Q3 2021 TMC the metals company Inc Earnings Call
Good afternoon, everyone and thank you for participating in the metals company third quarter, 2020, one corporate update conference call. Joining us today are the metals company's executive Chairman and Chief Executive Officer.
Gerard Marin and Chief Financial Officer, Craig Suski following their remarks, we'll open the call for your questions I would now like to turn the call over to CFO, Craig Schatsky as he reads the Companys Safe Harbor statement within the meaning of the private Security Litigation Reform Act of 1995.
That provides important cautions regarding forward looking statements Craig. Please go ahead.
Thank you all 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 currently available at this time.
Once are subject to known and unknown risks and uncertainties, many of which maybe beyond our control, including those set forth in the safe Harbor provisions for forward looking statements that can be found at the end of our third quarter 2021, corporate update press release.
Statements May also be found in our Form 10-Q, when it's available and other reports filed with the SEC I'll now provide further detail about the risks related to our business.
Please note that the Companys actual results may differ materially from those anticipated.
Except as required by law, we undertake no obligation to update any forward looking statement.
In the slide deck is available on our website at investors <unk> metals.
I'm now happy to turn it over to Sharon most company's chairman and Chief Executive Officer Sharon. Please go ahead.
Thank you Craig and good afternoon, and thank you all for joining us today for our third quarter corporate update conference call.
You're welcome to follow along with our slide deck or is joining us by phone you can access it at anytime at www muscles dovetail it.
So today, we will be reviewing our recently completed business combination or financial and project development The island.
Expected upcoming milestones for the company.
I'd like to begin with a recap on recent market developments and how we believe the metals company could fit into the big picture.
So the green sheets is metallic at top 20 X the world's governments.
Leading to a rapid transformation of LNG and transport.
Catching people by surprise is that this transition starts.
And with metals.
Last year the World Bank pointed out that we will need to extract to 3 billion tons of national by 2065 fold increase in production.
Couple of months back the International Energy Agency ran an analysis of their own.
And arrived at the conclusion that the hit net zero globally by 2015 will be a class six times more mineral imports in 2020 than today.
So in an attempt to get the message across and industry analysts fan woodmac in October did not mince words.
The energy transition starts and ends with metals and to hit the one five degree Celsius target a fivefold increase in base metal supply will be needed requiring an investment of cheap trillions of dollars. So maybe any demands could be mission impossible.
As we hurried to get out of one extractive industry. It's also feels the basket the whole enterprise depends on standing up another extractive industry in metals is understandably, a hard pill to swallow it but we cannot afford to ignore it because you can't build your giga factories in renewable power outage data.
If you look at the U S. H D D GMT months to electrify U S comp sales you need about one point she kilowatt in battery cell production capacity.
And all this president Biden outlined a target of 60 decided EDI sales share in 2013 is announcement was followed by a flurry of industry announcements to construct giga factories in the U S, but not much detail around how these giga factories will be supplied with raw materials and they do need to worry about this now because.
Does it takes on average about a decade to permit and develop a new mine.
In the longer in the U S. So 'twenty Jody is already yesterday with respect to the United States domestic capability to meet the expected demand.
Where will the battery metals come from let's imagine that.
But the U S implements mining reform and moves as quickly as China in that scenario, we think the U S might be able to solve copper and maybe find some more lithium but we don't think you can solve nickel cobalt manganese because the result is yeah.
When you look at the current supply chain from mining to processing and refining and cathode material production, it's a 50000 miles supply chain control by China.
The United States spends so much asset to achieve energy independence, only defined itself headed metal dependence muscle is the new oil and China is more powerful than old tech.
But by being illustration understands this and nickel has finally been elevated to most critical status and was mentioned 146 times and the 100 day supply chain review.
And Nicole refinery in the U S is trained as the highest short to medium term priority in that document.
And it so happens that there is a potential solution of the western seaboard of the United States.
Realization is slowly percolating through the system.
Over the summer the Wilson Center, a key non partisan policy for them in the U S held a dialogue with key level groups of stakeholders trying to find solutions to the troubling scenario faced by the United States. When it comes to the supply chain to critical minerals. Their report acknowledged the significant domestic opportunity to get the nickel.
Cobalt manganese from pulling the <unk> modules in the clarity and put it in done.
In developing the nausea resolve suffers a 1500 miles supply chain and an opportunity to reshape processing and refining in the U S.
So here is what a poly metallic nodule feel big sites and these images were taken at $4 three kilometer depth and that he was about 1.2 meters above the CFO and you can see continuous module coverage.
Joe is formed by precipitating metals that are in solution and ocean water and the sediment Paula.
The new trucks with approximately 95% of non drill mass exposed on top of the CTO of mud.
And we are using lightning here, some visibility, but otherwise its adopt cold St. Paul place.
Unlimited food means limited life. Indeed, it's one of the lowest biomass places on the planet compared to desert some land in an ice free Arctic enough.
But most likely as bacterial once in a while you can start a one or a sponge or us or <unk> and in general animals tend to be small.
Centimeters, there's a giant in Israel.
It's a fascinating slow changing world, but must be protected and as a precaution more area is already under protection. Yeah, then under extra duration and protected areas account for about 34% of the total clarity and triggered a zone already exceeding at least for the <unk> the global.
Push to protect 30% of the oceans.
In addition to the relative proximity to the U S and the option to process and refine these nodules in the U S. This resource has several other advantages it's abandoned its the largest estimated source of battery metals on the planet a portfolio alone is sufficient estimated in situ quantities of these metals too.
Electrify around 280 million Tvs, all the entire U S passenger too.
And its high grades on land, you would possibly need three different mines to obtain these metals and the grades are falling.
Modules contain high grades of full metals and a single resource on average we need to process several times less mass to get at the same amount of metal.
In security these nodules city in international waters on a regulated by an Intergovernmental organization. The international C that authority OSA comprised of 160 member States.
<unk>.
Decisions are subject to intense scrutiny and consensus takes time, but they cannot be changed on the win of a single government.
Low production costs that are potential steady state production, we expect to be the second lowest cost nickel producer on the planet largely due to the high grade multi metal nature of the resource.
And lowest flow ESG cost, we expect between 70, and 99% reduction of lifecycle ESG impacts no child labor, no social displacement or no deforestation.
Onshore production will generate near zero is solid waste.
We should be able to compress here to equivalent emissions by up to 90% and this is all using conventional technology, but we're pushing to do better than that.
We believe it is a much better than the alternatives.
But it isn't a miracle, we would be impacting in deep sea environment and a lot of care is going into making sure that we characterize and mitigate our impact on biodiversity.
So what does it take to get to production. It all starts with the resource we have secured exclusive exploration rights to three areas sponsored by three Pacific Island Nations.
Next we have to figure out how much is that and of what quality. We have resource estimates on two of our exploration areas and to move from exploration to exploitation need to secure and I say exploitation contracts.
How do we pick up nodules firm four kilometer depth well the basic technology was successfully demonstrated back in the 19 seventies, but we have to design and test system and we're doing this in partnership with overseas.
What are the environmental impacts of inaugural collection and how do we mitigate but here we have a much higher bar than most projects on land first loss baseline the marine environment since from CFO to surface. Then we must run our pilot system and monitor and measure its environmental impacts the deliverable.
Here is an environmental impact statement that is an important part of our application to the RSA for an exploitation contract.
Once you have the nodules, how do you turn them into metals.
We invested asset in developing two different associates and she chose to go with the lower risk option for our development and operational plans.
Uses conventional equipment and we expect to generate near zero solid waste we have to model. It then tested lab in pilot scale before introduction, we need to make sure. Our project is economically viable. So we go through a sequence of studies with increasing levels of confidence on project economics.
We started with an initial assessment, but we are now in the middle of a pre feasibility study followed by a bankable feasibility study.
We currently have sufficient level of cash to fund the milestones highlighted in blue.
We believe that the foremost important.
Firstly, the complete onshore pilot time program to process and refined poly metallic nodules into critical metals.
Secondly, it should build and deploy a pilot collection system to lift modules to the surface with a dual focus on operational performance and environmental impact mitigation.
And thirdly to compete the offshore environmental impact statement of future production on <unk> and then finally submitted application to the I S. A for an extra vacation contract. So the nori D area.
So where do we stand at the end of Q3 2021 as mentioned previously our business combination with sustainable opportunity acquisition Corp was completed on September nine 2021, the company renamed to TNC, The metals company and on September 10.
2021, we commenced trading on NASDAQ.
TMC received approximately $137 million in cash prior to transaction fees, including approximately $27 million from the select trust account after accounting to redemptions. As we've noted previously so that candidate into subscription agreements for $330 million of pipe.
Only $110 million of implied funding has been received today.
So I cant GNC continue to seek to enforce the funding obligations to lawsuits have been filed against the nonperforming investors in <unk>.
New York State Court.
So with cash in bank of approximately $113 million at September 30, we have maintained our expectations with funding our operations through the key milestone of submitting our application for an exploration exploitation call back to the eye.
In Q3 2023.
In terms of project development, it's been a record setting nine months you can see the highlights on this slide but I'd like to get some of these in more detail.
To date, our technical results statements were done in compliance with our stringent Canadian 43 101 standard to.
To become a U S listed entity, we had to comply with the SEC regulation S. K 1300 standards at Accordingly, AMC consultants reissued technical resource statements on Norrie and troubled areas Reconfirming. Our total estimated resource of $1 6 billion with tons of nodules in six years.
The loss of nickel copper and cobalt manganese equivalent to their requirements for 280 million electric vehicles.
One way to understand the significance of this resource is to compare it to other undeveloped and producing project.
<unk> is a key metal for us representing almost half of our expected future revenues and as you can see on the left side of this page our estimated results is significantly larger.
Then other known undeveloped nickel projects and earlier this year mining Dot com ranked just northern D asset as the largest undeveloped nickel project on the planet.
And if you convert all the metal content into a neutral equivalent grade at three 2% no other undeveloped oil producing project comes close.
Resource quality translates into attractive economics, and backing notch AMC consultants issue to FCC regulation S. K 1300 compliant initial assessment of project economics or the northern D area.
This area represents about 22% of the total estimated portfolio and is expected to have a net present value of $6 8 billion using very conservative commodity prices and as you may know the prices of most of our metals have reached multiyear highs at current prices the net present value with.
Nearly double.
And Q3 saw an important milestone on the regulatory side for us to move from exploration to exploitation. The international seed that authority needs to complete the adoption of the exploitation regime and the welcome. This regime started already back in 2011 that completion was targeted July 2002.
<unk> was disrupted by Covid. So the increased regulatory certainty at the end of June the Republic of nerve once reinstated minority area exercised its sovereign rights under section one paragraph 16 of the 1994 agreements relating to the implementation of Pops.
The United Nations Convention of the law of the sea Unclos bi severity achieving notice.
This notice was obliged.
To complete the adoption of exploitation regulations within two years of the request made by the member States and in response to the ISO has put together a work program to meet the deadline.
The outcome, we are hoping for is that the I would say to deliver on the work program and complete the adoption of the regulations with the consensus of the 167 nations in the EU behind them. However.
The 1994 implementation can agreement does lay out what happens if this does not materialize.
<unk> has not completed the adoption of such regulations within the prescribed time and an application for approval of a plan of work for exploitation is pending before the RSA. The RSA show Nonetheless, consider and provisionally approved such kind of work.
So we expected our subsidiary North will have submitted its proud of work for exploitation within the prescribed time frame.
Once we submitted application we expect the RSA to take at least 315 days to review it and decide as no changes requested in the application is approved we can expect to start production in Q3 2024 subject to our ability to fund the development of the project zero.
Putting together an application is a multi year effort that includes a comprehensive environmental impact statement all the foundations of the ice is collecting baseline data on the environment.
We need to understand that pre impact states. So we can compare it to what happens after Mel Joe collection.
While we started doing environmental data collection campaign several years ago. This has been a risk.
With full campaigns and 140 day 48 days at sea and the first nine months of this year all completed safely.
With all the data collection goals accomplished by our research partners and under superb management of our vessel operation partner most supply services.
The last completed campaign <unk> had researchers from the University of Hawaii.
Texas A&M in the Japan Agency for Marine Science.
Science and technology or <unk>.
One of the campaign achievements with sampling pelagic biodata.
It dips down to 4000 meters, marking what we believe was the world's first deep Mark nest net tow in the eastern tropical Pacific Ocean.
And I just returned from San Diego, where we are mobilizing for the fifth campaign. This year and the final of our baseline data collection campaigns baseline data being collected by the end of 2021 to the analysis will take some time.
And in parallel together with our offshore partner <unk>, we've been building a pilot collection system in the Netherlands with system consumes consists of our surface production vessel CFO.
Seafloor collect the robot on in Airlift Riser system.
The hidden gem of former Drillship acquired biopsies last year's in Rotterdam undergoing conversion into the surface production vessel. It is expected to be the first ship classified as a subsea mining vessel by the American Bureau shipping.
And the Red launch and recovery system that you can see in the middle east to lower and retrieved collect our robots has already been installed.
They collect the robot is being assembled as well and you can see the current state of our collective on the right hand side to chip.
And these images were taken at the end of October when we invited to stakeholders to Rotterdam to review progress on the conversion of the hidden gem and the assembly of that collector robot.
We are targeting system completion at the end of this year, followed by wet collect drive test in the North Sea and full pilot system trial in the northern <unk> area in the Pacific next year.
Even a pilot trial requires an environmental impact statement or it's Hernan announced subsidiary Norrie submitted the eyes for the upcoming pilot trial to the RSA in July 21.
Planning, a 12 week trial with about 260 hours of system operation and the directly impacted area is small it's <unk> five of one square kilometers.
One of the high profile issues addressed in the US is the potential environmental impact of <unk> <unk>.
Plans are essentially suspended CFO mud particles and early speculations about tunes suggested giant clouds of mod will be traveling to thousands of kilometers.
Staying suspended for long periods of time will or falling out and suffocating organisms in protected areas. We believe these initial speculations are proving to be wildly exaggerated.
And by a third party expert BHI using met Ocean data collected from minority D and using Normandy sediment properties supports predictions. The claims from the pilot system will be limited and localized and although the pilot system is similar to the production system.
We believe it is representative of the relative order of magnitude of the impacts that we can expect from the production system.
Results from DHA are consistent with the word published by <unk> on sea floor and mid water plumes, and Furthermore, fall seasonal fluids. Our results are consistent with field observations by the German contract to be Jr. And the Belgian contracted GSI, we did a CTO of collected test indices.
Z earlier this year and we look forward to having our own shield observations next year.
While our work offshore gets a lot of coverage I personally get us excited about what we've been able to achieve onshore.
For anyone wondering whether we can turn nodules into valuable critical metals. The answer now is a resounding yes.
First our pilot program to modules into our manganese silicate product that you go directly into manganese alloy production.
And Ah nickel copper and cobalt alloy.
And intermediate product that can be used as feedstock in some of the existing smelting and refining operations.
I was just held up well.
It looks like.
Then we have been able to convert.
The nickel copper and cobalt alloy internet.
Further intermediate product that could go into go into most Nicole refineries and here is what natural slash.
So.
We have started on the final part of our pilot plan program and that is turning Matt in the nickel sulphate cobalt sulfate and copper cathode.
So looking forward here's an overview of what we are focusing on mix. It will be an equally intense six to nine months for us.
Firstly, securing funding to get into production in 2024 is my number one priority to that end, we are working on multiple fronts, securing bankable upticks toward project zero production finalizing project zero economics, with all fees and securing an onshore partnership.
Site in.
In parallel we are in active discussions with strategic partners, who can help us get to full scale production ideally in the United States and they include common acres cathode material manufacturers mining majors oil and gas majors and EPC companies.
Offshore the pilot trial of the offshore collection system as a major events and while they have been a collective robot chess on the seashore a full system test, including the riser is not being done since the 1970. So a digital twin system for inaugural collection operation has never been developed in an opera.
It either so this is another exciting development for us and onshore we anticipate that we will complete a pilot planned program go interim nodules to battery cathode precursor materials in copper cathode.
So with that high end to the other to create to speech Tnc's recent third quarter and year to date financial statements.
Thank you very much Sherry.
Before we get into the results I do want to draw your attention to certain restatements to our first quarter and second quarter 2020 financials, which were included in our recent press release.
Now the restatements resulted from eight through invoices from exploration expenses, not being appropriately accrued as of June 32021, and be expensing options granted in the first quarter of 2021 based on <unk> historical startup phase with the company rather than big of the options on March 4th 2021.
More information is provided to the company in the press release as well as our soon to be filed 10-Q.
Turning to the financial results for the third quarter of 2021, the company reported a net loss of $36 7 million or <unk> <unk> per share compared to Pnc's net loss of $6 8 million <unk> per share for the third quarter of 2020.
Higher net loss was mainly attributable to $12 9 million in milestone payments.
Limited pilot mining system agreement with all fees.
And $2 8 million increase in offshore campaign expense due to increased offshore activity versus the prior year period.
Exploration expenses during the third quarter of 2021 were $23 8 million compared to $4 6 million third quarter of 2020 also explained by the old fees milestone payments and increased offshore expense.
General and administrative expenses were $14 3 million for the third quarter of 2021.
$2 2 million for the third quarter of 2020.
Mainly driven by higher noncash stock based comp expense and overall higher costs through the results and being a public company.
Now excluding the direct transaction costs related to the business combination free cash flow for the third quarter of 2021 was negative $9 8 million compared to negative $3 8 million in the third quarter of 2020.
For the nine months ended September 32021, the company reported a net loss of $121 5 million compared to 39 5 million in the prior year period.
Exploration expenses increased from $35 7 million to $80 2 million and G&A expenses decreased from $3 8 million to $41 million during the first nine months of 2021.
<unk> increases both in exploration expenses and G&A expenses were stock option to see three employees and contractors in the first quarter of 2021 before the business combination was finalized.
Equity awards for our key employees who've been progressing the project over the last several years and of course, retaining key employees and very high priority for us.
Excluding nonrecurring items free cash flow for the first nine months of 2021 was negative $23 8 million compared to negative $21 4 million in the first nine months of 2020 with that I will turn it back over to Jerry for some final comments.
Thanks, Greg So before we go to questions. Let me address the recent short report.
Clearly this report was written by somebody who doesn't know much about resource economics.
Results quality drives the value of exploration contracts not the fee you pay to applying for the contract.
We acquired the terminal assets at $32 million from a third party, who had no relation to any of the shareholders or executives of TNC, all deep green and.
And by the time of the acquisition in 2020 Tomo had conducted several resource definition campaigns and had a 43 101 compliant resource of 756 million tonnes of what modules for.
For comparison Northern D has a 43 101 compliant resource of 366 million tonnes, so less than half of the Tamil results. It also has an SEC S. K 3800 compliant initial assessment signed off by independent experts with an NPV of $6 8 billion and if we use.
Today's commodity prices that NPV would exceed $12 billion. So I think a $32 million acquisition of the terminal asset was an outstanding year by any measure.
It's also worth noting that in our opinion that nearly all of the good ground has already been trained in the <unk>.
No.
If the short seller believes getting an exploration contract for an area with high quality resource funds.
Sponsorship from a sovereign nation as easy as pain.
$250000 contract application fee.
We should go ahead and try.
The report also suggests that we overstated our exploration expenses scenario.
And that is also incorrect as part of the business combination we were required to adjust our accounting from interests to U S. GAAP and that meant we needed to fair value of the shares we paid to Merced, resulting in the increase from $14 9 million to $35 4 million.
TMC is the SEC regulated company, we take our compliance very seriously.
More importantly, we're a company that values transparency.
Nothing in this agenda driven report causes me any concern and we are purposely not commented on this report because the agitations will serve.
I'm serious.
They did not warrant a reply that given that retail investors have asked me to however periods.
So.
The energy transition starts and ends with metals.
Get factories comp make batteries out of Sienna and TNC is developing a massive resource that can truly move the needle in terms of metal feedstocks at Giga factories, and while also shortening supply chains compressing in ESG index and helping to ensure minimal independence.
For the United States.
We have made an incredible amount of progress on the project this year onshore offshore and environmental and we're just getting warmed up.
And with that we'll turn it back to the operator for some questions.
Sorry can lean we will now begin the question and answer session. If you would like to ask a question. Please press star followed by one on your telephone keypad. If for any reason you would like to remove that question. Please press star followed by Tim again to ask a question. Please press star one as a reminder.
We're using a speaker phone please remember to pick up your handset before asking a question, we'll pause briefly to allow questions to generate in Q.
The first question is from the line of Daniel Ives with Wedbush You May proceed.
Thanks.
So can we just first.
Talk about.
How conversations maybe of change where they're strategic.
Partners are within the auto food chain over the last call. It three six months is there a <unk>.
Discernible change just given more of the more of an acceleration of the evs need for with him.
Yes, Hi, Dan.
Absolutely there has been a discernible change and.
Of course, we while there is lithium in our modules, we don't focus on it as a product.
I think auto makers have historically.
Been a very dominant party when it comes to supply chain and.
Obviously with the semiconductor experience in the past year, it's highlighted how raw materials can really disrupt the business now the whole transition.
Two electric vehicles. So it's really sped up I guess since Covid came in obviously the stimulus packages has been announced by President <unk> and others means that everyone wants to catch up and go electric and so all of a sudden while historically they have pushed those conversations under the supply chain now.
It is not that easy now they realize that they have to get control of supply availability price sustainability are the key drivers for those automakers and yes, we're having very different conversations with them today compared to even six months ago.
Great. Okay, great. So can we just going on now obviously, you've gone through and slides.
When we think about 2022.
What are like let's call it just to read top priorities in terms of.
From an exploration or from a quarter.
Strategic perspective that we want to be.
A year from now.
As you look ahead can you kind of detailed version.
Sure well from the project perspective.
The priorities are.
This time next year, we will have completed our offshore pilot mining trial pilot collecting trial and that will be the full end to end system and as I mentioned earlier.
There has been a trial earlier by the Belgium contract.
The collective vehicle it was very successful and.
This is different.
In February last year old fees, our partner acquired the hidden gem, it's a $228 million 228 meter production vessel.
Formerly of Drillships that would be I think it's ticket price was $700 million.
10 years ago, and they bought it for low tens of millions of dollars.
We're busy.
They are busy converting that now.
In fact, I looked at the sheets those around 240 people at all seats working on that conversion last month.
And so by this time next year, we will have successfully well we will have been to the license area.
We will have conducted that that harvest in trial.
<unk> observed that and Thats, an important part of the permitting process because we have to demonstrate and we have to report on the impacts.
The same with onshore we have already completed a pyro metallurgical pilot plant processing work.
And we are in the early phases of our hydro network, but as I mentioned, the hydro and that is very low risk. It's we're adopting a process that is carried out by many other refiners all around the world. So we see that as very low risk I guess, the really exciting thing.
We will be more environmental.
<unk> is being published more environmental results because of course.
That's what everyone wants to know what are the impacts and as I reported on the <unk>.
Uh huh.
Our estimation is that the premium will travel five to six meters above the ocean floor and that is consistent with the.
Published papers, they put out two papers this year and the GSR published.
Released OBG argues.
That they released earlier this year from the actual trials in the <unk> Z, which is an area very near us So more of that environmental data being released is something we're really looking forward to and then on the strategic side.
We are talking to them as I said with companies from the resources sector.
The mining sector as we know it from the oil and gas sector and also with customers and intermediate players and I think the thing that will really get this.
Opportunity our lives will be consumer facing brands engaging.
So I think the consumer facing brands will come as a result of more environmental evidence supporting the lower impact of making battery metals from our modules compared to land based stores.
But some of the other players.
The resource companies Theres, no doubt they'll move faster in my opinion, and because you just don't find ore bodies around the world.
This size and this quality.
Thanks.
Thank you Ms Donna.
The next question is from the line of her boss Sandra with benchmark you May proceed.
Thank you so I'm looking at I think spine 11.
A lot of stuff in Illinois, it doesn't seem like.
And any sort of changes to the to do list.
Despite.
Failure.
A couple of those.
Yes.
Hedge funds or whoever but.
Came up short on their pricing.
Equity.
Curious what adjustments.
Do you have to make and.
How at what point do you think in some of these things youre working on bankable optics negotiating.
We all see either.
Partnerships for our project, one and beyond at what point, what's the event do you think that I.
I guess.
Given the market confidence in the liquidity.
To get to full production and get through project zero.
Sure. Thanks for the question Sebastian well Theres no doubt, we were disappointed to raise less money than we had anticipated and.
We always plan to take more money because it would fund us all the way through the production in fact, we will fund this through until 2025, but as you pointed out on slide 11, there's still a lot of work to be done so.
Fortunately, we have sufficient capital to do that they really value, adding staff at the moment, which is the offshore pilot the onshore pilot processing work all of the environmental impact studies.
And of course be ready to submit our application in in.
In Q3 of 2023, what we don't have money for is to fund that first production.
We called project zero however.
You know one of the great advantages of the partners that we have chosen is that <unk> acquired that production vessel in 2021, sorry 2020 in February and so that production vessel is being fitted out to the pilot trials in fact.
It came out of dry dock some weeks ago, we had a crew of people on it and inspect it a couple of weeks ago stakeholder today and so it will be in the Atlantic are doing trials straight after after Christmas.
We will be busy figuring out.
Through the all of the strategics that I mentioned during my presentation about what those funding options will be.
To get us into that first production that we have a lot of choices. There for example, even on the production vessel.
There is you've seen the numbers there's margin in this ore body and so if we had to.
Sacrifice some opex for Capex, then that's an option that's always available to us, but I remain confident that.
Based on the size and quality of the resource that we will have sold that funding issue before it starts impacting production on 2024.
And I mean, just add in there too.
The big takeaways from the event in Rotterdam, a couple of weeks ago was it was just great to be able to share with all the stakeholders, whether potential investors or strategics et cetera.
Tangibilitate of that progress.
Because they know about the size of the resource they know how attractive it is but as we continue to hit these milestones over the next two years with the cash that we have on hand.
It will just increase the certainty and continue to be risks so.
Obviously, we are.
Disappointed.
In the situation with the pipe, but it did refocus us on making sure we get the boat on the water. We show the successful collector test. We showed that we can convert these nodules into usable metal, which we're making great strides on and.
And that will put us in even better position when it comes to raising additional capital.
Okay, great and so maybe.
A little help there.
Two years, a long time and.
It certainly seems like the.
The macro trends are in your favor.
And your options.
<unk>, if not improve but.
When at what point do we sort of need to solve the project zero capital question.
Yes, we need to we need to solve that by Q1 2023.
Okay great.
A follow up here.
Maybe my second follow up.
You talked about the public comment period I think for normal.
You know for the pilot test in the CCC.
<unk>.
And it might be on the website, but I havent checked any color on what the initial comments look like an end.
What they might be concerned about or or how excited they might be about.
The CCC.
Many pilot.
Okay.
So that's would you just repeat the first part of that question. The comments about about what was it about the environmental.
Yes.
Uh huh.
Yes, so I think.
<unk>.
There's a public comment period.
For the CCC minus.
Mining pilot.
And I thought the public common period and have already opened.
And if you had any color on what some of those initial comments have been focusing on.
Uh huh.
Alright, I understand now yes look it's an open period now and we're engaging with all of those stakeholders throughout.
Through a stakeholder engagement program and.
I think the feedback we've been receiving from the extensive paper that we launched and that's available on the on our website and also the I would say website has been very complementary to the range of.
The scope of that study and so we don't we don't certainly don't see any showstoppers in it.
Okay. Thank you.
Thank you Mr. Sandra.
Again to ask a question. Please press star followed by one on your telephone keypad.
The next question is from the line of Malcolm Macdonald with Bank of America. You May proceed.
Hey, guys.
Quick question why does it take 315 days for the <unk> to make a decision.
Yes, hi.
Hi, Ravi.
Hum.
Sorry go ahead.
Yeah, no that's a process that they have.
Laid out it goes to the legal and technical Commission and it's.
It's a big document there'll be wheelbarrows too.
Gary It isn't there.
So that is.
That's just the process that they have.
Laid out.
And it's encouraging to see how the <unk> is preparing for that as well.
Recruiting heavily they are bringing in lots of expertise to be able to make these assessments and also to become the regulator and so it's a pretty reliable.
It's a pretty reliable timeframe from our perspective I think the one point I would highlight about the approval process that we have.
We often talk about the RSA as a regulator why we're very happy with them I mean, the RSA was setup in 1994.
And it was set up to govern the high fees and to put in place.
Regulatory framework to allow the development of this resource.
And with land based applications, if I just use them as a comparison.
What's you end up finding of course.
Changes you might find governments, who get voted out because of their position although approval you might file.
<unk> native title claims and so on and of course, we don't have those issues and so we don't see the delays that some.
Land based projects.
Located in certain jurisdiction would be subjected to.
We just don't have us.
Would it be possible for the ISI to make a decision.
Sooner than the 315 days there are a lot of.
We hope so.
And we'll be doing everything to encourage it but we're not banking on that at the moment.
And by the way what happens when we get the boat back.
Well when <unk> screened the boat back from the pilot it goes straight back into dry dock to have some more modifications made.
To make it ready for.
Project Zero production and so you know.
We're using the time pretty effectively we would clearly like to bring this resource into production as soon as possible, but I think thats a good timeframe and keep in mind I made the point during the presentation that permitting process on land is becoming more and more challenging and I think that.
It's getting anything approved in a developed country or a developing country.
Does not have a lot of certainty around it in this day and age.
Lifestyle.
Just a quick follow up there so given mccrone statement the other week it or the other than top 26.
Hum have they've been in touch with you guys regarding any sort of uptake and.
Just a follow up on that whereas China relative TMC.
Well.
Let me first address.
Micron Firstly, thank you president Macron neutral.
Making those comments because for those that weren't across it.
He gave an update on his 2030 plan and made the pitch that.
So France is future they need to reindustrialize, they need to develop secure supply lines they need to create local jobs and that means they get to need a lot of metals and France is a very large osha and economic zone holder. They also have a license in the same area that we do and he said poly metallic nodule.
<unk>.
It looks like being the solution to that and so they have allocated some billions of dollars for the development of that and I think that's significant to have a G. Seven litre European later come out in support of course, we have the leaders from our developing nations and we have China, and Japan, and Korea, but to have a president.
So those are really supporting that was good news in regard to China.
There is no doubt they have.
Three licenses two of the men.
Very close to us.
In Changsha before Covid struck and.
My team and I and we visited.
China Minmetals onshore processing pilot plant they had been processing modules for 20 years.
The same nodules that we're picking up that had been processing to 20 years. We also inspected the harvesting system. Then we understand they've been doing more trials, but not in the Ccs add more on that territorial waters. So I think it's safe to assume that China is moving we know they have an insatiable appetite for these important base metals.
And so.
We always thought it was a good thing the China was involved in that.
But I still remain confident that we will be the first out of the gate.
And certainly just to expand on that a little bit.
As more and more focus is come on this topic.
Topic over the last year, the more focus from policymakers not just in in Europe, and Asia, but more so in North America as well when there was the news earlier this year that China was doing some deep water testing further collector system. There are a lot of inbound calls and emails asking what the implications were so certainly we don't shy away from any competition.
And in fact.
No nothing validates our business model and the company more than other people looking at this resource as well.
Thank you.
Why March collecting.
If China are collecting nodules to make battery metals, then hopefully that means theyre going to be destroying less.
Carbon sinks less rainforest led by diversity.
Because if you look at the <unk> growth.
Avenue for nickel.
Is from Nicole latter rights, and we know where they formed a form in some of the most by the carbon sinks on our planet.
So that's the real enemy here.
Awesome and just one more kind of follow up on.
What you just mentioned.
When you go into production and start generating revenue would you guys consider taking.
Taking it one more step further in regards to the race.
Zero and actually.
Allocated percentage, possibly of your revenue, maybe even reforestation or.
Becoming a leader in terms of.
ESG and.
Electrifying the world in Decarbonization.
Well Theres no doubt.
We want to take that leadership role.
And of course, there are a lot of economic benefits that flow from this project not only to our sponsoring nations.
The nations that are.
Impacted climate change leased yet or in the front row to be impacted by the effects of climate change through rising sea levels.
Once we're in production this will deliver them royalties that will provide jobs training opportunities and have a meaningful impact on the GDP and of course, a much bigger royalty gets paid into the international seabed authority and on cost was very prescriptive about what should happen to those royalties they should be after paying for.
The cost of the regulator they should be distributed to the developing nations of the world, particularly the landmark nations. So there's that.
We are building this on an ESG platform there is no doubt about it.
So I guess you can you can expect us to strive for the gold standard when it comes to all of those ESG metrics.
Awesome. Thank you so much.
Thank you Mr Mcdonald.
There are no additional questions waiting at this time I would like to pass the conference back to Craig <unk> for any closing.
<unk> remarks.
And I'll pass it back to Jerry bearing our CEO well to conclude.
Our recent accomplishments have been significant.
And our strategic priorities remain on track to achieve four key milestones by the end of the third quarter 2023, when we expect to submit our application to the international seed that authority for an exploitation contract for our <unk> Gary D area.
Thanks for taking the time to join US on the conference call today, It's our first earnings call. So we've been very much looking forward to it and we look forward to speaking to you on our fourth quarter corporate update call.
Not so many months thank you.
That concludes the metals company's third quarter 2021, corporate update conference call I Hope you all enjoy the rest of your day you may now disconnect your lines.
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Right.
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