TMC (TMC) Q3 2026 Earnings Call Transcript

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DATE

Thursday, Nov. 12, 2026

CALL PARTICIPANTS

• Chairman and Chief Executive Officer - Gerard Barron
• Chief Financial Officer - Craig Shesky

TAKEAWAYS

• Liquidity -- $123 million, including $79.3 million in cash and $44 million in undrawn credit capacity as of Sept. 30, 2026.
• Net Loss -- $28.4 million or $0.06 per share, reflecting a decrease from a net loss of $184.5 million or $0.46 per share in the prior year quarter.
• Upfront Capital Reduction -- $500 million, achieved by simplifying the offshore production system and utilizing an upgraded pilot collector instead of a full-scale unit.
• Estimated Upfront Capital -- $300 million, representing the shared cost between the company and Allseas to reach first production.
• Initial Annual Production Target -- 1 million tonnes, focusing on speed to first production following the receipt of a commercial recovery permit.
• Second Year Production Target -- 1.5 million tonnes, as the operation begins its initial multiyear ramp-up phase.
• Steady-State Production Profile -- 12 million wet tonnes per annum, to be achieved through the deployment of four production vessels.
• Exploration and Evaluation Expenses -- $23.5 million, increasing by $13.9 million due to higher development, operating, and vessel costs.
• General and Administrative Expenses -- $9.5 million, a $36.2 million decrease driven primarily by lower share-based compensation.
• Operating Cash Outflow -- $19.4 million, compared to $11.5 million in the third quarter of 2025.
• NOAA Certification Timeline -- Mid-December 2026, delayed from Oct. 2026 to allow for the review of over 1,600 public comments.
• Resource Estimate -- 1.6 billion tonnes in the USA-A area, with an additional 300 million to 400 million tonnes identified in the applied area.
• Metals Grade -- 7% or higher on a copper-equivalent basis, derived from the high-grade content of nickel, copper, cobalt, and manganese in polymetallic nodules.
• Brownsville Site Size -- 1,500 acres across two parcels, including 735 acres with direct access to the Brownsville shipping channel.
• Environmental Research Investment -- $250 million, supporting a 1 petabyte data set that has generated 46 peer-reviewed studies to date.
• Mariana Minerals Funding -- $310 million, raised in a Series B round by the partner leading feasibility engineering for the Texas processing facility.
• NAV Valuation -- 4% of net asset value, which management noted is significantly below the 34% average valuation for peer developers.
• Japanese Government Financing -- Up to 50% of plant modification costs, available to support the toll processing partnership with PAMCO.
• Sediment Plume Dynamics -- 10 meters, the distance within which the vast majority of mobilized sediment settles according to recent peer-reviewed modeling.

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RISKS

• Barron noted that the certification process is taking longer than expected as NOAA reviews over 1,600 public comments, with a decision now anticipated by mid-December 2026.
• Barron noted that equipment availability is subject to competitive pressure, stating that "the offshore oil and gas sector is quite vibrant at the moment. And so all of those point to tension in the supply chain."
• Barron indicated that the construction of a domestic processing facility may lag behind offshore operations, stating that "having it up and running in time to receive the first nodules from our offshore operations may be a challenge given our anticipated permitting time line."

SUMMARY

TMC the metals company Inc. (NASDAQ:TMC) reported a strategic transition toward a capital-light offshore production model designed to reduce upfront capital requirements by $500 million. Management stated that the company will initially deploy an upgraded version of its proven pilot collection system to target 1 million tonnes of annual production, rather than starting with a full-scale 3 million tonne system. This phased approach is intended to protect the production schedule while reducing engineering and integration complexity. Onshore, the company is pursuing a dual-track strategy by utilizing a tolling arrangement with PAMCO in Japan as a bridge to a permanent U.S. processing facility at the Port of Brownsville, Texas. Management indicated that this approach allows for positive EBITDA potential during the first two years of operations while deferring significant capital expenditures until higher production scales are reached.

• Barron stated that NOAA certification "locks in the size and location of our area of activity and signals the transition into the final environmental review stage."
• Management reported that the updated offshore plan provides the "potential to reach positive EBITDA even at the lower production volumes targeted during the first two years."
• Shesky noted that a joint statement from the U.S. and Japanese governments "puts seabed minerals front and center of their plans to diversify mineral supply and support their industrial bases."
• The company is actively engaged in confidential funding processes with U.S. agencies and stated it does "not currently intend to pursue other capital market transactions" until these processes are complete.
• Barron indicated that the shift to an initial 1 million tonne target was made because "keeping the schedule was of paramount importance" to avoid jeopardizing first production.
• Shesky highlighted the scale of the company's research, stating the "data set is 1 petabyte, among the largest single-project data sets ever compiled."
• The company reported that Mariana Minerals is leading feasibility-level engineering for the first smelting stage in Brownsville, leveraging an AI-driven platform to reduce project timelines.

INDUSTRY GLOSSARY

• CCZ: Clarion Clipperton Zone, a region in the Pacific Ocean containing high concentrations of polymetallic nodules.
• DSHMRA: Deep Seabed Hard Mineral Resources Act, the U.S. statute governing the exploration and recovery of minerals from the deep seabed.
• EIS: Environmental Impact Statement, a document required under U.S. law to assess the environmental effects of a proposed action.
• Hidden Gem: The company's primary offshore production vessel.
• Nodule City: The proposed industrial park at the Port of Brownsville, Texas, designed for nodule processing and refining.
• PAMCO: Pacific Metals Co., Ltd., a Japanese smelting company and TMC's processing partner.
• Polymetallic Nodules: Deep-sea mineral deposits containing nickel, cobalt, copper, and manganese.

Full Conference Call Transcript

Operator: Good day, and thank you for standing by. Welcome to The Metals Company Third Quarter 2026 Corporate Update Conference Call. [Operator Instructions] Please be advised today's conference is being recorded. I would now like to hand the conference over to your speaker today, Craig Shesky. Please go ahead.

Craig Shesky: Thank you, Kevin. Please note that during this call, certain statements made by the company will be forward-looking and based on management's beliefs and assumptions using information available at this time. These statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, and the company's actual results may differ materially from those anticipated. And except as required by law, we undertake no obligation to update any forward-looking statement.

Our remarks today may also include non-GAAP financial measures, and additional details regarding these measures, including reconciliations to the most directly comparable GAAP measures, can be found in the slide deck being used with this call, and you're welcome to follow along with our slide deck or if joining us by phone, access at any time at investors.metals.co. And I'd now like to turn the call over to our Chairman and CEO, Gerard Barron. Gerard, please go ahead.

Gerard Barron: Yes. Thank you, Craig, and thanks to all of you for joining us today. Before we dive in, I'd like to take the time to welcome our new Board member, Liam Mallon. Liam is a former President of ExxonMobil Upstream, and he joins us at a very exciting time as we prepare to move from exploration into commercial operations. And Liam brings more than 40 years of global energy and offshore operating experience, having led ExxonMobil's worldwide upstream business, overseeing $20 billion to $30 billion in annual capital investment, and he played a central role in some of the energy industry's most significant developments, from ExxonMobil's landmark offshore project in Guyana to a $60 billion acquisition of Pioneer Natural Resources.

And since taking up his seat in September, we've benefited greatly from his expertise in moving complex and novel offshore operations into production. And Liam will chair our Sustainability and Innovation Committee, and he will be tasked in helping our project and environmental teams to improve project economics and manage environmental impacts. And my team and I look forward to his contributions moving forward. So to the agenda, we'll start with U.S. permitting, where our USA-A consolidated application stands with NOAA and the milestones ahead. Offshore, we'll walk through an updated plan we've built with Allseas that protects our schedule and cuts nearly $500 million from the capital needed to reach first production.

And onshore, we'll update you on Brownsville, where Mariana Minerals is leading feasibility-level engineering and U.S. government funding agencies are now working together on our Nodule City plan. We'll also cover a capital-light option to start by toll processing our nodules in Japan. And on the environment, we'll share our new peer-reviewed papers from our deep-sea data set published ahead of the environmental impact statement and how the research community is putting that open data to use. We'll then cover our partnerships and close with financial highlights and liquidity. So let's begin with permitting, specifically on our consolidated application over the USA-A area.

Following the application's publication to the Federal Register as reported last quarter, NOAA opened the first of several public comment periods to get the public's view on our application. The comment period closed on October 19, and NOAA is now reviewing those comments as part of its application review. Many of you were watching for certification in October. And as I shared earlier this week, NOAA has told us in a letter that it now expects to decide on certification by mid-December. This is taking longer than we had hoped, but ours is the first consolidated application done under DSHMRA and NOAA's new review process. And the regulator is rightly following the statute step by step.

Importantly, NOAA has not identified any issues or deficiency with our application. So what is certification? Well, it's NOAA's formal finding that TMC has the requisite finances and access to the technologies needed to commercially collect nodules and a rigorous plan to conduct such activities as required under the Deep Seabed Hard Mineral Resources Act. It also locks in the size and location of our area of activity and signals the transition into the final environmental review stage prior to the issuance of the commercial recovery permit.

Assuming a positive certification decision in mid-December, the application will then proceed into environmental review phase with NOAA publishing a notice of intent for this process publication of a draft environmental impact statement and the draft terms, conditions and restrictions and the required public comment periods before NOAA makes its final determination. This slide shows the remaining path for USA-A consolidated application. Since we last reported in August, NOAA has published the consolidated application in the Federal Register and as mentioned, has completed the first of several 60-day public comment periods and online webinars. The rigor of this review is ultimately helpful to the permit's legal defensibility in the coming decades.

It also helps ensure that there are no rubber stamps available for newer applicants that have not completed anywhere near the same level of work as TMC, its subsidiaries and our world-class partners. We've got some exciting developments with our offshore system to share. We've been working closely with Allseas on an updated offshore development plan with a clear purpose, protect our time line, derisk the system and move quickly into first production upon issuance of our commercial recovery permit. Instead of starting with the full 3 million tonne per annum system, we'll begin at 1 million tonnes per annum using an upgraded version of our proven pilot system.

That cuts engineering, procurement and integration complexity, lowers the upfront capital for both TMC and Allseas and means we can start commercial production as soon as possible after our permit is granted during the current administration. We'll then stage the major investments alongside the production ramp-up. So less capital is at risk in the early stages, running the system in sustained production builds operating experience demonstrates reliability and derisks the move to full scale. The result is a faster, leaner start and that stays close to our original 5-year ramp-up and gets the system out on the water sooner. This is good for TMC and Allseas and ultimately good for our shareholders.

The foundation of this plan is a simplified operating configuration with lower logistic costs, which builds upon the systems successfully demonstrated during our 6-month offshore pilot in 2022. The vast majority of the direct CapEx reduction comes from simplifying and upgrading the existing pilot production system and eliminating the transfer vessel. And this also allows us to eliminate the vast majority of long-lead-time items, which helps derisk the time line to first production in addition to a reduction of upfront CapEx.

Collectively, changes to the scope of the system reduced the estimated upfront capital required to reach first production from roughly $800 million under our prior schedule, of which TMC's share was approximately $500 million to roughly $300 million shared between the parties. Much of the remaining investment will be deferred to subsequent development phases. The simplified operating configuration and lower logistic costs also improved the economics of the initial operations, providing the potential to reach positive EBITDA even at the lower production volumes targeted during the first 2 years. So what does this mean in practice?

Well, by upgrading and scaling up the production system proven during our offshore pilot, we can reuse existing equipment and operate this upgraded system during the first 2 years of commercial production, deferring the full capacity equipment packages and more complex transfer interfaces until they are needed while maintaining our original production ramp-up targets. We plan on upgrading the existing 6-meter-wide pilot collector to 9 meters, deferring the new collectors until the point we are comfortable we can sustain production over long periods of time. And at the lower production rates anticipated during the early years, we can eliminate the need for a dedicated transfer vessel instead use -- instead load our nodules directly onto bulk carriers.

And by transshipping on U.S. West Coast before onward shipment to Japan, we can also combine nodule transport with regular offshore logistics, reducing the number of dedicated supply vessels required. Keep in mind, this is technology that both Allseas and TMC know very well, and it will undergo further optimization and testing during Allseas' upcoming Japan pilot program. So in short, the perfect proven foundation for the start of commercial operations. And rather than deploying the full 3 million tonne system from the outset, this upgraded pilot collection system will target approximately 1 million tonnes annually with the potential to increase up to 1.5 million in year 2.

And this fits with our existing production ramp-up strategy with the objective of maintaining the planned annual production profile as we progress towards 12 million tonnes across 4 production vessels. Building on our successful 2022 pilot with further optimization and testing planned by Allseas during the upcoming Japan pilot program, we intend to upgrade the existing collector, limit initial modifications to the Hidden Gem and simplify offshore transport and logistics. And these changes reduce complexity and both capital and operating costs. I'd like to now turn over to Craig to walk through our onshore partnerships as well as our latest environmental work and our financials.

Craig Shesky: Thanks, Gerard. So onshore, again, our primary objective remains, build a greenfield processing and refining facility in Brownsville, Texas. But having it up and running in time to receive the first nodules from our offshore operations may be a challenge given our anticipated permitting time line. And that's where we may lean on, as we noted, our 5-year partnership with PAMCO and their existing processing facility in Hachinohe, Japan, where they've been processing nickel laterites for many decades and where we successfully conducted an industrial-scale pilot in 2024 to 2025.

PAMCO will need to make some modifications to its plant to prepare for the arrival of first nodules, and our team and external engineering consultants have been in Hachinohe this week working through those plans just to make sure those schedules align. So taking a step back, PAMCO's history of smelting nickel laterite ores goes all the way back to the 1960s. And over the years, they built up significant processing infrastructure with 3 furnaces spread across the existing site.

Our history of working together is a bit shorter, but we have accomplished a remarkable amount over the past 5 years, including industrial-scale pilot processing, demonstrating technical feasibility of the process using existing architecture and a feasibility study demonstrating economic viability using their 80-megawatt furnace. So we know what needs to be done to bring the facility on-spec in preparation for nodules. And suffice it to say that our discussions with the U.S. government do include the potential of this attractive option at the start of production. And certainly, members of the U.S. government are in Japan as we speak, discussing the burgeoning seafloor minerals industry.

And you may have seen just moments ago, the U.S. and Japanese governments published a joint statement, which puts seabed minerals front and center of their plans to diversify mineral supply and support their industrial bases. And 2 particular lines from the State Department's release stand out: foster trusted commercial partnerships and secure processing capacity among trusted partners. PAMCO fits that bill perfectly. But again, we remain laser-focused on ultimately bringing nodule processing to the U.S.A. As a reminder, TMC USA holds an exclusive right of negotiation over a lease option for land at the Port of Brownsville.

The location provides direct access to the Brownsville shipping channel and sufficient land to evaluate an integrated processing and refining ecosystem serving TMC USA and potentially over time, other American operators. No investment decision has been made. And as we've said a few times before, any future capital commitment will remain contingent on U.S. government support. But we have started laying this groundwork to prepare for when bulk carriers with full nodule holds can begin arriving on U.S. shores. Site-specific feasibility work is a prerequisite for any potential U.S. government support, and we're happy to report that work is now well advanced.

And the Brownsville area under consideration covers nearly 1,500 acres across 2 parcels: 735 acres on the Shipping Channel and adjacent 731 acres. Prefeasibility level engineering is nearly complete and feasibility level engineering for the first smelting stage, as we mentioned previously, is underway, along with Mariana Minerals' leadership as part of TMC's ownership -- excuse me, owner's team. The engineering team is also testing the interfaces among the berth, ship unloaders, conveyors, stockpiles, processing facilities, utilities and supporting infrastructure, along with material flows, constructability and opportunities to phase future development.

And in late October, our TMC USA project team as well as our executive team spent 4 days in San Francisco with our partners at Mariana Minerals hosted at their San Francisco Bridge facility. Since we signed an MOU in April last year, the partnership has moved fast, and we signed a strategic partnership in March and a master service agreement in July. Mariana is a core part of our owner's team for Nodule City, which is, again, our proposed industrial park at the Port of Brownsville in Texas.

And in San Francisco, the teams reviewed the engineering completed to date and focused on 3 things: one, refining the plant's process flows, including the controls needed to meet stringent U.S. environmental requirements; two, identifying ways to bring down CapEx and OpEx; and three, aligning on a permitting strategy for this Brownsville site. And that work feeds directly into the next phase of development. We also want to take a moment to highlight some of the exciting developments with our royalty holder, TMCR, where The Metals Company holds a 20% equity interest in their stock.

And on September 28, Mesabi Metallics announced plans at the White House for a $15 billion steel complex in Iowa, described as the largest in U.S. history. Alongside its 2% royalty on our NORI area, TMCR holds a 2% gross production royalty on Mesabi's Minnesota mine, although they do not have interest in the Iowa complex. So we would like to commend the teams at both Mesabi and The Metals Royalty Company on the significant step forward in rebuilding America's domestic steel supply chain. And of course, as we know, steel requires manganese as well as iron ore and America's reindustrialization will depend on secure supplies of all 4 metals found in nodules, including manganese, nickel, copper and cobalt.

So on to some developments in our environmental program. Our vast deep-sea environmental data set, by far the industry's largest, continues to bear fruit as more of the data contained is published in peer-reviewed journals. And I'd like to highlight a few recent papers today. The first, published this week in the Journal of Marine Science and Engineering, presents the first commercial-scale sediment plume modeling showing that the vast majority of mobilized sediment settles within 10 meters of collector tracks with plumes dissipating within 2 to 5 days of operation ceasing.

The second paper, in press and soon to be published in that same journal, documents TMC's world-first environmental monitoring of an integrated collection system trial in near real-time and the technical expertise and choreography required to gather the empirical data that is essential to inform commercial-scale modeling. These new papers bring total peer-reviewed studies based on our data set to 46 with almost 220 citations by other researchers. But this is just scratching the surface. Our data set is 1 petabyte, among the largest single-project data sets ever compiled, larger than the Hubble Space Telescope archive, 1000 Genomes database and Sloan Digital Sky Survey combined.

And this will continue to deliver new insights with hundreds of papers expected in the coming months and years, particularly as we advance towards intensely monitored commercial operations. The size and scale of our decade-plus research effort and the resulting data set was on full display at the Underwater Minerals Conference in Japan this week, which we were pleased to attend and many of our team members were there for the first time, along with many members of others in the industry and many people who have been publishing work based on TMC data.

In fact, roughly half of all environmental research, whether delivered in presentation or poster format, was based on data collected during our offshore campaigns, reaffirming the immense value of our extensive investment in scientific research, and that investment has eclipsed $250 million to date. Members of our team as well as our research partners shared insights on a broad array of topics, including assessments of benthic impacts and recovery following test mining, sediment plume dynamics and monitoring, and the spatial distribution of dissolved metals. And our onshore team also presented on the development of our near-zero solid waste flow sheet. The conference is wrapping up this week.

And from where we sit, it was incredibly satisfying to see firsthand how our findings are shaping this new industry. So hopping to the financials, liquidity and valuation. As I'm sure you're all aware, the industry valuation metrics have moved down sharply since August. And while nickel and copper developers were valued at about 58% of NAV just 3 months ago, that same metric is now down to 34%. For producers, it's moved down from about 100% of NAV to 80%. And unfortunately, for TMC, we're valued at just 4% of the underlying net asset value for our SEC-compliant technical reports.

Bottom line, these valuations are swinging in our view, based on short-term technical and political factors rather than long-term realities for these metals that continue to be critical for the global economy. So rest assured, Gerard and I will be busy on the road in the coming months talking to new and existing investors about this very undervalued opportunity. Moving to liquidity. TMC liquidity, defined as cash plus borrowing capacity, stood at $123 million as of September 30, 2026, including $44 million available from our undrawn credit facility.

In the third quarter of 2026, TMC reported a net loss of approximately $28.4 million or $0.06 per share compared to a net loss of $185 million or $0.46 per share for the same period in 2025. The net loss for the third quarter of 2026 included exploration and evaluation expenses of $23.5 million versus $9.6 million in Q3 2025; G&A of $9.5 million, versus $45.7 million in Q3 2025; and other non-operating items totaling a gain of $4.6 million, versus the $125 million loss a quarter -- excuse me, a year ago in third quarter 2025.

Exploration and evaluation increased by $13.9 million in the third quarter of 2026 compared to the same period in 2025, mainly due to higher costs to recognize the full charge of ongoing development, operating and vessel costs. The increase also reflects higher share-based compensation, increase in feasibility and pre-feasibility study costs and increase in legal and professional costs related to the project. G&A expenses decreased by $36 million in Q3 2026 as compared to the same period due to $33 million lower share-based compensation expense and a decrease in legal fees.

Other non-operating items in Q3 2026 include the following: a decrease in the NORI royalty liability of $5 million, driven by an increase in the risk-free rate used to value the liability, which compares to an increase in the royalty liability of $131 million in the comparable quarter. There was also an increase of $4.4 million in equity-accounted investments resulting from TMCR's higher share-based compensation and changes in the fair value of derivative instruments and other financing costs. Net cash used in operating activities in Q3 2026 amounted to $19.4 million in comparison to $11.5 million in Q3 2025.

The increase in the outflow in Q3 2026 is mainly due to increased costs for the scaling of the nodule collection system, including $7.7 million in cash payments, fees, payroll, pre-feasibility, stakeholder engagement costs and legal and consulting fees. Free cash outflow for Q3 2026 was negative $19.4 million compared to negative $11.5 million in Q3 2025. And free cash flow is a non-GAAP measure, and I would point you to the non-GAAP reconciliation table included at the end of the slide deck. We do believe that our cash on hand is sufficient to meet working capital and CapEx commitments for at least the next 12 months from today.

And investments increased by $18 million, primarily due to $26.9 million in dilution gains on investment, partially offset by $9.2 million for our share of the loss in our TMCR investment. The warranty -- excuse me, the warrant liability decreased due to the expiration of all outstanding private warrants in Q3 and the royalty liability decreased by $5 million, driven by an increase, as said before, in the risk-free rate used to value the liability. With that, operator, we would like to take a moment to open it up to any questions from the audience.

Operator: [Operator Instructions] Our first question comes from Heiko with H.C. Wainwright.

Heiko Ihle: Let's talk a bit about the recent election results in the U.S. Can you give a bit of color on if there's been any strategic changes following the recent midterms? I assume investor questions have been focusing on that. Maybe give a bit of color on what they've been asking what you've been telling them. And building on all of that, is there anything that you think the market might be missing and that you can elaborate on, on this call?

Gerard Barron: Well, on the election front, I think it's important to remember that our permitting pathway is through DSHMRA. And DSHMRA, of course, is in statute. And so it is a reliable framework upon which we are applying. And of course, critical minerals are a bipartisan issue, and we believe the timing couldn't be better on one hand. I just -- I'm in Japan at the moment. And this week, I've attended the flagship conference for the underwater minerals sector, where our team highlighted the enormous amount of environmental data that is now becoming available, which really highlights just the concerns that some people have previously had on what are the environmental impacts.

And I think our very heavy investment in first-class environmental research with the help of leading institutions around the world comes together now with all of these -- I think we have 47 papers being published at the moment, peer-reviewed papers, either published or about to be. And what that highlights is that the environmental impacts are all very manageable, that they're a fraction of what people ever thought they were. They are largely contained to the area of extraction. And of course, I think this helps make it a bipartisan issue because critical minerals are essential to the functioning and to the security of the U.S. economy.

And the only time ever -- anyone ever gave a pause was really on the environmental front that we've always maintained that the environment is actually the biggest positive for the development of this resource because of the lower environmental impacts and the lower impacts on humans. So I feel very confident that we'll be spending a lot of time in D.C. There's a lot of new representatives and senators that we need to, I guess, highlight the importance of this resource. And so we're feeling pretty good about it.

Craig Shesky: Yes. And just to add a bit of color on that as well. Again, as we know, what Gerard said at the beginning, NOAA is under the Commerce Department. This is an executive branch agency. And we have been going step by step through the process based on implementing regulations on DSHMRA, where NOAA was given the power to be the regulator for this industry back in the 1980s. So this is in the hands of the executive branch.

But also when we look at the funding side of it, I think a lot of other people, we've seen, Heiko, a lot of names, not just TMC, but others in your coverage, where [ pendulum ] swings back and forth based on the political winds. But the money that's available here and much of it not yet being deployed is generally devoted to certain cabinet departments and agencies based on a reconciliation process and budgeting that has already been approved. So those funds are earmarked and how they want to be spent by the various cabinet departments, many of which now are working together. We're happy to report on the Nodule City potential.

That's all really already devoted to them, and it's not something where we could necessarily see those funds at risk or taken away. Now over time, might there be impacts on future years in terms of appropriations in the reconciliation process, what's available to deploy? Sure. But the money that's already been allocated. And in fact, there's a good article from MINING.COM this week where they interviewed Clark Street Associates about this very point. So both on the money front as well as the permitting front, we feel we're in a very good position despite some of the narrative that's out there in the market. But again, this is not about an executive order.

This is about a clear regulatory statute that we're following step by step.

Heiko Ihle: Yes. That's a very fair and very comprehensive answer. And I think it probably soothes some of the concerns that I've gotten on the phone, and I appreciate the color. And then just a quick one. You were talking about the lower CapEx Hidden Gem and how you're planning on converting it in year 3 while it's being in production. And I'm just trying to figure out how exactly that's supposed to work. How do you anticipate having the assets stay operational while you like increase capacity on there?

Gerard Barron: No, that would be a swap out. So essentially, we -- as custodians of your capital, we're very mindful of restoring value to the equity. And of course, we are confident that as we can show that we can -- as we show how we move into commercial production, the most important thing is to get started because then it's widely acknowledged that the size and the quality of this resource. I mean, we've defined 1.6 billion tonnes. We think we have another 300 million to 400 million tonnes in the area that we've applied for. So now talk about 2 billion tonnes of high-grade nickel, copper, cobalt, manganese.

And if you put the copper and the copper equivalents, it's around 7-plus percent. So 2 billion tonnes of 7-plus percent copper and copper equivalents. I mean, there's no other resource on the planet that compares. So we took the view that keeping the schedule was of utmost importance, and we just need to get into production. And then, of course, we know that capital will be more widely available. We already have people coming to us with great capital ideas around financing new vessels and operators who want to put vessels to work, providers who would provide finance to enable us to get more boats on the water.

And so we can -- it means that we can defer that investment until what we believe to be more proper and appropriate value is restored to the equity. And so that would be -- we keep the first boat in production until the time is right, but then we would move the second boat on to the area and the third and the fourth.

Craig Shesky: Yes. So Heiko, think of it as really kind of a very short-term miss of production, let's say, when we then expand the Hidden Gem capacity of 3 million tonnes. But doing that expansion, which, by the way, requires the ordering of long-lead-time items, and frankly, would add a bit more risk, not only in terms of money, capital spent, but just what happens if a few items are delayed several months, that's not something you want to deal with if you're waiting to start first production.

But if it's something you can do after production has begun and then the second vessel has come on the water, that's a much better time for us to be able to do those modifications with Allseas, but then also do it at a time when our cost of capital would be much lower.

Operator: Our next question comes from Tate Sullivan with Maxim Group.

Tate Sullivan: Does the updated capital-light plan require meaningful changes to the NOAA application process?

Gerard Barron: No. No changes at all.

Tate Sullivan: Nothing at all? Okay. And then for PAMCO, the PAMCO and, Craig, you went into the description about making some modifications to a plant in Japan to prepare for nodules. Can you remind us on the terms of the partnership? Would that be sharing those costs on the facility similar to what you're doing with Allseas as well?

Gerard Barron: Yes. Good question. And the Japanese government have already put in place a financing plan to cover up to half of that cost. And we are -- the arrangement with PAMCO is a tolling type arrangement, and we're having that sit down with them currently to see how we might support them to cover the remaining half. But while nothing has been agreed at this stage, it would seem fair that we would make some contribution alongside the PAMCO themselves.

Operator: Our next question comes from Dmitry Silversteyn with Water Tower Research.

Dmitry Silversteyn: Just wondering sort of what drove the revision in how you plan to ramp up production with Hidden Gem going from 3 million tonnes to 1 million tonnes. I mean, I understand the rationale behind it, but I'm just wondering why there was an approach from the beginning and what has changed that you now think this is the right approach?

Gerard Barron: Well, I think the -- keeping the schedule was of paramount importance. And I guess what we've seen are we were perhaps a little bit optimistic on when we might have seen permit in our hands, also optimistic about when we thought a government financing arrangement for Brownsville would be put into place. And so when you combine those 2 things and also combine the fact that the offshore oil and gas sector is quite vibrant at the moment. And so all of those point to tension in the supply chain, and so keeping the schedule was always of paramount importance. And so I guess it became just an obvious decision that we should not jeopardize first production.

As I said earlier, I think it's such a big valuable resource that if we can show the world just that it can be extracted and processed and we can produce these critical minerals, then all of a sudden, we can be valued against that resource as opposed to the first production vessel. As far as the -- I mean, it's a perfect scenario to have the boat moving to Japan to do some work with the Japanese government on some trials and then to be moving on to our license area once the permit is in our hands. And it means that there'll be learnings all the way along that.

And then it's just a methodical way of identifying the next vessel and vessels and taking those learnings and turning them into optimized production systems.

Operator: And I'm not showing any further questions at this time. I would like to turn the call back over to Gerard for any further remarks.

Gerard Barron: Yes. Thank you. And thanks to all our shareholders who have tuned in and who continue to support. I think -- and thank you to all of our -- the team who are working exceptionally hard and our supply chain. And I celebrate the tremendous results we've had this week up in Japan as our team have showcased important environmental papers and results over the last decade or more of environmental research. So yes, so stay tuned. We think it's going to be a very exciting lead into the end of the year, and I look forward to giving you those updates as they become available. Thank you.

Operator: Thank you, ladies and gentlemen. This does conclude today's presentation. We thank you for your participation. You may now disconnect, and have a wonderful day.

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