The Metals Company was formed in 2021 through the combination of Canadian mining company DeepGreen Metals with a US SPAC, the Sustainable Opportunities Acquisition Corporation. The shares listed on Nasdaq in September 2021. TMC is looking to mine polymetallic nodules in the deep water (over 4,000m) of the Clarion Clipperton Zone (CCZ) off the south-west coast of Southern California. These nodules contain nickel, cobalt, copper and manganese, all metals essential for the electrification required for decarbonizing the transport sector. The company has been carrying out resource analysis and environmental investigation in the region since award of an exploration licence in July 2011. Its subsidiary NORI, sponsored by the of state of Nauru, lodged a two-year notice in June 2021, triggering a process for the adoption of mining regulations. This will be followed by an exploitation application in 2023 that the company expects to lead to the first commercial licence in the region being awarded by Q324. If awarded, it would be the catalyst for an initial small-scale commercial project commencing in Q424, with a full commercial project planned from 2025.
The resource
The CCZ is an area of over 3m km², c 0.8% of the world oceans, situated in the north-east of the Pacific Ocean, around 1,500 miles off the coast of Southern California, and therefore in international waters; see Exhibit 3. The region is defined by two major fracture zones running through the seafloor – the Clipperton Fracture Zone to the south and the Clarion Fracture Zone to the north – and reaches depths of 6,000m.
The seabed of the region contains polymetallic nodules. These small stone-like nodules (weighing less than a kilo) are formed through deposition of iron and manganese hydroxides from seawater over millions of years and contain nickel, cobalt, copper, manganese and iron oxides/hydroxides. These metals are key materials for EV lithium-ion batteries, currently dominated by lithium-nickel-manganese-cobalt-oxide (NMC) chemistry reflecting the high content of nickel, manganese and cobalt. The decarbonisation agenda and shift to EVs will drive demand for battery metals and hence interest in new mineral deposits such as deep-sea nodules. The nodules sit on or just below the seabed; see Exhibits 1 and 2.
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Exhibit 2: Nodules in-situ
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Source: TMC 2021 annual report
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Source: TMC 2021 annual report
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Exhibit 2: Nodules in-situ
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Through its partnership arrangements with sponsoring governments, TMC companies have been awarded three licences for the exploration of polymetallic nodules in the region (see Exhibit 3). Note that it is a requirement of the ISA that applications are sponsored by a state government, which is also responsible for adherence to the relevant legal duties. TMC has the developed the following agreements:
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Nauru Ocean Resources (NORI). Sponsored by the government of the Republic of Nauru, formerly Pleasant Island, an independent island country in the south-western Pacific Ocean with a population of c 11,000. The total area of the NORI licence is 74,830km², split into four distinct blocks. NORI has been awarded a contract of exploration running from July 2011 to July 2026. Note these exploration licences are expected to be extended as required.
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Tonga Offshore Mining (TOML). Sponsored by the government of the Kingdom of Tonga. The total area of the licence is 74,713km², split into six blocks. TOML has been awarded a contract of exploration running from January 2012 to January 2027.
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Marawa Research and Exploration (Marawa). Sponsored by the government of the Republic of Kiribati, an independent island nation in the Pacific Ocean, population c 120,000. The total area of the licence is 74,990km², split into three blocks. Marawa has been awarded a contract of exploration running from January 2015 to January 2030.
Exhibit 3: TMC exploration licence area
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Source: TMC 2021 annual report. Note: NORI concessions in yellow, TOML in blue and Marawa in red.
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TMC’s first area of focus has been on a sub-region of the NORI block known as ‘NORI-D’, which accounts for 22% of TMC’s total estimated resource across NORI and TOML for which there are publicly available resource statements. The mineral resource estimates are based on the historical box-core and free-fall grab nodule sampling (262 samples) supplemented with recently acquired TOML nodule box core (113 samples). They have been classified under SEC Mining Rules to reflect the level of certainty: measured, indicated, inferred, in descending order. TMC is now in the process of applying for the first commercial mining licence in the region, as discussed in the regulatory section.
Exhibit 4: NORI D summary 2020 resource estimates
Category |
Nodules Mt (wet) |
Moisture (%) |
Nickel (%) |
Contained nickel (Mt) |
Copper (%) |
Contained copper (Mt) |
Cobalt (%) |
Contained cobalt (Mt) |
Manganese (%) |
Contained manganese (Mt) |
Measured |
4 |
24 |
1.42 |
0.04 |
1.16 |
0.04 |
0.13 |
0.00 |
32.2 |
0.98 |
Indicated |
341 |
24 |
1.40 |
3.63 |
1.14 |
2.95 |
0.14 |
0.36 |
31.2 |
80.86 |
Measured + Indicated |
345 |
24 |
1.40 |
3.67 |
1.14 |
2.99 |
0.14 |
0.37 |
31.2 |
81.81 |
Inferred |
11 |
24 |
1.38 |
0.12 |
1.14 |
0.10 |
0.12 |
0.01 |
31.0 |
2.59 |
Total |
356 |
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3.79 |
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3.08 |
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0.38 |
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84.40 |
Source: AMC Technical Report page 130 Issued in accordance with the requirements of SEC Regulation S-K (subpart 1300)
The resource estimate suggests that NORI-D contains around 3.8Mt of nickel. TMC estimates that its reserves for the two concessions where exploration has been carried out hold a total of 16Mt of nickel. Note that Edison expects nickel to account for c 45% of revenue, with the remainder from other battery materials cobalt, copper and manganese.
Exhibit 5: Resource overview and nickel content
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Measured Mt |
Inferred Mt |
Indicated Mt |
Total Mt |
Nickel content kg/dry tonne |
Total nickel content tonnes |
NORI D¹ |
4 |
345 |
11 |
356 |
13 |
3.8 |
NORI A-C¹ |
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510 |
510 |
12 |
4.8 |
TOML² |
3 |
70 |
696 |
768 |
13 |
7.6 |
Marawa |
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Data not yet available |
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Total |
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1,634 |
1,634 |
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16.1 |
Putting this into context, the two TMC concessions (NORI and TOML) reserves are second only to Russia based Nornickel (18.9Mt). Alternatively, assuming 60kg of nickel per car, a 90% retrieval rate and a 95% conversion rate, we estimate that the concessions have sufficient resources to power 230 million vehicles, compared to the entire US car parc of c 285 million units (world car parc c 1.4bn).
Exhibit 6: Nickel resources (inferred, indicated and measured) – million tonnes
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Regulatory process for deep-sea mining
The United Nations set up the UN Convention on the Law of the Sea (UNCLOS) in 1982 to create a legal framework to govern all marine and maritime activities, bringing together four previous treaties into a unified code. The agreement has been signed by 167 countries and the European Union, although not by the United States (note TMC is a Canadian registered company although US listed). Two key elements included:
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Establishing the jurisdiction of the high seas. The convention set up the limits of national jurisdiction and commercialisation of waters and the seabed beyond a country’s land mass. The furthest these can extend is 350 nautical miles. Areas beyond these zones are known as the ‘high seas’ and account for 64% of the world’s oceans. The CCZ region is therefore classified as ‘high seas’.
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Establishing the International Seaboard Authority (ISA). The ISA was established by UNCLOS within Part XI of the 1994 agreement. Its purpose is ‘to organize, regulate and control all mineral-related activities in the international seabed area for the benefit of mankind as a whole’. In so doing, ISA also has the ‘duty to ensure the effective protection of the marine environment from harmful effects that may arise from deep-seabed related activities’; see Article 145 of the United Nations Convention on the Law of the Sea.
The International Seabed Authority
The ISA is based in Jamaica. To ensure that the ISA reflects the interests of all nations, it consists of member groups with diverse interests, as shown in Exhibit 7. The ISA has dual mandates: promoting the development of deep-sea minerals while ensuring that this development is not harmful to the environment.
Exhibit 7: ISA current representatives
Category |
Members who are major importers/ consumers of metals found in the area |
Members from among the eight states making the highest investment in the area |
States who are major exporters of minerals to be produced in the area |
Members from special interest groups (eg land-locked states) |
Members elected according to the principle of ensuring an equitable geographical distribution of seats |
Number of countries |
4 |
4 |
4 |
6 |
18 |
Current seat holders |
China, Italy, Japan, Russia |
France, Germany, India, Korea |
Australia, Chile, Canada, South Africa |
Bangladesh, Brazil, Fiji, Jamaica, Lesotho, Uganda |
Argentina, Cameroon, Costa Rica, Czech Republic, Ghana, Indonesia, Mauritius, Mexico, Morocco, Mozambique, Netherlands, Nigeria, Poland, Sierra Leone, Singapore, Tonga, Trinidad & Tobago, United Kingdom |
The current regulatory state in terms of commercialisation of the deep sea can be split into:
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Exploration. The ISA has established exploration regulations along with a range of recommendations to provide a framework to permit exploration of the high seas. These are awarded to sponsoring states not individual organisations. At present the ISA has awarded 31 licences, including 17 licences for the exploration of polymetallic nodules in the CCZ region. Countries holding licences include China, France, India, Indonesia and Russia.
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Exploitation. Currently there are no regulations covering commercial exploitation of the high seas. The latest draft regulations on exploitation of mineral resources in the area have been prepared by the Legal and Technical Commission (LTC), a sub-body of the ISA, following a transparent process and a series of broad public consultations. The draft exploitation regulations will need to be adopted by the council before any contract for mineral exploitation can be issued. While this has inevitably been delayed by COVID-19, the ISA has scheduled meetings for July 2022 and November 2022 to expedite the process.
It is also worth noting the key strategic directions adopted for 2019–23:
1.
Realize the role of the ISA in a global context.
2.
Strengthen the regulatory framework for activities in the area.
3.
Protect the marine environment.
4.
Promote and encourage marine scientific research in the area.
5.
Build capacity for developing states.
6.
Ensure integrated participation by developing states.
7.
Ensure equitable sharing of financial and other economic benefits.
8.
Improve the organisation performance of the ISA.
9.
Commit to transparency.
NORI to submit exploitation contract application in Q223
In June 2021 NORI notified the ISA that it intends to apply for an exploitation contract (licence) effectively triggering Annex Section I, paragraph 15b of the Agreement relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982. This states that: ‘If a request is made by a State referred to in subparagraph (a) the Council shall, in accordance with article 162, paragraph 2(o), of the Convention, complete the adoption of such rules, regulations and procedures within two years of the request’.
In August 2021 the secretary-general published a further update ‘Status of the draft regulations for exploitation of mineral resources in the Area and proposed road map for 2022 and 2023’. Included in section IV paragraphs 12 and 13 is the following text:
‘By letter dated 25 June 2021, the President of Nauru notified the Council of the intention of Nauru Ocean Resources Inc., a Nauruan entity sponsored by Nauru, to submit an application for approval of a plan of work for exploitation in the Area. In such circumstances, section 1, paragraph 15 (b), of the annex to the Agreement relating to the Implementation of Part XI of the United Nations Convention on the Law of the Sea of 10 December 1982 requires the Council to complete the elaboration of the rules, regulations and procedures necessary to facilitate the approval of plans of work for exploitation in the Area within two years of the request’.
In order to meet that deadline and to ensure that a robust and holistic regulatory framework is adopted by the Council on or before 9 July 2023, it is clearly necessary for the Council to commit more time and financial resources to accelerate work on the draft regulations.’
Once these regulations have been adopted, NORI’s application can be considered and a licence granted. TMC’s expected timeframe from adoption of the regulations is shown in Exhibit 8.
Exhibit 8: TMC’s anticipated timeline for a commercial exploitation contract
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Source: TMC. Note: *From initial filing application could be approved, assuming no significant changes to the timelines.
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If agreement is not reached, these timelines could obviously change. Decisions by the ISA are primarily based on consensus, but allow for votes requiring a two-thirds majority where this is not possible. In the case of mining regulation, the default is adoption of the proposals, with a two-thirds majority vote needed to overturn the default.
Given the sensitivities to mining and the use of the ocean, combined with the newness of such exploitation, it is hardly surprising to see significant attention from third parties.
There is significant pressure from a range of NGOs to prevent deep-sea mining. The Deep Sea Conservation Coalition has 99 members including Greenpeace and the WWF and concerns itself with deep-sea mining, deep-sea fishing and ocean governance. Its stance on deep-sea mining is for: ‘a global moratorium on all exploration and mining activity until the risks are better understood and it can be clearly demonstrated that mining can be managed in a way that ensures the effective protection of the marine environment and prevents loss of biodiversity’.
The WWF sponsored a call for a moratorium on deep-sea mining citing limited research and looking for a ban until further research has been conducted. Current signatories include BMW, Volvo Group, VW, Samsung SDI, Scania, Microsoft, Google, Patagonia, Philips, Triodos Bank, Renault and Razer. The automotive companies that have signed accounted for c 24% of 2021 world auto sales.
The Congress of the International Union for Conservation of Nature (IUCN) voted overwhelmingly in favor of a moratorium on deep-sea mining (81 governments and government agencies voted in favor of the IUCN moratorium motion and 18 voted against). That same day, the European Commission published its 2021 Strategic Foresight Report, announcing plans to step-up deep-sea mining exploration, ie there are significant variances in views, albeit with many of the larger nations on the more pro mining stance, arguably evidence by France, India, China and Russia holding exploration licences. The true position of governments is only likely to become clear as the ISA legislative process proceeds.
As previously mentioned, the ISA is at advanced stages with its draft regulation on the development of mineral resources. The following is an extract of Regulation 2 of the draft regulation concerning the environmental considerations that must be taken into account:
e. Provide, pursuant to article 145 of the Convention, for the effective protection of the Marine Environment from the harmful effects which may arise from Exploitation, in accordance with the Authority’s environmental policy, including regional environmental management plans, based on the following principles:
(i)
A fundamental consideration for the development of environmental objectives shall be the effective protection of the Marine Environment, including biological diversity and ecological integrity;
(ii)
The application of the precautionary approach, as reflected in principle 15 of the Rio Declaration on Environment and Development;
(iii)
The application of an ecosystem approach;
(iv)
The application of “the polluter pays” principle through market-based instruments, mechanisms and other relevant measures;
(v)
Access to data and information relating to the protection and preservation of the Marine Environment;
(vi)
Accountability and transparency in decision-making; and
(vii)
Encouragement of effective public participation;
b.
Provide for the prevention, reduction and control of pollution and other hazards to the Marine Environment, including the coastline;
c.
Incorporate the Best Available Scientific Evidence into decision-making processes;
d.
Ensure the effective management and regulation of the Area and its Resources in a way that promotes the development of the common heritage for the benefit of mankind as a whole; and
e.
Ensure that these regulations, and any decision-making thereunder, are implemented in conformity with these fundamental policies and principles.’
Objectors believe that there is insufficient research to be able to from a biodiversity perspective to provide a baseline from which any activities can be monitored, along with insufficient information of the impact of mining and hence the application of the precautionary approach should be adopted.
The current process and timescale for adoption of mining regulations and award of a licence support TMC’s optimism. The flipside is that large multinational organisations tend to move slowly and with caution, we note that mining legislation has been a work-in-progress for the ISA since 2014, and there is clearly significant opposition, which may lead to legal challenges, which could have an impact on the process. We have no particular insight, but will hope to gain further information from the July ISA sessions.