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01/10 19:12
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals operational and financial challenges, including a significant net loss and increased expenses, which are concerning. The Q&A session highlighted regulatory uncertainties and vague management responses, contributing to a negative sentiment. Although there is potential for funding and partnerships, the lack of clear timelines and the competitive market pressures further weigh down the outlook.
Liquidity Approximately $165 million of liquidity today, inclusive of recent warrant exercises and over $50 million of potential additional proceeds from in-the-money warrants. This does not factor in the potential $48 million proceeds from the Korea Zinc warrants at a $7 strike price, nor the SOAC business combination warrants at $11.50, nor the warrants held by sponsoring stakes.
Net Loss Net loss of $184.5 million or $0.46 per share in Q3 2025 compared to a net loss of $20.5 million or $0.06 per share in Q3 2024. The increase in net loss is attributed to exploration and evaluation expenses, G&A expenses, and other items such as the change in the fair value of the royalty liability and Tonga warrant costs.
Exploration and Evaluation Expenses $9.6 million in Q3 2025, a decrease of $2.2 million compared to $11.8 million in Q3 2024. The decrease is not explicitly explained.
General and Administration Expenses $45.7 million in Q3 2025 compared to $8.1 million in Q3 2024, an increase of $37.6 million. This increase is mainly due to an increase in share-based compensation of $35 million and an increase of $2 million in professional and consulting fees.
Free Cash Flow Negative $11.5 million in Q3 2025 compared to negative $5.9 million in Q3 2024. The decline is primarily due to higher environmental, personnel, and corporate payments, partially offset by interest earned on the higher cash balance in 2025 and higher payments to Campaign 8 vendors made in the comparative period.
First-ever application for a commercial recovery permit: The company has launched three applications with NOAA, including the first-ever application for a commercial recovery permit.
Technical reports and resource value: Published two SEC-compliant technical reports showing a total resource value of more than $23 billion.
Nodule-derived manganese sulfate production: Successfully converted nodule-derived manganese silicate into battery-grade manganese sulfate, demonstrating the ability to produce key metals for EV platforms.
Pivot to the United States: The company has shifted its focus to the U.S., with productive discussions with NOAA and the U.S. government, aiming for a Commercial Recovery Permit by 2027.
Partnership with Japan: Announced a partnership with Japan to develop rare earth minerals from seafloor muds, with pilot nodule collection trials planned for early 2027.
Regulatory progress with NOAA: NOAA confirmed that exploration applications are fully compliant and progressing through the certification stage.
Innovations in mining technology: Developed advanced buoyancy systems and sediment management technologies to minimize environmental impact during nodule collection.
Focus on U.S. mineral independence: Positioning the U.S. to reduce dependence on foreign sources for critical metals like manganese, cobalt, and nickel.
Building an industrial ecosystem: Creating a broader industrial ecosystem around nodule resources, including partnerships with U.S. automakers and battery makers.
Regulatory Hurdles: The company faces delays in NOAA's review of applications due to the U.S. government shutdown, which slowed progress on regulatory processes. Additionally, the permitting process involves multiple stages, including public comment periods and interagency reviews, which could further delay operations.
Economic Uncertainties: The company reported a significant net loss of $184.5 million in Q3 2025, compared to $20.5 million in Q3 2024. This includes increased general and administrative expenses and non-operating non-cash expenses, which could strain financial resources.
Supply Chain and Operational Risks: The company is reliant on advanced technologies and partnerships, such as with Allseas, for mining and processing operations. Any technical or operational failures in these partnerships could disrupt production timelines and increase costs.
Market and Competitive Pressures: The company is undervalued compared to peers and faces competitive pressures from other players in the critical minerals and deep-sea mining sectors. This could impact its ability to attract investment and secure market share.
Strategic Execution Risks: The company’s pivot to the U.S. market and reliance on public-private partnerships for resource development involve complex coordination and execution challenges. Any missteps could delay the achievement of strategic objectives.
Commercial Recovery Permit: The company is confident that its U.S. pivot will lead to a Commercial Recovery Permit in 2027. Discussions with NOAA and the U.S. government are productive, and NOAA's streamlined application review process is expected to facilitate this timeline.
Cash Position and Liquidity: The company has approximately $165 million in liquidity, with potential for over $400 million in incoming cash from warrant exercises. This robust cash position ensures no immediate need to tap public capital markets.
Commercial Production Timeline: The company is targeting commercial production for the fourth quarter of 2027.
Market Trends and Strategic Importance: The U.S. is critically dependent on foreign sources for metals like manganese, cobalt, and nickel. The company's resource could supply 300 years of manganese, 200 years of cobalt, and almost a century of nickel based on current U.S. consumption levels.
Japanese Partnership and Pilot Testing: The Hidden Gem vessel will participate in Japanese nodule collection trials near Minamitori Island in early January 2027. This will test technical readiness and planned equipment upgrades while advancing Japan's industry.
NOAA Regulatory Process: NOAA has confirmed that exploration applications are fully compliant and are in the certification stage. Following certification, an Environmental Impact Statement (EIS) and public comment period will occur before determining license issuance.
Economic Projections: Steady-state production from 2031 to 2043 is expected to generate nearly $600 per dry ton of nodules, with an EBITDA margin of 43% or $250 per dry ton. The total estimated resource NPV is $23.6 billion, with projected revenue of $369 billion and EBITDA exceeding $200 billion over the life of the projects.
Technological Advancements: The company has achieved significant milestones, including the successful conversion of nodule-derived manganese silica into battery-grade manganese sulfate, demonstrating the feasibility of producing key metals for EV platforms.
The selected topic was not discussed during the call.
The earnings call reveals operational and financial challenges, including a significant net loss and increased expenses, which are concerning. The Q&A session highlighted regulatory uncertainties and vague management responses, contributing to a negative sentiment. Although there is potential for funding and partnerships, the lack of clear timelines and the competitive market pressures further weigh down the outlook.
The earnings call presents a positive outlook, with a clear regulatory pathway, strengthened cash position, and strategic partnerships. Despite increased G&A expenses, exploration costs have decreased, and free cash flow has improved. The Q&A session reveals strong government support, minimal regulatory risks, and potential U.S. funding, enhancing future prospects. The company's focus on critical minerals and positive geopolitical surprises further bolster sentiment. However, some uncertainties remain regarding CapEx details and funding timelines, slightly tempering the outlook. Overall, the stock price is likely to experience a positive movement in the short term.
The earnings call reveals concerns about environmental impacts and operational risks, which could affect regulatory support and public perception. Despite some financial improvements, the registered direct offering and ATM facility indicate potential cash flow issues. The Q&A section highlights management's vague responses, raising concerns about transparency and execution risks. These factors, along with the lack of a clear roadmap for commercialization and regulatory progress, suggest a negative sentiment, likely resulting in a stock price decline.
The earnings call reveals potential delays in regulatory processes, impacting operations and investor confidence. Share issuance indicates potential dilution, while the Q&A highlights management's lack of clarity on regulatory timelines and specific project areas, raising uncertainty. Despite improved financial metrics, the overall sentiment is negative due to regulatory uncertainties and potential dilution.
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