10-Q: TMC Q3 2025: Deep-Sea Mining Progress, Increased Loss

TMC the metals company Inc. reported a significantly increased net loss in Q3 2025, driven by non-cash expenses, while advancing its deep-sea mineral exploration and U.S. regulatory pathway.

Summary

• Net loss before tax for the three months ended September 30, 2025, was approximately $184.4 million, a substantial increase from $20.5 million in the same period of 2024.
• Net loss before tax for the nine months ended September 30, 2025, was $279.3 million, compared to $65.9 million in the same period of 2024.
• The accumulated deficit from inception through September 30, 2025, reached approximately $910.9 million.
• Cash on hand as of September 30, 2025, was $115.6 million, up from $3.48 million at December 31, 2024.
• Exploration and evaluation expenses decreased to $9.6 million for Q3 2025 (from $11.8 million in Q3 2024) and to $29.6 million for the nine months (from $42.3 million in 2024).
• General and administrative expenses surged to $45.7 million for Q3 2025 (from $8.1 million in Q3 2024) and to $65.7 million for the nine months (from $22.6 million in 2024), primarily due to non-cash share-based compensation.
• The company recorded $4.977 million in Nauru and Tonga Warrant costs for Q3 2025 and $38.056 million for the nine months, representing the fair value of warrants issued as part of revised sponsorship agreements.
• A dilution gain of $2.967 million was recorded due to Low Carbon Royalties' private placement, which reduced TMC's ownership from 32.27% to 30.73%.
• The fair value of the royalty liability increased by $131 million in Q3 2025, reaching $145 million, following the filing of the Pre-Feasibility Study (PFS) for NORI Area D.
• The fair value of the private warrants liability decreased by $3.852 million in Q3 2025 due to a decrease in the company's share price and public warrants price.
• TMC USA received notice of full compliance from NOAA on its exploration applications on August 11, 2025, confirming priority rights over two exploration areas.
• The company successfully produced battery-grade, high-purity manganese sulfate from nodule-derived intermediate manganese silicate product during bench scale trials in November 2025.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to a significantly increased net loss and accumulated deficit, driven by substantial non-cash expenses and ongoing legal challenges. While there is positive progress on regulatory applications (NOAA compliance) and technical development (manganese sulfate production), the financial performance indicates a worsening situation in the short term, and the company remains pre-revenue with significant future funding needs and regulatory uncertainties.

Positives

• Cash on hand significantly increased to $115.6 million as of September 30, 2025, from $3.48 million at December 31, 2024, strengthening liquidity.
• TMC USA received full compliance notice from NOAA on its exploration applications on August 11, 2025, confirming priority rights and advancing the U.S. regulatory pathway.
• Publication of two technical economic studies (NORI Area D Pre-Feasibility Study and NORI and TOML Initial Assessment) in August 2025, indicating technical and economic viability for NORI Area D.
• Successful production of battery-grade, high-purity manganese sulfate from seafloor nodules in bench scale trials, demonstrating processing technology advancement.
• Strategic partnerships with Allseas, PAMCO, Korea Zinc, and Glencore continue to advance development and potential commercialization.
• A dilution gain of $2.967 million was recorded from Low Carbon Royalties' private placement, as shares were issued at a price higher than book value.

Negatives

• Net loss before tax significantly increased to $184.4 million for Q3 2025, up from $20.5 million in Q3 2024, and to $279.3 million for the nine months, up from $65.9 million in 2024.
• Accumulated deficit reached approximately $910.9 million as of September 30, 2025.
• General and administrative expenses surged by $37.6 million in Q3 2025, primarily due to non-cash share-based compensation, indicating high operational overhead.
• The company incurred $4.977 million in Nauru and Tonga Warrant costs in Q3 2025 and $38.056 million for the nine months, representing non-cash expenses for sponsorship agreements.
• A material weakness in internal controls over financial reporting for significant non-routine transactions persists, despite remediation efforts, indicating ongoing control deficiencies.
• Ongoing legal proceedings, including a class action lawsuit alleging false/misleading statements and a lawsuit regarding breach of private placement Subscription Agreements, pose significant financial and reputational risks.

Risks

• The company is a pre-revenue entity, and profitable operations are dependent on arranging financing, establishing mineable reserves, demonstrating commercial and technical feasibility, favorable metal prices, and securing regulatory approvals.
• Uncertainty regarding the timing of NOAA's review and decision on exploration license and commercial recovery permit applications under DSHMRA, which is outside the company's control.
• No assurance that the certification process for NOAA applications will be favorable or that any applications will result in licenses or permits on a timely basis or at all, or on commercially viable terms.
• Potential delays and increased costs if NOAA requires starting the DSHMRA permitting process with an exploration license before a commercial recovery permit.
• Risk of non-compliance or inability to obtain a waiver for the DSHMRA requirement that minerals be processed in the United States.
• Exposure to a complex U.S. regulatory system, including environmental laws and potential legal challenges by third parties during the EIS process under NEPA.
• The ISA has not yet adopted final exploitation regulations, standards, and guidelines, creating uncertainty for activities under the UNCLOS/ISA system.
• Dependence on continued sponsorship from Nauru and Tonga for ISA exploration contracts; failure to obtain new sponsorship if terminated could materially impact operations.
• No assurance that definitive agreements with Allseas for commercial nodule collection will be entered into on favorable terms or that systems will be successfully developed/operated.
• Significant exposure to commodity pricing risks (nickel, copper, cobalt, manganese) once commercial production commences.
• The material weakness in internal control over financial reporting for significant non-routine transactions could lead to undetected material misstatements.
• Ongoing legal proceedings could result in substantial financial losses, judgments, or litigation costs not fully covered by insurance.

Future Outlook

The company anticipates a potential commercial production start in the fourth quarter of 2027, subject to required regulatory approvals. It expects to incur significant expenses and operating losses for the foreseeable future as it advances its NOAA applications and prepares for potential commercialization. The company will need additional financing to fund continued operations over time, which may include equity, debt, or project-based financings. Management believes current liquidity is sufficient for the next twelve months but acknowledges that actual results could differ, potentially requiring additional funding sooner or in greater amounts. The company is evaluating U.S.-based vessel and processing options to satisfy DSHMRA requirements and expects to seek a waiver if processing outside the U.S. is pursued initially.

Management Comments

• Management believes available liquidity is sufficient to support near-term operating and permitting activities for at least the next twelve months.
• Management remains focused on maintaining strong internal controls and continuing remediation efforts identified through ongoing SOX readiness work.
• We believe that our performance and future success pose risks and challenges, including those related to the approval of an application for a commercial recovery permit, development of environmental terms, conditions and restrictions associated with our application and development of our technologies to collect and process polymetallic nodules.
• We believe NOAA has historically adopted a cautious and science-based regulatory posture under DSHMRA, coordinating with other U.S. federal agencies and supporting environmental studies to inform future decisions.
• We are increasingly focused on pursuing commercial production through the U.S. regulatory pathway under DSHMRA, following the April 2025 submission of TMC USA’s exploration license and commercial recovery permit applications to NOAA.
• We believe that the pursuit of licenses and permits with NOAA under DSHMRA by TMC USA should not adversely affect the ISA exploration contracts held by NORI and TOML.

Industry Context

The deep-sea minerals industry is nascent, with TMC positioning itself as a leader in polymetallic nodule collection. The global demand for critical metals like nickel, copper, cobalt, and manganese, particularly for electric vehicles and renewable energy, provides a strong long-term market opportunity. The U.S. government's Executive Order to expedite DSHMRA permitting signals increasing strategic interest in domestic critical mineral supply chains, potentially favoring companies like TMC pursuing U.S. regulatory pathways over the slower International Seabed Authority (ISA) process. However, the industry faces significant regulatory uncertainty, environmental scrutiny, and technical challenges in scaling operations, which could impact timelines and costs. TMC's focus on a 'metal commons' aligns with broader sustainability trends, but the environmental impact of deep-sea mining remains a contentious issue.

Comparison to Industry Standards

• The company's pre-revenue status and significant accumulated deficit are typical for early-stage exploration and development companies in capital-intensive industries like deep-sea mining, where commercialization is years away.
• The substantial increase in net loss, driven by non-cash warrant costs and share-based compensation, reflects the high upfront investment required for R&D, regulatory compliance, and talent acquisition in a pioneering industry.
• The successful production of battery-grade manganese sulfate at bench scale is a positive technical milestone, comparable to early-stage process development in other mineral processing ventures, but commercial scalability and cost-effectiveness still need to be demonstrated.
• The ongoing legal challenges and material weakness in internal controls are significant concerns that could deter investors, contrasting with more mature, stable mining companies that typically have robust governance and fewer litigation risks.
• The company's strategy to pursue the U.S. DSHMRA pathway, distinct from the ISA, is a unique approach in the deep-sea mining sector, potentially offering a faster route to commercialization compared to competitors solely reliant on the ISA's delayed regulatory framework.

Management Changes

Corporate Governance

Legal Proceedings

• A lawsuit filed on January 23, 2023, by investors in the 2021 private placement (Atalaya Special Purpose Investment Fund II LP et al. v. Sustainable Opportunities Acquisition Corp.) alleges breach of representations and warranties in Subscription Agreements and breach of good faith and fair dealing. The claim for breach of good faith and fair dealing was dismissed, but the breach of Subscription Agreement claim was upheld on appeal in December 2024, moving the case to discovery. Losses cannot be reliably estimated.
• A putative class action lawsuit filed on November 8, 2024 (Lin v. TMC The Metals Company Inc., Gerard Barron, and Craig Shesky) alleges violations of Section 10(b) and Rule 10b-5 of the Exchange Act, and Section 20(a) by executives, related to misstatements and omissions regarding the classification of a non-financial asset from Low Carbon Royalties and the derecognition of a capitalized exploration contract. The court granted the company's motion to dismiss in full on June 18, 2025, but granted leave to amend. A Second Amended Complaint was filed on July 2, 2025, and the company's motion to dismiss it was filed on August 6, 2025. Losses cannot be reliably estimated.

Related Party Transactions

• The company entered into the 2024 Credit Facility with Gerard Barron (CEO and Chairman) and ERAS Capital LLC (family fund of director Andrei Karkar), allowing borrowing up to $44 million in aggregate ($22 million from each lender) with maturity extended to June 30, 2026.
• During Q3 2025, the company repaid $2.5 million of the drawn amount from the 2024 Credit Facility and incurred $0.7 million in underutilization fees.
• Robertsbridge Consultants Limited, chaired by one of the company's directors, provided consulting services amounting to $5 thousand for the nine months ended September 30, 2025.
• The 2025 Registered Direct Offering included $10 million from the participation of one of the company's directors.
• Consulting agreements were entered into with two individuals who subsequently became directors, with consideration in the form of RSUs and stock options, approved by shareholders on August 28, 2025.
• Allseas and its affiliates are significant related parties, with $32.9 million payable to them as of September 30, 2025, and Allseas and its affiliates owning 13.7% of total common shares outstanding.

Stakeholder Impact

• **Shareholders:** Experience significant dilution from recent capital raises and warrant exercises, face increased net losses, and are exposed to ongoing legal and regulatory uncertainties. However, the increased cash position and progress on NOAA applications offer potential long-term value.
• **Employees:** Benefit from share-based compensation, including significant RSU and option grants, which can incentivize retention and performance. The company's continued operations and development efforts provide job stability in a pioneering industry.
• **Customers (future):** Potential for a new, sustainable source of critical battery metals and steel-making feedstocks, reducing reliance on traditional mining and foreign sources.
• **Suppliers/Partners (e.g., Allseas, Korea Zinc):** Benefit from ongoing strategic partnerships, service agreements, and equity investments, indicating continued collaboration and revenue streams.
• **Creditors:** The company's increased cash balance and recent financings improve its ability to meet near-term obligations, but the significant accumulated deficit and need for future financing present long-term credit risk.
• **Regulatory Bodies (NOAA, ISA):** The company's applications and compliance efforts contribute to the development and testing of regulatory frameworks for deep-sea mining, setting precedents for future industry participants.
• **Republic of Nauru & Kingdom of Tonga:** Benefit from revised sponsorship agreements, including potential continuity benefits and commitments to in-country investments and corporate income tax if operations become profitable.

Next Steps

• Continue to advance the U.S. regulatory pathway under DSHMRA, including the NOAA certification process and Environmental Impact Statement (EIS) preparation.
• Further develop the Project Zero Offshore Nodule Collection System with Allseas, aiming to enter into binding Heads of Terms by the end of 2025.
• Investigate acquiring a second production vessel similar to the Hidden Gem with Allseas.
• Continue to define mineral resources and project economics for NORI Area D and the NORI and TOML Properties.
• Develop onshore technology to process polymetallic nodules into various metal products.
• Seek additional financing to fund continued operations and commercialization efforts.
• Continue remediation efforts for the material weakness in internal control over financial reporting, with reassessment during the 2025 year-end audit.
• NORI intends to submit an application for a five-year extension of its ISA exploration contract in early 2026.
• TOML intends to submit an application for a five-year extension of its ISA exploration contract in 2026.

Key Dates

Recommendation

TMC the metals company Inc. presents a complex investment profile. While the company has made significant strides in securing funding, advancing its U.S. regulatory pathway with NOAA, and achieving technical milestones like producing battery-grade manganese sulfate, its financial performance shows a substantial increase in net losses and accumulated deficit. These losses are heavily influenced by non-cash expenses such as share-based compensation and warrant costs, which are typical for a pre-revenue, capital-intensive exploration company. The ongoing legal proceedings and the material weakness in internal controls introduce considerable risk and uncertainty. The long-term potential in deep-sea critical minerals is compelling, especially with increasing global demand and U.S. strategic interest. However, the path to commercialization is still years away (estimated Q4 2027), fraught with regulatory hurdles, environmental concerns, and the need for substantial future financing. Given the high risk, pre-revenue status, and significant losses, but also the strategic progress and long-term market opportunity, a 'hold' recommendation is appropriate for investors who are already positioned and understand the speculative nature of this investment. New investors should approach with extreme caution, acknowledging the significant downside risks alongside the potential for substantial upside if commercialization is successfully achieved.

Keywords

Deep-sea mining, Polymetallic nodules, SEC 10-Q, Financial results, Exploration, NOAA permits, DSHMRA, ISA contracts, Nickel, Copper, Cobalt, Manganese, Battery metals, Critical minerals, Capital raise, Share-based compensation, Legal proceedings, Internal controls, Allseas, Korea Zinc, Low Carbon Royalties