Release Date: August 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- TMC The Metals Co Inc (TMC, Financial) reported improved liquidity, increasing from $40 million at the end of June to higher levels in August due to upsized borrowing limits on credit facilities.
- The company raised $2.6 million through its ATM at an average share price of $1.61, demonstrating judicious use of market opportunities.
- TMC welcomed two new directors to its Board, Steve Jurvetson and Brendan May, bringing expertise in disruptive technologies and sustainability, respectively.
- Geopolitical tailwinds are favorable for TMC's industry, with increased focus on seafloor resources by major economies like the US, China, India, Norway, and Japan.
- TMC's NORI and TOML projects are ranked as the largest two undeveloped nickel projects in the world, with a nickel equivalent grade of roughly 3%, indicating strong profitability potential.
Negative Points
- TMC reported a net loss of approximately $20.2 million or $0.06 per share in Q2 2024, compared to a net loss of $14.1 million or $0.05 per share in Q2 2023.
- Exploration evaluation expenses increased to $12.4 million in Q2 2024 from $8.1 million in Q2 2023, primarily due to increased engineering work and share-based compensation.
- General and administrative expenses rose to $7.9 million in Q2 2024 from $5.1 million in Q2 2023, driven by higher personnel costs and increased legal and consulting fees.
- Free cash flow for Q2 2024 was negative $12.2 million, compared to negative $8.5 million in Q2 2023, indicating higher cash burn.
- TMC's market cap is significantly lower than the nearly $0.5 billion spent since inception, reflecting a substantial discount to the underlying asset value.
Q & A Highlights
Q: How many nodule collection machines does TMC own?
A: TMC does not own the nodule collection machines. Instead, TMC focuses on exploring and developing the resource itself. Partners like Allseas provide the collection technology, including the Hidden Gem vessel and the collectors. This capital-light approach allows TMC to ramp up production using existing offshore assets and facilities in Japan, Indonesia, China, and other locations. (Craig Shesky, CFO)
Q: What is the progress on PAMCO completing the trial run of 2,000 tonnes of nodules?
A: Progress is being made, with another run scheduled for August 27. PAMCO has significant experience processing nodule material, particularly nickel laterite, since the 1960s. The trials are expected to be completed during the third quarter, with results coming out soon after. (Gerard Barron, CEO)
Q: Can you clarify the statement about the ISA council groups?
A: If the LTC recommends the approval of the NORI application, overturning this positive recommendation would require a two-thirds majority vote from the ISA council and a simple majority from each of the individual council groups. This high bar makes it challenging to overturn a positive LTC recommendation. (Craig Shesky, CFO)
Q: How does the current makeup of the ISA council view the mining code adoption?
A: The vast majority of member countries support getting the regulations in place. The newly elected Secretary General also supports regulations over moratoriums. Even countries supporting a precautionary pause are still negotiating the final regulations. (Gerard Barron, CEO)
Q: Is the slowdown in EV adoption affecting interest in asset-level investments for TMC subsidiaries?
A: The slowdown in EV adoption has not impacted asset-level interest, which primarily comes from strategic partners in the resource extraction industry. Consumer-facing brands are waiting for the results of the environmental program before making long-term commitments. (Gerard Barron, CEO)
Q: What are the expectations for the feasibility update?
A: The feasibility work is a key component of the ISA application. While no specific timeline is given, more information will be provided in the next report in November. (Craig Shesky, CFO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
