The Metals Company Third Quarter 2026 Corporate Update Conference Call - TMC THE METALS CO INC

Explicit Guidance:

• Production Ramp-Up Timeline: Targeting "first production" within the "current administration" timeframe following permit issuance, with a staged ramp-up to 1.2 million tons annually within five years across four production vessels.
• Upfront Capital Reduction: Reducing estimated upfront capital required to reach first production from roughly $800 million (TMC share ~$500 million) to roughly $300 million shared between parties; $500 million in capital to be deferred.
• Cash Runway: Management states cash on hand is sufficient to meet working capital and CapEx commitments for "at least the next 12 months from today" (from Sep 30, 2026).
• Year 1 Production Volume: Initial pilot system targeted at approximately 1 million tons annually.
• Year 2 Production Volume: Potential to increase capacity to 1.5 million tons in the second year.

Business-Segment Outlook:

• Offshore Operations (USAA): Transitioning from a 3 million ton/year initial target to a 1 million ton/year system using an upgraded 6m-to-9m pilot collector to de-risk the schedule. The transfer vessel will be eliminated in the early phase, with nodules loaded directly onto bulk carriers for trans-shipment to Japan and onward to the U.S.
• Onshore Processing (Brownsville, Texas): Brownsville greenfield facility remains the long-term goal but faces timing challenges relative to permitting. Feasibility-level engineering is underway with "Mariana Minerals" leadership; site specific work covers ~1,500 acres. U.S. government funding is being sought contingent on site feasibility.
• Tolling Interim Strategy: Executing a five-year tolling partnership with PAMCO in Hachinohe, Japan, to process first nodules if Brownsville is delayed. PAMCO is modifying existing 80MW furnaces (built since the 1960s) for nodule processing; U.S. and Japanese governments are discussing joint support for this arrangement.
• Production Scale: Ultimate objective is maintaining a planned annual production profile of 12 million tons across four production vessels.

Market and Competitive Outlook:

• Valuation Dynamics: Management asserts the company is currently undervalued at 4% of Net Asset Value (NAV), contrasting with 34% for producers and 80% for nickel/copper developers. This gap is attributed to short-term political factors rather than long-term metal fundamentals.
• Supply Chain & Partnerships: Leveraging a "trusted commercial partnership" with PAMCO to secure processing capacity as part of U.S.-Japan strategic mineral diversification.
• Resource Scale: Highlighting a resource base of ~2 billion tons of high-grade nodules (nickel, copper, cobalt, manganese) with >7% copper equivalence, positioning the asset as unique globally.
• Industry Validation: 47 peer-reviewed papers published on environmental impact, with half of all recent industry research based on TMC data, aiming to neutralize environmental opposition and solidify the industry's regulatory acceptance.

Macro / Industry Outlook:

• Regulatory Path: Permitting relies on the Deep Seabed Hard Mineral Resources Act (DSHRA), described as a "bipartisan issue" and a "reliable framework" unaffected by the recent U.S. midterm election results.
• Government Funding: Earmarked U.S. government funding for the Brownsville project and associated infrastructure is considered secure, as it is based on approved budget reconciliation processes rather than discretionary executive orders.
• Economic Context: Critical minerals are framed as essential to U.S. economy security and the "re-industrialization" of the domestic steel supply chain.
• Interest Rates: An increase in the risk-free rate utilized in financial models resulted in a $5 million decrease in royalty liability valuation.

Strategic Initiatives:

• Offshore System Redesign: Simplified operating configuration involving the elimination of the transfer vessel and deferral of new collector packages until sustained production is proven. Long-lead items deferred to subsequent phases.
• Japan Pilot Program: Allseas and TMC conducting further optimization and testing of the upgraded pilot system in Japan prior to commercial deployment.
• Brownsville Feasibility: "Mariana Minerals" leading feasibility-level engineering for the "Nodule City" (industrial park) at the Port of Brownsville, focusing on process flows, CAPEX/OPEX reduction, and permitting strategy.
• Environmental Research: Continued publication of data (1 petabyte dataset) to inform commercial modeling and demonstrate minimal environmental impact (sediment plumes dissipating within 2–5 days).

Risks and Headwinds to Outlook:

• Permitting Delays: NOAA certification decision expected mid-December (later than hoped); subsequent environmental review (Draft EIS, public comment) adds time before Commercial Recovery Permit issuance.
• Supply Chain Constraints: Tension in the offshore oil and gas sector (vibrant market) creates potential delays for vessels and long-lead items.
• Capital Access: Deferred investment relies on restoring equity value and securing wider capital availability for new vessels later in the ramp-up.
• Political Narrative: While statute is bipartisan, management acknowledges "short-term technical and political factors" driving current market undervaluation and investor sentiment.
• Operational Complexity: Potential risk in scaling up the collector in "Year 3" requires precise swap-out logistics while maintaining continuous production.

Management Tone on the Future:

• Confidence Level: High confidence in the resource quality and regulatory pathway; "laser-focused" on U.S. processing but pragmatic about immediate Japanese tolling.
• Strategic Shift: Moving from "optimistic" timelines to a "faster, leaner start" to protect the schedule and de-risk early capital exposure.
• Investor Relations: Proactive commitment to "talk to new and existing investors" to address the undervaluation gap and explain the strategic pivot.
• Risk Management: Explicitly prioritizing "first production" over immediate full-scale capacity to avoid jeopardizing the project timeline due to supply chain or capital delays.

Miscellaneous:

• Board Expansion: Liam Mellon (former ExxonMobil Upstream President) appointed to the Board and to chair the Sustainability and Innovation Committee.
• Financial Highlights (Q3 2026): Net loss of $28.4 million ($0.06/share); Liquidity at $123 million (including $44 million undrawn credit).
• Expenditure Trends: Exploration and evaluation expenses rose $13.9 million YoY due to development scaling; G&A fell $36 million YoY due to lower share-based compensation.
• Royalty Holder Update: Commendation of TMCR's investment in Masabi Metallics' $15 billion steel complex, aligning with the broader demand for manganese, nickel, copper, and cobalt.