Risk Defense Checklist: Deep-Sea Mining Company Evaluation

id_8.

Liquidity Runway vs Permit Milestones

The pressure between TMC's cash reserves and its regulatory timeline intensifies here. Current finances show a modest buffer but significant near-term burn. The company held $115.8 million in cash at the end of Q2 2025 while consuming $10.6 million in operating cash over that same quarter. This translates to roughly 11 months of runway assuming Q2's burn rate persists unchanged. However, this calculation faces material friction: the critical 100-day certification phase for NOAA permits, recently entered following full compliance confirmation, acts as a near-term deadline. Securing full U.S. commercial permits by mid-2027 for the planned Q4 2027 production launch remains contingent on this process progressing smoothly and overcoming persistent delays at the International Seabed Authority. The lack of disclosed operational cost specifics and resource grades for the 10.8 million tonnes annual target further clouds the true cash burn trajectory needed to reach production. This regulatory milestone stretch, coupled with unclear cost structures, creates significant downside vulnerability; if certification extends beyond the 100-day window or permit approvals face setbacks, the existing cash buffer could deplete faster than projected, jeopardizing the multi-year path to commercial output.

Regulatory Compliance Conflict Assessment

TMC's U.S.-centric deep-sea mining approach faces significant legal friction with international frameworks. The company attempts to sidestep UNCLOS/ISA oversight by operating solely in U.S. waters through a subsidiary, a strategy explicitly flagged as potentially violating International Seabed Authority contracts due to its detachment from UN regulations. This creates a fundamental conflict: while TMC leverages U.S. law for advantage, it operates in a regulatory vacuum internationally where the ISA's delayed mining code and growing moratorium pressures from nations like Germany and Canada compound uncertainty.

Current progress offers limited reassurance. TMC secured full NOAA compliance approval for exploration in August 2025, a critical step. However, certification hinges on a pending ~100-day review period, leaving the timeline for final U.S. authorization unresolved and vulnerable to delay. This creates a critical dependency; without NOAA's certification, commercial production targets (including the Q4 2027 launch goal and 10.8 million tonnes/year output by 2031-2043) remain unattainable.

The international regulatory environment remains unstable. Nauru's unresolved application for seabed mining rights in international waters could accelerate industry development yet simultaneously intensify conflicts with TMC's U.S.-based model, especially if the ISA eventually enforces compliance against companies operating outside its framework. Market risks here are profound: ecological backlash, fragmented global regulations, and potential maritime disputes could disrupt operations, increase legal costs, or force costly strategy shifts if international norms gain traction while TMC remains exposed to evolving U.S. policies and unresolved ISA authority.

Operational Feasibility Under Funding Constraints

The Metals Company's ambitious deep-sea mining plan faces a significant funding crunch as it races toward a Q4 2027 production target. While its core projects promise strong economics, current cash burn raises serious questions about operational feasibility. Recent filings show the company used $10.6 million in operational cash during Q2 2025, leaving it with only $115.8 million in cash reserves to cover ongoing costs and development milestones. This limited runway creates substantial pressure, especially given the project's capital-intensive nature.

Economic studies paint a compelling picture for the NORI-D project's core economics. The Pre-Feasibility Study projects a robust 27% internal rate of return, indicating strong profitability potential if production begins. This attractive return is primarily driven by remarkably low estimated cash costs of just $1,065 per tonne of nickel produced, even after accounting for valuable byproduct credits. The project's foundation rests on high-grade deposits: measured resources contain 1.30% nickel, 0.20% cobalt, 1.2% copper, and 30.2% manganese, supporting the projected low costs and high IRR.

However, these favorable economics are heavily contingent on regulatory success and sustained funding. The U.S. permit application submitted in April 2025 remains under NOAA review, with certification targeted for a 100-day phase in August 2025. Delays here could stall the entire production timeline. The current quarterly cash burn, combined with past losses including a $16.1 million net loss in Q4 2024, underscores the risk that existing reserves may not stretch to the finish line without additional capital infusions. Success hinges critically on navigating permit approvals swiftly and securing further financing before cash reserves are exhausted.

Risk Defense Action Framework

The risk defense framework sets clear triggers for adjusting positions in The Metals Company based on cash and certification dynamics. A key metric is cash reserves: if they drop below $30 million, it signals a potential liquidity crunch and triggers a position reduction. This is critical given the company's historical cash burn and ongoing operational losses. For example, in 2024, the company reported a full-year loss of $81.9 million and used $43 million in liquidity. Similarly, in Q2 2025, operational cash use was $10.6 million.

Another trigger relates to the certification timeline for U.S. mining permits. If the process extends beyond 12 months from the start of the 100-day certification phase, it indicates regulatory delays and reduces visibility into near-term production milestones. This could undermine the projected Q4 2027 production timeline. Regulatory uncertainty remains high, as delays at the International Seabed Authority have forced a pivot to U.S. permitting pathways, increasing dependence on federal approvals.

Regarding volatility, we monitor increases in quarterly cash burn and potential delays in H1 2026 milestones, such as permit submissions or regulatory reviews. While no specific burn rate threshold is set, rising cash consumption coupled with schedule slippage warrants a watchful stance rather than immediate action.

Compliance failures represent an absolute trigger: any deviation from regulatory requirements, as seen in the rigorous NOAA certification process, could immediately erode project viability and require a position reduction.