Seabed Nodule Permitting And Critical Mineral Demand Will Reshape This Long Term Opportunity

Catalysts

About TMC the metals

TMC the metals is focused on collecting polymetallic nodules from the seafloor and processing them into nickel, manganese, copper and cobalt products for industrial and battery supply chains.

What are the underlying business or industry changes driving this perspective?

• The pivot to the U.S. regulatory regime with NOAA, combined with President Trump's executive order and proposed streamlined permitting, positions the company to potentially secure a Commercial Recovery Permit and align with policy support for domestic critical minerals. This would be a key trigger for future revenue visibility and capital access.
• Formal recognition of manganese, cobalt, nickel and now copper as critical minerals for U.S. supply security, along with public private initiatives to reduce import dependence, creates a supportive demand backdrop. This could help underpin long term offtake interest and pricing power, feeding directly into revenue and EBITDA potential.
• The track record of first of its kind nodule resource statements, pre feasibility study, reserves and successful production of nickel, cobalt and manganese sulfates through conventional hydrometallurgical routes reduces technical uncertainty and could lower perceived project risk. This often supports improved valuation multiples and, over time, lower cost of capital and stronger net earnings.
• Planned collaboration with Japan on nodule collection trials using the Hidden Gem vessel during the permitting period provides a way to keep assets utilized and generate related income while refining equipment. This may soften near term cash burn and support liquidity ahead of full production, affecting future free cash flow and earnings trajectories.
• The pre feasibility study and initial assessment outline a large resource with an estimated combined NPV of US$23.6b, targeted steady state revenue of about US$600 per dry ton and an EBITDA margin per ton of roughly 43%. If the company moves closer to these project economics while remaining in the first quartile of the cost curve, that cost position could support resilient margins and long term EBITDA and earnings power.
• A liquidity position of about US$165 million plus over US$400 million of potential warrant exercise proceeds and the option to settle a large portion of amounts owed to Allseas in equity give management room to advance permitting and development without immediately accessing public markets. This may limit dilution and preserve per share exposure to any future revenue and earnings growth.

Assumptions

How have these above catalysts been quantified?

• TMC the metals currently has no revenue. Analysts are forecasting revenue to reach $450.3 million by March 2029.
• As a pre-revenue company, Analysts expect TMC the metals to achieve a profit margin of 20.8% in 3 years time.
• Analysts expect earnings to reach $93.8 million (and earnings per share of $0.22) by about March 2029, up from -$295.5 million today.
• In order for the above numbers to justify the price target of the analysts, the company would need to trade at a PE ratio of 76.1x on those 2029 earnings, up from -8.5x today. This future PE is greater than the current PE for the US Metals and Mining industry at 23.4x.
• Analysts expect the number of shares outstanding to grow by 7.0% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.95%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?

• The entire investment case leans heavily on securing a NOAA Commercial Recovery Permit around 2027, and any delay, denial or tighter than expected permit conditions under U.S. seabed mining law or environmental review could push back or limit commercial production volumes. This would directly reduce the timing and scale of future revenue and earnings.
• Long term demand and policy support for nickel, copper, cobalt and manganese in U.S. and Japanese supply chains is central to the story. Shifts in battery chemistries, recycling rates, substitution or a change in critical mineral policies could reduce pricing power for these metals. That would pressure the targeted roughly $600 per dry ton revenue and 43% EBITDA margin per ton and therefore weaken long run net margins.
• The business still has no operating revenue and reported a quarterly net loss of $184.5 million with free cash flow of negative $11.5 million. If warrant exercises or other funding sources fall short of the more than $400 million potential and cash burn persists longer than expected, the company may need fresh equity or debt on less favorable terms, which would weigh on future earnings per share and could dilute any upside from eventual revenue growth.
• The pre feasibility study and initial assessment rely on very large long life resource and NPV figures. Actual offshore collection and onshore processing at commercial scale may face technical setbacks, cost overruns or lower realized recoveries than modeled, which would increase operating and capital costs per ton and reduce the implied US$23.6b NPV and the projected EBITDA of more than US$200b over the project life.
• Growing environmental scrutiny of deep sea mining, including potential legal challenges around NEPA, public pushback during EIS comment periods or new international standards, could impose additional monitoring, mitigation and compensation requirements. This would increase G&A and environmental spend beyond the recent levels of US$45.7 million of quarterly G&A and higher environmental payments, pressuring free cash flow and compressing net margins even if production starts on time.

Valuation

How have all the factors above been brought together to estimate a fair value?

• The analysts have a consensus price target of $11.2 for TMC the metals based on their expectations of its future earnings growth, profit margins and other risk factors.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $12.25, and the most bearish reporting a price target of just $9.0.
  
• In order for you to agree with the analysts, you'd need to believe that by 2029, revenues will be $450.3 million, earnings will come to $93.8 million, and it would be trading on a PE ratio of 76.1x, assuming you use a discount rate of 7.9%.
  
• Given the current share price of $6.06, the analyst price target of $11.2 is 45.9% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.