Q1 2022 TMC the metals company Inc Earnings Call
Thank you for standing by the conference will begin momentarily until such time, you will hear music. Thank you and please continue to standby.
[music].
Yeah.
Good afternoon, everyone and thank you for participating in the metals company's first quarter 2022, corporate update conference call Joy.
Joining us today are the metals company's chairman and Chief Executive Officer, Gerard Barron and Chief Financial Officer, Craig Cheskey.
Following their remarks, we will open the call for your questions before.
Before we go any further I would like to turn the call over to CFO , Craig <unk> as he reads the Companys Safe Harbor statement within the meaning of the private Securities Litigation Reform Act of 1095.
It provides important cautions regarding forward looking statements and information about the use of non-GAAP measures Craig. Please go ahead.
Okay.
Thank you. Please note that during this call certain statements may be made by the company that are forward looking and based on management's beliefs and assumptions from information available at this time.
Payments are subject to known and unknown risks and uncertainties, many of which may need beyond our control, including those set forth in our safe Harbor provisions for forward looking statements that can be found at the end of our first quarter 2022, corporate update press release.
Such statements May also be found in our Form 10-Q, one vis available and other reports filed with the SEC all of that provides further detail about the risks related to our business. 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 statements although.
<unk> today May also include non-GAAP financial measures, including with respect to free cash flows and 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 and that slide deck is available on our website right now investors dot metals that CEO .
I will now turn it over to Jared Berlin metals Company's chairman and Chief Executive Officer. Darren. Please go ahead.
Thank you, Greg and good afternoon, and thank you all for joining us today for our first quarter 2022 corporate update.
Welcome to follow along with our slide deck or if you're joining us by phone and you can access it at any time at investors got metals Gulf Coast.
Today Lee will take you through the highlights from Q1, including significant progress offshore and onshore.
<unk> in the recent market and industry developments financial and project development highlights and the expected upcoming milestones for the company.
We will start with a brief reminder of the TMC value proposition.
<unk> is developing the largest estimated potential source of battery metals on the planet.
We believe our portfolio alone has sufficient estimated institute quantities of nickel copper and cobalt manganese to electrify 280 million Evs.
The size of the entire U S passenger fleet and with all of the raw material inflation squeezing automakers. This is a fantastic time to be developing a resource.
Can actually move the needle for them.
The result is also secure module shipped in international waters and regulated by the International Seabed authority will be <unk>.
The RSA resumed in person meetings in December last year after nearly a two year hiatus due to COVID-19.
<unk> also met again in March and have additional meetings scheduled in July and November of this year with a stated target of finalizing the exploitation regime by July 2023.
We expect our production cost to be lower as nodules contain high grades for metals in a single resource.
Which could put us firmly in the bottom quartile of the C. One nickel cost curve.
And importantly, we also expect to significantly improve ESG impacts compared to land based miners.
<unk> Mclaughlin no drilling no child labor no social displacement.
Forestation, another tailings, we anticipate much lower carbon impact compared to land based mine isn't nearly zero solid waste.
And finally, the recent rally in metal prices has led to a large increase in the expected NPV for nor indeed.
<unk> project, we are developing new.
The initial tests have been done by AMC and simply updating the current metal prices yes.
The estimated NPV for norm would be $22 billion with all other inputs being equal.
It's becoming increasingly obvious that automakers and other metal consumers are very worried about availability sustainability and priced battery metal box.
Boston Tesla CEO , Mark tweeted court.
Might actually have to go into mining and refining directly at scale unless costs improve unquote.
In a recent letter to shareholders GM CEO Mary Barra.
Express confidence in their supplies of lithium.
And cobalt.
Exception was the court.
GM is still working to secure adequate adequate nickel suppliers on quota.
And Ford Senior Jim Farley was recently asked about what keeps him up at night. These response was battery raw.
The raw materials that go into them and localizing that raw materials supply chain in the U S.
So U S automakers are clearly recognizing that the raw materials question.
Not just about how much that also where is it located or do controls it.
T M C.
As the largest single project in the world that.
But the top two largest <unk> in the world. According to our mining Dot com ranking from March of this year.
Ultimately, we believe we are the only mitigating future nickel, so that isn't already controlled by Russia or China.
Of which is winning the battery arms race through deliberate investment.
Several decades in locations, such as Indonesia, and the DRP.
And while China speeds ahead in these jurisdictions rife with environmental and social difficulties.
The U S continues to have nearly zero primary production of nickel cobalt and manganese.
And that doesn't look likely to change anytime soon.
East from land based sources.
Just last week, the environmental Protection agency recommended against reissuing, a key water related permits.
So knock that nickel project in Minnesota due to the potential for pollutants like mercury and be up in nearby waterways.
Largest potential nickel mines in the U S to a metal Minnesota office for its conduct rejected last year.
And so the headlines like the clearly underscore the massive strategic benefit there.
Results that our results could potentially offer to U S companies.
Especially given the challenges faced by so many projects online.
So our results is big but how big and how do we marry.
While in early 2021, AMC consultants issued an SEC compliant technical resource statement on the Naughty and Tamil areas.
Hello in dark Blue box on this page confirming a total estimated resource of one 6 billion wet tons of module.
The methodology used to determine which resolved with confidence can be found in the appendix to this presentation as well as minority initial assessment on our website.
SEC filings, but in short we can sample it and we can actually take pictures of it survey, which is all that just one of the many advantages of having a two dimensional resource sitting on top of the T. Flaw in an area with zero plant science.
Zooming in on the lower yellow box on this map that's normally do our first project.
The R&D alone is estimated to contain 356 million tonnes of what modules, representing 22% of Pmt's total estimated resource and.
And we expect that at steady postproduction, Northern D could produce up to 125000 tonnes of nickel annually equivalent to roughly 10%.
Current global production of class one Nicole.
We also expect to be a material source of cobalt.
<unk>.
Metal, which we think is underappreciated with manganese.
More on that later.
I'm very proud of our team and our partners for the progress made on the project development during this quarter.
We intend to use our cash balance of $69 million as of March 31st to continue this progress in the coming quarters.
On the right side of this page you will see a nonexistent summary of what's occurred at TMC in recent months.
Pleased to take you through these achievements in further detail.
As we discussed on our Q4 call. We wanted to remind you of the strategic developments announced in March that can potentially allow us to get into production in a capital light manner.
<unk> zero is alpha small scale commercial production project expected to collect and process, one 3 million tons of nodules annually from the noise the area.
March we signed a non binding term sheet with <unk> <unk> and a non binding Mou with Epsilon carbon which together with both are taking.
Two definitive agreements.
James the share creep production costs initially borne by TMC to approximately $55 million.
Down significantly from the previous estimate of $193 million.
Starting with offshore.
<unk> lays out the potential framework and the commercial terms so upgrading the pilot collection system.
Two a project zero assistant and operating at a minority area.
Further details on these economics can be found in our press releases in the transcript about Q4 corporate update call.
Already this year <unk> has made an incredible amount of progress on the system.
Testing, including Harbour webcast dynamic positioning chart trials and deepwater test and this keeps us on track to test the system and the CC said later on this summer when nodules and our contract area will be generally looks good after people and simply the hidden gem.
On the surface through the electronic system.
And rather than having it be simply talk about major offshore milestones achieved this quarter.
Like to play a short video, which allows you to see the progress yourself.
Yeah.
Hi.
Yes.
Please proceed ma'am.
Right.
Okay.
Yes.
Okay.
[music].
Motion picture.
Okay.
[music].
Steve.
[music].
Yes.
Two.
[music].
Last week the successful completion of the initial deepwater trials of the poly metallic nodule collected vehicle in the Atlantic Ocean.
Yeah.
The team at <unk> lowered the collected vehicle to the sequel at depths of two.
<unk> thousand 470 meters, marking the first time, the vehicle is being subjected to ultra deepwater temperatures and pressures.
Engineered and subject to the vehicle to extensive testing of its various pumps and critical mobility functions in and tried to vehicle over a kilometer across the CFO .
The pilot Nodule collection system is so far performing beautifully throughout these trials.
And getting the collective vehicle in the deepwater in the Atlantic has given the team the opportunity to really pressure test all the critical components were eager to share more offshore progress in the coming quarters.
Onshore, we announced the signing of a non binding Mou with Epsilon carbon March detailing their intention to finance engineer permit build and operate the <unk>.
Commercial poly metallic module processing facility in India building upon our pilot work finalized in Q4 last year, which successfully turned nodules into nickel copper and cobalt mass and manganese silicate product.
India is a great place for our first approach that same facility for many reasons, including support for nodule to make government at the highest level last year Prime Minister Modi half a billion dollars in the deep Ocean mission, including funds the deep Sea nodule collection system.
It's also worth noting that Ford stated in February that they are exploring.
Exploring the possibility of using a plant in India as an export base for EV manufacturing input.
Even beyond the potential for EV production in India. The country already represents a major hub for steelmaking.
Excellent carbon had been exclusive raw material purchase agreement with J SW steel India's largest steel manufacturer and this April we announced some very important news on the attractiveness of our manganese silica products to the steelmakers in India and beyond.
We retained syntax one of Europe's largest independent research institutions, we analyze our manganese silicate used to produce silica manganese steelmaking.
Pmt's high grade manganese silica product appears to have significant advantages over conventional land based manganese ore on costs.
<unk> footprint with the potential for 7% to 17% higher value in use depending on the carbon tax regimes.
So our manganese might not get as many headlines as nickel and cobalt.
Given that manganese could account for almost 30% as our future revenue.
Very pleased by these findings and Cynthia.
In advance of potential offtake discussions in the near future.
As you probably read critical minerals supplies and by extension Poly metallic nodules are growing area of focus for political and military leaders.
You'll see on this page a collection of ex exits from recent letters and the political and military fears regarding seafloor resources.
Most recent letter was the absolute haymaker landed by some of the marker rubia against Volkswagen accompany that first in virtue signaled the hesitancy on deep Sea mining, but then last month signed a large off take agreement with the Chinese funded cobalt and rainforest nickel supply.
In the letter Senator Rubio with VW believes that human trafficking child, labor and rainforest destruction unnecessary risks and whether they value deep sea sediment by the human rights.
Senator Lisa Makowski recent letter to the department of energy It was a bit less forceful in turn but every bit as clear in its conclusions telling them to do that any credible analysis of critical battery metal supply change must include seafloor resources and asking them.
Undertake a strategic assessment of poly metallic nodules.
And this echoes the sentiments with 17 regard retired generals admirals and offices across all branches of the military.
The Pentagon in February asking what they considered responsible development of pellet, calling metallic nodules as a potential game changer.
U S critical minerals supplies.
So to reduce dependence on metal controlled by authoritarian governments and to actually get enough of these metals to make a dent in fossil fuel use we think that nodules in the Clarion clipping and done the only real choice.
And the video will now play highlights the potential strategic benefit for the year.
Afforded by this remarkable results.
American automakers are leading the transition to electric cars.
And while we may be ahead in technology innovation.
Have a fundamental crops we.
We do not own the supply chain.
China does.
At the heart of an electric car is its battery.
From metals sourced from around the world.
Why change stretching 50000 months.
And after decades of deliberate industrial policy, China now controls the battery materials supply chain, China funds and operates mining projects around the world processes Refines. These metals at home and is now in a strong position to dictate the terms.
So currently China holds the lifeline to our electric future.
Our transition to clean energy will take several decades and require large quantities of critical metals.
Any cases, we don't have the domestic deposits to produce these metals at home.
So what can the United States do.
Except our dependence on China and learned to live with potential supply chain disruptions.
No we can't build an industry with this vulnerability.
With our allies to develop an alternative more secure supply chain, yes, but it won't be enough China owns nearly every contract for the future supply of key metals like Nicholas.
If we look beyond conventionally mined metal.
[music] recovering metal from scrap and electronic waste is crucial and may solve our problem in the long term, but it won't be enough in the next 30 years, which is why it may be time to look beyond land based mines.
1500 miles off the coast of California, as the world's largest known deposit of battery metals nickel copper and.
Cobalt manganese all factor into a single <unk>.
He's probably metallic nodules can be collected and brought to American soil and processed by American companies.
Pass to make real progress in solving our supply chain problems by making the battery materials at the heart of electric cars at home.
An opportunity to rebuild an entire industry from the ground up.
We sure manufacturing in the U S.
And create new jobs.
The United States has a choice we can try to play catch up with China, and the conventional metal supply chain.
We can innovate and secure file in the future.
Okay.
[music].
The metals for the clean energy transition need to come from somewhere and we believe the science based assessments of lifecycle ESG impact save a nodule the land based mining, especially given some of the geopolitical environmental problems of the alternatives.
For Reed's.
Summarize this well on the scanner and talk show in late April while showing images of one of the team sees environmental campaigns on the mask launches.
To close he said if people want to protect the planet from climate change and authoritarian governments people will need to get onboard with new projects, even the ocean floor cannot be off limits.
In terms of nickel the army other material option to supply growth is equatorial nickel laterites typically coming from underneath the world's carbon storing range for us.
AMC, our ESG principles continue to drive us and we're pleased to have many third party partners, who will help us tell the story of the all in tax compared with those of land based miners.
The next page summarizes some of our existing peer reviewed lifecycle analysis, which quantifies the significant impact of compression that nachos offer versus land base metals carbon emissions significantly reduced compared to nickel pig iron and carbon sinks at risk of reduced compared to the nickel sulphide and Nicola.
Right.
What do you use is reduced significantly.
And solid processing waste is reduced to nearly zero and no tailings allergies.
We think shouting from the rooftops about these studies for a long time and we were thrilled to announce in April that we've engaged benchmark minerals intelligence to provide an independent assessment of how the lifecycle environmental impacts of outdoor evening project compared to producing the same metals from a range of conventional land or methodology.
<unk>.
So Nicole nearly all net supply growth on land is expected to come from Indonesia. According to <unk>. The vast majority of that supply already has guaranteed offtake to China.
Some analysts predict that supply growth ex Indonesia could be negative globally through the end of this decade.
And if that's the case in Indonesia is the only other game in town besides nodules the nickel supply growth.
People need to be very aware of what nickel mining in Indonesia actually it looks like.
The answer well it isn't pretty deforestation high carbon impact by diversity loss massive amounts of waste toxic tailings that are sometimes dumped directly into the ocean and rivers certainly there are some good actors in the country, who are trying to improve things.
We feel there is just marginal improvements coming off a very dirty starting point.
I often images lag to the.
GSR collected test video from last year, which is on our website in the appendix to our Q1 corporate update presentation, along with a photo taken at the seafloor. After the test was completed.
Some opponents of <unk> say that we should wait a few decades, calling for more science from one side of their mouth.
Looking to slow down the company is actually funding that science from the other side of that now.
These are often the same people, who advocate shutting down or nuclear power plants.
<unk> zero accountability for the fact that they might be doing in the planet due to prolonged dependence on fossil fuels.
At best.
<unk> may be unaware of the significant impacts of existing land based mining ore.
Perhaps unaware the exponential growth needed in metal supply to combat the effects of climate change.
But at West Bay.
Ah complicit in the future.
The destruction of the bite of the carbon story and <unk> clients with a critically turning a blind eye to increased metal extraction beneath these glenn avatar incurred.
In furtherance of their own interests.
But sometimes even well, meaning advocate side, the precautionary principle to conclude that the world should wait a while before tapping the potential resource.
However, a true reading of the precautionary principle would actually favor the responsible collection of industrials as soon as practical.
One of the precautionary principle from the 19 92 billion.
Sure.
Is the one that many people focus on it says in order to protect the environment. The precautionary approach shall be widely adopted.
We agree.
The international seed that authority and this is why.
The 43% of the TC dead set aside as area that will never be touched even above 30% target laid out is not really a convention.
It's why this industry is now getting started after over 50 years of intense research, including a major study from Noah from $19 75 to 1980.
Also why we will deploy a digital twin because I'm pretty sure that transparency of our operations to the global community.
That you will rarely fine from a land based operation.
But part two of the precautionary principle is equally important and I quote.
There are threats of serious irreversible damage lack of food science.
Certainty it shall not be used as a reason for postponing cost effective measures to prevent environmental environmental degradation.
Yes.
Well, we don't have to go far to find two major threats of irreversible damage and environmental degradation. Firstly, there's the obvious threat to the world rainforest carbon sinks caused by land based mining on which the world would be even more dependent without an alternative models.
But there also is the threat of continued climate change exasperated by a lack of battery metal supply.
In fact, Princeton came out with a ground breaking report last week in the journal science, confirming what we and our team of Ocean scientists had been saying it is the biggest threat to the world's oceans as climate change and its climate change continues unabated marine life worldwide would suffer massive die off.
Likes of which hasnt been seen in hundreds of millions of years.
It is our company's mission to do everything we can to Stuart along the development of this incredibly important resource.
Accelerating the green transition and bringing us closer to.
To the day when a circular economy can be made possible.
Opponents of deep sea mining often paint a picture big scary machines digging up in churn in the sequel, which is totally inaccurate when it comes to poly metallic module.
We encourage you to watch the GSR collected tests videos and the appendix of this presentation as well as a slide differentiating nodules from other more invasive forms of deep sea mining.
But opponents also like to make it seem that one contract that goes ahead that the.
Jamie will be let out of the bottle and our largest waves in the sea floor are going to be affected but nothing could be further from the truth.
This slide shows the size of the TC said relative to the global people.
Also shows Tmc's exploration contract there is in yellow, which are each larger than any other known nickel project in development, but just tiny drops in the bucket compared to protected areas with <unk>.
And.
Much smaller compared to the total global CFO .
Even when we begin operation will only be touchy on tiny proportion per year of that contract area and this slide lays out that area a small sliver of blues in comparison to the global CFO .
It is also dwarfed by the annual fee for footprint of offshore wind and even smaller compared to annual trolling impacts that you can see here in blue.
Given the size of this important potential source of battery metal supply along with the relatively limited footprint of <unk>.
<unk> operations and the transparency offered by our digital twins, it's worth questioning why some would prefer to sculpt. This before it starts even on such a relatively small scale.
But thankfully this industry has a regulator that has been working hard for nearly three decades to come up with a robust set of rules and regulations, even before commercial operations begin Pete that's nearly unprecedented that any extractive industry history.
We also believe we have significant clarity on the permitting timeline.
Last year, the Republic, if not rude notified the RSA.
<unk> intention to large and application for an exploitation contract in July 2023.
This three year notice obliges, the I would say to consider and prudently provisionally approved nor is application based on the state of the exploit patient regulations at the time, where the final or not.
And following this three year notice.
They laid out a roadmap so each plan in 2022, and 2023, which includes an increased cadence of meetings.
After nearly a three year hiatus due to COVID-19 the ISI regime in meetings. This past December they held another session in March and expect two more this year and we expect that norrie will be applying for an exploitation contract in the second half of 2023.
And so this timeline keeps us on track to begin commercial production in the northern <unk> area in Q4 2024.
We've already completed several of our stated 2022 milestones and we intend to continue this cadence of progress.
One of the biggest upcoming milestones will be the pilot collective trial beginning this summer in order to date and this trial will include a second vessel as part of that collective test monitoring campaign, which will observe and analyze the impacts of pilot collection.
We're all excited to continue developing the digital twin with Kongsberg, which will give eyes and ears to the regulator and all stakeholders.
And we will soon release, our impact report a landmark document, which lays out our company's ESG story and long term goals.
With that I'll turn it over to Craig to speak on Tncs project economics in the first quarter results.
Thank you very much Darren.
So as at the end of March we had a cash balance of $69 million, which we'll use to continue progressing to work on our critical milestones, including the pilot collection system test in the CCC beginning this summer and further advancement of our environmental impact statement.
Both of which are prerequisites for application to the ISC for exploitation contract and.
And we make that application in the second half of 2023.
We believe that the cash on hand $69 million could fund us for at least the next 12 months from today.
Like most companies and individuals we certainly are noticing some cost inflation, including fuel prices and vessel rates and of course, we are always constantly evaluating our internal cost estimates.
But when you are exposed to the basket of metals that we are inflation can actually be a significant tailwind.
<unk> limitations of these middle markets are becoming increasingly worrisome to Jerome noted politicians military leaders automakers and the general public and nickel the short squeeze and a 10 day trading shut down at the London metals exchange in March showed just how precarious situations and since February nickel liquidity on the SME has been cut in half.
Yes.
We think can provide further incentive for nickel customers to think long and hard about locking up long term production.
So how do these higher metal prices translate into affecting our project economics.
It's a massively positive impact in March 2021, AMC consultants issued an SEC regulation SK <unk> hundred compliant initial assessment on the project economics for the noisy area.
This initial assessment is available in the investors section of our website.
<unk> financial model can be found beginning on page 310 of that document.
The north area represents just 22% of our total estimated resource portfolio.
The initial assessment rather than a net present value of $6 8 billion for noisy at the beginning of last year and Thats, assuming a very conservative assumption of $7 billion of project development Capex keeping.
Keep in mind that our announcements with all season Thats on carbon provide a playbook for how that capex amount can and we expect will be reduced significantly going forward.
So running the same model simply updated for current metal prices. The net present value of an already would be approximately $22 billion today and again, that's just 22% of our total estimated resource.
But focusing on the first quarter of 2020 to PNC reported a net loss for the first quarter of $21 1 million or <unk> <unk> per share compared to a net loss of $55 7 million or <unk> 29 per share for the first quarter of 2021.
Net operating loss, which excludes the loss on fair value changes in warrant liabilities of $5 2 million was $15 9 million for the first quarter of 2022, mainly driven by noncash share based comp.
$5 7 million and $1 3 million expense for the pilot test system.
Exploration expenses during the first quarter of 2022 were $7 3 million <unk>.
Compared to $38 1 million for the first quarter of 2021.
The first quarter of 2022 reflects a decrease in offshore campaign spending following the completion of <unk> environmental baseline campaigns in the fourth quarter of 2021 as well as a decrease in share based compensation.
Q1, 2021 included a fair value increase in common shares issued to Maersk.
General and administrative expenses or G&A were $8 6 million for the first quarter of 2022 compared to $17 4 million for the first quarter of 2021, reflecting a reduction in share based compensation.
Both exploration expenses and G&A expenses in the first quarter of 2021 were impacted by significant awards of stock options in March of 2021.
Excluding nonrecurring items free cash flow for the first quarter of 2022 was negative $15 7 million.
Compared to negative $7 4 million.
In the first quarter of 2021.
I'd like to provide some context of course on the nature of the cash outflows in Q1 2022 above the previous quarter of Q4, 2021 and strongly caution against extrapolating those amounts to determine our cash reach since they were driven mainly by items, which would not be occurring every quarter. For example in the fourth quarter of 2021.
Half of the cash outflow of $28 million was driven by two things first the.
First $10 million cash milestone payment to <unk>.
Given much of the progress that they've made on the offshore system and number two $5 3 million and campaign costs for the environmental program in the first quarter of 2020 to nearly half of the $15 $7 million cash outflow can be attributed to environmental campaign costs.
So at this point I will turn the call back over to Jared for some closing remarks, and then we will turn it over to the operator for some question Jared. Please go ahead.
Thanks, Craig.
Of all I, just like to crank out team and partner Ocs for hitting some very important milestones already this year.
In the world in metals, our expected production data for 2024 is just around the corner and we fully intend to keep this progress going to achieve that target.
In closing I'll paraphrase, what I said during our last corporate update call because it's even more apparent now.
At a time when the inherent risks of battery metal supply chains are becoming increasingly obvious to the media automakers politicians military leaders and investors.
We have taken major steps towards Derisking, the world's largest estimated undeveloped source of battery metals and we believe our current market cap represents less than 1% of the fundamental value of our estimated resource.
So while I am convinced that TMC shares are extremely undervalued our.
Stop today represents a very inexpensive way to gain exposure to the world's number one and number two largest nicole projects on the planet.
So I. Thank you for your interest and attention today and with that we'd like to turn it back to the operator for some Q&A.
Thank you presenters participants we will now begin the question and answer session.
To ask a question over the phone you May press the star key followed by the number one from your telephone keypad.
To withdraw your request you May press the pound key.
Again, Thats star one to ask a question or the Pouchy to withdraw your request.
Speakers. Our first question is from the line of Jacob <unk> of AGP. Your line is now open.
Hey, guys. Thanks for taking my questions.
Okay.
So George just starting with the deep sea trials.
In April I am just curious were there any surprises with the equipment I mean, it sounds like everything function properly, but I'm just wondering if it came across any surprises or any areas for improvement as you move towards commercialization.
I'm happy to say.
No I mean, they were minor operational things.
Our part needed, replacing or a bulk needed tightening but.
The pressure testing and putting this machine together and planning. It is <unk> has been doing since 2019 should then drop it in the water.
To work seamlessly.
<unk> 5000 meters below sea level.
Really exciting so now the sectors.
I think if you <unk> that question I'd say it was always going to look that way, but I'm sure. There was some very happy happy engineer faces on that boat as well and.
So.
Yes, so so far so good and I guess that plays into our strategy right I mean, if you ask.
<unk> was to bring industry expertise and support us because.
At the peak all seats had up to 400 people working on that project.
Sure.
They threw a lot of <unk>.
<unk> and <unk>.
<unk>.
Making sure that it all works.
Got it okay that makes sense.
And then just looking at capital spend and Craig you touched on this a bit.
With the trials underway I'm, just sort of curious if you're able to give us any color on on capital spend over the next couple of quarters as we head into the second half of the year.
Well, so we laid out.
This is dependent upon getting to final agreements with all season Epsilon carbon, but we would expect.
At some point to have capital spending of $55 million.
Preproduction Capex.
40 projects Euro commercial system as well as some engineering costs.
We are obviously as everybody else's.
Looking at inflation closely and making sure that we're managing costs.
Sure.
As we best possibly can as I mentioned, we do have the benefit of actually getting a tailwind from inflation in terms of project economics, given that the basket of metals, even after a pretty difficult last few days for little trading its still up very significantly nickel was up 45% already this year.
So we don't have anything that closely and always assessing and discussing with our team and the board, but we can say that the cash on hand is going to be sufficient to fund our operations and our capital expenditure needs for at least the next 12 months from today.
And I'll, just add to that that would be.
When we reached an agreement with old fees, we did agree of fixed price contracts as well, which I think has worked out pretty favorably because.
Firstly <unk> things to vary exacting standard.
They spent considerably more.
Than was budgeted to deliver that pilot.
Mining system collects the system. So it's worked out pretty well and it certainly helped us.
In managing our capital outflows.
Okay, and then just lastly on the PFS for the project zero plant.
Is it being designed in a modular fashion I guess is it being designed as an off the shelf type plant.
You can take the results from the PFS and apply it to potential additional plans down the road.
Yeah, absolutely I mean, we chose this flow sheet, we worked with a variety of companies, including hatch on it.
And we chose a flow sheet that works in many locations around the world today, primarily.
Used for the treatment of nickel laterite and so what we found through all of the pilot trials was that nickel laterites and probably metallic nodules.
Behave very analogously when theyre in the kiln and the electric arc furnace.
So.
That was encouraging and there are many dozens of those operating globally and so.
If you think about absolute sheet. It comes with the Pyro metallurgical front end, which is where we drive the modules and then we throw them into.
Electric arc furnace and then we.
<unk> and alloyed material and a big pile of manganese silicate, which you heard us talk about on the call and then we take that alloy and convert that into a matched material not material currently contains about 40% nickel and 30% cobalt.
Several percent of sorry, 30% copper and several defense koegel.
The plan.
It was to then refine that into.
Battery materials into sulphate, copper cathode and so thats like et cetera.
You see like flow sheet and to Optionality, we could do the pyro metallurgical step in one location and the hydro in another or we can just sell that intermediate product because today in the market, we will get paid between 90 and 95% of the payables that Matt.
Affords us a whole lot more flexibility.
The way that we've designed it.
Got it okay. So it sounds like youre not necessarily reinventing the wheel with the plant design at all.
No we're not we're not.
Okay.
The same thing Jake it's the same thing too of course offshore in.
We're trying to thread the needle.
In no way wanted diminished just how important are these tests are at home impressive what the team at all season, we've been able to do but I think it is a good example book onshore in terms of that flow sheet and offshore it's really building on a lot of technology that hasnt been tested if not quite at commercial scale.
So we are able to take the learnings on a lot of people.
Before us and build upon them in a more efficient manner.
But still pretty amazing achievements, especially from our partner all season this quarter.
Absolutely that's helpful. That's all on my end, Thanks again guys.
Yes, Thanks, Greg.
Sure.
Speakers. Our next question is from the line of John <unk> with Wedbush Securities. Your line is now open.
<unk> for us.
Hi, John .
I had a quick question so.
Taking a look for more of a bird's eye view looking at what's going on in the world supply chain problems and more sort of macro headwinds.
Do you see any potential headwinds.
Looking forward into 2022 or 2023, thank you.
Look I see.
Tailwind.
I think the headwinds.
I'll probably supply chain risk.
We've been facing those supply chain risks for the last two years as have the other manufacturing or companies who are building stuff straddle that if you look at how we manage that.
Last year, we spent 170 days at sea, we completed five environmental campaigns that meant moving.
50 to 65 people on a boat off the boat all without a single day lost to Covid.
We had multiple vendors on every campaign.
During that same year we.
With <unk>, we're building our offshore pilot collective system and as you said today, it's in the water being tested and so.
It's between ourselves and our partners we have lots of.
Expertise and success, we've chosen our partners very very well and along with disciplined I think.
When you compare our progress.
Exemplary.
Now.
What I do see as a tailwind and I think that tailwind will further.
As you heard in todays presentation, just make it obvious to people that we need to be prepared to go to new frontier. This problem is not going away. If I go to the environmental issue climate change is a global warming is the biggest threat to Allergan Allergan.
And so.
Then you add on top of that the security of supply of these metals.
Without the battery materials, you cant build the batteries and so.
All of these things work in favor of that project.
But.
I feel fortunate on this project.
I think the challenges we can overcome with the help of very very solid partnerships.
Of course cost of capital and there's always something that will be something we have to earn we have to work hard with the investigators to make sure that we can reduce that.
We're confident by delivering the milestones on this project that we will achieve it.
Thank you.
Thank you John So you had it down.
We will do.
Again participants its star one to ask a question what are the key to withdraw your request.
While we're waiting for that acute populate Jesse there was a question on the chat regarding our relationship with Glencore.
Overall update on that relationship there and if you have any comments on I guess the question was given their GM transaction has that changed anything.
The relationship with TMC.
Sure.
Look I'd say that we have.
Good relationship with that with Glencore.
<unk>.
There is from shareholder in the company.
<unk>.
Have a offtake for some of the nickel and copper on one of our license areas.
And they're always at the other end of the phone when we need some advice so some help on something.
No changes on asset.
And one other question from the chat from Stephen Clark regarding the <unk> process.
We talked about it quite a bit but.
Any change in our confidence for the process over the noise zone and.
The timeline to potentially get that exploitation contract.
We remain confident that the.
<unk> is on track to have the exploitation code adopted by.
By the time the council finishes sitting in July 2023.
As you heard in our presentation.
We do have a fallback solution, thanks to not re launching that two year notice.
But at this point in time I think we're pleased with the amount of progress and the hard work that is happening by every one of the secretary and also the member states, who are old shipping into to do what needs to be done.
Okay.
Jessica I think.
We're about to wrap anyway, so unless there are any more questions in the queue.
We will just turn it back over to Jared to.
To conclude the call.
Speakers no further questions at this time.
Okay.
Look thank you everyone for taking the time to join US on the conference call. We look forward to sharing even more progress in our sector. It second quarter update.
Sure Good day thank.
Thank you.
Okay.
Yeah.
This concludes today's conference call. Thank you all for joining you may now disconnect.
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