TMC the metals Co Inc. (TMC) Q3 2021 Earnings Call Transcript

Thank you. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions from information currently available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including those set forth in the Safe Harbor provisions for forward-looking statements that can be found at the end of our third quarter 2021 corporate update press release. Such statements may also be found in our Form 10-Q when it's 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 statement. And the slide deck is available on our website at investors.metals.co. I'm now happy to turn it over to Gerry Barron, The Metals Company Chairman and Chief Executive Officer. Gerry, please go ahead.

Thank you, Craig, and good afternoon. And thank you all for joining us today for our Third Quarter Corporate Update Conference Call. You're welcome to follow along with our slide deck or if joining us by phone, you can access it at any time at www.metals.co. So, today, we'll be reviewing our recently completed business combination, our financial and project development highlights, and expected upcoming milestones for the company. I'd like to begin with a recap on recent market developments and how we believe The Metals Company could fit into the big picture. So, the green future is metallic. At COP26, the world's governments are committing to a rapid transformation of energy and transport. What's catching people by surprise is that this transition starts and ends with metals. Last year, the World Bank pointed out that we will need to extract 2 billion to 3 billion tonnes of metal by 2050, a fivefold increase in production. And a couple of months back, the International Energy Agency ran an analysis of their own and arrived at the conclusion that to hit Net Zero globally by 2050 would require six times more mineral inputs than today. So, in an attempt to get the message across, an industry analyst firm WoodMac in October did not mince words. The energy transition starts and ends with metals and to hit the 1.5 degree Celsius target, a fivefold increase in base metal supply would be needed, requiring an investment of $2 trillion. So, meeting demands could be Mission Impossible. As we hurry to get out of one extractive industry being fossil fuels, the fact that the whole enterprise depends on scaling up another extractive industry, in metals, is understandably a hard pill to swallow. But we cannot afford to ignore it because you can't build your gigafactories and renewable power out of thin air. If you look at the US, it's been a dizzying few months. To electrify US car sales, you need about 1.2 terawatt in battery cell production capacity. And in August, President Biden outlined the target of 50% EV sales share in 2030. And his announcement was followed by a flurry of industry announcements to construct gigafactories in the US, but not much detail around how these gigafactories will be supplied with raw materials. And they do need to worry about this now because it takes on average about a decade to turn it and develop a new mine even longer in the US. So, 2030 is already yesterday with respect to the United States' domestic capability to meet expected demand. So, where will the battery metals come from? Let's imagine that the US implements mining, permitting reform and moves as quickly as China. In that scenario, we think the US might be able to solve copper and maybe find some more lithium. But we don't think you can solve nickel, cobalt, and manganese because the resources aren't there. The plot thickens when you look at the current supply chain from mining to processing and refining and cathode material production. It's a 50,000-mile supply chain controlled by China. The United States spends so much effort to achieve energy independence, only to find itself headed for metal dependence. Metal is the new oil, and China is more powerful than OPEC. The Biden administration understands this and nickel has finally been elevated to most critical status and was mentioned 146 times in the 100 days supply chain review. Building a nickel refinery in the US was framed as the highest short to medium-term priority in that document. And it so happens that there is a potential solution on the western seaboard of the United States. This realization is slowly percolating through the system. Over the summer, the Wilson Center, a key non-partisan policy forum in the US held a dialogue with key groups of stakeholders, trying to find solutions to the troubling scenarios faced by the United States when it comes to the supply chain for critical minerals. Their report acknowledged the significant domestic opportunity to get the nickel, cobalt, and manganese from polymetallic nodules in the Clarion-Clipperton Zone. And developing the nodule resource offers a 1,500-mile supply chain, and an opportunity to relocate processing and refining in the US. So here is what a polymetallic nodule field looks like. And these images were taken at 4.3 kilometers depth, and the view is about 1.2 meters above the seafloor. And you can see continuous nodule coverage. And nodules formed by precipitating metals that are in solution in ocean water, and the sediment pore water. And these are loose rocks with approximately 95% of nodule mass exposed on the top of the seafloor months. We are using lighting here for visibility, but otherwise it's a dark cold food for plates. And limited food means limited life. Indeed, it's one of the lowest biomass places on the planet, compared to deserts on land and the ice-free Arctic and Antarctic, and most life year bacterial. Once in a while, you can spot a worm or a sponge or a sea star. And in general, animals tend to be small, four centimeters is a giant in this world; it is a fascinating, slow-changing world that must be protected, and as a precaution, more area is already under protection here than under exploration, and protected areas account for about 34% of the total Clarion-Clipperton Zone, already exceeding, at least for the CCZ, the global push to protect 30% of the oceans. In addition to the relative proximity to the US, and the option to process and refine these nodules in the US, this results in several other advantages. It's abundant. It's the largest estimated source of battery metals on the planet. Our portfolio alone has sufficient estimated in situ quantities of these metals to electrify around 280 million EVs, all of the entire US passenger fleet. And its high grades; on land, you would possibly need three different mines to obtain these metals and the grades of forming. Nodules contain high grades of four metals in a single resource. On average, we need to process several times less mass to get the same amount of metal, and security; these nodules sit in international waters and are regulated by an intergovernmental organization, the International Seabed Authority, or ISA comprised of 160 Member States and the EU. Decisions are subject to intense scrutiny and consensus takes time, but they cannot be changed from the whim of a single government. And low production cost; we expect to be the second lowest cost nickel producer on the planet, largely due to the high-grade multi-metal nature of the resource and lowest ESG costs; we expect a 70% to 99% reduction of lifecycle ESG impacts. No child labor, no social displacement, or no deforestation. Onshore, our production would generate near-zero solid waste. We should be able to compress CO2 equivalent emissions by up to 90%. And this is all using conventional technology. But we're pushing to do better than that. We believe it is a much better solution than the alternatives. But it isn't a miracle. We will be impacting a delicate environment. A lot of care is going into making sure that we characterize and mitigate our impacts on biodiversity. So what does it take to get to production? It all starts with a resource. We have secured exclusive exploration rights to three areas sponsored by three Pacific island nations. Next, we have to figure out how much is there and of what quality. We have results estimates on two of our exploration areas, and to move from exploration to exploitation, we need to secure an ISA exploitation contract. How do we pick up nodules from four-kilometer depths? Well, the basic technology was successfully demonstrated back in the 1970s, but we have to design and test a saline system, and we're doing this in partnership with Allseas. What are the environmental impacts of nodule collection, and how do we mitigate them? Here we have a much higher bar than most projects on land. First, we must baseline the marine environments from seafloor to surface, then we must run our pilot system and monitor and measure its environmental impacts. The deliverable here is an environmental impact statement, that is an important part of our application to the ISA for an exploitation contract. Once you have the nodules, how do you turn them into metals? Well, we stood effort in developing two different spreadsheets and chose to go with the lower risk option for our development and operational plans. It uses conventional equipment, and we expect to generate near-zero solid waste. We have to model it, then test it in the lab and at pilot scale. Before production, we need to make sure our project is economically viable. We go through a sequence of studies with increasing levels of confidence on project economics. We started with an initial assessment, but we are now in the middle of our pre-feasibility study, followed by a bankable feasibility study. We currently have a sufficient level of cash to fund the milestones highlighted in blue. And we believe that the four most important are firstly to complete the onshore pilot plant program to process and refine polymetallic nodules into critical metals. Secondly, to build and deploy our pilot collection system to lift nodules to the surface, with a dual focus on operational performance and environmental impact mitigation. And thirdly, to complete the offshore Environmental Impact Statement of future production on NORI-D. Finally, submit an application to the ISA for an exploitation contract for the NORI-D area. So, where do we stand at the end of Q3 2021? As mentioned previously, our business combination with Sustainable Opportunities Acquisition Corp was completed on September 9, 2021. The company was renamed to TMC, The Metals Company and on September 10, 2021, we commenced trading on NASDAQ. TMC received approximately $137 million in cash prior to transaction fees, including approximately $27 million from the Select Trust account after accounting for redemptions. As we've noted previously, SOAC entered into subscription agreements for $330 million pipe, but only $110 million of the pipe funding has been received to date. SOAC TMC continues to seek to enforce the funding obligations; two lawsuits have been filed against the non-performing investors in New York State Court. So, with cash in the bank of approximately $130 million as of September 30, we have maintained our expectations of funding our operations through the key milestone of submitting our application for an exploitation contract to audit in Q3 2023. In terms of project development, it's been a record-setting nine months. You can see the highlights on this slide, but I'd like to share some of these in more detail. Today, our technical resource statements were done in compliance with a stringent Canadian 43-101 standard. To become a US listed entity, we had to comply with the FCC Regulation SK-1300 standards and accordingly, AMC consultants reissued technical resource statements for Nori and TOML areas, reconfirming a total estimated resource of 1.6 billion wet tonnes of nodules in situ resource of nickel, copper, cobalt and manganese, equivalent to the requirements for 280 million electric vehicles. One way to understand the significance of this resource is to compare it to other undeveloped and producing projects. Nickel is a key metal for us, representing almost half of our expected future revenues. As you can see on the left side of this page, our estimated resource is significantly larger than other known undeveloped nickel projects. Earlier this year, mining.com ranked our NORI-D asset as the largest undeveloped nickel project on the planet. If you convert all the metal contents into a nickel equivalent grade at 3.2%, no other undeveloped ore-producing project comes first. Resource quality translates into attractive economics, and back in March, AMC consultants issued an SEC regulation SK 1300 compliant additional assessment of project economics for the NORI-D area. This area represents about 22% of our total estimated portfolio and is expected to have a net present value of $6.8 billion, using very conservative commodity prices. As you may know, the prices of most of our metals have reached multi-year highs. At current prices, the net present value would nearly double. In Q3, we saw an important milestone on the regulatory side. For us to move from exploration to exploitation, the International Seabed Authority needs to complete the adoption of the exploitation regime. The work on this regime started already back in 2011. That completion, targeted for July 2020, was disrupted by COVID. To increase regulatory certainty at the end of June, the Republic of Nauru, the sponsoring state of the NORI area, exercised its sovereign rights under Section 1, paragraph 15 of the 1994 agreement relating to the implementation of part 11 of the United Nations Convention on the Law of the Sea, UNCLOS Part V, and submitted a two-year notice. This notice obligated the ISA to complete the adoption of exploitation regulations within two years of the request made by the Member State. In response, the ISA has put together a work program to meet the deadline. The outcome we are hoping for is that the ISA will deliver on a work program and complete the adoption of the regulations with the consensus of the 167 nations and the EU behind them. However, the 1994 Implementation Agreement does lay out what happens if this does not materialize. If the ISA has not completed the adoption of such regulations within the prescribed time, and an application for the approval of a plan of work for exploitation is pending before the ISA, the ISA shall nonetheless consider and provisionally approve such plan of work. So, we expect our subsidiary NORI will have submitted its plan of work for exploitation within the prescribed timeframe. Once we submit an application, we expect the ISA to take at least 315 days to review it and decide. If no changes are requested and the application is approved, we can expect to start production in Q3 2024, subject to our ability to fund the development of Project Zero. Putting together an application is a multi-year effort that includes a comprehensive Environmental Impact Statement or EIS. The foundations of the EIS are collecting baseline data on the environment. We need to understand pre-impact states so we can compare it to what happens after nodule collection. While we started doing environmental data collection campaigns several years ago, this has been a record for four campaigns and 140 days at sea in the first nine months of this year, all completed safely with all the data collection goals accomplished by our research partners, under superb management of our vessel operation partner Maersk Supply Services. The last completed campaign had researchers from the University of Hawaii, Texas, and the Japan Agency for Marine Science and Technology (GenoTech). One of the campaign achievements was sampling pelagic bio-data at depths down to 4,000 meters, marking what we believe was the world's first deep MOCHNESS nets and rosette in the eastern tropical Pacific Ocean. I have just returned from San Diego where we are mobilizing for the fifth campaign this year. The final of our baseline data collection will be collected by the end of 2021, but the analysis will take some time. In parallel, together with our offshore partner Allseas, we've been building a pilot collection system in the Netherlands. The system consists of a surface production vessel, seafloor collector robot, and an airlift riser system. The Hidden Gem, a former drill ship acquired by Allseas last year, is in Rotterdam undergoing conversion into the surface production vessel. It is expected to be the first ship classified as a Subsea Mining Vessel by the American Bureau of Shipping. The red launch and recovery system used to lower and retrieve collector robots has already been installed. The collector robot has been assembled as well, and you can see the current state of our collector in the pictures. These images were taken at the end of October when we invited key stakeholders to Rotterdam to review progress on the conversion of the Hidden Gem and the assembly of our collector robot. We are targeting system completion at the end of this year, followed by wet collector drive tests in the North Sea and a full pilot system trial in the NORI-D area in the Pacific next year. Even a pilot trial requires an environmental impact statement of its own, and our subsidiary NORI submitted the EIS for the upcoming pilot trial to the ISA in July 21. We are planning a 12-week trial with about 260 hours of system operation, and the directly impacted area is small, just 0.5 of one square kilometer. One of the high-profile issues addressed in the EIS is the potential environmental impact of plumes. Plumes are essentially suspended seafloor mud particles, and early speculations about plumes suggested giant clouds of mud would be traveling for thousands of kilometers, either staying suspended for long periods or falling out and suffocating organisms in protected areas. We believe these initial speculations are proving to be wildly exaggerated. Modeling by a third-party expert, DHI, using mud ocean data collected from the NORI-D and using NORI-D sediment properties supports predictions that plumes from the pilot system will be limited and localized. Although the pilot system is similar to the production system, we believe it is representative of the relative order of magnitude of the impacts that we can expect from the production system. Results from DHI are consistent with the work published by MIT on seafloor and mid-water plumes, and furthermore, for seafloor plumes, our results are consistent with field observations by the German contractor BGR and the Belgian contractor GSR, who did a seafloor collector test in the CCZ earlier this year, and we look forward to having our own shield observations next year. While our work offshore gets a lot of coverage, I personally get just as excited about what we've been able to achieve onshore. For anyone wondering whether we can turn nodules into valuable critical metals, the answer now is a resounding yes. First, our pilot program turned nodules into a manganese silicate product that can go directly into manganese-alloy production, and a nickel, copper, cobalt, alloy and intermediate product that can be used as feedstock in some of the existing smelting and refining operations. I just held up what that alloy looks like. Then we have been able to convert the nickel, copper, cobalt, alloy into a further intermediate product that could go into most nickel refineries, and here is what that product looks like. So, we've started on the final part of our pilot plant program, and that is turning that product into nickel sulphate, cobalt sulphate, and copper cathode. So, looking forward, here's an overview of what we are focusing on next. It will be an equally intense six to nine months for us. Firstly, securing funding to get into production in 2024 is my number one priority. To that end, we are working on multiple fronts, securing bankable off-takes for Production Zero, finalizing Project Zero economics with Allseas, and securing an onshore partnership and site. In parallel, we are in active discussions with strategic parties who can help us get to full-scale production, ideally in the United States. They include carmakers, cathode material manufacturers, mining majors, oil and gas majors, and EPC companies. Offshore, the pilot trial of our offshore collection system is a major event. While there have been collected robot tests on the seafloor, a full system test including the riser has not been done since the 1970s. So, a digital twin system for a nodule collection operation has never been developed and operated either. This is another exciting development for us. Onshore, we anticipate that we will complete our pilot plant program going from nodules to battery cathode precursor materials and copper cathode. So, with that, I am turning it over to Craig to speak on TMC's recent third quarter and year-to-date financial statements.

Thank you very much, Ger. Before we get into the results, I do want to draw your attention to certain restatements to our first quarter and second quarter 2021 financials, which were included in our recent press release. Now that we've seen this resulting from certain invoices for exportation expenses not being appropriately accrued as of June 30, 2021; and expensing of options granted in the first quarter of 2021, based on the grantee's historical start date with the company rather than the grant date of the options on March 4, 2021. More information is provided in the company press release, as well as our soon-to-be-filed 10-Q. Now in terms of the financial results for the third quarter of 2021, the company reported a net loss of $36.7 million or $0.18 per share compared to TMC's net loss of $6.8 million or $0.04 per share for the third quarter of 2020. The higher net loss was mainly attributable to $12.9 million in milestone payments accrued under the amended pilot mining test system agreement with Allseas and a $2.8 million increase in offshore campaign expenses given increased offshore activity versus the prior year period. Exploration expenses during the third quarter of 2021 were $23.8 million, compared to $4.6 million for the third quarter of 2020, also explained by the Allseas milestone payments and increased offshore expenses. General and Administrative expenses were $13.3 million for the third quarter of 2021 compared to $2.2 million for the third quarter of 2020, mainly driven by higher non-cash stock-based compensation expense and overall higher costs as a result of being a public company. Now excluding direct transaction costs related to the business combination, free cash flow for the third quarter of 2021 was negative $9.8 million compared to negative $3.8 million in the third quarter of 2020. For the nine months ended September 30, 2021, the company reported a net loss of $121.5 million compared to $39.5 million in the prior year period. Exploration expenses increased from $35.7 million to $80.2 million. G&A expenses increased from $3.8 million to $41 million during the first nine months of 2021. The largest increases in both exploration expenses and G&A expenses were stock options for the green employees and contractors in the first quarter of 2021 before the business combination was finalized. This represents the catch-up of equity awards for key employees who had been progressing the project over the last several years, and of course, retaining our key employees is a very high priority for us. Excluding non-recurring items, free cash flow for the first nine months of 2021 was negative $23.8 million compared to negative $21.4 million in the first nine months of 2020. With that, I will turn it back over to Ger for some final comments.

Thanks, Craig. So before we go to questions, let me address the recent short report. Clearly, this report was written by someone who doesn't know much about resource economics. Resource quality drives the value of exploration contracts, not the fee you pay to apply for the contract. We acquired the TOML asset for $32 million from a third party who had no relation to any of the shareholders or executives of TMC or DeepGreen. By the time of the acquisition in 2020, TOML had conducted several resource definition campaigns and had a 43-101 compliant resource of 756 million tonnes of nodules. For comparison, NORI-D has a 43-101 compliant resource of 356 million tonnes, so less than half of the TOML resource. It also has an SEC SK-1300 compliant initial assessment signed off by independent experts with an NPV of $6.8 billion. If we use today's commodity prices, that NPV would exceed $12 billion. So I think the $32 million acquisition of the TOML asset was an outstanding deal by any measure. It's also worth noting that in our opinion, nearly all of the good ground has already been claimed in the CCZ. So if the short seller believes getting an exploration contract for an area with high-quality resources and sponsorship from a sovereign nation is as easy as paying a $250,000 contract application fee, well, they should go ahead and try. The report also suggests that we overstated our exploration expenses for NORI, and that is also incorrect. As part of the business combination, we were required to adjust our accounting from IFRS to US GAAP, which meant we needed to fair value the shares we paid out, resulting in the increase from $14.9 million to $35.4 million. TMC is an SEC regulated company; we take our compliance very seriously. More importantly, we're a company that values transparency. Nothing in this agenda-driven report causes me any concern. We have purposely not commented on this report because the assertions were so unserious. They did not want to reply, but given that retail investors have asked me to, however, here it is. The energy transition starts and ends with metals. Giga factories can't make batteries out of thin air, and TMC is developing a massive resource that can truly move the needle in terms of metal feedstock for giga factories, while also shortening supply chains, compressing ESG impacts, and helping to ensure mineral independence for the United States. We have made an incredible amount of progress on the project this year, onshore, offshore, and environmentally. We're just getting warmed up. And with that, we'll turn it back to the operator for some questions.

Certainly. We will now begin the question-and-answer session. The first question is from Daniel Ives with Wedbush. You may proceed.

Thanks. Can we just first talk about how conversations maybe have changed with their strategic partners or within the auto food chain over the last call three, six months? And is there a discernible change, just giving more of these accelerations that there is need for working?

Yeah, hi, Dan. Absolutely, there has been a discernible change. While there is lithium in our modules, we don't focus on it as a product. I think auto makers have historically been a very dominant party when it comes to supply chains. Obviously, with the semiconductor experience in the past year, it has highlighted how raw materials can really disrupt the business. Now, the whole transition to electric vehicles has really sped up, especially since COVID came and the stimulus packages have been announced by President Biden and others. Everyone wants to catch up and go electric. All of a sudden, while historically, they have pushed those conversations onto the supply chain, now it is not that easy. They realize that they have to get control of supply, availability, price, and sustainability are the key drivers for those automakers. Yeah, we're having very different conversations with them today compared to even six months ago.

Great. Okay. So can we just go over what the top priorities are for 2022 from an exploration or strategic perspective that we want to achieve a year from now? As you look ahead, can you outline those again?

Sure, from the project perspective, the priorities are this time next year, we will have completed our Pilot Mining trial, a pilot collecting trial, and that will be the full end-to-end system. As I mentioned earlier, there have been trials conducted by a Belgian contractor of the collecting vehicle, and it was very successful. But this is different. In February last year, Allseas, our partner, acquired the Hidden Gem, a 228-meter production vessel, formerly a drillship. I believe its ticket price was $700 million ten years ago, and they bought it for low tens of millions of dollars. So, they are busy converting that now. In fact, I looked, there's around 3,040 people at Allseas working on that conversion last month. By this time next year, we will have conducted that harvesting trial and observed that. That's an important part of the permitting process because we have to demonstrate and report on the impacts. The same with onshore; we've already completed our pyrometallurgical pilot plant processing work, and we are in the early phases of our hydro network. The Hydro Net is very low risk as we're adopting a process that is carried out by many other refiners around the world. The really exciting thing will be more environmental papers published, more environmental results because that's what everyone wants to know, what the impacts are. As I reported, our estimation is that the plume will travel five to six meters above the ocean floor. That is consistent with the MIT published papers; they released two papers this year. The GSR published release or BGR news they released earlier this year from their actual trials in the CCZ, which is an area very near us. So more of that environmental data being released is something we're really looking towards. And on the strategic side, we are talking, as I said, with companies from the resource sector, the mining sectors, and oil and gas sector, also with customers and intermediate players. The consumer-facing brands engaging will really kick this opportunity into high gear. I believe that consumer-facing brands will come as a result of more environmental evidence supporting the lower impact of making battery metals from our modules compared to metals from traditional sources. But some of the other players, the resource companies, there's no doubt they'll move faster in my opinion because you just don't find ore bodies with such high size and quality around the world.

Thanks.

Thank you, Mr. Ives. The next question is from the line of Subash Chandra with Benchmark. You may proceed.

Thank you. I'm looking at slide 11, and there's a lot happening. It seems that the to-do list hasn't changed despite some hedge funds falling short on their commitments. I'm curious about what adjustments you need to make and when you expect to reach bankable off-take agreements or form strategic partnerships for Project One and beyond. What events do you foresee that would boost market confidence and liquidity, enabling us to reach full production and complete Project Zero?

Sure, thanks for the question, Subash. There's no doubt we were disappointed to raise less money than we had anticipated. We’re always trying to take more money because it would fund us all the way through to production; in fact, to fund us through to 2025. But as you pointed out on slide 11, there's still a lot of work to be done. Fortunately, we have sufficient capital to do the really value-adding stuff at the moment, which is the offshore pilot, the onshore pilot processing work, and all of the environmental impact studies. We need to hear what is needed and be ready to submit our application in Q3 of 2023. What we don't have money for is to fund that first production, what we call Project Zero. However, one of the great advantages of the partners that we have chosen is that, as I mentioned, they acquired that production vessel in 2021, sorry, 2020 February. That production vessel is being fitted out for the pilot trials. In fact, it came out of dry dock some weeks ago. We had a crew of people inspecting it a couple of weeks ago during stakeholder day. It will be in the Atlantic doing trials straight after Christmas. We will be busy figuring out all of the strategic items I mentioned during the presentation about what those funding options will be to get us into that first production. We have a lot of choices there. Even on the production vessel, you've seen the numbers; there’s margin in this ore body. If we had to sacrifice some OpEx for CapEx, that option is always available to us. I remain confident that based on the size and quality of the resource, we will have solved the funding issue before it starts impacting production in 2024.

Yeah, and I mean, just to add in there, too, one of the big takeaways from the events in Rotterdam a couple of weeks ago was that it’s just great to be able to share with a lot of stakeholders — their potential investors or strategic, etc. — the tangibility of that progress. Because they know about the size of the resource, they know how attractive it is. But as we continue to hit these milestones over the next two years with the cash that we have on hand, that'll just increase the certainty and continue to de-risk. Obviously, we are disappointed in the situation with the PIPE, but it did refocus us on making sure we get the boat on the water, show the successful collector tests, and that we can convert these nodules into usable metal, which we're making great strides on. That'll put us in an even better position when it comes to raising the additional capital.

There may be some hope here. If two years is considered a long time, it certainly looks like the macro trends are favorable. Your options should become more solid, if not better, but at what point do we need to address the Project Zero capital question?

Yeah, we need to solve that by Q1 2023.

Okay, great. And for my second follow-up, I believe you mentioned the public comment period regarding NORI for the pilot test in the CCZ. It might be available on the website, but I haven't checked to see what the initial comments look like. I'm curious about any concerns or excitement regarding the CCZ mining pilot.

Subhash, would you just repeat the first part of that question? The comments about what the - was it about the environmental?

Yeah, regarding the environmental aspect, I believe there's a public comment period for the CCZ mining pilot. I thought that period had already commenced. Can you provide any insights on what some of the initial comments have been focusing on?

It's an open period now. We're engaging with all those stakeholders through the stakeholder engagement program. I think the feedback we've been receiving from the extensive paper that we launched and that’s available on our website and also the ISA website has been very complimentary to the range of the scope of that study. We don't see any showstoppers in it.

Thank you, Mr. Chandra. The next question is from Malcolm MacDonald with Bank of America. You may proceed.

Hey, everyone. I have a quick question. Why does it take 315 days for the ISA to make a decision? Please go ahead.

Yes. So, that's a process that they have laid out. It goes to the legal and technical commission. It's a big document; there'll be wheelbarrows to carry it in there. That's just the process they have laid out. It's encouraging to see how the ISA is preparing for that as well; they are recruiting heavily. They are bringing in lots of expertise to be able to make these assessments and also to become the regulator. It’s a pretty reliable timeframe from our perspective. I think the one point I would highlight is that the approval process we have, and we often talk about the ISA as a regulator, but we're very happy with them. The ISA was set up in 1994 with the goal of governing the high seas and establishing a regulatory framework to allow for the development of these resources. With land-based applications, if I just use them as a comparison, what you find are changes; you might find governments being voted out because of their approval. You might find native title claims and so on. We don't have those issues, and thus we don’t see the delays that some land-based projects located in certain jurisdictions would be subjected to.

Would it be possible for the ISA to make a decision sooner than the 315 days if they wanted?

We hope so, and we'll be doing everything to encourage it, but we're not banking on it at the moment. And by the way, what happens when we get the boats back? Well, obviously, when we bring the boat back from the pilot, it goes straight back into dry dock to have some more modifications made to make it ready for Project Zero production. We’re using the time pretty effectively; we clearly would like to bring this resource into production as soon as possible. I think that’s a good timeframe. By the way, keep in mind, I made the point during the presentation that permitting processes on land are becoming more and more challenging. Getting anything approved in a developed country or developing country does not have a lot of certainty around it in this day and age. I think we're in a good space there.

Just a quick follow-up. Given Macron’s statement at COP26, have they been in touch with you regarding any sort of uptake? Also, where is China relative to TMC?

Let me first address Macron. Firstly, thank you, President Macron, for making those comments, because for those that weren't across, he gave an update on his 2030 plan and made the pitch for France's future; they need to reindustrialize, develop secure supply lines, create local jobs. That means they're going to need a lot of metals. France has a very large ocean and economic zone holder; they also have a license in the same area that we do. He said polymetallic nodules look like being the solution to that. They have allocated billions of dollars for the development of that. I think that's significant to have a G7 leader, a European leader come out in support. We have also the leaders from developing nations, and we have China and Japan and Korea; to have a president so vocally supporting that is good news. In regard to China, there is no doubt they have three licenses, two of them very close to us. We were in Changsha before COVID struck, my team and I, and we visited China metals, onshore processing pilot plants. They have been processing modules for 20 years. The same modules that we’re picking up; they’ve been processing for 20 years. We also inspected their harvesting system; we understand they have been doing more trials, but not in the CCZ. They had more in their territorial waters. I think it’s safe to assume that China is moving. We know they have an insatiable appetite for these important base metals. We always thought it was a good thing that China was involved. Nothing validates the business model and the company more than other people looking at this resource as well.

Certainly, just to expand on that a little bit, more and more focus has come on this topic over the last year. There’s more attention from policymakers not just in Europe and Asia, but more so in North America as well. When there was the news earlier this year that China was doing some deep water testing for their collector system, there were a lot of inbound calls and emails asking what the implications were. Certainly, we don't shy away from any competition. In fact, nothing validates the business model and the company more than other people looking at this resource.

If China is collecting modules to make those metals, then hopefully that means they'll be destroying less carbon sinks — that's rainforests, that's biodiversity. If you look at the only growth avenues for nickel, they come from nickel laterites, and we know where they form. They form in some of the most biodiverse carbon sinks on our planet. That's the real enemy here.

Awesome. I'd like to follow up on what you just mentioned. When you go into production, would you consider taking an additional step toward achieving net zero by possibly allocating a percentage of your revenue towards reforestation or becoming a leader in ESG, electrifying the world, and decarbonization?

There's no doubt we want to take that leadership role. Of course, there are a lot of economic benefits that flow from this project, not only to our sponsoring nations, the nations that are impacted by climate change the least yet are in the front row to be impacted by the effects of climate change through rising sea levels. Once we're in production, this will deliver them royalties that will provide jobs, training opportunities, and have a meaningful impact on their GDP. A much bigger royalty gets paid into the International Seabed Authority. A process was very prescriptive about what should happen to those royalties; they should be, after paying for the cost of the regulator, distributed to the developing nations of the world, particularly the landlocked nations. We are building this on an ESG platform; there is no doubt about it, and you can expect us to strive for the gold standard when it comes to all of those ESG metrics.

Awesome! Thank you so much.

Thank you, Mr. MacDonald. There are no additional questions waiting at this time. I’d like to pass the conference back to Craig Shesky for any closing remarks.

And I'll pass it right back to you, Gerry Barron, our CEO.

To conclude, our recent accomplishments have been significant. Our strategic priorities remain on track to achieve four key milestones by the end of the third quarter 2023, when we expect to submit our application to the International Seabed Authority for exploitation contracts for our NORI-D area. Thank you for taking the time to join us on the conference for today. It's our first earnings call, so we've been very much looking forward to it. We look forward to speaking to you for our fourth quarter corporate update call in not too many months. Thank you.

That concludes The Metals Company’s third quarter 2021 corporate update conference call. Hope you all enjoy the rest of your day. You may now disconnect your lines.