TMC Offers Massive Upside Mining the Seafloor
The weaker dollar has led to prices for commodities climbing sharply and quality mining stocks generating substantial gains. This has occurred in the face of the Federal Reserve raising interest rates at the fastest pace in history. Rising rates normally strengthen the dollar and we did see a USD rally in the first half of 2022 when the Fed began raising rates. But that rally fizzled and the dollar took a sharp turn lower in September of 2022, even with the Fed continuing to raise rates, doubling the Fed Funds rate from 2.5% to over 5%.
This can be explained by the markets being forward-looking and anticipating an end to rate hikes on the horizon. But this is also partially due to inflation remaining stubbornly high with no signs of fiscal responsibility from the current administration. And now that most of the rate hikes are behind us and we are at or near a terminal Fed Funds rate, we think the dollar decline will accelerate, which will translate into significantly higher commodity prices.
TMC the metals company Inc. (TMC)
TMC the metals company Inc., a deep-sea minerals exploration company, focuses on the collection, processing, and refining of polymetallic nodules found on the seafloor in the Clarion Clipperton Zone (CCZ) in the south-west of San Diego, California. It primarily explores for nickel, cobalt, copper, and manganese products. This company is interesting because they are the first publicly-traded company to attempt mining valuable metals from the sea floor.
They claim to be developing the world’s largest estimated source of battery metals, with enough nickel, copper, cobalt and manganese to electrify the entire U.S. passenger vehicle fleet. They estimate massive In situ quantities of nickel, copper, cobalt and manganese with a total resource of 15,700,000 t Ni / 2,400,000 t Co / 13,300,000 t Cu / 350,000,000 t Mn. Some nickel projects have high grade, some have a large resource, but TMC is an outlier among peers with the largest NiEq resource and highest NiEq grade.
The company estimates an NPV of over $10 billion at current nickel prices, based on just 22% of the NORI-D resource. Yet the company is trading at a market cap of around $300 million. This is a multiple of 10x to 20x less than their land-based peers, implying huge upside should they be successful obtaining permits and moving into production.
In just the past week, TMC said it plans to apply next year for a license to start mining in the Pacific Ocean, with production expected to start as early as late 2025. The company has signed non-binding MoU with Pacific Metals Company (PAMCO) of Japan to evaluate the processing of 1.3 million tonnes per year of wet nodules But environmental campaigners say seabed mining could have a catastrophic impact on marine ecosystems, so it is still unclear if they will get the license needed to start mining. There are also questions around the costs to pull these nodules up from deep locations on the seafloor.
TMC is an interesting speculative mining play. Management believes it has rights to the globe’s largest undeveloped Nickel project. Nickel is one of the most widely used minerals for EV batteries and will see increased demand in the years ahead. A supply gap is likely to push prices for nickel much higher in the years ahead, potentially increasing the value of TMC as well. Much will hinge on getting final regulations from the International Seabed Authority, which seems to be in no hurry. But if this happens and TMC gets permits, I think this stock is going to be 5x to 10x for investors buying shares ahead of the news.
The share price spiked higher on increased media coverage lately, but dropped back just as fast. I recommend this balanced article from CNBC for continued reading on TMC. The price went from 65 cents to $3.00, before falling back to $1.10 currently. Everyone will have to decide for themself if this is a good opportunity to buy the pullback or simply catching a falling knife. A small allocation as a lottery ticket could be of interest for risk-tolerant investors.
This can be explained by the markets being forward-looking and anticipating an end to rate hikes on the horizon. But this is also partially due to inflation remaining stubbornly high with no signs of fiscal responsibility from the current administration. And now that most of the rate hikes are behind us and we are at or near a terminal Fed Funds rate, we think the dollar decline will accelerate, which will translate into significantly higher commodity prices.
TMC the metals company Inc. (TMC)
TMC the metals company Inc., a deep-sea minerals exploration company, focuses on the collection, processing, and refining of polymetallic nodules found on the seafloor in the Clarion Clipperton Zone (CCZ) in the south-west of San Diego, California. It primarily explores for nickel, cobalt, copper, and manganese products. This company is interesting because they are the first publicly-traded company to attempt mining valuable metals from the sea floor.
They claim to be developing the world’s largest estimated source of battery metals, with enough nickel, copper, cobalt and manganese to electrify the entire U.S. passenger vehicle fleet. They estimate massive In situ quantities of nickel, copper, cobalt and manganese with a total resource of 15,700,000 t Ni / 2,400,000 t Co / 13,300,000 t Cu / 350,000,000 t Mn. Some nickel projects have high grade, some have a large resource, but TMC is an outlier among peers with the largest NiEq resource and highest NiEq grade.
The company estimates an NPV of over $10 billion at current nickel prices, based on just 22% of the NORI-D resource. Yet the company is trading at a market cap of around $300 million. This is a multiple of 10x to 20x less than their land-based peers, implying huge upside should they be successful obtaining permits and moving into production.
In just the past week, TMC said it plans to apply next year for a license to start mining in the Pacific Ocean, with production expected to start as early as late 2025. The company has signed non-binding MoU with Pacific Metals Company (PAMCO) of Japan to evaluate the processing of 1.3 million tonnes per year of wet nodules But environmental campaigners say seabed mining could have a catastrophic impact on marine ecosystems, so it is still unclear if they will get the license needed to start mining. There are also questions around the costs to pull these nodules up from deep locations on the seafloor.
TMC is an interesting speculative mining play. Management believes it has rights to the globe’s largest undeveloped Nickel project. Nickel is one of the most widely used minerals for EV batteries and will see increased demand in the years ahead. A supply gap is likely to push prices for nickel much higher in the years ahead, potentially increasing the value of TMC as well. Much will hinge on getting final regulations from the International Seabed Authority, which seems to be in no hurry. But if this happens and TMC gets permits, I think this stock is going to be 5x to 10x for investors buying shares ahead of the news.
The share price spiked higher on increased media coverage lately, but dropped back just as fast. I recommend this balanced article from CNBC for continued reading on TMC. The price went from 65 cents to $3.00, before falling back to $1.10 currently. Everyone will have to decide for themself if this is a good opportunity to buy the pullback or simply catching a falling knife. A small allocation as a lottery ticket could be of interest for risk-tolerant investors.