TMC the metals company Inc.

participating in the Metals Company's first quarter 2022 corporate update conference call. Joining us today are the Metals Company's Chairman and Chief Executive Officer Gerard Barron and Chief Financial Officer Craig Sheskey. Following their remarks, we'll open the call for your questions. Before we go any further, I would like to turn the call over to CFO Craig Sheskey as he reads the company's safe harbor statement within the meaning of the Private Securities Litigation Reform Act of 1995 that provides important cautions regarding forward-looking statements and information about the use of non-GAAP measures. Craig, please go ahead.

Thank you. Please note that during this call, certain statements may be made by the company that are forward-looking and based on management's beliefs and assumptions from information 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 our safe harbor provisions for forward-looking statements that can be found at the end of our first quarter 2022 corporate update press release. Such statements may also be found in our form 10Q when it is available and other reports filed with the SEC, all that provide 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 Our remarks today may also include non-GAAP financial measures, including with respect to free cash flows. And additional details regarding these non-GAAP financial measures, including reconciliations to the most directly comparable GAAP financial measures, can be found in our slide deck being used with this call. And that slide deck is available on our website right now, investors.metals.co. I will now turn it over to Jared Barron, the Metals Company's Chairman and Chief Executive Officer. Jared, please go ahead.

Thank you, Greg, and good afternoon, and thank you all for joining us today for our first quarter 2022 corporate update. You're welcome to follow along with our slide deck, or if you're joining us by phone, you can access it at any time at investors.metals.co. Today, we'll take you through the highlights from Q1, including significant progress offshore and onshore, a discussion of recent market and industry developments, our financial and project development highlights, and the expected upcoming milestones for the company. We'll start with a brief reminder of the TMC value proposition. TMC is developing the largest estimated potential source of battery metals on the planet. We believe our portfolio alone has sufficient estimated in situ quantities of nickel, copper, cobalt, and manganese to electrify 280 million EVs. about the size of the entire U.S. passenger fleet. And with all of the raw material inflation squeezing automakers, this is a fantastic time to be developing a resource that can actually move the needle for them. The resource is also secure. Nodules sit in international waters and are regulated by the International Seabed Authority, or the ISA. The ISA resumed in-person meetings in December last year after nearly a two-year hiatus due to COVID. The ISA also met again in March and had additional meetings scheduled in July and November of this year, with a stated target of finalizing the exploitation regime by July 2023. We expect our production costs to be low, as nodules contain high grades of four metals in a single resource, which could put us firmly in the bottom quartile of the C1 nickel cost curve. And importantly, we also expect to significantly compress ESG impacts compared to land-based miners. No digging, no glassing, no drilling, no child labor, no social displacement, no deforestation, and no tailings. We anticipate much lower carbon impacts compared to land-based miners and nearly zero solid waste. And finally, The recent rally in metal prices has led to a large increase in the expected NPV for Nori-D, the first project we are developing. Using the initial assessment done by ANC and simply updating the current metal prices, the estimated NPV for Nori-D would be $22 billion with all other inputs being equal. It's becoming increasingly obvious that automakers and other metal consumers are very worried about availability, sustainability, and price of battery metals. Last month, Tesla CEO Elon Musk tweeted, quote, Tesla might actually have to go into mining and refining directly at scale unless costs improve, unquote. In a recent letter to shareholders, GM's CEO, Mary Barra, expressed confidence in their supplies of lithium, rare earths, and cobalt. The exception was the, quote, GM is still working to secure adequate nickel supplies, unquote. And Ford CEO Jim Farley was recently asked about what keeps him up at night. His response was batteries, the raw materials that go into them, and localizing that raw material supply chain in the U.S. So U.S. automakers are clearly recognizing that for the raw materials question, it's not just about how much, but also where is it located and who controls it? TNC not only has the largest nickel project in the world, but the top two largest nickel projects in the world, according to a mining.com ranking from March of this year. Importantly, we believe we are the only needle-moving future nickel source that isn't already controlled by Russia or China, the latter of which is winning the battery arms race through deliberate investments over several decades in locations such as Indonesia and the DRC. And while China speeds ahead in these jurisdictions, rife with environmental and social difficulties, the U.S. continues to have nearly zero primary production of nickel, cobalt, and manganese. And that doesn't look likely to change anytime soon, at least from land-based sources. Just last week, the Environmental Protection Agency recommended against reissuing a key water-related permit for a North Net nickel project in Minnesota due to the potential for pollutants like mercury ending up in nearby waterways. The largest potential nickel mine in the U.S., Twin Metal in Minnesota, also saw its permit rejected last year. And so headlines like these clearly underscore the massive strategic benefits that our resource could potentially offer to U.S. companies, especially given the challenges faced by so many projects on land. So our resource is big, but how big and how do we know? Well, in early 2021, AMC Consultants issued an SEC-compliant technical resource statement on the Nori and Tomal areas. The yellow and dark blue box on this page confirming a total estimated resource of 1.6 billion wet tons of nodules. The methodology used to determine this resource with confidence could be found in the appendix to this presentation, as well as the NOI initial assessment on our website and our SEC filings. But in short, we can sample it and we can actually take pictures of it, survey pictures of it. Just one of the many advantages of having a two-dimensional resource sitting on top of the sea floor in an area with zero plant life. Zooming in on the right lower yellow box on this map, that's Nori D, our first project. Nori D alone is estimated to contain 356 million tons of wet nodules, representing 22% of TNC's total estimated resource. And we expect that at steady state production, Nori-D could produce up to 125,000 tons of nickel annually, equivalent to roughly 10% of current global production of Class I nickel. We also expect to be a material source of cobalt, copper, and a metal which we think is underappreciated is manganese, but more on that later. I'm very proud of our team and our partners for the program made on the project development during this quarter. We intend to use our cash balance of $69 million as of March 31st to continue this progress in the coming quarters. On the right side of this page, you'll see a non-exhaustive summary of what's occurred at TMC in recent months, and I'm pleased to take you through these achievements in further detail. As we discussed on our Q4 call, we wanted to remind you of the strategic developments announced in March that can potentially allow us to get into production in a capital-light manner. Project Zero is our first small-scale commercial production project expected to collect and process 1.3 million wet tons of nodules annually from the Nori B area. In March, we signed a non-binding term sheet with all fees and a non-binding MOU with Epsilon Carbon, which together, if both are taken to definitive agreement, would reduce the share of pre-production costs initially borne by TMC to approximately $55 million, down significantly from the previous estimate of $193 million. So starting with offshore, the term sheet with all these lays out the potential framework and the commercial terms for upgrading the pilot collection system into a project zero system and operating it in the Nori-D area. Further details on these economics can be found in our press releases and the transcripts from our Q4 corporate update call. Already this year, Allseeds has made an incredible amount of progress on this system, testing including hardware web tests, dynamic positioning trials, and deep quarter tests. And this keeps us on track to test the system in the CCZ later on this summer, when nodules in our contract area will be generally listed off the sea floor and sent with a hidden gem on the surface through the electrolyzer system. And rather than having me simply talk about the major offshore milestones achieved this quarter, I'd like to play a short video which allows you to see the progress yourself. last week the successful completion of the initial deep water trials of the polymetallic nodule collector vehicle in the Atlantic Ocean. The team at Altis lowered the collector vehicle to the seafloor at depths of 2,470 meters, marking the first time the vehicle has been subjected to ultra deep water temperatures and pressures. Engineers then subjected the vehicle to extensive testing of its various pumps and critical mobility functions and and drove the vehicle over a kilometer across the seafloor. The pilot nodule collection system is so far performing beautifully throughout these trials and getting the collective vehicle in the deep water in the Atlantic has given the team the opportunity to really pressure, test all the critical components. We're eager to share more offshore progress in the coming quarters. Onshore, we announced the signing of a non-binding MOU with Epsilon Carbon in March. detailing their intention to finance, engineer, permit, build, and operate the world's first commercial polymetallic nodule processing facility in India, building upon our pilot work finalized in Q4 last year, which successfully turned nodules into nickel, copper, cobalt mass, and manganese silicate products. India is a great place for our first processing facility for many reasons, including support for nodules from their government at their highest level. Last year, Prime Minister Modi earmarked half a billion dollars for India's deep ocean mission, including funds for deep sea nodule collection systems. It's also worth noting that Ford stated in February that they are, quote, exploring the possibility of using a plant in India as an export base for EV manufacturing, unquote. Even beyond the potential of For EV production in India, the country already represents a major hub for steelmaking. Epsilon Carbon has an exclusive raw material purchase agreement with JSW Steel, India's largest steel manufacturer. And this April, we announced some very important news on the attractiveness of our manganese silica product for the steelmakers in India and beyond. We retained Sintes, one of Europe's largest independent research institutions, to analyze our manganese silicate used to produce silica manganese for steelmaking. TMC's high-grade manganese silicate product appears to have significant advantages over conventional land-based manganese ores on cost and CO2 footprint, with the potential for 7% to 17% higher value in use depending on the carbon tax regimes. So manganese might not get as many headlines as nickel and cobalt, but given that manganese could account for almost 30% of our future revenues, we are very pleased by these findings from Sintef in advance of potential offtake discussions in the near future. As you probably read, critical mineral supplies and by extension, polymetallic nodules are a growing area of focus for political, and military leaders. You'll see on this page a collection of excerpts from recent letters in the political and military spheres regarding seafloor resources. The most recent letter was an absolute haymaker landed by Senator Marco Rubio against Volkswagen, a company that first in virtue signaled their hesitancy on deep sea mining, but then last month signed a large offtake agreement with the Chinese-funded cobalt and rainforest nickel supply. In the letter, Senator Rubio asked if VW believes that human trafficking, child labor, and rainforest destruction are necessary risks, and whether they value deep sea sediment over human rights. Senator Lisa Murkowski's recent letter to the Department of Energy was a bit less forceful in tone, but every bit as clear in its conclusions, telling the DOE that any credible analysis of critical battery metal supply chains must include seafloor resources and asking the DOE undertake a strategic assessment of polymetallic nodules. And this echoes the sentiments of 17 retired generals, admirals, and officers across four branches of the military who wrote to the Pentagon in February asking that they consider responsible development of polymetallic nodules as a potential game changer for U.S. critical mineral supplies. So to reduce dependence on metals controlled by authoritarian governments and to actually get enough of these metals to make a dent in fossil fuel use, we think that nodules in the clarion-clipidin zone are the only real choice. And the video we'll now play highlights the potential strategic benefits to the Earth afforded by this remarkable resource.