TMC the metal company (TMC) - 2023 Q1 - Quarterly Report

Exploration and Production Plans - The company holds exclusive exploration rights to three polymetallic nodule contract areas in the Clarion Clipperton Zone (CCZ), covering approximately 74,830 km²[94] - The company plans to start commercial production by the end of 2024 or early 2025, pending the application for an exploitation contract from the International Seabed Authority (ISA)[81] - A non-binding memorandum of understanding (MoU) was signed with Pacific Metals Co Ltd (PAMCO) to evaluate the toll treatment of 1.3 million tonnes of wet polymetallic nodules per year starting in 2025[89] - The pilot nodule collection system is expected to have a production capacity of 1.3 million tonnes of wet nodules per year, with readiness targeted for Q4 2024[142] Financial Performance - The company reported a net income of approximately $nil for Q1 2023, compared to a net loss of $21.1 million in Q1 2022, marking a 100% reduction in net loss[114] - Exploration and evaluation expenses for Q1 2023 were $7.2 million, a decrease of 4% from $7.4 million in Q1 2022[113] - General and administrative expenses decreased by 27% to $6.2 million in Q1 2023 from $8.5 million in Q1 2022[113] - The company reported a gain of $13.75 million on the disposition of NORI's 2% royalty in Q1 2023[117] - The change in fair value of warrants liability resulted in a charge of $0.5 million in Q1 2023, compared to a charge of $5.2 million in Q1 2022, reflecting a 90% decrease[118] - The company has an accumulated deficit of approximately $475.1 million from inception through March 31, 2023[103] - As of March 31, 2023, the company had cash on hand of $28.4 million[119] Financing and Capital Strategy - The company entered into an unsecured credit facility agreement allowing borrowing up to $25 million, with interest based on the 6-month Secured Overnight Funding Rate (SOFR) plus 4% per annum[86] - The company is seeking additional financing to fund continued operations, which may include public or private equity, debt financings, or other sources[124] - The company entered into an At-the-Market Equity Distribution Agreement allowing the issuance and sale of common shares with an aggregate offering price of up to $30 million, but no sales have been made as of the report date[126] - A Credit Facility was established with Argentum Credit Virtuti GCV, allowing the company to borrow up to $25 million, with no amounts drawn as of the report date[127] - The company may receive approximately $281.8 million from cash exercises of Public and Private Warrants, but the exercise price is $11.50 per share, and there is uncertainty regarding their exercise[128][129] Environmental and Regulatory Compliance - An independent lifecycle assessment (LCA) by Benchmark Mineral Intelligence indicated that the NORI Area D project has a better environmental impact profile compared to land-based production routes for nickel, cobalt, and copper[82] - The company is developing a near-zero solid waste flowsheet for processing polymetallic nodules, which is expected to serve as the basis for onshore processing facilities[81] - The company submitted extensive deep-sea environmental data to the ISA, including over 1,400 biological samples and 8,000 images analyzed for benthic megafauna[84] - The company is part of an international consortium to develop an ESG disclosure handbook for marine minerals, emphasizing responsible supply chains[83] Operational and Strategic Alliances - The company has strategic alliances with Allseas Group S.A. for nodule collection system development and Glencore International AG for offtake rights to 50% of nickel and copper production from the NORI area[81] - The estimated work plan for 2023 under the NORI Exploration Contract is approximately $25 million, contingent on ISA's approval for future plans[135] - The TOML Exploration Contract includes an estimated five-year expenditure of up to $44 million, subject to regular reviews and potential changes[136] - The company has committed to spend AUD $3 million in fiscal 2023 and AUD $2 million in fiscal 2024 under the Marawa Option Agreement[137] Risk Management - The company expects to be exposed to commodity price risks, particularly related to nickel, copper, manganese, and cobalt, which are essential for future revenue generation[162] - The company has maintained a low credit risk due to receivables primarily consisting of general sales tax due from the Federal Government of Canada[159] - The company has not had material exposure to foreign currency fluctuations to date, primarily holding cash in U.S. dollars[161] - The company does not expect its disclosure controls and procedures to prevent all errors and fraud, acknowledging inherent limitations in control systems[169] Resource Assessment - Approximately 97% of the NORI Area D resource is categorized as measured or indicated, indicating a significant level of resource quality[154] - The initial assessment of the NORI Area D indicates potential technical and economic viability, although economic viability has not yet been demonstrated[152] - The company plans to continue estimating resources in the NORI and TOML Areas and developing project economics[152] Internal Controls - The company has identified material weaknesses in internal control over financial reporting, which were remediated by March 31, 2023, through previously disclosed remediation items implemented by the end of 2022[166]