Q4 2024 TMC Metals Co Earnings Call
Good day and thank you for standing by. Welcome to the Metals Company, fourth quarter of 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 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.
Please be advised that today's conference is being recorded.
Speaker Change: I would now like to hand the conference over to Craig Shesky, Chief Financial Officer of the Metals company. Please go ahead.
Thank you, Liz.
Speaker Change: 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.
Speaker Change: These statements are subject to known in unknown risks and uncertainties, many of which may be beyond our control.
Speaker Change: Additionally, please note that the company's actual results may differ materially from those anticipated, and accept as required by law, we undertake no obligation to update any forward
Speaker Change: Our remarks today may also include non-GAAP financial measures, including with respective free cash flows, additional details regarding these non-GAAP financial measures, including reconciliation to the most directly comparable GAAP financial measures, can be found in our slide deck being used with this call.
Speaker Change: And you're welcome to follow along with our slide deck or if joining my phone, you can access it at any time at investors.medals.co. And I will now turn the call over to our chairman and CEO , Gerard Barron. Gerard, please go ahead.
Thank you, Craig!
Speaker Change: Well, before we announce the material and very exciting change in our way forward, I want to revisit the premise behind our company.
Speaker Change: So in the next 30 years, we expect to need to mine more base metals than have been in all of our human history.
Speaker Change: So where can we get these critical metals with the least cost to humans and nature?
Speaker Change: 70% of our planet is covered by the oceans, but they are home to only 3% of living biomass.
Speaker Change: and the Abyssal Zone accounts for more than half of the ocean area, and according to
Speaker Change: The Abyssal Zone her sparse but resilient life that thrives on sinking organic matter in a vast
Otherworldly expands. Limited, left over food, means limited life.
Speaker Change: And 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.
Speaker Change: while it would take three separate mines on land. And crucially, we can process this resource onshore with near zero solid waste. And this means we will not need to manage lakes of toxic sludge.
Speaker Change: And what's the alternative? Well, keep cutting down biodeverse 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.
Speaker Change: And 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.
So these first principles are backed by decades of research.
Speaker Change: Since the 1970s, the Clarion Clippet & Zone has received billions of dollars of investment and hundreds of research campaigns, in fact after three commercial mining tests in the 1970s.
Speaker Change: The initial programmatic environmental impact statement, all PEIS, was prepared by NOAA already in 1981 based on several research campaigns conducted by the agency in the CCZ.
Speaker Change: And by 1995, Noah reported to Congress that their studies basically eliminated pending verification of plume behavior during monitoring of further at-sea mining system tests.
Speaker Change: Virtually all other environmental concerns which were raised around deep sea mining.
Speaker Change: Starting in 2011, the Metals Company has repeated a lot of this work and then some in our contract area in the CCZ.
Speaker Change: 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.
Speaker Change: that our conclusions are not materially different from what Noah concluded already 30 years ago.
Speaker Change: And Furthermore, thanks to last year's expedition that revisited the size of the 19 seventies 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 to 80 centimeters into the sediment compared.
Speaker Change: To the top three to five centimeters that I'll see for seafloor collect impacts today.
Speaker Change: So we too have a sense of the recovery from al collector or immediately after and then 12 months after the test.
Speaker Change: So the notion that we do not know enough to evaluate the impacts of collecting these metals rich rocks is wrong.
Speaker Change: So looking back at least 14 years of our company's existence, we and our partners have achieved numerous milestones worth writing home about.
Speaker Change: Firstly technical statements showing the results of one 6 billion tons of Dow Jones, representing the world's two largest undeveloped nickel projects.
Speaker Change: Then there's the first integrated collection system test since the 19 seventies lifting more than 3000 tonnes of modules to the surface.
Speaker Change: There was the successful industrial scale nodule processing into high grade nickel copper and cobalt alloys.
Speaker Change: Alloy and manganese silicate, which we announced earlier this year alongside our partner tanker.
Speaker Change: And successful bench scale refining of our intermediate product into nickel sulphate and cobalt sulfate.
Speaker Change: Twenty-three offshore research campaigns in some years delivering five campaigns per year, while most contractors manage when one every other year and the adoption of a campaign capital light approach utilizing the existing assets of our partners.
Speaker Change: So we've shown that we can pick up nodules from the sea floor.
Speaker Change: You can listen to the surface and process them onshore all the way to the refined products with minimal environmental impact and limited capital expenditure.
Speaker Change: Although we may have achieved much in 40 years. Many investors are focused on a different 14 years and that is how long the I S. A has been working on the mining regulations for this industry.
Speaker Change: After repeated failures to deliver the mining code in 2020, and then 2023 based on what we've seen during the current I S. A session. There remains a possibility of continued delay on the <unk> target for the mining code adoption in 2025.
Speaker Change: The United States timeline drift and failure to deliver its a legal obligation of adult T. A mining code does not change one key fact and that is that we are ready we've amassed an untreated ended wealth of environmental impact data.
Speaker Change: Have gone above and beyond to design a system that minimizes environmental impacts and feel confident that we now know enough to get started.
Speaker Change: And prove we can manage environmental risks, what we need is a fair hearing and a regulator willing to engage.
Speaker Change: Thankfully, we have another path forward.
Speaker Change: It States has had the legal framework and regulations for issuing exploration licenses in commercial recovery permits for deep sea bed minerals in international waters in place since the 19 eighties.
Speaker Change: And now there is political will to put existing authorities to use.
Speaker Change: So today I'm pleased to announce that our U S subsidiary the metals company USA LLC.
Speaker Change: We'll submit applications in the second quarter of this year to move into commercial production through the existing U S regulatory regime.
Speaker Change: And we did not make this decision lightly.
Speaker Change: It took careful consideration and many months of legal due diligence and government conversations with.
Speaker Change: We've engaged multiple law firms and have conducted thorough legal diligence on the deep sea bed hard mineral resources Act of 1980 or described as well as implementing regulations from dela.
Speaker Change: Congress passed dishware as an interim regime to allow U S citizens to pursue deep seabed mineral projects in international waters in anticipation of the United States One day ratified on class.
Speaker Change: 45 years later, the United States is not ratified on Clos, while dishwasher and Noah's implementing regulations remain on the books and have stood the test of time.
Speaker Change: The total of four exploration licenses have been issued under this regime with two still active.
Speaker Change: So we've begun a dialogue with Noah and agency within the U S Department of Commerce authorized as the lead agency for permitting and the dishwasher and.
Speaker Change: And have in fact initiated a formal process of pre application consultation with Noah.
Speaker Change: We also met with numerous officials in the White house as well as U S Congress regarding their support for this industry and.
Speaker Change: And in fact today it was great to see Secretary rupiah talking to leaders in the Caribbean and highlighting the.
Speaker Change: Developing Steve Flores resources responsibly was an important opportunity for everyone.
Speaker Change: It is our strong belief that this path offers the greatest probability of receiving a commercial permit to begin operations in a timely manner.
Speaker Change: So I'm sure you will all have many questions that I promised that we will spend the vast majority of this call.
Speaker Change: Talking about the details of this strategy, including the many months of meetings in Dcs and legal analysis, but 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 <unk>.
Speaker Change: I don't want to hand, it back to Craig Cheskey our CFO.
Craig Cheskey: Thanks, Jared certainly very exciting moment.
Speaker Change: But first let's assess where things stand right now with the IFC.
Speaker Change: So the USA has missed two code adoption targets and is currently on its third so it's worth looking at why exactly this part of the mining code is so hard.
Speaker Change: Well four years is about the average time that it takes to negotiate an international instrument and it took around four years for the IFA to adopt the first exploration regulations that took around four years to negotiate the convention on biological diversity, the Paris agreement and the arms trade Treaty.
Speaker Change: Covid disruption certainly did not hit yet the Hiseq Treaty was also impacted by Covid.
Speaker Change: Took eight years, so depending on when you start counting if the IFA duffs 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 and its still much longer than other instruments.
Speaker Change: So we're coming up with regulations for the exploitation of deep sea minerals in the area may sound like a daunting task considered the fact that most coastal states already regulate offshore extractive activities like offshore oil and gas and all countries with the land mining have mining codes.
Speaker Change: Plenty of expertise and precedent to draw.
Speaker Change: Now the IC Council is currently sitting for part one of its 30 assertion in Kingston, Jamaica and as with every recession, we're simply looking for progress.
Speaker Change: Contrary to the legitimate expectations of contractors and of our sponsoring states, which are set out in the convention.
Speaker Change: <unk> is persistently missed the deadlines that have self has set first in 2020 and then in 2023 and we're already three months into the third targeted year for adoption of 2025.
Speaker Change: Now roofs requests that council adopted agreed process for the review of noise and pending application that is consistent with the isa's obligations on our own class was opposed by Chile.
Speaker Change: The world's largest copper producer.
Speaker Change: So 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.
Speaker Change: Of course, there's one country that doesn't mind the delays as they play catch up and that's China.
Speaker Change: Two Chinese contractors are preparing for collection tests in the next year or so trying to replicate what TMC and our partner also use achieved in 2020 to.
Speaker Change: China is also built up an entire city around DTE My having spent billions on lasagna deep Sea technology City.
Speaker Change: China is also using <unk> as an incentive to influence geopolitics and the Pacific.
Speaker Change: After we ended our contractual relationship with Tomorrow. It was reported that China was exploring a deep sea mining partnership with the nation of Kiribati.
And in February China signed an agreement with Cook Islands, which focused on deep sea minerals.
Speaker Change: Following that surprising move New Zealand, which is increase associated with the Cook Islands announced that they would consider withdrawing their support for a moratorium on deep sea mining.
Speaker Change: And it is increasingly clear that deep sea mining is at the center of geopolitics and the Pacific.
Speaker Change: Elsewhere in Asia.
Speaker Change: Been encouraging headlines out of South Korea, Japan, and India with respect to their support of and interest in deep Sea mining the.
Speaker Change: The increased focus on people or 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.
Speaker Change: In fact, we've had multiple reverse inquiries already this year on potential future work.
Speaker Change: But in the meantime, it is an all hands on deck focused on getting our applications over the line.
Speaker Change: 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 poly metallic nodules.
Speaker Change: So the headlines of support from the U S, including barcode Rubios announcements jeri shared have been clearly building, but why would the new administration care, so much about switch where resources, particularly poly metallic tangibles.
Speaker Change: So the answer is simple because they can help establish metal independents and they are the critical missing piece for U S re industrialization.
Speaker Change: Here, China continues to dominate and has shown an increasing willingness to banned exports to the U S.
Speaker Change: It's clear that American Reindustrialization simply cannot depend on Chinese metal production.
Speaker Change: So to give you a sense of scale what would it mean for the U S to gain access to let's say 1 billion tonnes of modules. The answer is it would be transformational.
Speaker Change: If measured by current U S consumption of 1 billion tons of nodules would provide 456 years of manganese 165 years of cobalt.
Speaker Change: <unk> 81 years of nickel and four years of copper.
Speaker Change: Nodules are not some marginal solution they can and just tmc's contract areas alone solve U S needs for several metals deemed critical by the U S Geological survey.
Speaker Change: And it's worth remembering that it was U S companies in the U S government, including NOAA, which pioneered the evaluation and development of this resource in the 19 seventies.
The U S government develop the regulatory framework and conducted a strategic environmental impact assessment.
Speaker Change: S companies, including Transocean, Lockheed Martin and U S steel developed and piloted natural collection of natural process technology.
Speaker Change: This U S leadership slowed however, when the U S does not ratified the UN convention of the law of the sea power.
Speaker Change: However, the U S did have foresight to enact conditional so that U S citizens and entities could access seabed resources in international waters.
Speaker Change: U S entities can apply to nowhere for exploration and commercial recovery licenses.
Speaker Change: And because of the U S has never submitted to the jurisdiction of the ESA. This U S law remains in full effect, even if the U S. Does eventually adopt the final mining code.
Speaker Change: There are a few handfuls of nations that do have bilateral agreements with the U S regarding each other's activities in international waters, but generally beyond that U S. Law continues to offer freedom of activity in the high seas, just as it did prior to unclos ever being contemplated.
Speaker Change: And leading experts on the law of the sea such as Stephen Growths agreed at applying for a commercial recovery license through dishwasher and Noah is a viable path based on a robust and well thought out regulations.
Speaker Change: Stephen Groves has with the Heritage Foundation, a leading D. C think tank as well as a former staff or for the White House Counsel's office during President Trump's first term.
Speaker Change: And in fact, it was about one year ago to the day that we were talking about steep growth in the segment on 60 minutes discussing the law surrounding deep sea mining.
Speaker Change: It was a critical minerals arms race discussed the map piece between the U S and China and that arms races of linger on more intense.
Speaker Change: It simply dismount remains law today for the exact same reason hesitant when it was passed into law during the Cold War in the early 19 eighties National security.
Speaker Change: So if we step back and compare the U S regulatory regime to what we've experienced recently at the RSA from our perspective, the U S regulatory regime is more attractive than what's currently on offer.
Speaker Change: If you look at the RSA draft for mining code the international regulatory regime has had issues from the outset.
Speaker Change: Unclos was not deemed commercially viable for D. C. Mining initially and then took another 14 years to negotiate an implementation agreement to comprehensively modify the part of Unclos that was dealing with deep sea mining.
Speaker Change: It took a few years to put the exploration regulations in place, but the exploitation regulations have been in negotiations since 2014 and the process is still ongoing.
Speaker Change: By contrast, the U S adopted dishware in 1980 laying a solid foundation for U S citizens to pursue exploration licenses in commercial recovery permits in international waters.
Speaker Change: As a non signatory to unclos in a conscientious objector, the United States believed that mining of the deep sea bed resources is a freedom of the high seas.
Speaker Change: <unk>, then authorized Noah to development to develop implementing regulations.
Speaker Change: That same year no one delivered regulations for exploration licenses. It took Noah 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.
Speaker Change: In terms of the regulatory approach Noah recognize the difficulty of being prescriptive with regard to an industry that has not started so unlike the Esa they've explicitly chosen a flexible approach that can be adapted to the specific technology and circumstances of each applicant through terms conditions and restrictions.
Speaker Change: Noah's approach is common sense explicitly recognizing the tradeoffs 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.
Speaker Change: Importantly, no one expects to engage with applicants pre application to reduce application related uncertainties and is committed to providing written binding guidance and to that end TMC USA has already initiated a detailed request for pre application consultation with Noah.
Speaker Change: Perhaps the biggest difference between the RSA approach them to Noah approach to environmental permitting is where the regulator takes a much heavier role Noah has created programmatic environmental impact statements for the domes region that covers all declaring clipper to consume.
Speaker Change: It takes the applicants environmental data and analysis, but then develops in house or hires a third party consultant to develop a site specific eas.
Speaker Change: So we believe the U S and the newer approach to environmental permitting has been put in place for very good reasons.
Speaker Change: And since no or third party contractor prepares the site specific eas and assures the analysis, it's unbiased and uninfluenced are perceived to be influenced by the interest of the applicant.
Speaker Change: This approach provides protection to the applicant as well because this transparency can help build public trust during the public review and comment period.
Speaker Change: Can also help build confidence amongst investors and other stakeholders, who want to ensure that environmental risks had been assessed with due care.
Speaker Change: Finally, it offers a level of protection to the African legally and financially as the independents and transparency on this process can further reduce the risk of future delays fines or lawsuits.
Speaker Change: So taking a step back beyond the carefully thought out regulations. No also helped pioneer the environmental assessment of potential module collection.
Speaker Change: In addition to its monitoring of 19 seventies trials by several U S companies Noah conducted several seafloor disturbance experiments as another leading international research institutions from these studies, which revisit and impacts sites repeatedly over a 40 year period. We now have extensive data that address common and misleading claims from activists.
Speaker Change: We don't know enough.
Speaker Change: Thanks to these studies, we do know how the ecosystem response and with multiple papers showing that recovery is not only possible, but likely and within just a few decades.
Speaker Change: The <unk> studies, which used a plow harrow attach with blades to rate the sea floor and the different studies using no as deep sea sediment Resuspension system also varying levels of recovery within just a few years.
Speaker Change: Based on our review of the studies conducted to date full recovery of the microbes that make up 70%, 80% of the life of these steps can be expected within 50 years.
Speaker Change: This is a very encouraging result, though new data, including our own suggest that these timelines maybe quicker still.
Speaker Change: And remember these studies were all carried out using equipment designed for one purpose to create the maximum disturbance.
Speaker Change: 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.
Speaker Change: Back in 1979, the O M C O mining consortium piloted their robot miner with an intrusive Archimedes screw style propulsion system raking several hundred tonnes of nodules from the seafloor with mechanical mechanical times.
Speaker Change: The robot disturb the top up to 80 centimeters of seafloor sediment, leaving deep furrows in the seafloor and blanketing nearby Fon and <unk> a month.
Speaker Change: Fast forward to 2022, and the gentler Columbia nozzles installed on our tracks collector vehicle disturbed just roughly the top three centimeters compared to 80 and the other trial of sediment during the test mining campaign and over 95% of that settled within one kilometer of the test area.
Speaker Change: Of course this is a very different picture to the one painted by those opposing this industry, who spread baseless claims that settlement could travel tens of thousands of kilometers.
Speaker Change: Unfortunately for them, we have the data and it shows these claims are pure fiction.
Speaker Change: We'd like to of course call out our engineering partners at all seats for their incredible efforts. These past few years to reduce the impact footprint of our collector vehicle, while ensuring we collect maximum quantity of nodules and as we look ahead to commercial mining and as the industry grows you can expect that these impacts will only get smaller.
Speaker Change: And while the media has as expected focused on the continued presence of tracks on the seafloor, which does absolutely nothing about recovery. We believe the new papers findings are very encouraging for.
Speaker Change: For decades after the disturbance a near total recovery of sediment dwelling Macrofauna and forum and <unk> have been measured in both the vehicle tracks in areas affected by the pollutants and dizziness, which provide a hard substrate that other organisms can live on and they've already recolonized the area.
Speaker Change: In the case of the plume, which I might see retrospectively modeled researchers reported that it had no detectable over in some cases slightly positive biological impacts don't expect green piece to mention that one anytime soon and by the way we feel about for them for the loss of that lawsuit.
Speaker Change: We have always been clear that our primary impact will be for those organisms on nodules that get collected but as the study showed nodules that get left behind can be quickly recolonized with megafon are present on retained naturals. This is very promising as if we leave.
Speaker Change: This is very promising as if we leave some modules as we intend to do with at least 30% left at the sea floor and these will be available as habitats, we're organisms to takeover.
Speaker Change: So how does this compare to our own findings, while yesterday study measured recovery in four decades preliminary data shows that we can do far better thanks to the lower environmental impact of our vehicles.
Speaker Change: Our team have already found that for a minute for a directly located in our collector tracks and <unk> areas had recovered to 30% of background density in just 12 months and to 50% of pre disturbance density.
Speaker Change: And as we look ahead to our application will be releasing these findings and much much more we can tell you it's quite incredible what our team are finding.
Speaker Change: And findings like these are made possible by the fact that no matter, where an application is launched its going to be back by one of the largest environmental datasets ever compiled based on work alongside dozens of respected research institutions and over $200 million in cumulative environmental spending we.
Speaker Change: We've 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.
Speaker Change: Bottom line, we believe that we along with research pioneers from Noah and others before that have answered all of the key questions posed for environmental impact statement.
Speaker Change: And 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.
Speaker Change: So given the magnitude of today's news we expect many of you are going to have questions regarding the workings of just broad implications for the ISI process impacts on economics, and timelines and many many others that we promised that over the coming weeks and months, we will continue to put out information to help everyone get up to speed.
Speaker Change: For now and in addition to this call upcoming Q&A, we provided some answers here to anticipated questions to summarize a few of them.
Speaker Change: Yes, we believe we can pursue exploration and commercial recovery permits concurrently under dishwasher and there could be opportunities to expedite certain elements of the review processes.
Speaker Change: The environmental work done so far is very robust and we don't anticipate any additional campaigns needed prior to the launch of our U S applications.
Speaker Change: Even when the ISC adopts the mining code as the U S is not ratified on Clos or joined the assay the contracts issued under dishwasher are going to stay in effect.
Speaker Change: And while some described dishware as a temporary or interim measure. This law remains in full effect 45 years later.
Speaker Change: Perhaps some of the drafters had expected the U S to ratify the law of the sea convention, but that didn't happen and it's not likely to happen anytime soon.
Speaker Change: As you can imagine as you might imagine the release of our PFS or pre feasibility study does require the sign off of quite a few qualified persons were <unk> and given the context of today's announcements, it's prudent for us to discuss certain assumptions with them at a bit more links and this also applies to the timing of our strategy day, we do of course still intend for that longer form session.
Speaker Change: To occur, but as you can imagine we've been laser focused on pursuing this new path in the last few months.
Speaker Change: So what are these actions mean for nori Tamil 10 are sponsoring states.
Speaker Change: Well, we've consulted on this application strategy with these sponsoring states in fact, Jared spoke just last night with the president of <unk> and the Prime Minister's office in Tonga.
Speaker Change: Our relationships with our sponsoring states are excellent and we continue to respect our agreements together.
Speaker Change: Regarding the specific areas of where we'll apply the scope of the upcoming applications is under careful consideration and we'll continue to discuss the strategy with our sponsoring states for what it's worth dishware exploration licenses can be granted up to 150000 square kilometers.
Speaker Change: And yes, we are still planning to launch an application over the north area in June of 2025.
Speaker Change: But we've not yet determined with with regulator.
Speaker Change: So even after U S applications launched we still retain the new Oriental and Tamil exploration contracts and we fully intend on remaining compliant with the requirements of those ISR contracts.
Speaker Change: So onto the financial results.
Speaker Change: And the last quarter of 2000, 2014, <unk> reported a loss net loss of $16 1 million or five cents per share compared to a net loss of $33 5 million or 11 cents per share for the same period in 2023.
Speaker Change: The net loss for the last quarter of 2024, including exploration and evaluation expenses of $8 3 million.
Speaker Change: Versus $26 7 million in Q4, 2023 general and administrative expenses of $8 1 million versus $6 $6 million in Q4 2023.
Speaker Change: 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, eight which commenced in the last quarter of 2023 was completed in the first quarter of 2024.
Speaker Change: So a decrease in mining technology and process development costs due to a lower transit in lay up cost in the fourth quarter of 2024 compared to the prior year period.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Other items impacting the Q4 movement in 2024, it's higher fees and interest on our credit facilities in 2024, offset by foreign exchange gain year over year.
Speaker Change: In the fourth quarter of 2024 net cash used in operating activities was 13 $8.8 million compared to $15 2 million for the first excuse me for the last quarter of 2023.
Speaker Change: The lower spending in Q4, 2024 reflects mainly lower spending on project development and environmental studies as compared to campaign spending in Q4, 2023, and due to changes in working capital levels year over year.
Speaker Change: 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.
Speaker Change: Free cash flow is a non-GAAP measure and I'd point you to the non-GAAP reconciliation reconciliation table included in the slide deck and on our website.
Speaker Change: We believe that our cash on hand, and the undrawn amount of $41 $5 million from our unsecured credit facility, which are our Barron, our chairman and CEO and with <unk> capital will be sufficient to meet our working capital and capital expenditure requirements for at least the next 12 months from today.
Speaker Change: 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 $19 9 million.
Speaker Change: And the last quarter of 2024. The company also drew $2 5 million from the working capital loan from all six.
Speaker Change: Our accounts payable and accrued liabilities balance at the end of 2024 or $42 7 million majority includes $25 8 million owed to all sees for various services provided the majority of that can be settled in equity at TMC selection.
Speaker Change: TMC liquidity, which we define as cash plus borrowing capacity stood at $62 million at December 31 were $48 million pro forma for the credit facility amendments at full receipt of the registered direct proceeds in the first quarter of 2025, where the final 5 million came in.
Speaker Change: And in Q1 2025, we increase the principal amount of our unsecured aerospace facility by $6 million and the credit facility with an affiliate of all six 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.
Speaker Change: Never the maturity of the $7 5 million also use working capital loan was extended to September 2025.
Speaker Change: With that operator, we would like to turn it over to the line for some Q&A.
Speaker Change: Okay.
Speaker Change: As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Speaker Change: Withdraw your question. Please press star one again.
Speaker Change: Our first question comes from the line of Matthew O'keefe with Cantor Fitzgerald.
Matthew O'Keefe: Oh, hi, thanks, operator.
Speaker Change: That was a there was a lot so just.
Speaker Change: Help me through the dish.
Speaker Change: I came here a little bit achieved if you may.
Speaker Change: So this is a different.
Speaker Change: It's a sort of a different.
Speaker Change: <unk>.
Speaker Change: Regulatory body as you've described.
Speaker Change: Your licenses were issued to you under enclose with partner you're supporting sponsor states.
Speaker Change: Will.
Speaker Change: It will be the application to dish might be.
Speaker Change: For these for these license areas or different license areas that are currently because I think they have four license areas under these overlapping or are they are they separate how does that how does this how are we supposed to think about this yeah.
Matthew O'Keefe: Yeah, Hi, Matt.
Speaker Change: I'll have a crack at that.
Matthew O'Keefe: There is an important concept.
Matthew O'Keefe: To just for everyone to get their mind around and that is the.
Matthew O'Keefe: Freedom of the high seas.
Matthew O'Keefe: Sure.
Matthew O'Keefe: Of course, what happens when they were agreeing on costs or.
Matthew O'Keefe: Is that.
Matthew O'Keefe: <unk>.
Matthew O'Keefe: The United Nations member countries wanted too.
Matthew O'Keefe: Join a treating when it came to the extraction or development of metals.
Matthew O'Keefe: <unk>.
Matthew O'Keefe: The high seas.
Matthew O'Keefe: However.
Matthew O'Keefe: 168 countries plus the European Union have now joined that Treaty. The U S stood fast and said.
Speaker Change: We are not going to join that Tracy.
Matthew O'Keefe: <unk>.
Matthew O'Keefe: And so essentially the freedom of the high seas.
Speaker Change: Kids you.
Matthew O'Keefe: Covers minerals it covers.
Matthew O'Keefe: The freedom pass age it covers cable lane and so on.
Matthew O'Keefe: And America.
Matthew O'Keefe: America will argue that they will have access to those waters.
Matthew O'Keefe: Under the freedom of the seas.
Matthew O'Keefe: <unk> debt.
Matthew O'Keefe: Any member country of the International C that authority would have over those areas as well, we haven't announced today exactly which areas.
Matthew O'Keefe: We're still in dialogue.
Matthew O'Keefe: Both internally and we will in the pre consultation process that is underway with Noah we will also.
Matthew O'Keefe: That'd be seeking some advice that however, what.
Matthew O'Keefe: What we want to do is to take advantage of all of the work we've done for the last 14 years.
Matthew O'Keefe: And so this will not be.
Matthew O'Keefe: Let's start again this is about what pathway can get us into commercial production.
Matthew O'Keefe: Fastest way and.
Matthew O'Keefe: As we went at lengths in the presentation to talk about.
Matthew O'Keefe: There is no.
Matthew O'Keefe: Z part here on the environmental emphasize either in fact, we think.
Matthew O'Keefe: Environmental regulations as laid out under this fraud.
Matthew O'Keefe: Sure.
Matthew O'Keefe: Sensible.
Matthew O'Keefe: Workable and very very thorough and so.
Matthew O'Keefe: So stay tuned on us to announce once we formally launched those applications.
Matthew O'Keefe: You won't have to wait long for that matter.
Matthew O'Keefe: And that too we also recognize just how much of our valuation is pinned on the work that's been done with new Oriental and we've got a defined resource we've done test mining we've done test processing, we've done environmental work in those in those areas.
Matthew O'Keefe: So for US that is obviously the key question that we look forward to sharing more with you.
Matthew O'Keefe: But 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: Okay.
Matthew O'Keefe: Okay.
Matthew O'Keefe: So more to come there and can I ask two.
Matthew O'Keefe: From.
Matthew O'Keefe: Maybe this is getting a little too ahead of where we are but.
Matthew O'Keefe: If you were to decide to do get approval through a different path.
Matthew O'Keefe: Your partner all CS owns the vessel, they're not I mean, the vessel is in the U S. It's not a U S.
Matthew O'Keefe: Based company or maybe it is I don't know if ever USR them or not but I mean could they legally participating as a partner in this situation.
Matthew O'Keefe: Absolutely yeah, there's some nuances with differ and one of them is that the production vessel needs to be U S. Flagged.
Matthew O'Keefe: Sure.
Speaker Change: We have with all six already looked into that and that is a.
Matthew O'Keefe: Pretty straightforward process.
Matthew O'Keefe: And of course, the applicants that has kicked this off as well.
Matthew O'Keefe: U S subsidiary that we established in 2013.
Matthew O'Keefe: Okay cool and maybe just one more.
Matthew O'Keefe: This is this does this is the first of course investors are hearing of it.
Matthew O'Keefe: This idea of been raised with the RSA as Theyre meeting right now or is there going to be.
Matthew O'Keefe: And then just thinking about this now as well.
Matthew O'Keefe: Oh, okay. Okay.
Matthew O'Keefe: Look for the minutes from meetings tomorrow.
Matthew O'Keefe: Okay.
Matthew O'Keefe: Some reaction, okay I'll leave it to open to some other questions.
Matthew O'Keefe: I haven't sat back thank you very much thanks Pat.
Matthew O'Keefe: Yes.
Speaker Change: Our next question comes from the line of Jacob Zukowski with Alliance Global partners.
Jacob Zukowski: Hey, guys. Thanks for taking my questions.
Speaker Change: Hey, Jake.
Speaker Change: Just to confirm building on the last question a bit.
Speaker Change: Noah process.
Speaker Change: Shifts in the permanent pathway.
Speaker Change: From the IFA pathway or more of a secondary Avenue.
Speaker Change: Our primary Avenue alongside.
Speaker Change: Yes.
Speaker Change: Yes, Jacob it's definitely it's a new path and we view it as advantageous and the best chance of success, but this is not one door closing another opening this is in our view.
Speaker Change: It's an incremental path forward and we view a better path forward. It just so happens we built on our.
Speaker Change: 45 years of work.
Speaker Change: And you know a bunch of environmental work from Noah, It's just been sitting relatively idle for some time, but the legal precedent is there. It's always been there and what has been missing is the political appetite in the United States to take advantage of it and that's the main change that has come with this administration. So theres no new legislation that has to come there.
Speaker Change: Might be.
Speaker Change: Some adjustments I would say two aspects of the regulations, perhaps you know as you've seen for critical minerals projects throughout the U S views about.
Speaker Change: Permitting perhaps being accelerated in some circumstances, but this is something where its been on the books for a long time, what's been missing is the political appetite and that's what's changed that's what's changed with the new election.
Speaker Change: This frankly has been a door that opened to us and after the November election, we engaged in the diligence required to make this decision and we think very strongly we're making the right decision.
Speaker Change: Okay that makes sense.
Speaker Change: And in building that are you able to provide any color on what what this new process looks like key milestones or even a high level timeline or is that a bit too early at this stage.
Speaker Change: You know that will become.
Speaker Change: We have a very strong sense of it already.
Speaker Change: But in respect to the.
Speaker Change: The dialogue that's underway with the permitting agencies now.
Speaker Change: We'll come back to you with more on that but it's a as we mentioned in the presentation. The first thing.
Speaker Change: It's a two way consultation and that's a that's a really.
Speaker Change: Important step forward when you're trying to permit a project and.
Speaker Change: And so.
Speaker Change: That's refreshing from out of the sector. The fact that we can sit with the regulator and that there is a formal process, which they outline in the regulations.
Speaker Change: That Africans can follow.
Speaker Change: Of course, the very unique thing.
Speaker Change: About our.
Speaker Change: <unk> and.
Hence why we talk about a.
Speaker Change: Our recovery from that as well is that we have all this amazing data.
Speaker Change: Have an application that is coming to completion.
Speaker Change: <unk>.
Speaker Change: I'd say.
Speaker Change: And the work is very consistent as follow on work to what was done.
Speaker Change: Unbeknownst sponsorship back in the Seventy's and Eighty's.
It's an alignment of stuffs.
Speaker Change: Got it Okay and then just lastly, you know with all that being said and I think Craig you touched on that.
Speaker Change: How does it impact the timeline of the ups.
Speaker Change: From an economic study is still something we should expect in the first half of year do you think it will that will spill into later in the year.
Speaker Change: No we are.
Speaker Change: So expecting it to be wrapped up certainly in advance of our applications to the U S. So nothing's changed on that front and as we've reiterated youre going to see the applications in June.
Speaker Change: It's just now that we have.
Speaker Change: In our view some very interesting paths forward there.
Speaker Change: But that obviously that economic analysis, it's important for the U S as well.
Speaker Change: Not just important for the <unk> application, so while the new path, obviously brings up.
Speaker Change: Additional point, so we're discussing with our two piece, it's still on the front burner for us.
Speaker Change: Okay. That's all for me thanks again.
Speaker Change: Thank you. Thank you.
Speaker Change: Our next question comes from Dmitry Silverstein with water Tower research.
Dmitry Silverstein: Good afternoon, gentlemen, thank you for taking my call.
Dmitry Silverstein: I just want to follow up on a couple of things So first of all.
Speaker Change: And fundamental impact study you said youre working on that now I'm, assuming that's going to be completed around or before the time to complete the economics.
Dmitry Silverstein: Usability study.
Dmitry Silverstein: And the application submission and drilling.
Dmitry Silverstein: Or is there something that's going to happen.
Dmitry Silverstein: Weeks.
Dmitry Silverstein: Well the.
Dmitry Silverstein: You know one of the things on our economic study.
Dmitry Silverstein: Is that a lot of the work has been done and.
Dmitry Silverstein: That of course, we were just going through.
Dmitry Silverstein: Many experts sign offs as is necessary.
Dmitry Silverstein: S K 800 requirements.
Dmitry Silverstein: With any PFS when.
It came obvious.
Dmitry Silverstein: Some of the other options in front of us.
Dmitry Silverstein: It was.
Dmitry Silverstein: Deemed that we should just be a little bit cautious around that.
Dmitry Silverstein: But the environmental.
Dmitry Silverstein: Writing is going at full speed.
Dmitry Silverstein: The environmental data has been flooding in we held out last.
Dmitry Silverstein: Key environmental conference back in January in Brisbane, Australia.
Dmitry Silverstein: And the team.
Dmitry Silverstein: Yeah.
Dmitry Silverstein: Pumping the stay awake at pill stay awake pills, working very long hours and very motivated by what they're doing because obviously it's.
Dmitry Silverstein: All of this data that we've been gathering to 70 years is now coming together as a comprehensive picture and so you are happening happening side by side to meet you.
Dmitry Silverstein: I understand I understand.
Dmitry Silverstein: Want to make sure.
Dmitry Silverstein: I got some clarity.
Dmitry Silverstein: The.
Dmitry Silverstein: And to the U S government.
Dmitry Silverstein: Assuming that that goes through and you give them an exploitation.
Dmitry Silverstein: License.
Dmitry Silverstein: What are you going to give them a license to it's not it's not the problem on the Oregon area right. There will be some other area about CTG.
Dmitry Silverstein: As we said Dmitry, we are going to make that clear.
Dmitry Silverstein: Long side, the consultations that are ongoing with our sponsoring states.
Dmitry Silverstein: But based on dish realized there was a potential for overlap.
Speaker Change: Okay got it Greg Greg.
Dmitry Silverstein: You bet.
Speaker Change: As mentioned in our press release for Q4.
Speaker Change: Terminated your contract with the FERC.
Speaker Change: Sponsor state.
Speaker Change: What was the thinking that I know you haven't talked about it a lot.
Speaker Change: For patients and I've always sort of a kind of a back burner will get with the pump point type of a deal, but what has changed and why now.
Speaker Change: Yeah. So look we put that we announced we will put that into a filing back in November.
Speaker Change:
Speaker Change: You know we didn't get a lot of inquiry about it actually until recently it was reported that.
Speaker Change: Kiribati, we're talking with China or the step into our shoes there.
Speaker Change: It came down to priorities it came down to the fact that we.
Speaker Change: We had have to vary.
Speaker Change: Prospective blocks and Norrie and Tamil.
Speaker Change: Yeah, we had to decide.
Speaker Change: Where to focus our resources and those.
Speaker Change: Those blocks require money to be spent on them they require.
Speaker Change: A large five year plans and to do what programs and we had also done some exploration work.
Speaker Change: And some of the results once the most encouraging on those blocks and I and I think that's one of the things that.
Speaker Change: No one needs to remember what the metals company has we have a defined resource on the norrie and tomo ground and not.
Speaker Change: Not all license areas.
Speaker Change: <unk> the grades may be very consistent that the abundances or not and so it is generally regarded that orient tomo some of the very best ground out there.
Speaker Change: We know more and hence.
Craig: Craig's answer to your question about overlap.
Speaker Change: There.
Speaker Change: There certainly is the prospect of some overlap in that.
Speaker Change: So yes.
Speaker Change: Yes.
Speaker Change: Thinking with borrower was we knew that there were other parties interested to work closely with care of us.
Speaker Change: Obviously <unk>.
Speaker Change: Yes.
Speaker Change: I mean, they are a great partner to have the great developing country.
Speaker Change: They do recognize one China.
Speaker Change: And it didn't surprise me, what I led that some.
Speaker Change: Some of the interested parties.
From China.
Speaker Change: The ambassador mentioned that in some media reports in recent weeks.
Speaker Change: And then last question.
Speaker Change: And then your comments about your service business getting some inbound inquiries seems to be well received.
Speaker Change: Is this something that we can expect from results from in terms of revenue and profit in the next one to two years.
Speaker Change: Sort of in the development stage.
Speaker Change: Let's see.
Speaker Change: Just in Hong Kong constant look.
Speaker Change: It looks now we're excited about it and we.
Speaker Change: We have.
Speaker Change: Built so much expertise around this industry and you know how people.
Speaker Change: Approached all the time with job offers to go them work elsewhere.
Speaker Change: They like working at the metals company and.
Speaker Change: They know we do a high quality science I think a lot of the services are focused around the environmental work programs.
Speaker Change: We also know a lot about defining these resources now that part of the business.
Speaker Change: Led by Tony O'sullivan, we've done more resource definition work than any other contract very very successfully.
Speaker Change: Also during the middle of Covid ran nine offshore campaigns without losing a single day to illness and.
Speaker Change: That's nine campaigns across two years.
Speaker Change: So these are really challenging tasks, which we have been able to.
Speaker Change: Complete very successfully so it makes sense that we seek out team together keep our team together we.
Speaker Change: We do think that there will be.
Speaker Change: A lot of services opportunities.
Speaker Change: Sure.
Speaker Change: In the coming year.
Speaker Change: Yes.
Speaker Change: We want to take advantage of that and we have some very very interesting conversations which can range from.
Speaker Change: Pilot mining using the hidden gem, which would obviously be something that we would have to collaborate with all seize on very very closely and of course, putting the hidden gem.
Speaker Change: To pick up the <unk> involves a lot of environmental planning as well and so there's some very interesting work scopes available to us.
Speaker Change: But of course today.
Speaker Change: Those people are very busy on our own application and so.
Speaker Change: We have had to turn away some opportunities simply because we need to get this application completed.
Speaker Change: Okay. So it sounds like maybe sort of half of the year. When you have it all with more free time with your people and equipment.
Speaker Change: Some of these national turned into contracts, Yeah, that's right yeah, yeah yeah.
Speaker Change: The business development function inside the business is chomping at the bit whereas the.
Speaker Change: The scientists and other people.
Speaker Change: Im just just slow down.
Speaker Change: Just we cant take anything more until we get this application at the door.
Speaker Change: Got it. Thank you that's a nice problem to have thank you gentlemen.
Dmitry Silverstein: Yes, Thanks Dmitry.
Speaker Change: As a reminder to ask a question. Please press star one one on your telephone.
Speaker Change: In the meantime, it also I think we're going to take a question from the webcast. Eric Goldstein suggests asked a question can we discuss our current finances, where do we expect liquidity at the end of Q1.
Speaker Change: Didn't note roughly $43 million liquidity.
Speaker Change: At the time of this filing.
Speaker Change: So look the overall point here is that the.
Speaker Change: The element that in our view has been holding back the valuation of our stock has been the lack of regulatory certainty.
Speaker Change: Our view is that dishwasher and along with Noah and frankly to support <unk> in Congress.
Speaker Change: Our view it should be pretty clear to everybody that this is an industry that the U S wants to get into and the good news is they already have the legislation to do it.
Speaker Change: So for US what we want to do is continue to be very cautious stewards of capital.
Speaker Change: And if we get to the point, where regulatory uncertainty is no longer there.
Speaker Change: Things are moving along at a very fast clip, let's say through the U S process will that may put us in a different financial position, but what remains is what we told the market late last year that we were not going to be raising a lot of money for preproduction capital spending until such time as we have that regulatory certainty, but that doesn't have to be.
Speaker Change: Through the ISI, we've heard from many investors look at the U S administration took reelection here that could be something too.
Speaker Change: Get people off the sidelines.
Speaker Change: We think after months of consultations as you've seen certainly on social media Geron and I have spent a lot of time and the rest of our team Eric.
Speaker Change: Eric <unk>, and Christopher <unk>, and everybody heading down to Washington D. C to have diligence 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.
Speaker Change: So we view this as a path that can truly unlock.
Speaker Change: Regulations and allow us to move forward into commercial production, but it doesn't change. The fact that we do need to show that regulatory certainty before we're going to be out there.
Speaker Change: Raising tons and tons of money and spending it on preproduction capital So that perspective on our finances has not change and that's why we've had some modifications to our credit facilities to kick out maturities and assuring that they were right sized for what we need to do to get these applications over the line, but the basic spending and what we.
Speaker Change: Need to do to get the applications ready doesn't really differ that much from what was necessary to prepare for the ISI and thats in part because we've already front end loaded much of that work and we've done the test mining we've done the test processing and we've also done all of the environmental research campaigns. So from a financial perspective, I would say we are.
Speaker Change: Looking forward greatly to the point when these applications over the line and we can show the market that regulatory certainty frankly, that's been missing over the last few years as a public company.
Speaker Change: Okay.
Speaker Change: I am showing no.
Speaker Change: Yes, sorry lives is there anything else.
Speaker Change: The line for questions no phone questions at this time.
Speaker Change: One more question actually from the webcast somebody asked theyre not clear whether or not we're going to submit an application contract on June 27th with the ISC Jared do you want to.
Speaker Change: Reiterate what we said on that.
Speaker Change: Well we have.
Speaker Change: What I'll say is what we said earlier in the call and that is.
Speaker Change: We will keep outstanding.
Speaker Change: With the NSA and we will.
Speaker Change: Preserve our rights there we will have an application ready.
Speaker Change: And.
Speaker Change: On June 27.
Speaker Change: <unk>.
Speaker Change: Uh huh.
Im decided where that application will land.
Speaker Change: But the decisions that will drive that.
Speaker Change: <unk> certainty.
Speaker Change: Okay, well I think that's a.
Speaker Change: For the conference call today.
Speaker Change: Perhaps I'll turn it back over to Jared for any closing remarks.
Speaker Change: I'd like to thank everyone for attending today.
Speaker Change: I'd like to thank my team and my board for the support our partners.
Speaker Change: Who work with us and our shareholders who.
Speaker Change: Have been amazing supporters on this journey as a public company and before that as a private company.
Speaker Change: And we.
Speaker Change: We are greatly encouraged by all of the stars aligning right now and the environmental results coming through offering us tremendous encouragement.
Speaker Change: And.
Speaker Change: Yes.
Speaker Change: I Hope this news will be.
Speaker Change: Able to see this industry in production and supply metals with the latest planetary and human touch as quickly as humanly possible. Thank you very much.
Speaker Change: This concludes today's conference call.
Speaker Change: Thank you for participating you may now disconnect.
Speaker Change: Yeah.