Regulations expected to be released this year will determine the course of deep sea mining

Deep-sea mining for battery materials has garnered considerable interest over the past year, but 2023 is set to be a key turning point, both for the practice itself and for the companies leading the campaign to mine. the bottom of the ocean.

Deep-sea mining could be allowed around the world as early as July this year, despite fears that one of the world’s last largely untouched habitats could suffer significant damage by doing so.

For startups such as Canadian miner The Metals Co., approval could determine whether or not it can attract future investment.

The International Seabed Authority, a United Nations monitoring organization, is developing a regulatory framework for deep-sea mining based on data collected during explorations by TMC and other companies to inform its decisions. .

However, the prospect of such mining is subject to criticism. More recently, French President Emmanuel Macron specifically called for a ban on seabed mining at November’s COP 27 UN climate change conference in Egypt. Previously, Germany, New Zealand and several Pacific countries have also called for moratoriums.

The ISA is expected to meet member countries in March, when deep sea exploration and its regulations are expected to be discussed.

TMC began conducting pilot tests in September 2022 to determine if deep sea mining would harm the environment. It holds three exploration permits to harvest polymetallic nodules, or rocks, from the seabed to extract battery metals that can be used for electric vehicles.

For most mining companies, exploration licenses are usually an important step in attracting funds, but the lack of clarity around the legality of deep sea mining creates a barrier. One of the main investors of TMC, the Norwegian Storebrand AS

A, who left the company last month, citing concerns about environmental destruction of the seabed.

TMC warned in November that if it did not raise enough funds, it would could “be forced to delay our exploration and/or exploitation activities or further reduce our operations, which could have a material adverse impact on our business and financial prospects”.

TMC shares are also at risk of delisting from the Nasdaq, which would limit them to over-the-counter transactions, an additional impediment to the company’s ability to raise money through loans or sales. of shares.

To avoid delisting, TMC shares must trade above $1 for 10 consecutive business days by June 5. Its share price closed at 72 cents on Tuesday, putting its market capitalization just above $192 million. Gerard Barron, chairman of TMC, calls the delisting notice a non-event that could easily be resolved by consolidating its shares.

TMC hasn’t posted a profit since its 2021 IPO and held $66.9 million in cash as of Sept. 30, 2022, according to Securities and Exchange Commission filings. It spent $46.8 million in the first nine months of last year.

At its current spending rate and without a new injection of cash, the company would have about a year’s worth of capital, said Dmitry Silversteyn, principal research analyst at Water Tower Research LLC.

TMC filed a registration statement with the SEC in September, indicating its intention to raise more money. The company would rather raise capital from investors and strategic partners than dilute shareholders, Barron said.

TMC only raised a fifth of its fundraising ambitions when it went public in 2021 via a merger with a purpose-built acquisition company. However, strategic partner Allseas Group SA, which built TMC’s exploratory sailing vessel, agreed in November to receive a payment of $10 million in TMC common stock, rather than cash.

The TMC remains essential but not imperative in lobbying to change or confirm deep sea mining regulations, industry participants said. “To be clear, TMC is a catalyst in this scenario, but the drive to open up the high seas to surface mining doesn’t just come from them,” said Emma Wilson, policy manager at the environmental campaign group Deep Sea Conservation Coalition. said.

In mid-November, TMC, through its subsidiary Nauru Ocean Resources Inc., collected 4,500 metric tons of polymetallic rock from the Clarion-Clipperton Zone of the Pacific Ocean and brought to the surface 3,000 metric tons containing nickel, cobalt and manganese. , the company said. TMC does not plan to refine the nodules itself and is looking to sell them.

Write to Yusuf Khan at yusuf.khan@wsj.com

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