TMC the metals company Inc.

afternoon everyone and thank you for participating in the metals corporate company fourth quarter and full year 2022 corporate update conference call joining us today are the metals company chairman and chief executive officer gerard barron and chief financial officer craig sheshke following their remarks we'll open the call for your questions before we go further i would like to turn the call over to cfo Craig Chesky, as he reads the company 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 made by the company will be 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 fourth quarter 2022 corporate update press release. Such statements may also be found in our annual report on Form 10-K for the year ended December 31, 2021, and other reports subsequently filed with the SEC, including our upcoming 10-K for the year ended December 31, 2022, 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 the slide deck being used with this call. The slide deck is now available on our website at investors.metals.co. I will now turn it over to Jared Barron, TMC'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 fourth quarter 2022 corporate update call. 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.nettles.co. The fourth quarter saw some incredible and historic milestones for TMC, Nori, and our strategic partner and shareholder, Allseas. The single biggest milestone, of course, was the first integrated collection and lift of polymetallic nodules in the CCZ since the 1970s, in which 4,500 tons of nodules were collected and over 3,000 tons were lifted to the surface. But it wasn't just about collecting nodules. The test and the monitoring campaign, running in parallel, also collected over 200 terabytes of environmental data. And that data will help us better understand absolute impacts of nodule collection, while lifecycle analysis can help us better understand relative impacts. On that front, the full benchmark lifecycle analysis previewed on our last call but now released in full after third-party review shows that the Nori-D project model performed better in almost every impact category analyzed than all land-based routes chosen for comparison. But we're not alone in the quest to provide the environmental and social guideposts for the responsible use of seafloor resources. And we were very pleased to announce in February that we joined a group of roughly 25 participants to develop an ESG handbook for marine minerals, the first of its kind in this area. And then earlier this month, we announced that Bechtel, a global leader in engineering, procurement and construction, will collect and compile the techno-economic studies being done by various consultants, which are required for Nori to lodge its application for an exploitation contract with the ISA. And even in its early stages, we've already seen this partnership open many doors for us, given the instant credibility that comes with the Bechtel name. Also this month, we announced a non-buy-me MOU with Pacific Metals Company, or PAMCO, in Japan to evaluate the tolling of 1.3 million tons of wet polymetallic nodules per year at PAMCO's Henshin-Oi smelting facility starting in 2025. This is another example of capital light approach to get into production as it takes advantage of an existing facility with minimal required capex. And we'll dive deeper on this a bit later on. And finally, I'm pleased to announce some further developments on the financing front. Our partner and shareholder, Allseas, has made available to us a $25 million unsecured credit facility, maturing in May 2024. The interest rate, if drawn today, would be just under 8%, and there is a 4% per annum fee on undrawn amounts. We've been clear about our intentions to explore asset level financing options and minimize dilution to shareholders. But as we continue those longer term financing discussions, it's extremely helpful to have this additional tool for shorter term liquidity. We also announced a strategic partnership with low carbon royalties in which we contributed a 2% gross overriding royalty on Nori in exchange for $5 million and a 35% equity stake in LCR, and importantly, a right to repurchase up to 75% of the royalty at a fixed IRR return. And in the coming years, LCR has the potential to be an important additional source of capital to bring Nori-D and other TMC projects into production, given their talented management team's track record of valuation creation and accretive deal-making. Finally, you may have seen the news in December We put in place a $30 million ATM program to potentially issue shares opportunistically in the open market with the help of our bankers at Stiefel and Wedbush. This tool provides us flexibility and optionality, but make no mistake, it is not our intention to use this as a primary financing tool. And when we report our Q1 results in May, you can expect that the drawn amount then will be the same as it is today, zero. So on the agenda, we're going to take you through the following items on the call. An overview of the recent headlines in the market, a regulatory update, an update on the Nori-D project, a recap of our near-term milestones, and our financial update. So anyone scanning the press on the topic of deep sea nodules would have noticed a large pickup in coverage recently from the likes of the New York Times, Bloomberg, Reuters, and a very worthwhile piece from Stephen Levine in The Electric just this week which I'd recommend, it's hard sometimes to cut through all of the noise and the vocal and well-funded minority is likely to get louder as the ISA progress continues. But amidst this noise, there have been some strong signals and real action taken by credible companies and countries. Belgian's contractor GSR announced investment from leading offshore contractor Transocean who will also provide GSR with the Samsung 10,000 drill ship Olympia for conversion into a nodule production vessel ahead of its system integration test currently scheduled for 2025. And Norway recently announced a major discovery of critical minerals on the seabed off its continental shelf, as it considers permitting offshore exploration within its EEZ. In December 2022, Japan announced plans to possibly begin extracting rare earth elements from the mud on the Western Pacific's deep sea bottom as early as 2024, budgeting $44 million for trial extraction equipment. There were also some attention-grabbing headlines regarding China's action on deep sea nodules. In February, China's Comra signed an extension of their CCZ contract exploration contract. And just this month, China's state-owned newspaper recognized TMC's leadership position in the industry and announced its intention to invest further into the development of technologies to recover polymetallic nodules. But while the Chinese and Russian-funded production dominates the nickel picture on land, that's not the case for seafloor nodules. Herein lies the opportunity for nations and companies worried about supply chain security for battery metals. Collectively, our Nori and Toml projects rival today's largest producers, both in Russia and Indonesia. And Nori and Toml were ranked earlier this year by mining.com as the world's largest undeveloped nickel projects. Larger than other projects in the pipeline in Canada and the U.S., and about an order of magnitude higher in grade. And speaking of grade, this chart, excuse me, plots the nickel equivalent grade on the Y axis and nickel equivalent resource size on the X axis, comparing some of the more prevalent nickel projects for which data is available. And focusing on the bubbles in gray, some nickel projects have high grade and some have a large resource, but very few have both. TMC is an absolute outlier amongst peers with the largest nickel equivalent resource and the highest nickel equivalent grade. The scale of our resource can also be measured in terms of how big of a gap it can fill in the clean energy transition. With each little car on this page representing the metal required to electrify 1 million vehicles with a 75 kilowatt battery on an NMC811 chemistry. Our NORI and TOML areas contain in situ quantities of nickel, copper, cobalt, and manganese equivalent to the requirements of about 280 million vehicles or roughly the entire US passenger fleet. And to deliver on energy transition goals, Countries like the U.S. need to tap unconventional resources like nodules that can truly move the needle for nickel-rich battery chemistries. Shifting gears, as some of you may have read, U.N. member states reached a landmark agreement this month focused on the conservation and sustainable use of marine biodiversities of area beyond national jurisdiction, or BBNJ as we know it. The High Seas Treaty, as it is known, took roughly two decades of negotiation, and we applaud the commitment of member states to protect 30% of our ocean by the end of the decade. But I would remind our listeners that the International Seabed Authority has already exceeded this target with 43% of the Clarion-Clipton Zone of the Pacific Ocean, home to 90% of all nodule exploration activity, set aside for protection. far more than is under exploration. There has been some confusion as to the implications of the new treaty for deep sea mining. The short answer is that the treaty neither impacts the mandate of the ISA as regulator, nor the rights and responsibilities of sponsoring states and contractors. As we speak, the ISA session is in progress in Kingston, Jamaica, with the focus on the financial regime, regulations, and standards and guidelines, working hard to stick to the roadmap that has been laid out on this page. We're encouraged by much of what we're hearing from our team on the ground regarding the progress in this ongoing session, and we'll have a lot more to report after the session concludes on our next quarterly update call in May. Earlier this month, we announced that Bechtel will collect and compile the techno economic studies currently being compiled by various consultants, which are required for Nori to lodge its application for an exploitation contract with the ISA. And with their extensive experience working on historic infrastructure and mining projects, it's incredibly exciting to have a partner of Bechtel's caliber on board to help Nori deliver a first of its kind exploitation contract application to the ISA and ultimately bring this important resource of energy transition metals online in a responsible way. So with the help of another of our industry leading partners, Hatch, we developed a near zero waste flow sheet that uses almost all of the nodules mass while producing zero tailings. And the products on the right side of the page are what you get after the refining process. And while we've developed the flow sheet as well, we may or may not take that extra step, given that some future customers may prefer to take the alloy or mat directly. Our pilot processing trials wrapped up in Q4 2021, showing definitively that we can turn that flow sheet into a reality. And over the last year, we've been searching for the right partner to help us from pilot stage to commercial stage production. We previously announced that we were exploring the possibility of building a new nodule processing facility in India with the help of Epsilon Carbon. And we still might find a way to work together in the future, but another opportunity presented itself last year, a turnkey option to potentially process our nodules in an RKF facility, which already exists. Earlier this month, we announced that we had signed a non-binding MOU with PAMCO, of Japan to evaluate the tolling of 1.3 million tons or more of polymetallic nodules per annum at their Japanese smelting facility study in 2025. PAMCO will undertake the studies to estimate the cost of processing nodules using their existing facilities and to identify any additional equipment requirements which are currently expected to be minimal. In fact, a 22-ton sample of the nodules collected in last year's test has already been offloaded at the facility for testing. PAMCO have been smelting nickel laterite ore at their facility since 1965, and its plant seems well-suited to deploy our near-zero solid waste flow sheet, particularly because these nodules behave very similarly to nickel laterites in the smelting process. And working with PAMCO can help us achieve our stated capital light strategy to get into initial commercial production, potentially reducing both our time to market and our upfront costs. As a reminder, Nori-D is the first project we are developing. It represents about 22% of our total estimated resource. And so far, we've invested over a decade of network and $300 million on this project. This slide lays out some of the key attributes of the NORI-D project, which gives a sense of how much progress has been made and why it's of increasing interest among strategic partners. As I mentioned, we were pleased to report in the fourth quarter that Allseas and NORI achieved all significant pilot collection system milestones while collecting approximately 4,500 tons of seafloor polymetallic nodules, and over 3,000 tons were lifted up the 4.3 kilometer long riser to the hidden gem vessel. The pilot system achieved a sustained production rate of 86.4 tons per hour and gave us valuable operational data to inform future system optimizations and upgrades. And the Project Zero system will be targeting an average production rate of over 200 tons per hour following some modification. I'd like to play a short video where you can hear from the TMC and Allseas team on board the vessel, just a few of the team members among the hundreds who made this historic achievement a reality. And for anyone on the audio call only, this will take about three minutes.