Hello, everyone, and thank you for participating in this session of WTR Insights Conference featuring The Metals Company. My name is Dmitry Silversteyn, and I am serving as a Managing Director of Chemicals and Materials Technology here at Water Tower Research. We are pleased to be hosting Craig Shesky today, Chief Financial Officer of The Metals Company, which trades on the Nasdaq under the ticker TMC. Welcome, Craig.
Thanks, Dmitry. It is a pleasure to be here.
Before we proceed, I must note that The Metals Company safe harbor statements are available on the investor tab of their website and in their latest presentation, which can be found at www.themetalscompany.com. As always, investor questions are encouraged. Please enter them in the chat box and we will address as many as possible during the session or within our upcoming management series report. Those wishing to request a meeting with The Metals Company can do so through the conference portal as well. With that out of the way, let us begin. Craig, let us start at the highest level for investors who may be new to the TMC story, although it is hard to imagine that there are still investors left who are new to the story. Still, can you explain what TMC is trying to build? What makes polymetallic nodules different from conventional terrestrial ore bodies?
Where the company stands today in moving this from a decade-long resource definition and technology development story towards commercial production.
Yeah, happy to do so. Just starting on your first point, hard to imagine there are investors who haven't heard it. Certainly, I think a lot of the people who will be viewing this would be well familiar with our fireside chats together and have probably been following us for some time. It was actually heartening to be at a conference in Laguna Beach last week at Morgan Stanley's industrial conference. What I was reminded is while all of this seems obvious to us and many other investors, we're still not yet at that inflection point where a lot of the large long-only institutions and even research analysts at banks really have their head wrapped around the story and how quickly it's developing.
On the one hand, it feels like we've been just on the edge of getting into production for some time now, and now we're actually seeing that light at the end of the tunnel. But we have to remind ourselves, too, that it's a story that is new to many people and an industry that is new to many people. Yet the technology to do this was actually proven back in the 1970s to collect these polymetallic nodules, and this is what they look like lying on the sea floor. To collect them at scale was proven by companies like Lockheed Martin and U.S. Steel and many other pioneers back in the 1970s. But what wasn't agreed upon at that time was the regulatory framework on how a resource like this in international waters in the deep ocean could be extracted.
We have a clear regulatory path through our regulator, NOAA, the National Oceanic and Atmospheric Administration, to collect these polymetallic nodules at scale. But we can talk about the technology, we can talk about the regulatory matters, we can talk about potential U.S. government funding. What matters here is the type of the resource and the grade of the resource. This is a two-dimensional resource of little potato-sized rocks that contain high concentrations of these four metals, nickel, cobalt, copper and manganese. It's the grade of that material that separates this from the pack of other terrestrial deposits. The grade on a nickel equivalent basis is over 3%. The grade on a copper equivalent basis, if you rolled all the metals into copper equivalent, would be over 7%. The average copper mine last year was producing about 0.6% grade.
More metal in each nodule than the traditional terrestrial deposit, and it's four metals in one resource. The fact that it's two-dimensional as well is very important in that the resource just lies unattached on top of the sea floor, so TMC can effectively collect this resource with a drill ship, a riser pipe, and a collector vehicle. In fact, we did just that, lifting 3,000 tons of these nodules to the surface in late 2022. So we feel the technology's proven. We have the place to process the nodules, whether tolled processing in Japan or eventually funding permitting the Brownsville site for U.S. domestic processing and refining, which this administration clearly cares about. In fact, the State Department reiterated at the International Seabed Authority meeting in July that this is a national security and economic priority, deep sea mining for the United States.
The resource is there, it is high grade, we can collect it, we can process it, and we have SEC compliant resource statements showing a net present value for the areas under which we have priority right of about $23.6 billion today. It is happening very quickly, and I think it is evidenced by the fact that new competitors are coming into the space through the U.S. process, and we welcome that. We want this to be a maturing, diverse set of companies that are pushing this forward and developing really an ecosystem to help the United States reindustrialize, and that starts with reestablishing metal independence.
Absolutely. I agree with you 100%, Craig. The big missing piece in reshoring national security concerns with critical metals is the processing part of it. I am glad that you are pursuing this as aggressively as you are, both with the PAMCO deal but also with the potential Brownsville site. We talked about, you mentioned the scale of the project briefly. Your NORI-D, which I think is under the old designation, was about 22% of the resource that you had under the ISA regime. It is probably even less under the larger NOAA territory that you have gotten. But your PFS talks about $5.5 billion of net present value. Your larger NORI and TOML resource is about $18.1 billion according to your economic assessment. Can you walk us through what those studies demonstrate about the initial project?
Just as importantly, how much additional optionality exists beyond the first NORI-D development we have talked about? I mentioned the TOML resource is much bigger than the NORI-D that you have, and I understand that you are going to be out in the ocean doing some more work to help define those resources. Can you talk us through that pathway?
Yeah, absolutely. Just to flash up on the screen some of the numbers. This is all, of course, available at investors.metals.co in our investor decks. But the PFS is here in dark blue, that $5.5 billion NPV, approximately $70 billion of lifetime revenue. You are right that the PFS only represented about 22% of the resources calculated by NORI and TOML exploration contracts, wholly owned subsidiaries of TMC.
But now our other wholly owned subsidiary, TMC USA, has applied for and has been deemed fully compliant in a commercial recovery area that is even larger than this PFS area. Bottom line, the numbers you see here on a combined basis, think of this as the whole playing field. Plus, there is some additional exploration upside. So 1.6 billion tons of nodules, maybe another 200 million in our estimate of additional tonnage in the areas over which we have applied under NOAA.
But the bottom line is going from initial assessment-level certainty to PFS and then to reserves. You asked the question, what does it mean? What it means to us is commercial viability. We have now shown that this is a commercially viable resource and even beginning at small scale with one vessel, we believe the economics here are going to be very attractive.
And if you are looking at all the areas here in blue over which TMC has technical studies that have been published per SEC standards, much of it here in the NORI-D area, in this dark blue area, has been moved from inferred resource to indicated and measured. And then within that, 51 million tons of probable reserves, the first time reserves have ever been reported for a polymetallic nodule project. So that is important in that we are by the definition that resource investors are used to talking about.
We show that this is an economically viable resource. But this is not going to be something where it is like, all right, here is the snapshot of the economics, and then it just sits stagnant until we begin work. We have every intention to continue to upgrade other areas of the resource, even beyond NORI-D, from inferred to measured and indicated. And this is another area where the resource itself, being effectively two-dimensional, allows us to go up that certainty curve on a capital-efficient basis. What do I mean? Well, when you take a campaign out and you are doing box core sampling, and we have every intention of going back in the area formerly known as TOML to do some additional sampling in the months or quarters ahead.
You can do box core samples and then pair that up with imagery of the sea floor and have a very good sense of where the nodules are and where the nodules are not. And you can assay the nodules and figure out exactly what the percent of these four key metals is within a certain square meter. And all of that allows us to efficiently upgrade this resource and get more, let us say, up to PFS standards, and then add to the probable reserve base. But just you had mentioned about 25,000 sq km for NORI-D. If I zoom in here, that is this dark blue block. The area now that we are applying for commercial production through the NOAA process is 65,000 sq km, all three of these various shades of blue. So that area is about the size of West Virginia.
The area over which we have applied for exploration license and/or commercial recovery through NOAA is about the size of Oklahoma. So this is a very, very big area, but I think it is important for people to know we are getting started in a measured basis. We can ramp up in a modular way by adding more ships with multiple collectors on each of them. But there is not that much guesswork of, I wonder where the ore body is. Where should I drill these holes? You generally know where to look, and it is generally predictable in the work that you have to do, and you are talking single-digit millions of dollars to be able to move up that certainty scale and add to your resource and potentially in the future, add to reserves.
That's absolutely important, particularly for analysts and investors who will look at companies like yours who are resource-based. We're rapidly moving towards commercialization here and production. Let's talk about that. The biggest change in the story over the past year has certainly been the emergence of the defined U.S. permitting pathway that you mentioned through NOAA. Your USA-A subsidiary is now in Federal Register after NOAA's full compliance determination, and your USA-B application has been certified, and it's in the Environmental Impact Statement process, and that has formally begun. Can you walk us and the investors through where each application sits today, what the next milestones are, and what has to happen before TMC can receive a commercial recovery permit?
Focusing on the commercial recovery permit first. Yes, both applications are now on the Federal Register. We are in a public comment period. What does that mean? This isn't something where this process is just a rubber stamp. While we do have an executive order as of April 2025 from President Trump supporting this industry and encouraging many federal agencies to do what they can to support it's also important that the permit granted allows us to operate unfettered for decades to come. That's important because you never know politically where the winds will be blowing in a few years or a few decades from now.
Now, we believe this resource is very large and high grade, and high-grade resources tend to get into production and stay in production, especially as they're potentially bringing thousands of jobs and potentially hundreds of billions of GDP ultimately to the United States. That said, going through the process in a very measured, predictable way, step by step, and allowing the public to comment on our applications, then allowing companies like TMC USA to respond to some of the questions and suggestions, that's all part of this NOAA process. What I can tell you behind the scenes is we're in the middle of that now. We are providing information to NOAA when requested.
They filter through various questions that come through, and we have all the data, thankfully, to answer them because we've spent already $700 million on this project, about $250 million of which was spent on the environmental research.
Great. Thank you, Craig. You talked about the permitting process advancing. You've also moved the offshore system from a pilot program that you mentioned before into a commercial development agreement with Allseas. Can you explain what the 3 million wet tons per annum of nodules the first system will look like, how much of the engineering has already been completed, and what has to happen between today and the targeted start of commissioning you mentioned the fourth quarter of 2027?
It's really, I think, well in hand, when we're talking about what the planning has already been, the engineering for the system. We generally know what it's going to look like. It will be this vessel, the Hidden Gem, instead of this one collector vehicle here, which was at pilot scale, about 9 m wide. There will be two larger collectors operating concurrently and hooked up via flexible umbilical cord to the riser pipe, which is deployed here with this derrick. The riser pipe would go from about 8 in to perhaps 18 in wide. So that's more throughput of nodules, and in order to get the compressed air necessary to pump that amount of nodules, you need a more powerful compressor spread on the deck of this vessel. We are in the active procurement process with Allseas, looking towards fourth quarter of 2027 vessel commissioning.
This timeline is moving forward because of the confidence that TMC and Allseas have together that the permit is ultimately coming from NOAA. Otherwise, if it was more of a coin flip, one could say, all right, perhaps you wait to get the vessel ready and to spend that money until such time as you have that certainty. We feel very strongly in the quality of our application and our ability to move forward on the timeline already laid out to the market that we are already getting ready to do this on a parallel path to prepare the vessel concurrently with the expected permit grant. That's our level of confidence that this is coming.
Great. That certainly does send a signal to the market, I believe. The onshore side of the story, excuse me, has also become much more strategic. You mentioned the PAMCO agreement to get you into production initially, but you secured an exclusive right over a large site at the Port of Brownsville here in Texas, U.S.A. And you're working with Mariana Minerals on a potential U.S. processing and refining complex, while your agreement with Eco Minerals also ultimately broadens the opportunity beyond TMC's own nodules, perhaps processing other companies as they get into production as well. How do you envision the Brownsville facility fitting into the U.S. critical metal supply chain, and could it ultimately become the infrastructure serving multiple offshore resources, not just those of TMC?
Sure, yeah. I think the fact that we are bringing a novel resource but with a proven processing technology does allow for some of that flexibility. The site that we have chosen is nearly 1,500 acres. We reported this in our last earnings deck, but I will pull up the slide here. It is at the Port of Brownsville, near the new LNG terminal, across the channel from Saronic, who is also interestingly developing a lot of autonomous offshore technology that may be relevant for this industry in the years ahead, and just a couple miles away from Starbase.
Of course, one of our board members is also a board member of SpaceX, Steve Jurvetson. So you are starting to see this America first reindustrialization and reassertion of maritime dominance and aerospace dominance and space dominance. It is all coalescing here in the very southern tip of Texas. So that is a very exciting story.
But again, we are developing this only assuming the majority of the funding to build such a facility, what we call Nodule City, is coming from the U.S. government. As we stated on our last earnings call, we are in advanced negotiations with multiple U.S. government agencies on that potential funding. We have no interest in tapping the market to raise any funds, given we have significant liquidity as is, $143 million as of the end of June. That is going to allow us to keep ordering the long lead time items necessary to keep the project on track, but wait until we are able to say more to the market on what the shape of these potential government financings might look like to make Port of Brownsville Nodule City a reality. So stay tuned for more news on that front, hopefully.
But that is a real opportunity for the U.S. to put its stake in the ground that, all right, China has beaten us in the processing and refining of these metals for the last couple of decades due to centralized planning and the sheer will of partnerships across Africa and Asia to source the ore needed to support those Chinese facilities. This is the opportunity for the U.S. to lean in to the leader in this industry, TMC, and bring these nodules to establish a permanent processing and refining facility. 1,500 acres does mean we can expand as needed if there are potentially additional nodule operators in the future who can provide some feedstock. But again, it is not something where you need to build it all right away. We have the necessary ground to see it develop into that down the road.
We also, we believe, have the right flow sheet and partnerships and processing technology to be that natural partner for anybody who just wants to focus on the offshore side. So it again, gives us maximum optionality. Commitments financially are not made yet, and they would not be unless there is a majority of the financing coming from the government. I keep using that word flexibility. Keep in mind, there is always that great capital-light toll processing option in Japan as well. You may have noticed several months ago, the U.S. and Japan, as part of their critical minerals deal together, focusing on what they view as responsible seafloor mining development, working together arm in arm. So I think that is a positive for where we are heading in this industry. But again, maximum flexibility for a resource of this size and quality is a pretty nice place to be.
Absolutely, Craig. Thank you. We talked about your permitting process. We touched on your offshore and onshore programs. I want to spend a little bit of time talking about The Metals Royalty Company now, or TMCR, because the relationship can be confusing for investors seeing the two public companies side by side. Can you explain how TMCR was created, what royalty it holds on Nori, what equity interest TMC retains, and why TMC chose to separate that royalty interest into a dedicated public vehicle rather than keep everything inside?
Yeah, absolutely. A lot of people I think saw in April when TMCR listed on the Nasdaq, they saw it as potentially a new deal. It wasn't. This was originally the Low Carbon Royalties transaction that TMC announced in February of 2023. That original transaction would have, from the Nori property, a 2% gross overriding royalty paid into Low Carbon Royalties, now known as TMCR, as they listed publicly earlier this year. That 2% gross overriding royalty can be bought back through cash flows once we are in production, so it's effectively a self-funding buyback mechanism to bring that 2% down to 0.5%. At the time, TMC received $5 million in cash and also received a 35% equity interest in Low Carbon Royalties directly, and that's been a very good trade. We've actually seen dividends coming through on a quarterly basis from their producing natural gas assets in Colombia.
Now, the Nori part of the equation and then the portfolio that they've grown since going public is now listed as TMCR, The Metals Royalty Company, and they've had to raise some money, so we've seen our equity stake reduced to 22%. But now that they are public, that's a very visible liquid capital raising tool for TMC. That said, we think just like our own share price, it's very undervalued right now. But that's certainly an exciting portfolio and a pipeline of potential deals that the TMCR team has. In fact, you would've seen the Mesabi Metallics royalty that they purchased for a northern Minnesota high DR grade pellet operation.
In fact, John Jovanovic, the head of EXIM Bank who has been a supporter of that project, visited the property just last week and was there to watch some red, white, and blue smoke go up during their blasting up there, the first new iron ore operation in many decades in the U.S., and that's a very high-grade resource. Those are the types of deals that we expect TMCR to continue doing, led by Brian Paes-Braga, a longtime supporter and shareholder in TMC, and non-executive chairman Michael Hess, who is also on the TMC Board. So these guys certainly love this space. And somebody like Mike and his family, of course, have been patriots for a very long time in supporting U.S. energy independence, so it all fits nicely together.
I would view that as an exciting portfolio of deals like this in what is still, as you know, a pretty underserved market. When you think about gold royalties or silver royalties, those are rather mature industries. The royalties on base metals or iron ore or uranium or many other parts of the critical minerals portfolio tend to be underserved, and overall capital for exploration and development-grade resources tends not to be there. It is a sector that, for a long time, has been unloved. There is not a lot of expertise in the generalist investor community, and that means you have the large diversified miners who are held by long onlys and are well populated across ETFs and indices. Then you have some of the smaller guys who just cannot get the capital necessary to develop.
There is this big gap, and how is that going to be filled? Sometimes it is going to be filled through government capital, and this is why you are seeing the U.S. lean in. For example, the Department of War supported a domestic tungsten mine with $450 million last week. The U.S. is focused really first on rare earths. They have been doing what they can to solve that problem as of a year ago. Then they were looking at more munitions metals, tungsten, antimony. You can bet that nickel and cobalt are also high on the list given their necessity for aerospace and defense. Bottom line, it all fits together with our mission, but there is also a financial component here, which remains very attractive to TMC.
Understood. Thank you for clarifying that. I think investors will need to do some more digging, but I think that was a good layout of how the cross-ownership works, and where the companies are going. They are not the same company despite the similarity in tickers. If we put all of this together, TMC now has a defined project economics. We have talked about they have an advancing U.S. permitting process, a commercial offshore agreement, a potential domestic processing hub, or at least a strategic relationship with a domestic onshore processor. What are the two or three milestones over the next, let us say, 6-12 months that could do the most, in your opinion, to change the market perception of TMC, and really have people look at you as a pre-commercial, but almost ready to be a commercial critical metals producer?
I think the main obvious catalyst is continued permitting milestones. Certification of our consolidated application later this year, that is a big milestone. That is effectively NOAA saying, "All right. We still have to go through that Environmental Impact Statement review, which will have public comment, but everything else in your application checks out." They agree with the mine plan. They agree that we have the ability to finance it. That is a pretty big milestone. Again, this is not just a permit that falls out of the sky. There are half a dozen or more key steps, and as you continue to tick those boxes, I would expect or certainly hope that as we communicate that to the market, it should be more and more clear that this permit grant, in our view, is inevitable because we have all the data to support it.
We have the bottoms-up approach from NOAA, given that they were the ones who actually pioneered the environmental research in this space, going back to the 1970s. They are well across it. Their team, of course, is busier than usual, given the fact that after TMC applied, there have been nine additional companies who have put in at least exploration license applications. There is plenty of paperwork going on at NOAA right now. Certainly TMC, we feel, is in the driver's seat, and I think we are getting their best attention. The permitting catalyst is going to be the one to really focus on. But again, as we noted, we are not going to be in the market doing capital raises until we can say more about what is ongoing with potential U.S. funding for the Brownsville site.
That is not something where I would put a date on in terms of predicting when something could be announceable. But we are reporting earnings again in November, and this will continue to be front of mind. As we are leading up to the midterm elections, getting the money that has been allocated to many of these cabinet departments and agencies showing that it is being well spent is certainly a priority of this administration. So keep an eye on those two things, permitting, government funding, and then think about what really moved the stock last year. Certainly we are doing everything we can to get that momentum back, but there was a lot of news on the back of the Trump executive order of TMC getting a new partner in Korea Zinc. They invested $85 million. The Hess family made their investment in the second quarter of last year.
There are a lot of milestones that you would not have been able to predict as catalysts, and there is always bubbling beneath the surface a lot of discussions with potential partners and other exciting things that could be coming. But really, the two main items to focus on are funding and permitting, and I think both of those work streams look very good.
Great. Thank you. Let me finish by giving you the floor for the remaining couple of minutes. TMC has spent years building the resource base environmental data set and offshore technology, but many of the most consequential regulatory and commercial milestones now appear to be directly ahead. We just went through them, and it sounds like the next 12 months are going to be a very exciting time for you from a permitting perspective. What do you think investors are still misunderstanding or under-appreciating about TMC today, and why is this an important time to take a closer look at the company?
Well, I think we are at the point where the spring, I have used this analogy before, the spring is getting very tightly coiled. When it comes to what could really make the share price move, I think it is going to be aggregation a lot of the milestones that you and I already talked about. Short interest is relatively high. You also have a difficult dynamic where there has been a lot of selling over the course of 2026 in names that had a boost from the Trump administration's agenda last year. Many of those names, like TMC, are down year to date significantly, and that is not acceptable to us. Taking a step back, we are much closer to production now, and we feel we are in a very good place from the permitting front.
That is frustrating to see, but at the same time, there have been some other TMC specific headwinds. You have had some folks who were selling in large size because they are participating in the SpaceX IPO, and that was a headwind that was difficult, along with a lot of the other retail selling and other market-wide moves in the critical mineral sector that is just been painful.
But oftentimes I will talk to funds, even some of our largest shareholders, and we will all look around and say, "What are people missing?" Why with this obvious path to production and with TMC in this leadership position, I think people are going to look back at this $4 a share in a few years from now and be like, "Why wasn't this more obvious to people?" I think oftentimes, you want to have that validation, whether you are a PM, whether you are somebody working for a cabinet department, whether you are working at the regulator. Having that validation of, all right, this person says it checks out. This person on the permitting front says that checks out.
This fund manager who I know and trust bought a position, and I just saw his 13F, and now I can go tell my CIO, "Well, this guy likes it, so you should like it, too." That starts to build, and you get into this virtuous cycle. We have had moments where it looks like it moving in that direction, and for one reason or another, momentum stalls, and perhaps that is for a permitting delay. We had an expectation of the permit coming in the first quarter of next year. Now we think it will take longer than that due to some administrative delays for a regulator at NOAA. I think it could be shortsighted just to say, "Oh, well, you missed your expectation." I take that seriously. We put forth our guidance based on all available information, and unfortunately, sometimes in this sector, there are delays.
In the context of a resource that will be bringing metal independence to the U.S. for a period of many decades, to be so fundamentally important for supply chain security compared to China, who would otherwise control the processing and refining of this material, we can deal with delays of weeks or months. Now that we have gone forward on the U.S. permitting path, we are not beholden to the never-ending many years of delays at the ISA. This is something that we are comfortable with. TMC has been through this before. We have many battle scars over the last five years as a public company. We are getting closer to the finish line. I think investors can and should trust that this is a management team that is resilient and will steer the ship in the right direction.
Great. Thank you. Craig Shesky, CFO of TMC, T he Metals Company. Thank you for spending time with us today.
My pleasure, Dmitry. Always good to speak with you.
Absolutely. Thank you all who joined us and contributed to this program. You can find current and future research and insights on The Metals Company at www.watertowerresearch.com. If you have additional questions or would like to request a meeting with management, please indicate through the conference portal and we will attempt to accommodate said requests. We will be moving directly into our next conference session shortly, so please stay tuned.