When you think of a mining company, you might think of something like this: giant yellow trucks crawling in and out of an pit, drills breaking up rock in the earth, maybe a long conveyor belt or dump truck transporting ore to a processing plant.
TMC The Metals Company (NASDAQ: TMC), however, looks nothing like that typical picture.
Instead, the picture for TMC is more like this: a ship out in the Pacific Ocean, vacuuming rocks off the seabed with a vehicle that looks it could have auditioned for Wall-E.
As a frontrunner in the deep-sea mining space, TMC could offer a cheaper and less disruptive way to extract critical minerals. At the same time, the company is pre-revenue and faces regulatory hurdles, which is why it’s worth taking a closer look at what the company is trying to do before investing.
TMC’s entire business is tied to polymetallic nodules in the Clarion-Clipperton Zone, a region of the Pacific Ocean that holds billions of these lumpy potato-sized rocks. Each nodule is essentially an electric car battery in composite form, as they contain nickel, copper, cobalt, and manganese.
In a nutshell, the company wants to mine these nodules robotically by vacuuming them off the seafloor of the Pacific Ocean. It will then process them into battery-grade metals and sell them into supply chains.
It’s a bold idea. And it has some early support. Korea Zinc, a non-ferrous metal refiner, recently invested about $85 million in the company, while Allseas, an offshore engineering specialist, converted a drillship into a deep-sea mining vessel.
As far as opportunity goes, TMC could be sitting on a treasure chest worth billions. Its latest economic study, for example, points to a project value of $23.6 billion, which dwarfs its current market valuation of about $3.2 billion.
Although it might be sitting on a multibillion-dollar nodule reserve, TMC does not have regulatory approval to mine those rocks commercially.
Not only that, but the regulatory process for deep-sea mining is still an enigma. The International Seabed Authority (ISA), which governs mining in international waters, has not finalized its rulebook, and debate over the environmental risks of deep-sea mining has muddled the timeline for when companies like TMC can apply for a commercial license.
