TMC the metals company Water Tower Research Virtual Insights Conference

Hello, everyone, and thank you for participating in this session of WTR Insights Conference featuring The Metals Company. My name is Dmitry Silversteyn, and I am serving as a managing director of Chemicals and Materials Technology here at Water Tower Research. We are pleased to be hosting Craig Shesky today, chief financial officer of The Metals Company, which trades on the NASDAQ under the ticker TMC.

Welcome, Craig. Thanks, Dmitry. It is a pleasure to be here.

Before we proceed, I must note that The Metals Company safe harbor statements are available on the investor tab of their website and in their latest presentation, which can be found at www.themetalscompany.com. As always, investor questions are encouraged. Please enter them in the chat box and we will address as many as possible during the session or within our upcoming management series report. Those wishing to request a meeting with The Metals Company can do so through the conference portal as well. With that out of the way, let us begin. Craig, let us start at the highest level for investors who may be new to the TMC story, although it is hard to imagine that there are still investors left who are new to the story. Still, can you explain what TMC is trying to build? What makes polymetallic nodules different from conventional terrestrial ore bodies?

Where the company stands today in moving this from a decade-long resource definition and technology development story towards commercial production.

Yeah, happy to do so. Just starting on your first point, hard to imagine there are investors who haven't heard it. Certainly, I think a lot of the people who will be viewing this would be well familiar with our fireside chats together and have probably been following us for some time. It was actually heartening to be at a conference in Laguna Beach last week at Morgan Stanley's industrial conference. What I was reminded is while all of this seems obvious to us and many other investors, we're still not yet at that inflection point where a lot of the large long-only institutions and even research analysts at banks really have their head wrapped around the story and how quickly it's developing.

On the one hand, it feels like we've been just on the edge of getting into production for some time now, and now we're actually seeing that light at the end of the tunnel. But we have to remind ourselves, too, that it's a story that is new to many people and an industry that is new to many people. Yet the technology to do this was actually proven back in the 1970s to collect these polymetallic nodules, and this is what they look like lying on the sea floor. To collect them at scale was proven by companies like Lockheed Martin and U.S. Steel and many other pioneers back in the '70s. But what wasn't agreed upon at that time was the regulatory framework on how a resource like this in international waters in the deep ocean could be extracted.

We have a clear regulatory path through our regulator, NOAA, the National Oceanic and Atmospheric Administration, to collect these polymetallic nodules at scale. But we can talk about the technology, we can talk about the regulatory matters, we can talk about potential U.S. government funding. What matters here is the type of the resource and the grade of the resource. This is a 2-dimensional resource of little potato-sized rocks that contain high concentrations of these four metals, nickel, cobalt, copper and manganese. It's the grade of that material that separates this from the pack of other terrestrial deposits. The grade on a nickel equivalent basis is over 3%. The grade on a copper equivalent basis, if you rolled all the metals into copper equivalent, would be over 7%. The average copper mine last year was producing about 0.6% grade.

More metal in each nodule than the traditional terrestrial deposit, and it's four metals in one resource. The fact that it's 2-dimensional as well is very important in that the resource just lies unattached on top of the sea floor, so TMC can effectively collect this resource with a drill ship, a riser pipe, and a collector vehicle. In fact, we did just that, lifting 3,000 tons of these nodules to the surface in late 2022. So we feel the technology's proven. We have the place to process the nodules, whether tolled processing in Japan or eventually funding permitting the Brownsville site for U.S. domestic processing and refining, which this administration clearly cares about. In fact, the State Department reiterated at the International Seabed Authority meeting in July that this is a national security and economic priority, deep sea mining for the United States.

The resource is there, it is high grade, we can collect it, we can process it, and we have SEC compliant resource statements showing a net present value for the areas under which we have priority right of about $23.6 billion today. It is happening very quickly, and I think it is evidenced by the fact that new competitors are coming into the space through the U.S. process, and we welcome that. We want this to be a maturing, diverse set of companies that are pushing this forward and developing really an ecosystem to help the United States reindustrialize, and that starts with reestablishing metal independence.

Absolutely. I agree with you 100%, Craig. The big missing piece in reshoring national security concerns with critical metals is the processing part of it. I am glad that you are pursuing this as aggressively as you are, both with the PAMCO deal but also with the potential Nodule City site. We talked about, you mentioned the scale of the project briefly. Your NORI-D, which I think is under the old designation, was about 22% of the resource that you had under the ISA regime. It is probably even less under the larger NOAA territory that you have gotten. But your PFS talks about $5.5 billion of net present value. Your larger NORI and TOML resource is about $18.1 billion according to your economic assessment. Can you walk us through what those studies demonstrate about the initial project?

Just as importantly, how much additional optionality exists beyond the first NORI-D development we have talked about? I mentioned the TOML resource is much bigger than the NORI-D that you have, and I understand that you are going to be out in the ocean doing some more work to help define those resources. Can you talk us through that pathway?

Yeah, absolutely. Just to flash up on the screen some of the numbers. This is all, of course, available at investors.metals.co in our investor decks. But the PFS is here in dark blue, that $5.5 billion NPV, approximately $70 billion of lifetime revenue. You are right that the PFS only represented about 22% of the resources calculated by NORI and TOML exploration contracts, wholly owned subsidiaries of TMC. But now our other wholly owned subsidiary, The Metals Company USA LLC, has applied for and has been deemed fully compliant in a commercial recovery area that is even larger than this PFS area. Bottom line, the numbers you see here on a combined basis, think of this as the whole playing field. Plus, there is some additional exploration upside. So 1.6 billion tons of nodules, maybe another 200 million in our estimate of additional tonnage in the areas over which we have applied under NOAA.

But the bottom line is going from initial assessment-level certainty to PFS and then to reserves. You asked the question, what does it mean? What it means to us is commercial viability. We have now shown that this is a commercially viable resource and even beginning at small scale with one vessel, we believe the economics here are going to be very attractive. And if you are looking at all the areas here in blue over which TMC has technical studies that have been published per SEC standards, much of it here in the NORI-D area, in this dark blue area, has been moved from inferred resource to indicated and measured. And then within that, 51 million tons of probable reserves, the first time reserves have ever been reported for a polymetallic nodule project. So that is important in that we are by the definition that resource investors are used to talking about.

We show that this is an economically viable resource. But this is not going to be something where it is like, all right, here is the snapshot of the economics, and then it just sits stagnant until we begin work. We have every intention to continue to upgrade other areas of the resource, even beyond NORI-D, from inferred to measured and indicated. And this is another area where the resource itself, being effectively two-dimensional, allows us to go up that certainty curve on a capital-efficient basis. What do I mean? Well, when you take a campaign out and you are doing box core sampling, and we have every intention of going back in the area formerly known as TOML to do some additional sampling in the months or quarters ahead.