TMC the metals company - Earnings Call - Q4 2024

Executive Summary

• Q4 2024 net loss improved to $16.1M with EPS of $0.05 as exploration and evaluation costs fell versus prior year; liquidity at filing stood at ~$43M, backed by expanded ERAS/Barron credit facility capacity.
• Company pivoted permitting strategy: formally initiated a U.S. NOAA pre-application under DSHMRA, targeting applications in Q2 2025—potentially a material catalyst for regulatory clarity and financing optionality.
• Operationally, PAMCO processed 450 tonnes of calcine to alloy and manganese silicate; management highlighted capital-light onshore processing and continued environmental dataset progress supporting permitting narratives.
• Comparison vs prior quarters: Q4 net loss improved vs Q3/Q2 on lower environmental and transit/layup costs, partially offset by higher share-based comp and consulting/advisory costs.
• Street estimates (S&P Global) for Q4 2024 were unavailable—investors should anchor on expense trajectory, liquidity runway, and permitting milestones rather than consensus beats/misses (consensus unavailable from S&P Global).

What Went Well and What Went Wrong

What Went Well

• Pivot to U.S. permitting path: “We’ve formally initiated the process of applying for licenses and permits under the existing U.S. seabed mining code… we believe the United States offers a stable, transparent, and enforceable regulatory path”.
• Expense discipline and quarterly loss improvement: Q4 exploration and evaluation expenses fell to $8.3M vs $26.7M in Q4 2023; net loss narrowed to $16.1M from $33.5M YoY.
• Onshore processing progress: Commercial-scale PAMCO campaign produced Ni-Cu-Co alloy and Mn silicate products, building confidence in capital-light refining pathways.

What Went Wrong

• Ongoing reliance on credit facilities/liquidity constraints: Year-end cash was ~$3.5M with short-term debt of $11.8M; payables included $25.8M owed to Allseas (mostly settleable in equity), underscoring financing sensitivity pre-permit.
• Elevated share-based compensation increased G&A: Q4 G&A rose YoY due to amortization of RSUs/options and higher consulting/advisory costs.
• No revenue and limited Street coverage: Pre-revenue status continues; S&P Global consensus estimates for Q4 2024 were unavailable (consensus unavailable from S&P Global), reducing typical beat/miss framing.

Transcript

Operator (participant)

Good day, and thank you for standing by. Welcome to The Metals Company fourth quarter 2024 corporate update conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Craig Shesky, Chief Financial Officer of The Metals Company. Please go ahead.

Craig Shesky (CFO)

Thank you, Liz. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. Additionally, please note that the company's actual results may differ materially from those anticipated, and except as required by law, we undertake no obligation to update any forward-looking statement.

Our remarks today may also include non-GAAP financial measures, including with respect to free cash flows. Additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide deck being used with this call. You are welcome to follow along with our slide deck, or if joining by phone, you can access it at any time at investors.metals.co. I will now turn the call over to our Chairman and CEO, Gerard Barron. Gerard, please go ahead.

Gerard Barron (Executive Chairman and CEO)

Thank you, Craig. Before we announce a material and very exciting change in our way forward, I want to revisit the premise behind our company. In the next 30 years, we expect to need to mine more base metals than have been mined in all of our human history. Where can we get these critical metals with the least cost to humans and nature? 70% of our planet is covered by the oceans, but they are home to only 3% of living biomass. The abyssal zone accounts for more than half of the ocean area. According to Grok, the abyssal zone hosts sparse but resilient life that thrives on sinking organic matter in a vast otherworldly expanse.

Limited leftover food means limited life. Limited life to begin with means less life to impact, and vast self-similar abyssal zone means ample opportunities for smart conservation. That is just the beginning of why nodules could be a great source of critical metals. Once you get this far offshore and this deep, there are no human communities to impact, metal grades are high, and there are four metals in one resource here, while it would take three separate mines on land. Crucially, we can process this resource onshore with near zero solid waste.

This means we will not need to manage lakes of toxic sludge. What is the alternative? Keep cutting down biodiverse rainforests, displace people, poison air and water, and generate massive, often toxic waste streams, much of which ends up in the ocean, sometimes in smothering beautiful reefs. As a company, we reasoned from first principles and believed that we have a better shot at responsible extraction where we have fewer impacts and fewer impact receptors.

These first principles are backed by decades of research. Since the 1970s, the Clarion Clipperton Zone has received billions of dollars of investment and hundreds of research campaigns. In fact, after three commercial mining tests in the 1970s, the initial programmatic environmental impact statement, or PEIS, was prepared by NOAA already in 1981 based on several research campaigns conducted by the agency and the CCZ. By 1995, NOAA reported to Congress that their studies basically eliminated, pending verification of plume behavior during monitoring of further at-sea mining system tests, virtually all other environmental concerns which were raised around deep-sea mining.

Starting in 2011, The Metals Company has repeated a lot of this work and then some. In our contract area in the CCZ, we are finishing our own EIS now, and we have orders of magnitude more environmental data. Our mining system is much better designed, and our impact modeling is much more sophisticated than in the 1970s. Our conclusions are not materially different from what NOAA concluded already 30 years ago.

Furthermore, thanks to last year's expedition that revisited the site of a 1970s mining test, we now have a 45-year perspective on how the deep-sea ecosystem recovers from a machine that looks quite irresponsible by today's standards, cutting 20-80 centimeters into the sediment compared to the top three to five centimeters that our seafloor collector impacts today. We, too, have a sense of the recovery from our collector immediately after and then 12 months after the test. The notion that we do not know enough to evaluate the impacts of collecting these metals-rich rocks is wrong.

Looking back at least 14 years of our company's existence, we and our partners have achieved numerous milestones worth writing home about. Firstly, technical statements showing a resource of 1.6 billion tons of nodules representing the world's two largest undeveloped nickel projects. There is the first integrated collection system test since the 1970s, lifting more than 3,000 tons of nodules to the surface.

There was the successful industrial-scale nodule processing into high-grade nickel, copper, cobalt alloy, and manganese silicate, which we announced earlier this year alongside our partner PAMCO, and successful bench-scale refining of our intermediate product into nickel sulfate and cobalt sulfate. 23 offshore research campaigns in some years delivering five campaigns per year, while most contractors manage one every other year, and the adoption of a capital-light approach utilizing the existing assets of our partners.

We have shown that we can pick up nodules from the seafloor, we can lift them to the surface, and process them onshore all the way to the refined products with minimal environmental impacts and limited capital expenditure. Though we may have achieved much in 40 years, many investors are focused on a different 14 years, and that is how long the ISA has been working on the mining regulations for this industry.

After repeated failures to deliver the mining code in 2020 and then 2023, based on what we have seen during the current ISA session, there remains a possibility of continued delay on the ISA's target for the mining code adoption in 2025. The ISA's timeline drift and failure to deliver its legal obligation of adopting a mining code does not change one key fact, and that is that we are ready. We have amassed an unprecedented wealth of environmental impact data, have gone above and beyond to design a system that minimizes environmental impacts, and feel confident that we now know enough to get started and prove we can manage environmental risks.

What we need is a fair hearing and a regulator willing to engage. Thankfully, we have another path forward. The United States has had the legal framework and regulations for issuing exploration licenses and commercial recovery permits for deep-sea bed minerals in international waters in place since the 1980s. Now there is political will to put existing authorities to use. Today, I'm pleased to announce that our US subsidiary, The Metals Company USA will submit applications in the second quarter of this year to move into commercial production through the existing US regulatory regime. We did not make this decision lightly.

It took careful consideration and many months of legal due diligence and government conversations. We've engaged multiple law firms and have conducted thorough legal diligence on the Deep Seabed Hard Mineral Resources Act of 1980, or DSHMRA, as well as implementing regulations from NOAA. Congress passed DSHMRA as an interim regime to allow US citizens to pursue deep-sea bed mineral projects in international waters in anticipation of the United States one day ratifying UNCLOS. Forty-five years later, the United States has not ratified UNCLOS, while DSHMRA and NOAA's implementing regulations remain on the books and have stood the test of time. The total of four exploration licenses have been issued under this regime, with two still active.

We have begun a dialogue with NOAA, an agency within the US Department of Commerce authorized as the lead agency for permitting under DSHMRA, and have, in fact, initiated a formal process of pre-application consultation with NOAA. We have also met with numerous officials in the White House as well as US Congress regarding their support for this industry. In fact, today, it was great to see Secretary Rubio talking to leaders in the Caribbean and highlighting that developing seafloor resources responsibly was an important opportunity for everyone. It is our strong belief that this path offers the greatest probability of receiving a commercial permit to begin operations in a timely manner.

I'm sure you will all have many questions, and I promise that we will spend the vast majority of this call talking about the details of the strategy, including the many months of meetings in DCs and legal analysis. First, we'd like to take you through some of the rationale that led us and our board to pursue this new path forward. For that, I want to hand it back to Craig Shesky, our CFO.

Craig Shesky (CFO)

Thanks, Gerard. Certainly a very exciting moment. First, let's assess where things stand right now with the ISA. The ISA has missed two code adoption targets and is currently on its third. It is worth looking at why exactly this part of the mining code is so hard. Four years is about the average time that it takes to negotiate an international instrument, and it took around four years for the ISA to adopt the first exploration regulations. It took around four years to negotiate the Convention on Biological Diversity, the Paris Agreement, and the Arms Trade Treaty. COVID disruption certainly did not help. Yet the High Seas Treaty, which was also impacted by COVID, took eight years.

Depending on when you start counting, if the ISA adopts the mining code in 2025, it would be 14 years, or 11 years if you count from when the work started in earnest in 2014. It is still much longer than other instruments. While coming up with regulations for the exploitation of deep-sea minerals in the area may sound like a daunting task, consider the fact that most coastal states already regulate offshore extractive activities like offshore oil and gas, and all countries with land mining have mining codes. There is plenty of expertise and precedent to draw on. The ISA Council is currently sitting for part one of its 30th session in Kingston, Jamaica. As with every session, we are simply looking for progress.

Contrary to the legitimate expectations of contractors and of our sponsoring states, which are set out in the convention, the ISA has persistently missed the deadlines that it has set, first in 2020 and then in 2023, and we're already three months into the third targeted year for adoption of 2025. Now, Nauru's request that Council adopt an agreed process for the review of NORI's impending application that is consistent with the ISA's obligations under UNCLOS was opposed by Chile, the world's largest copper producer.

With no agreement on the process, we do not yet have sufficient clarity as to how our application would be treated upon submission, presenting an unacceptable level of risk for our shareholders. Of course, there is one country that doesn't mind the delays as they play catch-up, and that's China. Two Chinese contractors are preparing for collection tests in the next year or so, trying to replicate what TMC and our partner Allseas achieved in 2022. China has also built up an entire city around deep-sea mining, having spent billions on the Sanya Deep-Sea Technology City.

China is also using deep-sea mining as an incentive to influence geopolitics in the Pacific. After we ended our contractual relationship with Marawa, it was reported that China was exploring a deep-sea mining partnership with the nation of Kiribati. In February, China signed an agreement with the Cook Islands, which focused on deep-sea minerals. Following that surprising move, New Zealand, which is in free association with the Cook Islands, announced that they would consider withdrawing their support for a moratorium on deep-sea mining. It is increasingly clear that deep-sea mining is at the center of geopolitics in the Pacific.

Elsewhere in Asia, there have been encouraging headlines out of South Korea, Japan, and India with respect to their support of and interest in deep-sea mining. The increased focus on seafloor resources from some of the world's top economies could also have a positive impact on the total addressable market for our announced services business. In fact, we've had multiple reverse inquiries already this year on potential future work. In the meantime, it is an all-hands-on-deck focus on getting our applications over the line.

To that end, we believe that the United States is getting ready to retake its role as a leader in this industry and to provide explicit support for the collection of polymetallic nodules. The headlines of support from the U.S., including Marco Rubio's announcement that Gerard shared, have been clearly building. Why would the new administration care so much about seafloor resources, particularly polymetallic nodules? The answer is simple: because they can help establish metal independence, and they are the critical missing piece for US reindustrialization.

Here, China continues to dominate and has shown an increasing willingness to ban exports to the US. It is clear that American reindustrialization simply cannot depend on Chinese metal production. To give you a sense of scale, what would it mean for the US to gain access to, let's say, one billion tons of nodules? The answer is it would be transformational. If measured by current US consumption, a billion tons of nodules would provide 456 years of manganese, 165 years of cobalt, 81 years of nickel, and four years of copper. Nodules are not some marginal solution.

They can, in just TMC's contract areas alone, solve US needs for several metals deemed critical by the US Geological Survey. It is worth remembering that it was US companies and the US government, including NOAA, which pioneered the evaluation and development of this resource in the 1970s. The US government developed the regulatory framework and conducted a strategic environmental impact assessment. US companies, including Transocean, Lockheed Martin, and US Steel, developed and piloted nodule collection and nodule process technology.

This US leadership slowed, however, when the US did not ratify the United Nations Convention on the Law of the Sea. However, the US did have foresight to enact DSHMRA so that US citizens and entities could access seabed resources in international waters. US entities can apply to NOAA for exploration and commercial recovery licenses. Because the US has never submitted to the jurisdiction of the ISA, this US law remains in full effect, even if the US does eventually adopt the final mining code. There are a few handfuls of nations that do have bilateral agreements with the US regarding each other's activities in international waters.

Generally, beyond that, US law continues to offer freedom of activity in the high seas, just as it did prior to UNCLOS ever being contemplated. Leading experts on the law of the sea, such as Stephen Groves, agree that applying for a commercial recovery permit through DSHMRA and NOAA is a viable path based on robust and well-thought-out regulations. Stephen Groves is with the Heritage Foundation, a leading DC think tank, as well as a former staffer for the White House Counsel's office during President Trump's first term.

In fact, it was about one year ago to the day that we were talking about Stephen Groves in a segment on 60 Minutes discussing the law surrounding deep-sea mining. It was a critical minerals arms race discussed in that piece between the U.S. and China, and that arms race has only grown more intense. Quite simply, DSHMRA remains law today for the exact same reason as it did when it was passed into law during the Cold War in the early 1980s: national security.

If we step back and compare the U.S. regulatory regime to what we have experienced recently at the ISA, from our perspective, the U.S. regulatory regime is more attractive than what's currently on offer. If you look at the ISA draft mining code, the international regulatory regime has had issues from the outset. UNCLOS was not deemed commercially viable for deep-sea mining initially, and it took another 14 years to negotiate an implementation agreement to comprehensively modify the part of UNCLOS that was dealing with deep-sea mining.

It took a few years to put the exploration regulations in place, but the exploitation regulations have been in negotiation since 2014, and the process is still ongoing. By contrast, the US adopted DSHMRA in 1980, laying a solid foundation for US citizens to pursue exploration licenses and commercial recovery permits in international waters. As a non-signatory to UNCLOS and a conscientious objector, the United States believed that mining of the deep-sea bed resources is a freedom of the high seas. DSHMRA then authorized NOAA to develop implementing regulations.

That same year, NOAA delivered regulations for exploration licenses. It took NOAA a little over six years to put in place regulations for commercial recovery permits. It was an intense, consultative process with several rounds of comments, including from other agencies, industry, NGOs, and other stakeholders. In terms of the regulatory approach, NOAA recognized the difficulty of being prescriptive with regard to an industry that has not started. Unlike the ISA, they have explicitly chosen a flexible approach that can be adapted to the specific technology and circumstances of each applicant through terms, conditions, and restrictions.

NOAA's approach is common sense, explicitly recognizing the trade-offs versus other resource types and drawing the red line at irreparable environmental harm and aiming to avoid significant adverse economic—excuse me—environmental impacts. Importantly, NOAA expects to engage with applicants pre-application to reduce application-related uncertainties and is committed to providing written binding guidance. To that end, TMC USA has already initiated a detailed request for pre-application consultation with NOAA.

Perhaps the biggest difference between the ISA approach and the NOAA approach to environmental permitting is where the regulator takes a much heavier role. NOAA has created programmatic environmental impact statements for the DOMES region that covers all of the Clarion Clipperton Zone. It takes the applicant's environmental data and analysis, but then develops in-house or hires a third-party consultant to develop a site-specific EIS. We believe the US and the NOAA approach to environmental permitting has been put in place for very good reasons.

Since NOAA or a third-party contractor prepares the site-specific EIS, it ensures the analysis is unbiased and not influenced or perceived to be influenced by the interests of the applicant. This approach provides protection to the applicant as well because this transparency can help build public trust during the public review and comment period. This can also help build confidence among investors and other stakeholders who want to ensure that environmental risks have been assessed with due care. Finally, it offers a level of protection to the applicant legally and financially, as the independence and transparency of this process can further reduce the risk of future delays, fines, or lawsuits.

Taking a step back, beyond the carefully thought-out regulations, NOAA also helped pioneer the environmental assessment of potential nodule collection. In addition to its monitoring of 1970s trials by several US companies, NOAA conducted several seafloor disturbance experiments, as did other leading international research institutions. From these studies, which revisited impact sites repeatedly over a 40-year period, we now have extensive data that address a common and misleading claim from activists that we don't know enough.

Thanks to these studies, we do know how the ecosystem responds, and with multiple papers showing that recovery is not only possible but likely and within just a few decades. The DISCOL studies, which used a plow harrow attached with blades to rake the seafloor, and the different studies using NOAA's deep-sea sediment resuspension system all show varying levels of recovery within just a few years. Based on a review of the studies conducted to date, full recovery of the microbes that make up 70-80% of the life at these depths can be expected within 50 years.

This is a very encouraging result, though new data, including our own, suggests that these timelines may be quicker still. Remember, these studies were all carried out using equipment designed for one purpose: to create the maximum disturbance. Since those early pioneer trials, much effort has been devoted to ensuring that the environmental footprint of nodule collectors is reduced as much as possible.

Back in 1979, the OMCO Mining Consortium piloted their robot miner with an intrusive Archimedes screw-style propulsion system, raking several hundred tons of nodules from the seafloor with mechanical tines. Their robot disturbed the top up to 80 centimeters of seafloor sediment, leaving deep furrows in the seafloor and blanketing nearby fauna in thick layers of mud. Fast forward to 2022, and the gentler Coanda nozzles installed on our tracked collector vehicle disturbed just roughly the top 3 centimeters compared to 80 in the other trial of sediment during the test mining campaign, and over 95% of that settled within one kilometer of the test area.

Of course, this is a very different picture to the one painted by those opposing this industry who spread baseless claims that sediment could travel tens of thousands of kilometers. Unfortunately for them, we have the data, and it shows these claims are pure fiction. We'd like to, of course, call out our engineering partners at Allseas for their incredible efforts these past few years to reduce the impact footprint of our collector vehicle while ensuring we collect the maximum quantity of nodules. As we look ahead to commercial mining and as the industry grows, you can expect that these impacts will only get smaller.

While the media has, as expected, focused on the continued presence of tracks on the seafloor, which says absolutely nothing about recovery, we believe the new paper's findings are very encouraging. Four decades after the disturbance, a near-total recovery of sediment-dwelling macrofauna and foraminifera have been measured in both the vehicle tracks and areas affected by the plumes and the xenos, which provide a hard substrate that other organisms can live on, and they've already recolonized the area. In the case of the plume, which MIT retrospectively modeled, researchers reported that it had no detectable or, in some cases, slightly positive biological impacts.

Don't expect Greenpeace to mention that one anytime soon. By the way, we feel bad for them for the loss of that lawsuit. We have always been clear that our primary impact will be for those organisms on nodules that get collected. As this study showed, nodules that get left behind can be quickly recolonized with megafauna present on retained nodules. This is very promising as if we leave some nodules, as we intend to do, with at least 30% left at the seafloor, then these will be available as habitats for organisms to take over. How does this compare to our own findings?

While yesterday's study measured recovery in four decades, preliminary data shows that we can do far better thanks to the lower environmental impact of our vehicle. Our team has already found that foraminifera directly located in our collector tracks and in plume areas had recovered to 30% of background density in just 12 months and to 50% of pre-disturbance density. As we look ahead to our application, we'll be releasing these findings and much, much more. We can tell you it's quite incredible what our team are finding.

Findings like these are made possible by the fact that no matter where an application is lodged, it's going to be backed by one of the largest environmental data sets ever compiled, based on work alongside dozens of respected research institutions and over $200 million in cumulative environmental spending. We have now gathered nearly one petabyte of data through the scientific research. To give you a sense of scale, the largest library in the world, the U.S. Library of Congress, manages about 20 petabytes of data in total.

Bottom line, we believe that we, along with research pioneers from NOAA and others before that, have answered all of the key questions posed for our environmental impact statement. We strongly believe that the time has come to move forward, begin production, and allow even more evidence to be shared with the entire world. Given the magnitude of today's news, we expect many of you are going to have questions regarding the workings of DSHMRA, implications for the ISA process, impacts on economics and timelines, and many, many others.

We promise that over the coming weeks and months, we will continue to put out information to help everyone get up to speed. For now, and in addition to this call's upcoming Q&A, we've provided some answers here to anticipated questions. To summarize a few of them, yes, we believe we can pursue exploration and commercial recovery permits concurrently under DSHMRA, and there could be opportunities to expedite certain elements of review processes. The environmental work done so far is very robust, and we do not anticipate any additional campaigns needed prior to the launch of our US applications.

Even when the ISA adopts a mining code, as the US has not ratified UNCLOS or joined the ISA, the contracts issued under DSHMRA are going to stay in effect. While some describe DSHMRA as a temporary or interim measure, this law remains in full effect 45 years later. Perhaps some of the drafters had expected the US to ratify the Law of the Sea Convention, but that did not happen, and it is not likely to happen anytime soon. Finally, as you might imagine, the release of our PFS, or Pre-Feasibility Study, does require the sign-off of quite a few qualified persons, or QPs.

Given the context of today's announcement, it is prudent for us to discuss certain assumptions with them at a bit more length. This also applies to the timing of our strategy day. We do, of course, still intend for that longer-form session to occur, but as you can imagine, we've been laser-focused on pursuing this new path in the last few months. What do these actions mean for NORI, TOML, and our sponsoring states? We've consulted on this application strategy with these sponsoring states. In fact, Gerard spoke just last night with the President of Nauru and the Prime Minister's office in Tonga.

Our relationships with our sponsoring states are excellent, and we continue to respect our agreements together. Regarding the specific areas of where we'll apply, the scope of the upcoming applications is under careful consideration, and we continue to discuss the strategy with our sponsoring states. For what it's worth, DSHMRA exploration licenses can be granted up to 150,000 sq km. Yes, we are still planning to lodge an application over the NORI area in June of 2025, but we've not yet determined with which regulator.

Even after a U.S. application is launched, we still retain the NORI and TOML exploration contracts, and we fully intend on remaining compliant with the requirements of those ISA contracts. Onto the financial results. In the last quarter of 2024, TMC reported a net loss of $16.1 million, or $0.05 per share, compared to a net loss of $33.5 million, or $0.11 per share for the same period in 2023. The net loss for the last quarter of 2024 included exploration and evaluation expenses of $8.3 million versus $26.7 million in Q4 2023, general and administrative expenses of $8.1 million versus $6.6 million in Q4 2023.

Exploration and evaluation expenses decreased by $18.4 million in the last quarter of 2024 compared to the same period in 2023, mainly due to a decrease in the cost of environmental studies as Campaign 8, which commenced in the last quarter of 2023, was completed in the first quarter of 2024. Also, a decrease in mining technology and process development costs due to a lower transit and layup cost in the fourth quarter of 2024 compared to the prior year period. This decrease in exploration and evaluation costs was offset by an increase in share-based compensation costs, reflecting the amortization of the fair value of restricted stock units granted to officers in the second quarter of 2024.

G&A expenses increased by $1.5 million in the last quarter of 2024 compared to Q4 of 2023, mainly due to an increase in share-based compensation costs as discussed and an increase in consulting and advisory costs. Other items impacting the Q4 movement in 2024 are higher fees and interest on the credit facilities in 2024, offset by foreign exchange gain year over year. In the fourth quarter of 2024, net cash used in operating activities was $13.8 million compared to $15.2 million for the last quarter of 2023.

The lower spending in Q4 2024 reflects mainly lower spending on project development and environmental studies as compared to Campaign 8 spending in Q4 2023 and due to changes in working capital levels year over year. The free cash flow for the last quarter of 2024 was negative $13.9 million compared to negative $15.6 million in the last quarter of 2023. Free cash flow is a non-GAAP measure, and I'd point you to the non-GAAP reconciliation table included in the slide deck and on our website.

We believe that our cash on hand and the undrawn amount of $41.5 million from our unsecured credit facility with Gerard Barron, our Chairman and CEO, and with Eras Capital will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from today. During the fourth quarter of 2024, the company entered into a registered direct offering, issuing 19.9 million common shares and 9.95 million Class B warrants. The share issuance was completed in February of 2025, and the company received all gross proceeds of the $19.9 million.

In the last quarter of 2024, the company also drew $2.5 million from the working capital loan from Allseas. Our accounts payable and accrued liabilities balance at the end of 2024 of $42.7 million, the majority includes $25.8 million owed to Allseas for various services provided, and the majority of that can be settled in equity at TMC's election. TMC liquidity, which we define as cash plus borrowing capacity, stood at $62 million at December 31st, or $48 million pro forma for the credit facility amendments and full receipt of the registered direct proceeds in the first quarter of 2025, where the final $5 million came in.

In Q1 2025, we increased the principal amount of our unsecured Eras Capital facility by $6 million. The credit facility with an affiliate of Allseas of $25 million was terminated by mutual agreement in March as maturity was approaching in the third quarter of this year and no amounts were outstanding. However, the maturity of the $7.5 million Allseas working capital loan was extended to September 2025. With that, operator, we would like to turn it over to the line for some Q&A.

Operator (participant)

As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Our first question comes from the line of Matthew O'Keefe with Cantor Fitzgerald.

Matthew O'Keefe (Senior Research Analyst)

Hi, thanks, operator. That was a—there was a lot. Just to help me through the DSHMRA thing here a little bit, if you may. This is a different—it is sort of a different regulatory body, as you've described. Your licenses were issued to you under UNCLOS with partner—your supporting sponsor states. Will the application to DSHMRA be for these license areas or different license areas that are currently—because I think they have four license areas under DSHMRA? Are these overlapping, or are they separate? How was this—how are we supposed to think about this?

Gerard Barron (Executive Chairman and CEO)

Yeah. Yeah. Hi, Matt. I'll have the first crack at that. There is an important concept just for everyone to get their mind around, and that is the freedom of the high seas. Of course, what happened when they were agreeing UNCLOS was that the United Nations member countries wanted to join a treaty when it came to the extraction or development of metals in the high seas. However, while 168 countries plus the European Union have now joined that treaty, the U.S. stood fast and said, "We are not going to join that treaty." Essentially, the freedom of the high seas covers minerals, it covers freedom of passage, it covers cable lane, and so on.

America will argue that they will have access to those waters under the freedom of the seas treaty that any member country of the International Seabed Authority would have over those areas as well. We haven't announced today exactly which areas. We're still in dialogue, both internally, and we will, in the pre-consultation process that is underway with NOAA, we will also be seeking some advice there. However, what we want to do is to take advantage of all of the work we've done for the last 14 years. This will not be a, "Let's start again."

This is about what pathway can get us into commercial production the fastest way. As we went at length in the presentation to talk about, there's no easy path here on the environmental oversight either. In fact, we think the environmental regulations as laid out under DSHMRA are sensible, are workable, and very, very thorough. Stay tuned on us to announce once we formally lodge those applications, and you won't have to wait long for that.

Craig Shesky (CFO)

Matt, too, we also recognize just how much of our evaluation is pinned on the work that's been done with NORI and TOML. We've got a defined resource. We've done test mining. We've done test processing. We've done environmental work in those areas. Yeah, for us, that is obviously the key question, and we look forward to sharing more with you. This is not something where we're just saying, "Okay, let's go out and cobble something together." This has been well thought out, and we feel this is going to take advantage of the work that we've already done in consultation with our sponsoring states.

Matthew O'Keefe (Senior Research Analyst)

Okay. Okay. Some more to come there. Can I ask too from a—maybe this is getting a little too ahead of where we are—but if you were to decide to, if you do get approval through a different path, your partner, Allseas, owns the vessel. I mean, the vessel is in the U.S. It's not a U.S.-based company, or maybe it is. I do not know if they have a U.S. arm or not, but I mean, could they legally participate as a partner in this situation?

Gerard Barron (Executive Chairman and CEO)

Yeah, absolutely. Yeah, there's some nuances with DSHMRA, and one of them is that the production vessel needs to be US-flagged. We have, with Allseas, already looked into that, and that is a pretty straightforward process. Of course, the applicant that has kicked this off is our US subsidiary that we established in 2013.

Matthew O'Keefe (Senior Research Analyst)

Okay. Cool. Maybe I ask this one more I've got. Is this the first of course, investors are hearing of it. Has this idea been raised with the ISA as they're meeting right now, or are they going to be are they just hearing about this now as well?

Gerard Barron (Executive Chairman and CEO)

Have you heard some questions as well? Yeah, they're hearing that question too.

Matthew O'Keefe (Senior Research Analyst)

Oh, okay. Okay. We'll wait for the minutes from meetings tomorrow to see some reaction. Okay. I'll leave it open to some other questions, and if I have another question. Thank you very much.

Craig Shesky (CFO)

Thanks, Matt.

Operator (participant)

Our next question comes from the line of Jake Sekelsky with Alliance Global Partners.

Jake Sekelsky (Managing Director and Head of Metals & Mining Research)

Hey, guys. Thanks for taking my question.

Gerard Barron (Executive Chairman and CEO)

Hey, Jake.

Jake Sekelsky (Managing Director and Head of Metals & Mining Research)

Just to confirm, building on the last question a bit, is the NOAA process a complete shift in the permitting pathway from the ISA pathway, or more of a secondary avenue or primary avenue alongside the ISA process?

Gerard Barron (Executive Chairman and CEO)

Yeah, Jake, it's definitely a new path, and we view it as advantageous and the best chance of success. This is not one door closing, another opening. This is, in our view, it's an incremental path forward, and we view a better path forward. It just so happens we built on 45 years of work and a bunch of environmental work from NOAA. It's just been sitting relatively idle for some time. The legal precedent is there. It's always been there. What has been missing is the political appetite in the United States to take advantage of it.

That's the main change that has come with this administration. There is no new legislation that has to come. There might be some adjustments, I would say, to aspects of the regulations, perhaps, as you've seen for critical minerals projects throughout the U.S., views about permitting perhaps being accelerated in some circumstances. This is something where it's been on the books for a long time. What's been missing is the political appetite. That's what's changed. That's what's changed with the new election. This, frankly, has been a door that opened to us. After the November election, we engaged in the diligence required to make this decision. We think very strongly we're making the right decision.

Matthew O'Keefe (Senior Research Analyst)

Okay. That makes sense. In building off that, are you able to provide any color on what this new process looks like, key milestones, or even a high-level timeline, or is it a bit too early at this stage?

Gerard Barron (Executive Chairman and CEO)

That will become—we have a very strong sense of it already. In respect to the dialogue that's underway with the permitting agency now, we'll come back to you with more on that. As we mentioned in the presentation, the first thing is it's a two-way consultation. That's a really important step forward when you're trying to permit a project. That's refreshing from our perspective, the fact that we can sit with the regulator and that there is a formal process, which they outline in the regulations, that applicants can follow. Of course, the very unique thing about our application, and hence why we talk about a recovery permit as well, is that we have all this amazing data. We have an application that is coming to completion.

It is a very consistent follow-on work to what was done under NOAA sponsorship back in the 1970s and 1980s. It is an alignment of stuff.

Matthew O'Keefe (Senior Research Analyst)

Got it. Okay. Just lastly, with all that being said, and I think, Craig, you touched on this, how does it impact the timeline of the upcoming economic study? Is this still something we should expect in the first half of the year, or do you think it'll spill into later in the year?

Craig Shesky (CFO)

No, we are still expecting it to be wrapped up, certainly in advance of our applications to the US. Nothing's changed on that front. As we've reiterated, you're going to see the applications in June. It's just now that we have, in our view, some very interesting paths forward there. Obviously, that economic analysis is important for the US as well, not just important for the ISA application. While the new path obviously brings up additional points that we're discussing with our QPs, it's still on the front burner for us.

Matthew O'Keefe (Senior Research Analyst)

Okay. That's all for me. Thanks again.

Craig Shesky (CFO)

Thank you.

Gerard Barron (Executive Chairman and CEO)

Thank you.

Operator (participant)

Our next question comes from Dmitry Silversteyn with Water Tower Research.

Dmitry Silversteyn (Senior Analyst)

Good afternoon, gentlemen. Thank you for taking my call. I just want to follow up on a couple of things. First of all, on the environmental impact study, you said you're working on that now. I'm assuming that's going to be completed around or before the time you complete the economic feasibility study and the application submission in June. Is this something that's going to happen in the next few weeks?

Gerard Barron (Executive Chairman and CEO)

One of the things on our economic study is that a lot of the work has been done. Of course, we were just going through getting expert sign-off as is necessary under S-K 1300 requirements and with any PFS when it became obvious some of the other options in front of us. It was deemed that we should just be a little bit cautious around that. The environmental writing is going at full speed. The environmental data has been flooding in. We held our last key environmental conference back in January in Brisbane, Australia.

The team are popping the stay-awake pills, working very long hours, and very motivated by what they're doing because, obviously, all of this data that we've been gathering for so many years is now coming together as a comprehensive picture. Yeah, happy side by side, Dmitry.

Dmitry Silversteyn (Senior Analyst)

I understand. I understand. I just want to make sure I got some clarity on the application to the U.S. government. Assuming the bid goes through and you're given an exploration license, what area are you going to be giving the license to? It's not the TOML and the NORI area, right? It'll be some other area of the CCZ?

Craig Shesky (CFO)

As we said, Dmitry, we are going to make that clear alongside the consultations that are ongoing with our sponsoring states. Based on DSHMRA laws, there is a potential for overlap.

Dmitry Silversteyn (Senior Analyst)

Okay. Got it, Craig. You mentioned the press release that you've terminated your contract with a third sponsor state. What was the thinking in that? I know you haven't talked about it a lot in your presentations. There was always sort of a kind of a back burner, "We'll get to it at some point," type of a deal. What has changed and why the termination now?

Gerard Barron (Executive Chairman and CEO)

Yeah. Look, we announced we'll put that into our filing back in November. We didn't get a lot of inquiry about it, actually, until recently it was reported that CureVac were talking with China about stepping into our shoes there. Look, it came down to priorities. It came down to the fact that we have two very prospective blocks in NORI and TOML. We had to decide where to focus our resources. Those blocks require money to be spent on them. They require to lodge five-year plans and to do work programs. We had also done some exploration work.

Some of the results weren't the most encouraging on those blocks. I think that's one of the things that one needs to remember what The Metals Company have. We have a defined resource on the NORI and TOML ground. Not all license areas are equal. The grades may be very consistent, but the abundances are not. It is generally regarded that NORI and TOML are some of the very best ground out there. We know of more. Hence, Craig's answer to your question about overlap. There certainly is the prospect of some overlap in that.

Our thinking with Marawa was we knew that there were other parties interested to work closely with CureVac. Obviously, CureVac, I mean, they're a great partner to have. They're a great developing country. They do recognize One China. It did not surprise me when I learned that some of the interested parties were from China. I heard the ambassador mention that in some media reports in recent weeks.

Dmitry Silversteyn (Senior Analyst)

Understood, Gerard. Last question. You mentioned in your comments about your service business getting some inbound inquiries and seems to be well received. Is this something that we can expect some results from in terms of revenue and profits in the next, I don't know, one to two years, or is this still sort of in the development stage and just see how it goes kind of stage?

Gerard Barron (Executive Chairman and CEO)

Look, no, we're excited about it. We have built so much expertise around this industry. Our people are approached all the time with job offers to go and work elsewhere. They like working at The Metals Company. They know we do high-quality science. I think a lot of the services are focused around the environmental work programs. We also know a lot about defining these resources, that part of the business led by Anthony O'Sullivan. We've done more resource definition work than any other contractor, very, very successfully.

We also, during the middle of COVID, ran nine offshore campaigns without losing a single day to illness. That's nine campaigns across two years. These are really challenging tasks, which we have been able to complete very successfully. It makes sense that we stick our team together, keep our team together. We do think that there will be a lot of services opportunities in the coming years. We want to take advantage of that. We have some very, very interesting conversations, which can range from pilot mining using the Hidden Gem, which would obviously be something that we would have to collaborate with Allseas on very, very closely.

Of course, putting the Hidden Gem out to pick up nodules involves a lot of environmental planning as well. There is some very interesting work scopes available to us. Of course, today, those people are very busy on our own application. We have had to turn away some opportunities simply because we need to get this application completed.

Dmitry Silversteyn (Senior Analyst)

Okay. It sounds like maybe second half of the year when you have a little bit more free time with your people and equipment that some of these may actually turn into contracts.

Gerard Barron (Executive Chairman and CEO)

Yeah, that's right. Yeah, yeah, yeah. The business development function inside the business is chomping at the bit, whereas the scientists and other people are going, "Just slow down. Just we can't take anything more until we get this application out the door.

Dmitry Silversteyn (Senior Analyst)

Got it, Gerard. Thank you. That's a nice problem to have. Thank you, gentlemen.

Gerard Barron (Executive Chairman and CEO)

Yeah.

Craig Shesky (CFO)

Thanks, Dmitry.

Operator (participant)

As a reminder, to ask a question, please press star 1 1 on your telephone.

Craig Shesky (CFO)

In the meantime, Liz, I think we're going to take a question from the webcast. Eric Goldstein suggests ask a question, "Can we discuss our current finances? Where do we expect liquidity to be at the end of Q1?" Did note roughly $43 million of liquidity at the time of this filing. Look, the overall point here is that the element that, in our view, has been holding back the valuation of our stock has been the lack of regulatory certainty. Our view is that DSHMRA, and along with NOAA, and frankly, the support of this administration and Congress, in our view, it should be pretty clear to everybody that this is an industry that the US wants to get into.

The good news is they already have the legislation to do it. For us, what we want to do is continue to be very cautious stewards of capital. If we get to the point where regulatory uncertainty is no longer there and things are moving along at a very fast clip, let's say, through the US process, that may put us in a different financial position. What remains is what we told the market late last year, that we are not going to be raising a lot of money for pre-production capital spending until such time as we have that regulatory certainty. That does not have to be through the ISA.

We've heard from many investors, "Look, if the U.S. administration took real action here, that could be something to get people off the sidelines." We think after months of consultations, as you've seen, certainly on social media, Gerard and I have spent a lot of time and the rest of our team, Erika Ilves and Kristin Hengstebeck and everybody heading down to Washington, DC, to have diligent sessions and to make sure that we're kicking the tires on all of these legal questions. This was made after many, many months of detailed conversation, including that with our board of directors.

We view this as a path that can truly unlock regulations and allow us to move forward into commercial production. It doesn't change the fact that we do need to show that regulatory certainty before we're going to be out there raising tons and tons of money and spending it on pre-production capital. That perspective on our finances has not changed. That's why we've had some modifications to our credit facilities to kick out maturities and ensure that they're right-sized for what we need to do to get these applications over the line.

The basic spending and what we need to do to get the applications ready doesn't really differ that much from what was necessary to prepare for the ISA. That's in part because we've already front-end loaded much of that work. We've done the test mining. We've done the test processing. We've also done all of the environmental research campaigns.

From a financial perspective, I would say we are looking forward greatly to the point when these applications are over the line. We can show the market that regulatory certainty, frankly, that's been missing over the last few years as a public company.

Operator (participant)

I'm showing up.

Craig Shesky (CFO)

Yes. Sorry, Liz. Is there anything else on the line for questions?

Operator (participant)

No phone questions at this time.

Craig Shesky (CFO)

One more question, actually, from the webcast. Somebody asked, they're not clear whether or not we're going to submit an application contract on June 27th with the ISA. Gerard, do you want to reiterate what we said on that?

Gerard Barron (Executive Chairman and CEO)

What I'll say is what we said earlier in the call. That is we will keep our standing with the ISA. We will preserve our rights there. We will have an application ready on June 27th. We are undecided where that application will land. The decisions that will drive that are permitting certainty.

Craig Shesky (CFO)

Okay. I think that's it for the conference call today. Perhaps we'll turn it back over to Gerard for any closing remarks.

Gerard Barron (Executive Chairman and CEO)

No, I'd like to thank everyone for attending today. I'd like to thank my team and my board for the support, our partners who work with us, and our shareholders who have been amazing supporters on this journey as a public company and before that as a private company. We are greatly encouraged by all of the stars aligning right now. The environmental results coming through are offering us tremendous encouragement. I hope this news will be able to see this industry in production and supplying metals with the lightest planetary and human touch as quickly as humanly possible. Thank you very much.

Operator (participant)

This concludes today's conference call. Thank you for participating. You may now disconnect.