Last close As at 05/08/2026
USD4.02
▲ 0.07 (1.77%)
Market capitalisation
USD1,742m
Research: Metals & Mining
The Metals Company (TMC) is approaching a critical phase in its development. As key milestones are achieved, so the project will be de-risked and the valuation expand. Of particular note are the anticipated award of an exploitation licence and physical nodule collection, which management expects to commence in Q126.
The Metals Company |
Growing up |
FY23 results |
Metals and mining |
3 April 2024 |
Share price performance
Business description
Next events
Analyst
The Metals Company is a research client of Edison Investment Research Limited |
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The Metals Company (TMC) is approaching a critical phase in its development. As key milestones are achieved, so the project will be de-risked and the valuation expand. Of particular note are the anticipated award of an exploitation licence and physical nodule collection, which management expects to commence in Q126.
Year end |
Revenue ($m) |
PBT* |
EPS* |
DPS |
P/E |
Yield |
12/23 |
0 |
(62) |
(22) |
0 |
N/A |
N/A |
12/24e |
0 |
(50) |
(17) |
0 |
N/A |
N/A |
12/25e |
0 |
(40) |
(13) |
0 |
N/A |
N/A |
12/26e |
179 |
(38) |
(9) |
0 |
N/A |
N/A |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
FY23 results and liquidity
Underlying operating loss for the year reduced from $87m to $63m, primarily due to the smaller scale of the offshore campaign in the year. Net cash outflow for the year was $40m, leaving cash of $6.8m at the year end. The company received $9m from a registered direct offering in January 2024 and has $45m of unsecured credit, giving total short-term liquidity of $61m, sufficient headroom for at least the next 12 months on our forecasts. Our expectations for 2024 and 2025 are unchanged and we issue 2026 forecasts, which include the first revenue from nodule collection.
Key future events
The most closely watched event in 2024 will be the July meeting of the International Seabed Authority (ISA), which is scheduled to complete the mining code, providing the framework for exploitation licensing. TMC’s key schedule for events for 2024 include an application for an exploitation licence, expected post the July ISA meeting, release of a pre-feasibility study (PFS) along with further environmental analysis from the recent follow-up offshore operation. Assuming the award of a licence, management now expects to commence mining toward the end of Q126 (previously Q325).
Valuation: Value driver timeline in place
Our DCF-based valuation uses a sliding scale discount factor as milestones are achieved and the risk reduced. Our base case valuation of $479m is based on publication of a preliminary economic assessment, a stage of development that TMC has already surpassed. More important is the timeline for future events and the impact on the valuation. A PFS is due to be published in 2024, potentially increasing our valuation to $592m; permitting is expected in 2025, increasing our valuation to $1,328m; and nodule collection is expected to commence in 2026, increasing our valuation to $1,781m. In full production our valuation is $6,056m using Edison’s long-term metals prices, the key being nickel at $16,000/t versus $16,750/t at present. Note that this valuation is solely for the NORI-D block, 22% of TMC’s estimated reserves.
FY23 results
Underlying operating loss for the year reduced from $87.1m to $63.2m, primarily due to lower exploration and evaluation costs, reflecting the smaller NORI development block offshore scientific research campaign undertaken to assess the seafloor and environmental impacts from the nodule collection test programme conducted in the prior year. This information will be used within the Environmental Impact Statement (EIS) as part of the exploitation licence application. Administration expenses were also reduced. The operating loss translated to a cash outflow of c $40m after the c $20m fund raise. Net cash at the year end was $6.8m, with the company having access to significantly greater liquidity (see the next section).
Exhibit 1: Key financial statements
Year to 31 December ($m) |
2022 |
2023 |
PROFIT & LOSS |
||
Exploration & evaluation costs |
(66.2) |
(44.8) |
General & administrative costs |
(20.9) |
(18.4) |
Group underlying operating profit |
(87.1) |
(63.2) |
Share awards |
(17.1) |
(9.2) |
EBIT (reported) |
(104.2) |
(72.4) |
Financing charges inc warrants |
(66.7) |
(1.4) |
PBT reported |
(170.9) |
(73.7) |
PBT before exceptionals |
(86.0) |
(62.2) |
CASH FLOW |
||
Operating profit |
(170.9) |
(72.4) |
Amortisation development costs |
0.4 |
0.4 |
Charge for share schemes/warrants |
86.2 |
12.4 |
EBITDA |
(84.4) |
(59.7) |
Net change in WC |
17.8 |
(0.8) |
Other adjusting items |
0.9 |
|
Operating cash flow |
(66.6) |
(59.6) |
Net capex |
(1.2) |
(0.5) |
Free cash flow |
(67.8) |
(60.1) |
Equity/warrants issued / (repurchased) |
29.7 |
20.1 |
Net cash flow |
(38.1) |
(40.0) |
Net cash/(debt) b/fwd |
84.9 |
46.8 |
Movement in net debt |
(38.1) |
(40.0) |
Net cash / (debt) |
46.8 |
6.8 |
Source: The Metals Company information
Liquidity
As highlighted in Exhibit 2, the company has pro-forma liquidity of approximately $61m, which management believes will cover working capital and capital expenditure commitments for at least the next 12 months. There is no expensive offshore sea trial planned for FY24, positive for cash consumption, although we expect the requirement to be replaced by the costs associated with the feasibility study and the exploitation contract application. Hence our forecast cash requirement is within the current liquidity.
Exhibit 2: Total available liquidity
$m |
|
Cash at 31 December 2023 |
6.8 |
Registered direct offering final payment received January 2024 |
9.0 |
Allseas unsecured credit facility (matures August 2025) |
25.0 |
ERAS/Gerard Baron unsecured credit facility |
20.0 |
Current liquidity |
60.8 |
Announced at-the-market equity program (untapped) |
30.0 |
Filed S-3 universal shelf filing additional equity raise capacity |
26.4 |
Potential further S-3 universal shelf filing additional capacity |
100.0 |
Full potential liquidity |
217.2 |
Cash at 31 December 2023 |
Registered direct offering final payment received January 2024 |
Allseas unsecured credit facility (matures August 2025) |
ERAS/Gerard Baron unsecured credit facility |
Current liquidity |
Announced at-the-market equity program (untapped) |
Filed S-3 universal shelf filing additional equity raise capacity |
Potential further S-3 universal shelf filing additional capacity |
Full potential liquidity |
$m |
6.8 |
9.0 |
25.0 |
20.0 |
60.8 |
30.0 |
26.4 |
100.0 |
217.2 |
Source: The Metals Company information
Activity update and outlook
Recent achievements
TMC continues to make positive progress. Key recent achievements include:
■
Completion of a follow-up offshore campaign. In Q423, 12 months after the initial sea trials and nodule collection programme, a further campaign was undertaken to assess the impact of the previous activities on the seafloor and environment. This information will be released through the ISA and form key elements to the various reports, such as the EIS, required to support NORI’s exploitation licence application.
■
Memorandum of understanding (MoU) signed with PAMCO for the processing of 1.3m wet tonnes of nodules on commencement of commercial operations. This follows on from the agreement in March 2023, within which PAMCO would evaluate its ability to process nodules in its existing facilities. Under the MoU and as part of the process development and ratification, PAMCO will treat 2,000 tonnes of nodules attained from the 2022 sea trials.
■
First nickel sulphate produced from polymetallic nodules. Work continues to validate the processing route for the nodules with the production of high-grade nickel sulphate, expected to be suitable for battery markets. The process provides clear benefits, including eliminating waste, by not having to produce nickel metal to arrive at a battery cathode material.
2024 key anticipated events
ISA Mining Code adoption
The ISA issued the first consolidated text of the ‘Draft regulations on exploitation of Minerals in the Area’ in February. Discussions continued at the March meeting of the council, with the full text due for approval at the July meeting. The ISA is mandated by its UN charter to issue exploitation regulation, with authorisation the de-facto position of the authority, requiring a two-thirds majority to overturn. Nevertheless, there is obviously no absolute guarantee that the stated objective timeframe for completion in July will be achieved.
Submission of NORI’s exploitation contract
Management’s intention is to submit an exploitation application for the NORI-D project after the ISA meeting in July. The operating company, NORI, initially informed the ISA of its intention to submit an application in June 2021, initiating a two-year time frame for adoption of the legislation. In 2023, in light of the delayed adoption of such regulation, NORI deferred its application by a year. Management’s expectation is that the approval process for its application will take 344 days, suggesting a timeline out to July 2025.
Pre-feasibility study to be released
Much of the work for the PFS, such as the offshore trials with Allseas and the onshore processing with PAMCO, has been finalised. Further elements will be completed in the year and are predominantly required for the application for the exploitation licence. Our expectation is that this key report for commercial purposes will be available in H224.
Commencement of commercial nodule collection
Management has put back the expected timeline for commencement of operations from Q425 to the end of Q126. The deferral primarily reflects the additional upgrade work required for the collection module, riser system and Little Gem vessel associated with the expanded capacity.
National Defence Authorisation Act
Congress has been mandated to provide a report concerning the US position on critical minerals required in the transition to a low carbon economy. This includes the potential of polymetallic nodules and the ability to process these mineral resources in the US. The report was due in March 2024. This could pave the way for government assisted funding of nodule processing infrastructure in the US.
Forecasts
Our forecasts for FY24 and FY25 are unchanged, FY25 due to our cautious approach of only factoring in production commencing in FY26. We have introduced forecasts for FY26, with the assumption that production commences in H2, slightly more conservative than the latest management guidance of Q126.
Valuation
We have rolled forward our valuation for the new financial year, which, particularly at higher discount rates, has a meaningful impact on the valuation. We continue to use a range of discount values to reflect the level of risk, as highlighted in Exhibit 3.
The company is arguably beyond the preliminary economic assessment in terms of development, suggesting that the associated valuation of $479m is conservative. More interesting is the clear timeline for a PFS to be released in 2024, permitting in 2025 and ramp-up of production in 2026, which would significantly reduce the risk and enhance the valuation. The valuations are based on Edison’s long-term metal price expectations, primarily nickel at $16,000/t versus the current price of $16,700/t.
We also note that (1) our project valuation of $6.1bn is consistent with yet conservative compared to the NORI Technical Report Summary, which indicated a post-tax project NPV of $6.8bn; and (2) our valuation only takes into account NORI-D block, which only consists of 22% of the total estimated reserves within the NORI and TOML blocks for which TMC is contracted to develop.
Exhibit 3: Project valuation
Discount rate used |
Project valuation |
|||||
Milestone |
High (%) |
Low (%) |
Low ($m) |
High ($m) |
Average |
|
Preliminary economic assessment |
36 |
31 |
355 |
603 |
479 |
|
Pre-feasibility study |
34 |
29 |
439 |
744 |
592 |
|
Bankable feasibility study |
31 |
26 |
603 |
1,020 |
812 |
|
Permitted |
27 |
21 |
918 |
1,738 |
1,328 |
|
Ramp-up |
23 |
19 |
1,402 |
2,160 |
1,781 |
|
Project Zero |
18 |
13 |
2,411 |
4,233 |
3,322 |
|
Project One |
11 |
9 |
5,341 |
6,771 |
6,056 |
|
Source: Edison Investment Research
Exhibit 4: Financial summary
2022 |
2023 |
2024e |
2025e |
2026e |
|
Year to 31 December ($m) |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
US GAAP |
INCOME STATEMENT |
|||||
Revenue |
0.0 |
0.0 |
0.0 |
0.0 |
179.2 |
Cost of Sales |
0.0 |
0.0 |
0.0 |
0.0 |
(170.7) |
Gross Profit |
0.0 |
0.0 |
0.0 |
0.0 |
8.5 |
EBITDA |
(84.4) |
(59.7) |
(50.0) |
(39.6) |
(34.9) |
Underlying operating profit |
(87.1) |
(63.2) |
(50.0) |
(40.0) |
(37.7) |
Amortisation of acquired intangibles |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Exceptionals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Share-based payments |
(17.1) |
(9.2) |
(10.0) |
(20.0) |
(20.0) |
Reported operating profit |
(104.2) |
(72.4) |
(60.0) |
(60.0) |
(57.7) |
Net Interest |
1.1 |
1.3 |
0.0 |
0.0 |
0.0 |
Exceptionals, warrants etc |
(67.8) |
(2.6) |
0.0 |
0.0 |
0.0 |
Profit Before Tax (norm) |
(86.0) |
(61.9) |
(50.0) |
(40.0) |
(37.7) |
Profit Before Tax (reported) |
(170.9) |
(73.7) |
(60.0) |
(60.0) |
(57.7) |
Reported tax |
0.0 |
(0.0) |
0.0 |
0.0 |
7.5 |
Profit After Tax (norm) |
(86.0) |
(62.2) |
(50.0) |
(40.0) |
(30.2) |
Profit After Tax (reported) |
(170.9) |
(73.8) |
(60.0) |
(60.0) |
(50.2) |
Net income (normalised) |
(86.0) |
(62.2) |
(50.0) |
(40.0) |
(30.2) |
Net income (reported) |
(170.9) |
(73.8) |
(60.0) |
(60.0) |
(50.2) |
Average Number of Shares Outstanding (m) |
240 |
289 |
297 |
318 |
318 |
EPS - normalised (c) |
(36) |
(22) |
(17) |
(13) |
(9) |
EPS - normalised fully diluted (c) |
(32) |
(20) |
(16) |
(12) |
(9) |
EPS - basic reported (c) |
(71) |
(26) |
(20) |
(19) |
(16) |
Dividend (c) |
0 |
0 |
0 |
0 |
0 |
BALANCE SHEET |
|||||
Fixed Assets |
44.8 |
60.1 |
50.9 |
100.5 |
127.7 |
Intangible Assets |
42.8 |
43.2 |
43.2 |
43.2 |
43.2 |
Tangible Assets |
2.0 |
2.8 |
7.8 |
57.4 |
84.5 |
Investments & other |
0.0 |
14.2 |
0.0 |
0.0 |
0.0 |
Current Assets |
49.7 |
8.8 |
2.0 |
2.0 |
46.8 |
Stocks |
0.0 |
0.0 |
0.0 |
0.0 |
44.8 |
Debtors |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Cash & cash equivalents |
46.8 |
6.8 |
0.0 |
0.0 |
0.0 |
Other |
2.9 |
2.0 |
2.0 |
2.0 |
2.0 |
Current Liabilities |
(41.7) |
(31.3) |
(31.3) |
(31.3) |
(31.3) |
Creditors |
(41.7) |
(31.3) |
(31.3) |
(31.3) |
(31.3) |
Tax and social security |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Short term borrowings |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Long Term Liabilities |
(11.7) |
(26.6) |
(51.9) |
(141.6) |
(243.7) |
Long term borrowings |
0.0 |
0.0 |
(39.2) |
(128.8) |
(238.5) |
Other long term liabilities |
(11.7) |
(26.6) |
(12.7) |
(12.7) |
(5.2) |
Net Assets |
41.1 |
10.9 |
(30.4) |
(70.4) |
(100.6) |
Minority interests |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Shareholders' equity |
41.1 |
10.9 |
(30.4) |
(70.4) |
(100.6) |
CASH FLOW |
|||||
Operating Cash Flow |
(84.4) |
(59.7) |
(50.0) |
(39.6) |
(34.9) |
Working capital |
17.8 |
(0.8) |
0.0 |
0.0 |
(44.8) |
Exceptional & other |
0.0 |
0.9 |
0.0 |
0.0 |
0.0 |
Tax |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net operating cash flow |
(66.6) |
(59.6) |
(50.0) |
(39.6) |
(79.7) |
Capex |
(1.2) |
(0.5) |
(5.0) |
(50.0) |
(30.0) |
Acquisitions/disposals |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net interest |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Equity financing |
29.7 |
20.1 |
9.0 |
0.0 |
0.0 |
Dividends |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Net Cash Flow |
(38.1) |
(40.0) |
(46.0) |
(89.6) |
(109.7) |
Opening net debt/(cash) |
(84.9) |
(46.8) |
(6.8) |
39.2 |
128.8 |
FX |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Other non-cash movements |
0.0 |
0.0 |
0.0 |
0.0 |
0.0 |
Closing net debt/(cash) |
(46.8) |
(6.8) |
39.2 |
128.8 |
238.5 |
Source: company information, Edison Investment Research
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