TMC the metals company Inc., an explorer of lower-impact battery metals from seafloor polymetallic nodules, provided a corporate update and financial results for the first quarter ending March 31, 2023.

Q1 2023 Financial Highlights

• Net income and per share amount of $nil for the quarter ended March 31, 2023, after recording a gain on disposition of asset of approximately $14 million
• Total cash of approximately $28.4 million at March 31, 2023
• The Company believes that existing cash and liquidity will be sufficient to fund operations for at least the next twelve months

Gerard Barron, TMC Chairman and CEO, commented: “The first quarter of 2023 has progressed as we had hoped. At the March 2023 ISA session, member states made significant progress on key aspects of the regulatory text and reiterated their commitment to adopting final rules, regulations, and procedures. I would like to thank the 167 member states (and the European Union) for their tremendous efforts both at these formal sessions and the intersessional work that is happening in between. I’m also pleased that we were able to sign a non-binding memorandum of understanding with Japan’s PAMCO to explore nodule processing at their existing facility, another example of our capital-light strategy to get into commercial production. We also entered into an agreement with Bechtel to support our subsidiary NORI’s planned application to the ISA for our NORI-D project. A lifecycle assessment (LCA) completed by Benchmark in March showed that critical battery metals from our first NORI-D project would outperform key land-based production routes across almost every impact category analyzed. The two important areas not covered by Benchmark’s LCA—impact on marine biodiversity and ecosystem function—are being analyzed by our science partners based on the wealth of data we’ve gathered over the past decade.”

Operational Highlights

Extensive deep-sea environmental data submission to the International Seabed Authority: In March 2023, TMC announced that its wholly-owned subsidiary Nauru Ocean Resources Inc. (NORI) had begun the process of submitting data collected during 17 offshore resource definition and environmental baseline campaigns in the NORI-D exploration area to DeepData, an open database of contractor data managed by the International Seabed Authority (ISA). Collected using a suite of high-tech equipment, the dataset submitted to the ISA includes over 1,400 biological samples from extensive boxcore and multicore sampling, and over 8,000 images analyzed for benthic megafauna captured by Remotely Operated Vehicles from two offshore campaigns. This first submission of benthic data will provide a significant expansion to the biological holdings contained within the ISA’s ‘DeepData’ platform by contributing over 270,000 occurrences.

Benchmark LCA of NORI Area D project: In March 2023, we announced that leading lithium-ion battery supply chain research firm, Benchmark Mineral Intelligence, had completed an independent third-party lifecycle assessment (LCA) of the environmental impacts of our NORI Area D Project, comparing the production of key energy transition metals (nickel, cobalt and copper) from the NORI Area D Project to key land-based production routes for the same metals. Benchmark’s LCA shows the NORI Area D Project model performed better in almost every impact category analyzed than all the land-based routes chosen for comparison.

Consortium for ESG handbook for marine minerals: In February 2023, we announced that we had joined a broad international consortium to develop a handbook for Environmental, Social and Governance (ESG) disclosure in relation to marine minerals. The purpose of the guidance document is to enable evidence-based assessments of the ESG performance of marine mineral projects in the context of global standards. Marine minerals are emerging as a strong potential source to help meet growing metals demand. As with any extractive industry, consideration of ESG issues is key to ensuring transparent and responsible supply chains. The ESG handbook will provide guidance to address material topics related to marine mineral projects in the deep-sea environment using a standardized approach.

MoU with PAMCO to evaluate nodule processing at existing facility: In March 2023, we announced that we had entered into a non-binding memorandum of understanding (MoU) with Pacific Metals Co Ltd (PAMCO) of Japan, to evaluate the toll treatment of an initial quantity of 1.3 million tonnes of wet polymetallic nodules per year at PAMCO’s Hachinohe smelting facility starting in 2025.

Engagement with Bechtel Australia Pty Ltd: In March 2023, we announced that we entered into an agreement with Bechtel Australia Pty Ltd (Bechtel), a global leader in engineering, procurement and construction, to collect and compile the technical and economic studies prepared by various consultants required for NORI to lodge its application for an exploitation contract for its NORI Area D Project with the ISA.

Credit facility with Argentum Credit Virtuti GCV, parent of Allseas Investments S.A.: In March 2023, TMC entered into a $25 million unsecured credit facility agreement with Argentum Credit Virtuti GCV, the parent of Allseas Investments S.A., with a maturity date of May 21, 2024. The interest rate on the facility is the 6-month Secured Overnight Funding Rate (SOFR), 180-day average plus 4.0% per annum payable in cash semi-annually (or plus 5% if paid-in-kind at maturity, at TMC's election). The facility remains undrawn.

Strategic Partnership with LCR and Subsequent LCR Transactions: In February 2023, we announced a strategic partnership with Low Carbon Royalties (LCR) to further the shared interests of advancing clean energy production, storage, and the electrification of the world’s economy. TMC and LCR have agreed to a purchase and sale agreement whereby LCR has acquired a 2.0% gross overriding royalty on TMC’s NORI project area in the Clarion Clipperton Zone of the Pacific Ocean (“NORI Royalty”). In consideration for the NORI Royalty, TMC received $5,000,000 cash and an initial 35.0% equity interest in LCR. TMC retains the right to repurchase up to 75% of the NORI royalty at a capped return. If both repurchase transactions are executed, the NORI Royalty will be reduced to 0.5%. In March 2023, LCR acquired additional gross overriding royalties on NG Energy’s natural gas fields in Latin America, bringing its total gross overriding royalty on the Maria Conchita block to 3.13%, and adding a 1.44% gross overriding royalty on the SINU-9 block. The royalty acquisitions were financed through the issuance of LCR common shares, thereby reducing the Company’s ownership in LCR to 32% from 35%. For more information, go to: http://www.lowcarbonroyalties.com/

Industry Update

The ISA completed what we believe was a productive March 2023 session and continues to work inter-sessionally to finalize regulations regarding exploitation of deep-sea minerals. At the session, all member states of the ISA reiterated their commitment to the adoption of final rules, regulations, and procedures (Mining Code). The main item on the agenda of the ISA Council remains the negotiation of the Draft Regulations on Exploitation of Mineral Resources in the Area. During the session, the ISA Council confirmed it has the obligation to consider a plan of work for exploitation submitted after July 2023. We are aligned with the members of the ISA in that we do not want to submit an application for a work plan for exploitation and start commercial operations in the CCZ until final regulations are in place. We will continue to constructively support the negotiations. NORI, however, may exercise its legal rights under UNCLOS to lodge an application for a plan of work for exploitation before the final Mining Code is adopted and in place. The next ISA Council session is scheduled for July 2023. We expect that discussions will continue at this session on the approval process for an application for a plan of work for exploitation, if one is submitted before final regulations are in place. NORI is committed to submitting an application for a plan of work for exploitation only after we complete a quality comprehensive, science-driven environmental and social impact assessment.

Financial Results Overview

On March 31, 2023, TMC held cash of $28.4 million and held no debt. We believe that our cash on hand and borrowing availability under our recently signed credit facility with an affiliate of Allseas will be sufficient to meet our working capital and capital expenditure requirements for at least the next twelve months from today.

TMC reported net income of approximately $nil for the quarter ended March 31, 2023, compared to net loss of $21.1 million, or $0.09 per share, for the quarter ended March 31, 2022. The first quarter 2023 results include a gain of approximately $14 million on the sale of a 2% royalty on the NORI asset to Low Carbon Royalties. Exploration evaluation expenses during the quarter ended March 31, 2023 were $7.2 million compared to $7.4 million for the quarter ended March 31, 2022. General and administrative expenses were $6.2 million for the quarter ended March 31, 2023 compared to $8.5 million for the quarter ended March 31, 2022. The lower spending in the first quarter of 2023 reflect lower share-based compensation, as options with specific market capitalization vesting conditions were fully amortized in 2022, and lower spending on the PMTS as the collector test was completed in November 2022.