TMC the metals: A Speculative Buy Where Patience Could Benefit The Brave

Company Overview - The Metals Company (TMC) is focused on deep-sea minerals exploration, specifically targeting critical battery metals in the Clarion Clipperton Zone (CCZ) [2] - TMC went public via a SPAC in September 2021 and has since seen a return of -86.7%, trading at $1.41 per share as of June 13, 2024 [2] - The company currently generates zero revenue and cannot market its products, with small-scale commercial operations expected to begin in Q1-2026 [2][9] Financial Position - TMC is projected to continue burning cash for another 18-20 months at a rate of approximately $60 million per year, necessitating an additional financing requirement of $90 million to $100 million [2] - As of Q1-2024, TMC has access to $215 million in funding through various equity and debt financing vehicles, including a $20 million credit facility from shareholders [2][12] - The company reported a cash burn of $12.1 million in Q1-2024, a nearly 50% decrease compared to Q1-2023, and had $4 million in cash and equivalents remaining [18] Market Dynamics - Battery metals markets are currently volatile, with significant price declines over the past year for nickel (-17.1%), cobalt (-13.5%), and lithium (-71.4%), while copper has increased by 19.8% [7] - The slowdown in global EV sales growth is negatively impacting midterm demand for battery metals [7] Regulatory Environment - TMC is awaiting an exploitation permit from the International Seabed Authority (ISA), with no deep-sea mining projects currently operational in the CCZ [8] - Management plans to apply for the exploitation license in July 2024, with the approval process expected to take an additional 12 months [8] - Political support for deep-sea mining is reportedly growing, with Norway beginning commercial operations and other countries like France and China softening their stances [8] Competitive Position - TMC has an offtake agreement with Glencore for 50% of its production once operations commence, which may expedite commercial activities [2][16] - The targeted nodules in the CCZ are noted for their higher metal content compared to traditional mining sources, making them attractive for future operations [16] Investment Outlook - TMC is viewed as a highly risky and speculative investment, with potential upside if regulatory approvals are obtained [2][15] - The company’s success hinges on its ability to secure financing until it can operate commercially, with various untapped financing options available [19]