agreed with LCR to a purchase and sale agreement whereby LCR acquired a 2.0% gross overriding royalty on our NORI project area in the Clarion Clipperton Zone of the Pacific Ocean (“NORI Royalty”). In consideration for the NORI Royalty, the Company received $5,000,000 cash and an initial 35.0% equity interest in LCR.
As will be disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023 expected to be filed with the SEC on March 25, 2024 (the “2023 Annual Report”) – see Note 22, Quarterly Financial Data (Unaudited) Restatement of Previously Issued Financial Statements, to the audited consolidated financial statements included in the 2023 Annual Report when available - and as will be discussed on the Company’s conference call for the fourth quarter and full year ended December 31, 2023 to be held on March 25, 2024, the right to royalty payments underlying the NORI asset (sale of future revenue) amounting to $14 million was considered as the transfer (sale) of a non-financial asset in the Previous Financial Statements. In preparing the Previous Financial Statements, the Company derecognized the capitalized exploration contract related to the NORI project amounting to $0.25 million and recorded the remaining value of the non-financial asset received amounting to $13.75 million as a gain on disposition. In connection with the preparation of the financial statements for the year ended December 31, 2023 and a re-evaluation of Accounting Standards Codification 470, Debt (“ASC 470”), by the Company, the Company concluded that the sale of future revenue falls within the scope of ASC 470 and, as a result, the Company re-evaluated whether the offsetting entry to the proceeds it received from LCR should be classified as debt or deferred income. As the transaction with LCR was considered an equity investment rather than a sale transaction, the sale of future revenue will be reclassified as Royalty liability, as per ASC 470, in the Company’s 2023 financial statements for the year ended December 31, 2023 to be included in the 2023 Annual Report. Factors that also influenced this reclassification included the Company’s continued significant involvement in generating future cash flows from operations and the fact that the earnings process implied in this transaction had not been completed. As a result, the Company will restate the Previous Financial Statements in the 2023 Annual Report.
| • | This error had no impact on the Company’s annual audited financial statements as of December 31, 2023 to be included in the 2023 Annual Report. |
| • | This error had no impact on the consolidated statements of loss and comprehensive loss for the three-month period ended June 30, 2023 and the three month period ended September 30, 2023. |
| • | The error and restatement of the 2023 quarterly financial statements does not impact the Company’s reported cash position in any of the previously reported periods or as of December 31, 2023. |
The following tables present a reconciliation of the Company’s unaudited condensed consolidated financial information as originally reported in the Previous Financial Statements to the as restated amounts as of and for the three months ended March 31, 2023, six months ended June 30, 2023 and nine months ended September 30, 2023. The restatements will be reflected in the comparative financial statements included in the Company’s future filings of its 2024 unaudited condensed consolidated financial statements within the Company’s Quarterly Reports on Form 10-Q for the quarters ended March 31, 2024, June 30, 2024 and September 30, 2024, respectively.
The tables below set forth the unaudited condensed consolidated balance sheet information, the unaudited condensed statements of loss and comprehensive loss and the unaudited condensed consolidated statements of cash flows including the amounts as reported, adjustments and the amounts as restated (in thousands, except per share amounts):
Condensed Consolidated Balance Sheet Information
| As at March 31, 2023 | As at June 30, 2023 | As at September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As
Restated | As Previously Reported | Restatement Adjustments | As
Restated | As Previously Reported | Restatement Adjustments | As
Restated | ||||||||||||||||||||||||||||
| ASSETS | ||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||
| Cash | $ | 28,390 | $ | 28,390 | $ | 20,006 | $ | 20,006 | $ | 22,548 | $ | 22,548 | ||||||||||||||||||||||||
| Receivables and prepayments | 3,230 | 3,230 | 1,637 | 1,637 | 5,325 | 5,325 | ||||||||||||||||||||||||||||||
| 31,620 | - | 31,620 | 21,643 | - | 21,643 | 27,873 | - | 27,873 | ||||||||||||||||||||||||||||
| Non-current | ||||||||||||||||||||||||||||||||||||
| Exploration contracts | 42,900 | 250 | 43,150 | 42,900 | 250 | 43,150 | 42,900 | 250 | 43,150 | |||||||||||||||||||||||||||
| Equipment | 1,997 | 1,997 | 1,970 | 1,970 | 2,078 | 2,078 | ||||||||||||||||||||||||||||||
| Right-of-use asset | - | - | - | 6,198 | 6,198 | |||||||||||||||||||||||||||||||
| Investment | 8,781 | 8,781 | 8,644 | 8,644 | 8,525 | 8,525 | ||||||||||||||||||||||||||||||
| 53,678 | 250 | 53,928 | 53,514 | 250 | 53,764 | 59,701 | 250 | 59,951 | ||||||||||||||||||||||||||||
| TOTAL ASSETS | $ | 85,298 | $ | 250 | $ | 85,548 | $ | 75,157 | $ | 250 | $ | 75,407 | $ | 87,574 | $ | 250 | $ | 87,824 | ||||||||||||||||||
| LIABILITIES | ||||||||||||||||||||||||||||||||||||
| Current | ||||||||||||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | 17,544 | 17,544 | 18,113 | 18,113 | 19,344 | 19,344 | ||||||||||||||||||||||||||||||
| 17,544 | - | 17,544 | 18,113 | - | 18,113 | 19,344 | - | 19,344 | ||||||||||||||||||||||||||||
| Non-current | ||||||||||||||||||||||||||||||||||||
| Deferred tax liability | 10,675 | 10,675 | 10,675 | 10,675 | 10,675 | 10,675 | ||||||||||||||||||||||||||||||
| Royalty Liability | - | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | 14,000 | |||||||||||||||||||||||||||||
| Warrants liability | 1,528 | 1,528 | 2,314 | 2,314 | 2,197 | 2,197 | ||||||||||||||||||||||||||||||
| TOTAL LIABILITIES | $ | 29,747 | $ | 14,000 | $ | 43,747 | $ | 31,102 | $ | 14,000 | $ | 45,102 | $ | 32,216 | $ | 14,000 | $ | 46,216 | ||||||||||||||||||
| EQUITY | ||||||||||||||||||||||||||||||||||||
| Common shares (unlimited shares, no par value) | 345,090 | 345,090 | 345,775 | 345,775 | 434,099 | 434,099 | ||||||||||||||||||||||||||||||
| Special Shares | - | - | - | - | - | - | ||||||||||||||||||||||||||||||
| Additional paid in capital | 186,796 | 186,796 | 188,722 | 188,722 | 124,168 | 124,168 | ||||||||||||||||||||||||||||||
| Accumulated other comprehensive loss | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | (1,216 | ) | ||||||||||||||||||||||||
| Deficit | (475,119 | ) | (13,750 | ) | (488,869 | ) | (489,226 | ) | (13,750 | ) | (502,976 | ) | (501,693 | ) | (13,750 | ) | (515,443 | ) | ||||||||||||||||||
| TOTAL EQUITY | $ | 55,551 | (13,750 | ) | $ | 41,801 | $ | 44,055 | (13,750 | ) | $ | 30,305 | $ | 55,358 | (13,750 | ) | $ | 41,608 | ||||||||||||||||||
| TOTAL LIABILITIES AND EQUITY | $ | 85,298 | $ | 250 | $ | 85,548 | $ | 75,157 | $ | 250 | $ | 75,407 | $ | 87,574 | $ | 250 | $ | 87,824 | ||||||||||||||||||
Condensed Consolidated Statements of Loss and Comprehensive Loss
| For
three months period ended March 31, 2023 | For
six months period ended June 30, 2023 | For
nine months period ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | ||||||||||||||||||||||||||||
| Operating expenses | ||||||||||||||||||||||||||||||||||||
| Exploration and evaluation expenses | $ | 7,169 | $ | 7,169 | $ | 15,267 | $ | 15,267 | $ | 23,172 | $ | 23,172 | ||||||||||||||||||||||||
| General and administrative expenses | 6,214 | 6,214 | 11,345 | 11,345 | 15,958 | 15,958 | ||||||||||||||||||||||||||||||
| Operating loss | 13,383 | 13,383 | 26,612 | 26,612 | 39,130 | 39,130 | ||||||||||||||||||||||||||||||
| Other items | ||||||||||||||||||||||||||||||||||||
| Equity-accounted investment loss | 219 | 219 | 356 | 356 | 475 | 475 | ||||||||||||||||||||||||||||||
| Gain on disposition of asset | (13,750 | ) | 13,750 | 0 | (13,750 | ) | 13,750 | 0 | (13,750 | ) | 13,750 | 0 | ||||||||||||||||||||||||
| Change in fair value of warrants liability | 544 | 544 | 1,331 | 1,331 | 1,214 | 1,214 | ||||||||||||||||||||||||||||||
| Foreign exchange loss | 29 | 29 | 52 | 52 | 66 | 66 | ||||||||||||||||||||||||||||||
| Interest income | (454 | ) | (454 | ) | (773 | ) | (773 | ) | (1092 | ) | (1092 | ) | ||||||||||||||||||||||||
| Fees and interest on credit facility | 27 | 27 | 277 | 277 | 529 | 529 | ||||||||||||||||||||||||||||||
| Loss and comprehensive loss for the year, before tax | $ | (2 | ) | $ | 13,750 | $ | 13,748 | $ | 14,105 | $ | 13,750 | $ | 27,855 | $ | 26,572 | $ | 13,750 | $ | 40,322 | |||||||||||||||||
| Tax expense | ||||||||||||||||||||||||||||||||||||
| Loss (gain) and comprehensive loss (gain) for the period, after tax | $ | (2 | ) | $ | 13,750 | $ | 13,748 | $ | 14,105 | $ | 13,750 | $ | 27,855 | $ | 26,572 | $ | 13,750 | $ | 40,322 | |||||||||||||||||
| Loss per share | ||||||||||||||||||||||||||||||||||||
| - basic and diluted | - | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.05 | $ | 0.10 | $ | 0.09 | $ | 0.05 | $ | 0.14 | |||||||||||||||||||
| Weighted average number of Common Shares outstanding – basic | 272,029,603 | 272,029,603 | 272,029,603 | 276,702,050 | 276,702,050 | 276,702,050 | 282,745,892 | 282,745,892 | 282,745,892 | |||||||||||||||||||||||||||
| Weighted average number of Common Shares outstanding – diluted | 300,376,133 | 272,029,603 | 272,029,603 | 276,702,050 | 276,702,050 | 276,702,050 | 282,745,892 | 282,745,892 | 282,745,892 | |||||||||||||||||||||||||||
Condensed Consolidated Statements of Cash Flows
| For
three months period ended March 31, 2023 | For
six months period ended June 30, 2023 | For
nine months period ended September 30, 2023 | ||||||||||||||||||||||||||||||||||
| As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | As Previously Reported | Restatement Adjustments | As Restated | ||||||||||||||||||||||||||||
| Operating activities | ||||||||||||||||||||||||||||||||||||
| Gain/(Loss) for the period | 2 | (13,750 | ) | (13,748 | ) | (14,105 | ) | (13,750 | ) | (27,855 | ) | (26,572 | ) | (13,750 | ) | (40,322 | ) | |||||||||||||||||||
| Items not affecting cash: | ||||||||||||||||||||||||||||||||||||
| Amortization | 88 | 88 | 175 | 175 | 262 | 262 | ||||||||||||||||||||||||||||||
| Lease expense | - | - | - | 318 | 318 | |||||||||||||||||||||||||||||||
| Expenses settled with share-based payments | 1,775 | 1,775 | 4,307 | 4,307 | 6,839 | 6,839 | ||||||||||||||||||||||||||||||
| Expenses to be settled with share-based payments | 15 | 15 | 0 | 0 | ||||||||||||||||||||||||||||||||
| Equity-accounted investment loss | 219 | 219 | 356 | 356 | 475 | 475 | ||||||||||||||||||||||||||||||
| Gain on disposition of asset | (13,750 | ) | 13,750 | - | (13,750 | ) | 13,750 | - | (13,750 | ) | 13,750 | - | ||||||||||||||||||||||||
| Change in fair value of warrants liability | 545 | 545 | 1,331 | 1,331 | 1,214 | 1,214 | ||||||||||||||||||||||||||||||
| Vesting of Allseas Warrant | - | - | - | - | ||||||||||||||||||||||||||||||||
| Unrealized foreign exchange movement | (20 | ) | (20 | ) | (17 | ) | (17 | ) | (24 | ) | (24 | ) | ||||||||||||||||||||||||
| Changes in working capital: | ||||||||||||||||||||||||||||||||||||
| Receivables and prepayments | (469 | ) | (469 | ) | 1,123 | 1,123 | (2,364 | ) | (2,364 | ) | ||||||||||||||||||||||||||
| Accounts payable and accrued liabilities | (11,877 | ) | (11,877 | ) | (11,277 | ) | (11,277 | ) | (10,757 | ) | (10,757 | ) | ||||||||||||||||||||||||
| Net cash used in operating activities | (23,472 | ) | - | (23,472 | ) | (31,857 | ) | - | (31,857 | ) | (44,359 | ) | - | (44,359 | ) | |||||||||||||||||||||
| Investing activities | ||||||||||||||||||||||||||||||||||||
| Cash received from investment in Low Carbon Royalties | 5,000 | (5,000 | ) | - | 5,000 | (5,000 | ) | - | 5,000 | (5,000 | ) | - | ||||||||||||||||||||||||
| Acquisition of equipment | - | - | (75 | ) | (75 | ) | (175 | ) | (175 | ) | ||||||||||||||||||||||||||
| Net cash provided by (used in) investing activities | 5,000 | (5,000 | ) | - | 4,925 | (5,000 | ) | -75 | 4,825 | (5,000 | ) | -175 | ||||||||||||||||||||||||
| Financing activities | ||||||||||||||||||||||||||||||||||||
| Proceeds from Low Carbon Royalties investment | - | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | 5,000 | |||||||||||||||||||||||||||||
| Proceeds from Registered Direct Offering | - | - | - | 15,723 | 15,723 | |||||||||||||||||||||||||||||||
| Expenses paid for Registered Direct Offering | - | - | - | (779 | ) | (779 | ) | |||||||||||||||||||||||||||||
| Proceeds from PIPE financing | - | - | - | - | ||||||||||||||||||||||||||||||||
| Expenses paid for PIPE financing | - | - | - | - | ||||||||||||||||||||||||||||||||
| Proceeds from employee stock plan | - | - | 49 | 49 | 49 | 49 | ||||||||||||||||||||||||||||||
| Proceeds from exercise of stock options | - | - | - | 77 | 77 | |||||||||||||||||||||||||||||||
| Proceeds from exercise of warrants by Allseas | - | - | - | 116 | 116 | |||||||||||||||||||||||||||||||
| Proceeds from issuance of shares | - | - | 30 | 30 | 30 | 30 | ||||||||||||||||||||||||||||||
| Taxes withheld and paid on share-based compensation | - | - | - | |||||||||||||||||||||||||||||||||
| Net cash provided by financing activities | - | 5,000 | 5,000 | 79 | 5,000 | 5,079 | 15,216 | 5,000 | 20,216 | |||||||||||||||||||||||||||
| Decrease in cash | (18,472 | ) | (18,472 | ) | (26,853 | ) | (26,853 | ) | (24,318 | ) | (24,318 | ) | ||||||||||||||||||||||||
| Impact of exchange rate changes on cash | 20 | 20 | 17 | 17 | 24 | 24 | ||||||||||||||||||||||||||||||
| Cash - beginning of period | 46,842 | 46,842 | 46,842 | 46,842 | 46,842 | 46,842 | ||||||||||||||||||||||||||||||
| Cash - end of period | 28,390 | 28,390 | 20,006 | 20,006 | 22,548 | 22,548 | ||||||||||||||||||||||||||||||
Cautionary Note Regarding Forward-Looking Statements. Except for historical information contained in this Current Report on Form 8-K, this Current Report on Form 8-K contains forward-looking statements which involve certain risks and uncertainties that could cause actual results to differ materially from those expressed or implied by these statements. Please refer to the cautionary note in the 2023 Annual Report, when available, regarding these risks and uncertainties.
| Item 9.01. | Financial Statements and Exhibits. |
(d) Exhibits.
| Exhibit No. | Description |
| 99.1 | Press Release dated March 25, 2024 |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| TMC THE METALS COMPANY INC. | ||
| Date: March 25, 2024 | By: | /s/ Craig Shesky |
| Name: | Craig Shesky | |
| Title: | Chief Financial Officer | |
Exhibit 99.1
TMC Announces Fourth Quarter and Full Year 2023 Results
NEW YORK, March 25, 2024 — TMC the metals company Inc. (Nasdaq: TMC) (“TMC” or “the Company”), an explorer of lower-impact battery metals from seafloor polymetallic nodules, today provided a corporate update and fourth quarter and full year financial results for the period ending December 31, 2023.
Q4 2023 and FY 2023 Financial Highlights
| · | $15.2 million cash used in operations for the quarter ended December 31, 2023 |
| · | Net loss of $33.5 million and net loss per share of $0.11 for the quarter ended December 31, 2023 |
| · | For the full year 2023, a net loss of $73.8 million or $0.26 per share (compared to $171 million and $0.71 per share in 2022) |
| · | Total cash on hand of approximately $6.8 million at December 31, 2023, excluding $9 million received in January 2024 as final payment from the Registered Direct Offering announced in August 2023 |
| · | Total pro forma liquidity of approximately $61 million at December 31, 2023, inclusive of: |
| o | Cash of $6.8 million |
| o | $9 million of additional gross proceeds received in January 2024 from the final payment in the Registered Direct Offering |
| o | The undrawn $25 million unsecured credit facility from an affiliate of Allseas Group SA, the maturity date of which has been extended through August 2025 |
| o | An additional $20 million unsecured credit facility with a maturity date of September 22, 2025 provided by our largest shareholder, ERAS Capital LLC (the family office of TMC director Andrei Karkar), and our Chairman & CEO, Gerard Barron |
Gerard Barron, CEO & Chairman of The Metals Company commented: “Over the last 12 years, we’ve completed 22 offshore campaigns on the NORI-D area to build a data-driven picture of the marine environment and how it is impacted by nodule collection. NORI’s investment in research by the world’s leading deep-sea research institutions has produced the most comprehensive dataset ever collected in the CCZ and a fair bit of excitement among the researchers. Our latest campaign to assess the state of the ecosystem 12 months after the nodule collection pilot finished earlier this month, and the observed state of the seafloor ecosystem was encouraging. We believe we now have sufficient real-world data to address most of the concerns raised by those who oppose the industry, and we look forward to researchers publishing their findings in peer-reviewed literature and NORI submitting its Environmental Impact Statement to the International Seabed Authority (ISA). Perceptions of the environmental peril of nodule collection are starting to be publicly challenged by ocean scientists: it was exciting to see an influential group like the Breakthrough Institute publicly weigh into the debate.”
“We are also encouraged by the pace of U.S. initiatives aimed at supporting domestic processing and refining of polymetallic nodules, as well as re-invigorated calls for the U.S. to ratify the Law of the Sea treaty and take advantage of Member State rights that come with the ratification. Meanwhile, two new applications for deep-sea mineral exploration have recently been submitted to the ISA by the government of India. With support for deep-sea minerals growing, I’m happy to provide additional financial flexibility to TMC in the form of a new unsecured credit facility alongside our director and largest shareholder Andrei Karkar, which is in addition to the existing and recently extended Allseas credit facility. As discussions with potential strategic partners continue, these significant sources of liquidity from our three largest shareholders will help ensure that we can deliver a world-class application for an exploitation contract following the July 2024 ISA session.”
Operational Highlights Since Last Corporate Update
| · | Update to NORI-D Expected Timeline to First Production: We are currently focused on preparing our application to submit to the ISA for our first exploitation contract for NORI Area D following the July 2024 meeting of the ISA. We now expect to commence production offshore at the end of the first quarter of 2026, assuming an ISA review process of approximately one year from the submission of our application. This new estimated timeline to first production is based on: |
| o | Refined assumptions following discussions with our strategic partner, Allseas, with respect to planned upgrades to the Hidden Gem (including an additional nodule collector vehicle and associated equipment) to increase maximum annual production capacity from 1.3 million wet tonnes to 3.0 million wet tonnes of nodules per annum while carefully ramping-up production in manageable increments over a 5-year period based on precautionary principles. These planned upfront upgrades to the Hidden Gem’s capacity, prior to the start of production, will help avoid a situation where the Hidden Gem would need to be taken out of the field to increase its nameplate production capacity from 1.3 to 3Mtpa. |
| o | The latest consolidated ISA draft text of the rules, regulations and procedures the “Mining Code”) issued on February 16, 2024, describe an estimated review process on an application for an exploitation contract of 344 days, compared to previous versions which described a review process of 315 days. |
| · | TMC Subsidiary NORI Concludes Key Offshore Research Campaign, Evaluating Seafloor Ecosystem Function a Year Post Nodule Collection Test: In December 2023, we announced the completion of one of the two offshore scientific research campaign to assess seafloor impacts and recovery rates twelve months after the pilot nodule collection system test conducted by NORI. NORI’s December offshore scientific research campaign successfully gathered crucial environmental data on ecosystem recovery and functioning to further support our application for a commercial exploitation contract, and the preliminary qualitative assessments are encouraging. |
| · | NORI Shares Preliminary Findings on Environmental Impacts of Pilot Nodule Collection System Test: In November 2023, we began sharing emerging data on the impacts of seafloor sediment plumes, which show that the plume forms a gravity-driven turbidity current that hugs the contours of the seafloor and does not loft up into the water column where it could possibly be transported longer distances by ocean currents. A key component to understanding our environmental impacts, the data builds upon earlier laboratory predictions and in-field verifications from prior collector tests. |
| · | First Nickel Sulfate Produced from Polymetallic Nodules: In March 2024, NORI produced what is believed to be the first nickel sulfate ever generated from polymetallic nodules. The sulfate, whose quality is indicative of material suitable for battery markets pending confirmation of preliminary assays, was produced in a program testing our efficient flowsheet design that processes intermediate nickel matte direct to nickel sulfate (without making nickel metal) and produces fertilizer byproducts instead of waste. |
| · | Binding MoU with Pacific Metals Company of Japan (“PAMCO”): In November 2023, we signed a binding Memorandum of Understanding (MoU) with PAMCO to process 1.3 million wet tonnes of nodules when commercial operations commence. PAMCO is planning a commercial sized pilot production run in the second quarter of 2024 in which 2,000 tonnes of nodules, collected during NORI’s mining test, will be processed at PAMCO’s existing rotary kiln-electric arc furnace (RKEF) plant. |
Industry Update
| · | International Seabed Authority: Part 1 of the ISA’s 29th Session is currently taking place between March 18-29, 2024, where the ISA Council will continue negotiations of the Mining Code. In February 2024, the ISA published a consolidated set of draft regulations for the first time, harmonizing and cleaning up the text. The 225-page text is comprehensive and signals the next phase in the negotiations. |
| · | New ISA Exploration Applications from the government of India: In January 2024, the Government of India submitted two applications to the ISA for approval of two plans of work for exploration in the international seabed area (the Area) of the Indian Ocean. The Government of India already holds two contracts for exploration—one for polymetallic sulphides in the Central Indian Ocean Basin and another for polymetallic nodules in the Indian Ocean Ridge. |
| · | Forthcoming Pentagon Report on Domestic Processing of Seafloor Nodules: In January 2024, we welcomed the passage of the 2024 National Defense Authorization Act (“NDAA”) into law and the inclusion of provisions directing the U.S. Department of Defense to submit a report to the House Armed Services Committee assessing the domestic processing of seafloor polymetallic nodules. |
| · | Thirty-One Members of the U.S. Congress Call Upon Pentagon to Develop Plan for Processing Deep-Sea Polymetallic Nodules: In December 2023, we welcomed a letter by thirty-one Members of the U.S. House of Representatives calling upon the U.S. Department of Defense to address the national security implications of deep-sea nodule collection as part of its mandate to ensure the stability and strength of critical minerals used for defense and clean energy technologies like batteries and renewable energy infrastructure. |
| · | ~350 Former U.S. Political and Military Leaders Urge Senate to Ratify the Law of the Sea: In March 2024, an influential group of former U.S. government officials and military officers — including former Secretary of State Hillary Clinton and former Secretary of Defense Leon Panetta — urged U.S. Senators to ratify the Law of the Sea Treaty (UNCLOS), so “The United States can take its seat on the Council of the International Seabed Authority”, and pursue deep sea mining sites “each containing a trillion dollars in value.” |
| · | Responsible Use of Seafloor Resources Act (RUSRA): In March 2024, legislation was introduced in the U.S. House of Representatives calling for the U.S. to “support international governance of seafloor resource exploration and responsible polymetallic nodule collection by allied partners”, and to “provide financial, diplomatic, or other forms of support for seafloor nodule collection, processing and refining.” |
Financial Results Overview
At December 31, 2023, we held cash of approximately $6.8 million and held no financial debt. We believe that our cash on hand, and borrowing availability under our recently amended and extended credit facility with an affiliate of Allseas, and our recently announced credit facility with ERAS Capital LLC and Mr. Barron, will be sufficient to meet our working capital and capital expenditure commitments for at least the next twelve months from today.
We reported a net loss of approximately $33.5 million, or $0.11 per share for the quarter ended December 31, 2023, compared to net loss of $109.6 million, or $0.41 per share, for the quarter ended December 31, 2022. Exploration and evaluation expenses during the quarter ended December 31, 2023 were $26.7 million compared to $81.8 million for the quarter ended December 31, 2022. The significant decrease in the exploration and evaluation expenses in the fourth quarter of 2023 reflects a reduction in environmental studies costs as the collector test was completed in 2022, partially offset by the monitoring work in the NORI Area D following the collector test which was carried out in the fourth quarter of 2023, a reduction in the pilot mining test system (“PMTS”) cost and a reduction in share based compensation cost as the cost of the Long-Term Incentive Plan (“LTIP”) options with specific market capitalization vesting conditions were fully amortized in 2022. In addition, the last quarter of 2022 included a charge of $69.9 million on the fair value of the exercise of the warrant held by Allseas. The reduction in these costs in 2023 was partially offset by an increase in engineering work to advance the NORI project, an increase in exploration labor costs mainly attributable to an increase in headcount and an increase in the cost of prefeasibility work.
General and administrative expenses were $6.6 million for the quarter ended December 31, 2023 compared to $7.0 million for the quarter ended December 31, 2022, reflecting lower share-based compensation in the 2023 period, as LTIP options with specific market capitalization vesting conditions were fully amortized in 2022, partially offset by higher spending on consulting and advisory work.
We reported a net loss for the year ended December 31, 2023 of $73.8 million, or $0.26 per share, compared to net loss of $171.0 million, or $0.71 per share, for the year ended December 31, 2022. Exploration and evaluation expenses during the year ended December 31, 2023 were $49.8 million compared to $144.6 million for the year ended December 31, 2022. General and administrative expenses in 2023 were $22.5 million compared to $29.5 million in 2022. For the year ended December 31, 2023, we recorded total share-based compensation expenses of $9.2 million ($17.1 million in 2022) of which $5.1 million was recorded in exploration and evaluation expenses ($8.5 million in 2022) and $4.1 million was recorded in general and administrative expenses ($8.6 million in 2022).
Conference Call
We will hold a conference call today at 4:30 p.m. EDT to provide an update on recent corporate developments, fourth quarter and full year 2023 financial results and upcoming milestones.
Fourth Quarter and Full Year 2023 Conference Call Details
| Date: | Monday, March 25, 2024 |
| Time: | 4:30 pm EDT |
| Audio-only Dial-in: | Register Here |
| Virtual webcast w/ slides: | Register Here |
Please register with the links above at least ten minutes prior to the conference call. The virtual webcast will be available for replay in the ‘Investors’ tab of the Company’s website under ‘Investors’ > ‘Media’ > ‘Events and Presentations’, approximately two hours after the event.
About The Metals Company
The Metals Company is an explorer of lower-impact battery metals from seafloor polymetallic nodules, on a dual mission: (1) supply metals for the global energy transition with the least possible negative impacts on planet and people and (2) trace, recover and recycle the metals we supply to help create a metals commons that can be used in perpetuity. The Company through its subsidiaries holds exploration and commercial rights to three polymetallic nodule contract areas in the Clarion Clipperton Zone of the Pacific Ocean regulated by the International Seabed Authority and sponsored by the governments of Nauru, Kiribati and the Kingdom of Tonga. More information is available at www.metals.co.
Contacts
Media | media@metals.co
Investors | investors@metals.co
Forward Looking Statements
This press release contains “forward-looking” statements and information within the meaning of the Private Securities Litigation Reform Act of 1995. These statements may be identified by words such as “aims,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “may,” “plans,” “possible,” “potential,” “will” and variations of these words or similar expressions, although not all forward-looking statements contain these words. Forward-looking statements in this press release include, but are not limited to, statements with respect to the expected timing of first production, estimated timing of ISA review of the Company’s application for an exploitation contract, the Company’s expected filing of an application for an exploitation contract, PAMCO’s planned commercial sized pilot production run, and the Company’s anticipated cash runway. The Company may not actually achieve the plans, intentions or expectations disclosed in these forward-looking statements, and you should not place undue reliance on these forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in these forward-looking statements as a result of various factors, including, among other things: the Company’s strategies and future financial performance; the ISA's ability to timely adopt the Mining Code and/or willingness to review and/or approve a plan of work for exploitation under the United Nations Convention on the Laws of the Sea (UNCLOS); the Company’s ability to obtain exploitation contracts or approved plans of work for exploitation for its areas in the Clarion Clipperton Zone; regulatory uncertainties and the impact of government regulation and political instability on the Company’s resource activities; changes to any of the laws, rules, regulations or policies to which the Company is subject, including the terms of the final Mining Code, if any, adopted by ISA and the potential timing thereof; the impact of extensive and costly environmental requirements on the Company’s operations; environmental liabilities; the impact of polymetallic nodule collection on biodiversity in the Clarion Clipperton Zone and recovery rates of impacted ecosystems; the Company’s ability to develop minerals in sufficient grade or quantities to justify commercial operations; the lack of development of seafloor polymetallic nodule deposit; the Company’s ability to successfully enter into binding agreements with Allseas Group S.A. and other parties in which it is in discussions, if any; uncertainty in the estimates for mineral resource calculations from certain contract areas and for the grade and quality of polymetallic nodule deposits; risks associated with natural hazards; uncertainty with respect to the specialized treatment and processing of polymetallic nodules that the Company may recover; risks associated with collective, development and processing operations, including with respect to the development of onshore processing capabilities and capacity and Allseas Group S.A.’s expected development efforts with respect to the Project Zero offshore system; the Company’s dependence on Allseas Group S.A.; fluctuations in transportation costs; fluctuations in metals prices; testing and manufacturing of equipment; risks associated with the Company’s limited operating history, limited cash resources and need for additional financing; risks associated with the Company’s intellectual property; Low Carbon Royalties’ limited operating history and other risks and uncertainties, any of which could cause the Company’s actual results to differ from those contained in the forward-looking statements, that are described in greater detail in the section entitled “Risk Factors” in the Company’s Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission (SEC), including the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, when filed with the SEC. Any forward-looking statements contained in this press release speak only as of the date hereof, and the Company expressly disclaims any obligation to update any forward-looking statements contained herein, whether because of any new information, future events, changed circumstances or otherwise, except as otherwise required by law.
| TMC the metals company Inc. |
Consolidated Balance Sheets (in thousands of US Dollars, except share amounts) |
As at December 31, 2023 | As at December 31, 2022 | |||||||
| ASSETS | ||||||||
| Current | ||||||||
| Cash | $ | 6,842 | $ | 46,876 | ||||
| Receivables and prepayments | 1,978 | 2,726 | ||||||
| 8,820 | 49,602 | |||||||
| Non-current | ||||||||
| Exploration contracts | 43,150 | 43,150 | ||||||
| Equipment | 2,776 | 2,025 | ||||||
| Right-of-use asset | 5,721 | - | ||||||
| Investment | 8,429 | - | ||||||
| 60,076 | 45,175 | |||||||
| TOTAL ASSETS | $ | 68,896 | $ | 94,777 | ||||
| LIABILITIES | ||||||||
| Current | ||||||||
| Accounts payable and accrued liabilities | 31,334 | 41,614 | ||||||
| 31,334 | 41,614 | |||||||
| Non-current | ||||||||
| Deferred tax liability | 10,675 | 10,675 | ||||||
| Royalty liability | 14,000 | - | ||||||
| Warrants liability | 1,969 | 983 | ||||||
| TOTAL LIABILITIES | $ | 57,978 | $ | 53,272 | ||||
| EQUITY | ||||||||
| Common shares (unlimited shares, no par value – issued: 306,558,710 (December 31, 2022 – 266,812,131)) | 438,239 | 332,882 | ||||||
| Special Shares | - | - | ||||||
| Additional paid in capital | 122,797 | 184,960 | ||||||
| Accumulated other comprehensive loss | (1,216 | ) | (1,216 | ) | ||||
| Deficit | (548,902 | ) | (475,121 | ) | ||||
| TOTAL EQUITY | 10,918 | 41,505 | ||||||
| TOTAL LIABILITIES AND EQUITY | $ | 68,896 | $ | 94,777 | ||||
| TMC the metals company Inc. |
Consolidated Statements of Loss and Comprehensive Loss (in thousands of US Dollars, except share and per share amounts) |
| For
the year ended December 31, 2023 | For
the year ended December 31, 2022 | |||||||
| Operating expenses | ||||||||
| Exploration and evaluation expenses | $ | 49,849 | $ | 144,599 | ||||
| General and administrative expenses | 22,540 | 29,518 | ||||||
| Operating loss | 72,389 | 174,117 | ||||||
| Other items | ||||||||
| Equity-accounted investment loss | 571 | - | ||||||
| Change in fair value of warrants liability | 986 | (2,143 | ) | |||||
| Foreign exchange loss | 310 | 24 | ||||||
| Interest income | (1,297 | ) | (1,111 | ) | ||||
| Fees and interest on credit facility | 781 | - | ||||||
| Loss and comprehensive loss for the year, before tax | $ | 73,740 | $ | 170,887 | ||||
| Tax expense | 41 | 77 | ||||||
| Loss and comprehensive loss for the year, after tax | $ | 73,781 | $ | 170,964 | ||||
| Loss per share | ||||||||
| - basic and diluted | $ | 0.26 | $ | 0.71 | ||||
| Weighted average number of Common Shares outstanding – basic and diluted | 288,643,700 | 239,867,019 | ||||||
| TMC the metals company Inc. |
Consolidated Statements of Changes in Equity (in thousands of US Dollars, except share amounts) |
| Accumulated | |||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
| Common Shares | Special | Paid in | Comprehensive | |||||||||||||||||||||||||
| For the year ended December 31, 2023 | Shares | Amount | Shares | Capital | Loss | Deficit | Total | |||||||||||||||||||||
| December 31, 2022 | 266,812,131 | $ | 332,882 | $ | - | $ | 184,960 | $ | (1,216 | ) | $ | (475,121 | ) | $ | 41,505 | |||||||||||||
| Shares issued to Allseas | 15,000,000 | 15,910 | - | - | - | - | 15,910 | |||||||||||||||||||||
| Exercise of warrant by Allseas | 11,578,620 | 70,016 | - | (69,900 | ) | - | - | 116 | ||||||||||||||||||||
| Issuance of shares and warrants under Registered Direct Offering, net of expenses | 7,961,540 | 11,420 | - | 3,179 | - | - | 14,599 | |||||||||||||||||||||
| Conversion of restricted share units, net of shares withheld for taxes | 4,912,747 | 7,720 | - | (7,690 | ) | - | - | 30 | ||||||||||||||||||||
| Shares purchased under Employee Share Purchase Plan | 173,672 | 147 | - | (45 | ) | - | - | 102 | ||||||||||||||||||||
| Exercise of stock options | 120,000 | 144 | - | (67 | ) | - | - | 77 | ||||||||||||||||||||
| Share-based compensation and Expenses settled with equity | - | - | - | 12,360 | - | - | 12,360 | |||||||||||||||||||||
| Loss for the year | - | - | - | - | - | (73,781 | ) | (73,781 | ) | |||||||||||||||||||
| December 31, 2023 | 306,558,710 | $ | 438,239 | $ | - | $ | 122,797 | $ | (1,216 | ) | $ | (548,902 | ) | $ | 10,918 | |||||||||||||
| Accumulated | |||||||||||||||||||||||||||
| Additional | Other | |||||||||||||||||||||||||||
| Common Shares | Special | Paid in | Comprehensive | |||||||||||||||||||||||||
| For the year ended December 31, 2022 | Shares | Amount | Shares | Capital | Loss | Deficit | Total | |||||||||||||||||||||
| December 31, 2021 | 225,432,493 | $ | 296,051 | $ | - | $ | 102,073 | $ | (1,216 | ) | $ | (304,157 | ) | $ | 92,751 | |||||||||||||
| Vesting of Allseas Warrant | - | - | - | 69,900 | - | - | 69,900 | |||||||||||||||||||||
| Issuance of shares under PIPE financing - net of expenses | 38,266,180 | 29,621 | - | - | - | - | 29,621 | |||||||||||||||||||||
| Conversion of restricted share units, net of shares withheld for taxes | 2,877,068 | 6,875 | - | (6,945 | ) | - | - | (70 | ) | |||||||||||||||||||
| Exercise of stock options | 118,461 | 142 | - | (66 | ) | - | - | 76 | ||||||||||||||||||||
| Shares purchased under Employee Share Purchase Plan | 117,929 | 193 | - | (79 | ) | - | - | 114 | ||||||||||||||||||||
| Share-based compensation and Expenses settled with equity | - | - | - | 20,077 | - | - | 20,077 | |||||||||||||||||||||
| Loss for the year | - | - | - | - | - | (170,964 | ) | (170,964 | ) | |||||||||||||||||||
| December 31, 2022 | 266,812,131 | $ | 332,882 | $ | - | $ | 184,960 | $ | (1,216 | ) | $ | (475,121 | ) | $ | 41,505 | |||||||||||||
| TMC the metals company Inc. |
Consolidated Statements of Cash Flows (in thousands of US Dollars) |
| For
the year ended December 31, 2023 | For
the year ended | |||||||
| Cash provided by (used in) | ||||||||
| Operating activities | ||||||||
| Loss for the year | $ | (73,781 | ) | $ | (170,964 | ) | ||
| Items not affecting cash: | ||||||||
| Amortization | 360 | 418 | ||||||
| Lease expense | 795 | - | ||||||
| Share-based compensation and Expenses settled with equity | 12,360 | 20,077 | ||||||
| Equity-accounted investment loss | 571 | - | ||||||
| Change in fair value of warrants liability | 986 | (2,143 | ) | |||||
| Vesting of Allseas Warrant | - | 69,900 | ||||||
| Unrealized foreign exchange movement | (51 | ) | (53 | ) | ||||
| Changes in working capital: | ||||||||
| Receivables and prepayments | 748 | 960 | ||||||
| Accounts payable and accrued liabilities | (1,561 | ) | 15,202 | |||||
| Net cash used in operating activities | (59,573 | ) | (66,603 | ) | ||||
| Investing activities | ||||||||
| Acquisition of equipment | (578 | ) | (1,169 | ) | ||||
| Net cash used in investing activities | (578 | ) | (1,169 | ) | ||||
| Financing activities | ||||||||
| Proceeds from Registered Direct Offering | 15,923 | - | ||||||
| Expenses paid for Registered Direct Offering | (1,182 | ) | - | |||||
| Proceeds from PIPE financing | - | 30,399 | ||||||
| Expenses paid for PIPE financing | - | (797 | ) | |||||
| Proceeds from employee share purchase plan | 102 | 114 | ||||||
| Proceeds from exercise of stock options | 77 | 76 | ||||||
| Proceeds from exercise of warrants by Allseas | 116 | - | ||||||
| Proceeds from issuance of shares | 30 | - | ||||||
| Proceeds from Low Carbon Royalties investment | 5,000 | - | ||||||
| Taxes withheld and paid on share-based compensation | - | (70 | ) | |||||
| Net cash provided by financing activities | 20,066 | 29,722 | ||||||
| Decrease in cash | $ | (40,085 | ) | $ | (38,050 | ) | ||
| Impact of exchange rate changes on cash | 51 | 53 | ||||||
| Cash - beginning of year | 46,876 | 84,873 | ||||||
| Cash - end of year | 6,842 | $ | 46,876 | |||||