Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis provide information that management believes is relevant to an assessment and understanding of our interim condensed consolidated results of operations and financial condition. The discussion should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto contained in this Quarterly Report on Form 10-Q and the consolidated financial statements and notes thereto for the year ended December 31, 2025 contained in our 2025 Annual Report on Form 10-K. This discussion contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those described in “Risk Factors” in Item 1A of Part I of the 2025 Annual Report on Form 10-K, as updated and/or supplemented in subsequent filings with the SEC, including our Quarterly Report on Form 10-Q for the quarter ended March 31, 2026 and this Quarterly Report on Form 10-Q. Actual results may differ materially from those contained in any forward-looking statements. Unless the context otherwise requires, references to “we”, “us”, “our”, “TMC” and “the Company” are intended to mean the business and operations of TMC the metals company Inc. and its consolidated subsidiaries. The unaudited condensed consolidated interim financial statements for the three and six months ended June 30, 2026 and 2025, respectively, present the financial position and results of operations of TMC the metals company Inc. and its consolidated subsidiaries.
Overview
We are a deep seabed minerals developer focused on the collection, processing and refining of polymetallic nodules found on the seafloor in international waters of the Clarion Clipperton Zone (“CCZ”). The CCZ is a geological submarine fracture zone of abyssal plains and other formations in the Eastern Pacific Ocean, with a length of around 7,240 kilometers (4,500 miles) that spans approximately 4,500,000 square kilometers (1,737,000 square miles). Polymetallic nodules are discrete rocks that sit unattached to the seafloor, occur in significant quantities in the CCZ and have high concentrations of nickel, copper, cobalt and manganese, alongside meaningful concentrations of rare earth elements (“REEs”) in a single rock.
Our mission is to build a carefully managed shared stock of metal (a “metal commons”) that can be used, recovered and reused for generations to come. We believe significant quantities of newly mined metal are required because existing metal stocks are insufficient to meet rapidly rising demand.
The four base metals and REEs contained in the polymetallic nodules are on the U.S. Department of Interior’s “2025 List of Critical Minerals”, with end-uses in strategic sectors including semiconductors and AI data centers, steel manufacturing, the defense and marine industrial base. Nickel was included on the list of 13 minerals selected by the U.S. Department of War in March 2026 for targeted procurement efforts through the Defense Industrial Base Consortium. Our resource definition work to date shows that nodules in our contract areas represent the world’s largest undeveloped resource of several of these critical metals. If we are able to collect polymetallic nodules from the seafloor on a commercial scale, we plan to use such nodules to initially produce nickel, cobalt and copper-bearing intermediate and high-purity refined metal products as well as a manganese silicate product of approximately 40% manganese comparable to medium-grade manganese ore. Once in production, we may explore expanding into other product formats including silicomanganese alloy, battery-grade sulfates and precursor Cathode Active Materials (“pCAM”), as well as extracting REEs contained in nodules.
We are now in the development stage following the release of the results of a pre-feasibility study on one of our development areas in a report titled S-K 1300 Technical Report Summary - Prefeasibility Study for NORI Area D , dated August 4, 2025, prepared by AMC Consultants Pty Ltd. and other qualified persons (the “NORI-D PFS”), which declared the world’s first mineral reserves for a seafloor polymetallic nodule project demonstrating the project’s economic viability. On the same date, we also recently released an initial assessment of certain of our other resource areas in a report titled S-K 1300 Technical Report Summary—Initial Assessment of TOML and NORI Properties , Clarion-Clipperton Zone, dated August 4, 2025, prepared by AMC Consultants Pty Lt. and other qualified persons (the “TOML and NORI IA” together with the NORI-D PFS, the “Technical Reports”). We have yet to obtain a commercial recovery permit or other related offshore and onshore permits from the regulators. Additionally, we do not yet hold the environmental or other permits required to construct and operate commercial-scale polymetallic nodule processing and refining facilities on land.
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Two parallel regulatory regimes exist to regulate deep seabed exploration and extraction activities in the high seas. The United States adopted the Deep Seabed Hard Mineral Resources Act of 1980 (“DSHMRA”), a U.S. domestic statute administered by the U.S. Department of Commerce through the National Oceanic and Atmospheric Administration (“NOAA”) to regulate deep-sea mining activities of its citizens in the high seas. NOAA implemented regulations for exploration licenses in 1981 and for commercial recovery permits in 1989 and amended these regulations introducing a consolidated exploration license and commercial recovery permit application process in 2026. In parallel, the International Seabed Authority (“ISA”), which today comprises of 171 Member States and the European Union was established in 1994, pursuant to the United Nations Convention on the Law of the Sea (“UNCLOS”) to regulate deep seabed exploration and exploitation activities of the nationals of Member States. The ISA adopted exploration regulations in 2000 (amended in 2013 and 2014) and issued 19 polymetallic nodule exploration contracts (17 of which are located in the CCZ) but has not completed its adoption of the exploitation regulations, standards and guidelines despite initiating work in 2014, and despite being under an obligation to do so by July 2023. Almost 30 countries, including the United States, have not ratified UNCLOS and are not Member States of the ISA. The United States has remained a persistent objector to Part XI of UNCLOS which governs seabed mining in the Area.
We believe that DSHMRA provides a viable and robust regulatory path to commercial production, distinct from the ISA regime under UNCLOS, which despite expectations to the contrary, has repeatedly failed to adopt the regulations and standards and guidelines for the exploitation of mineral resources in the Area. On April 24, 2025, the Executive Order 14825, titled “Unleashing America’s Offshore Critical Minerals and Resources” directed the Secretary of Commerce to implement an expedited process for reviewing and issuing seabed mineral exploration licenses and commercial recovery permits under DSHMRA. In addition to directing the International Development Finance Corporation, Export-Import Bank and Trade and Development Agency to identify tools to support this new industry, the Executive Order instructed the Departments of War and Energy to assess the use of the National Defense Stockpile for nodule-derived materials and entering into offtake agreements for these minerals. These departments were also directed to review and support domestic processing capabilities for seabed mineral resources.
We continue focusing on advancing our commercial production strategy under the DSHMRA regime. In April 2025, our wholly owned subsidiary, The Metals Company USA, LLC (“TMC USA”), submitted two exploration license applications (covering 187,017 square kilometers in the CCZ referred to as TMC USA-A and TMC USA-B) and one commercial recovery permit application (covering 25,160 square kilometers in the CCZ referred to as TMC USA-A) to NOAA. Following the introduction of the consolidated application process by NOAA in January 2026, TMC USA submitted a consolidated exploration license and commercial recovery permit application covering approximately 65,000 km², representing a significant expansion from the approximately 25,160 km² commercial recovery area in the initial April 2025 application, with an estimated resource of 619 million wet tonnes (Mt) of polymetallic nodules with additional potential exploration upside. On April 28, 2026, NOAA determined that the consolidated application is in full compliance with the applicable requirements under DSHMRA, and the application has advanced to the certification review stage. Final permit issuance remains subject to the completion of the certification stage 1 (including interagency consultation) and an environmental review, including preparation of an Environmental Impact Statement. The application areas in total, including the TMC USA-A and TMC USA-B exploration license areas, are estimated to hold approximately 1.639 billion wet tonnes of measured, indicated and inferred mineral resources. Together, the mineral resources are estimated to contain approximately 15.5 million tonnes of nickel, 12.8 million tonnes of copper, 2.0 million tonnes of cobalt, and 345 million tonnes of manganese .
While TMC USA pursues the U.S. regulatory pathway, our wholly owned subsidiaries, Nauru Ocean Resources Inc. (“NORI”) and Tonga Offshore Mining Limited (“TOML”), continue to maintain their ISA contracts and comply with all of their contractual obligations under the ISA system. The ISA has an ongoing inquiry into the possible non-compliance of NORI and TOML with their exploration contracts, which they dispute. See “Legal Proceedings” in Item 1 of Part II of this Quarterly Report on Form 10-Q. While the ISA does not have jurisdiction over activities conducted by U.S. citizens under the regulatory authority of the United States, NORI and TOML maintain two ISA exploration contracts in the CCZ. NORI is sponsored by the Republic of Naoero, formerly known as the Republic of Nauru (“Naoero” or “Nauru”) 2 , and TOML is sponsored by the Kingdom of Tonga (“Tonga”). Operations of NORI and TOML in the CCZ are being conducted under their ISA exploration contracts.
1 Certification under DSHMRA and its implementing regulations is an intermediate determination by the NOAA Administrator confirming an applicant’s eligibility (based on financial responsibility, technological capability, prior obligations, and plan adequacy) for an exploration license or commercial recovery permit, but it is not the final issuance of that license or permit.
2 In July 2026, the Republic of Nauru officially changed its name to the Republic of Naoero, restoring the country’s traditional Indigenous name to more faithfully reflect its heritage, language and national identity.
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We have key strategic partnerships with (i) Allseas, a leading global offshore engineering contractor, which developed and tested a pilot collection system, and is now modifying it into the first commercial production system, (ii) Pacific Metals Co. Ltd. (“PAMCO”), an experienced Japanese ferronickel producer, which has completed pre-feasibility and feasibility studies on nodule processing at their smelting facilities in Hachinohe, Japan, (iii) Korea Zinc, a world leader in non-ferrous metal refining and precursor Cathode Active Material (“pCAM”) technology, partnering to advance development in the U.S., (iv) Mariana Minerals, an American software-first mineral developer and operator working as part of TMC USA’s owners’ team to accelerate the development of potential domestic onshore processing and refining facilities (“Mariana”) and (v) Glencore International AG (“Glencore”) which holds offtake rights to 50% of the NORI nickel and copper production if produced from a TMC-owned or controlled facility. In addition, we are working with engineering firm Hatch Ltd. (“Hatch”) and consultants Kingston Process Metallurgy Inc. (“KPM”) to develop, test and engineer a near-zero solid waste flowsheet. The primary processing stages of the flowsheet from nodule to NiCuCo matte intermediate were demonstrated as part of our pilot plant program at FLSmidth facilities in Pennsylvania, USA and XPS’ (Glencore subsidiary) facilities in Ontario, Canada; and later at industrial scale at PAMCO’s facilities in Hachinohe, Japan. The matte refining stages have been tested at an SGS facility in Lakefield Canada with positive results. The near-zero solid waste flowsheet provides a design that is expected to serve as the basis for our onshore processing facilities. In addition to the flowsheet scope, Hatch was engaged to conduct a PFS refresh for our potential onshore processing and refining in the United States. On March 19, 2026, we signed a Strategic Partnership Agreement with Mariana focusing on the potential development of a nodule processing and refining facility in the Port of Brownsville, Texas as part of our owner’s team.
To reach our objective and initiate commercial production, we are working to: (i) further refine our project economics, (ii) completed the development and commission a commercial offshore nodule collection system, (iii) continue to assess the environmental, social and cultural impacts of offshore nodule collection, and (iv) secure existing foreign and/or develop new domestic U.S. onshore facilities to process collected polymetallic nodules into a manganese silicate product, an intermediate nickel-copper-cobalt matte product and end-products of nickel, cobalt and copper metal.
Developments in the Second Quarter 2026
Below are some of the major developments that occurred in the second quarter of 2026:
NOAA Certifies TMC USA’s USA-B Exploration License Application
On May 28, 2026, NOAA formally certified the USA-B exploration license application submitted by our U.S. subsidiary, TMC USA, representing another key milestone in the regulatory approval process. Following certification, NOAA will begin preparation of an Environmental Impact Statement (EIS) for TMC USA’s planned exploration activities in the USA-B area. The USA-B application area covers ~122,000 km2 of seafloor and hosts an estimated 1.02 billion tonnes of polymetallic nodules based upon TMC’s Technical Report Summary for the Initial Assessment published in August 2025.
TMC and Allseas Sign Commercial Agreement for the First Offshore Nodule Recovery Operation
On May 11, 2026, we announced that we had signed a Contract for Development Work and Commercial Production with our strategic partner and investor Allseas, a global leader in offshore pipeline installation, heavy lift and subsea construction, for the development, commissioning and operation of the first commercial polymetallic nodule collection system. The agreement establishes the commercial framework for advancing offshore nodule recovery operations and builds on the successful pilot collection test completed in 2022. The commercial system is expected to have a nameplate production capacity of 3.0 million wet tonnes of nodules per annum, with commissioning targeted to begin in the fourth quarter of 2027, subject to regulatory approvals.
NOAA Determines TMC USA’s Consolidated Deep-Seabed Mining Application for USA-A Area is in Full Compliance
On April 28, 2026, NOAA determined that the consolidated application by our subsidiary, TMC USA, for an exploration license and commercial recovery permit for the USA-A area under DSHMRA is in full compliance with the requirements of the Act and its implementing regulations, marking a key step in the U.S. regulatory and permitting process. The news follows the earlier determination of substantial compliance on March 6, 2026, and represents another step along the path of regulatory milestones.
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TMC Subsidiaries Submit Massive Deep-Sea Dataset to Public Database as Company Launches Video Series on Findings of Environmental Research
On April 15, 2026, we announced that our subsidiaries, NORI and TOML, had submitted extensive environmental datasets to the ISA’s DeepData database, covering a decade of exploration activities in the Clarion Clipperton Zone (CCZ). The submission includes data from 777 equipment deployments and more than 4,800 distinct environmental samples, generating approximately 76,000 biological records and 69,185 geochemical data points across the full water column and seafloor environment. Key findings are showcased in a new video series demonstrating how the data addresses environmental concerns and how innovation has reduced the impact footprint of TMC’s collection system versus legacy technology.
The Metals Royalty Co. (Nasdaq: TMCR) Begins Public Trading
On April 8, 2026, The Metals Royalty Co. began public trading (Nasdaq: TMCR). TMCR has a 2.0% Gross Overriding Royalty (GORR) on the NORI area from a 2023 transaction which was previously announced. As part of the agreement, TMC was granted an equity stake in TMCR, which at that time represented approximately 25% of TMCR’s outstanding equity. TMC retains the right to repurchase up to 75% of the NORI Royalty at an agreed capped return, exercisable in two transactions, between the second and the tenth anniversary of the agreement. If both repurchase transactions are executed, TMCR’s remaining gross overriding royalty on the NORI project revenue will be 0.5%.
Developments Subsequent to June 30, 2026
International Tribunal for the Law of the Sea Unanimously Orders ISA to Respect NORI and TOML’s Due Process Rights
On July 18, 2026, the Seabed Disputes Chamber of the International Tribunal for the Law of the Sea prescribed provisional measures in the proceedings brought by our subsidiaries NORI and TOML against the ISA. In the first contentious case ever decided by the Chamber under Part XI of UNCLOS, the Chamber unanimously found that it has jurisdiction on a prima facie basis, that the rights asserted by NORI and TOML to due process and fair treatment are plausible, and that those rights are at real and imminent risk of irreparable prejudice. The measures require the ISA to act in accordance with the applicable legal framework, including rules of due process, and to provide NORI and TOML the information they need to respond meaningfully. The Chamber did not order the suspension of the inquiries that NORI and TOML had requested. The orders do not prejudge the merits which remain to be determined. For a description of these proceedings, see Note 17 to our unaudited condensed consolidated interim financial statements and “Legal Proceedings” in Item 1 of Part II of this Quarterly Report on Form 10-Q.
NORI Obtains Exploration Contract Extension from the ISA
On July 20, 2026, the Council of the ISA approved a five-year extension of NORI’s exploration contract, effective July 22, 2026 and expiring July 21, 2031.
The approval is without prejudice to any findings or recommendations arising from the ISA’s inquiry into possible non-compliance.
TOML Applies to the ISA for an Extension of its Exploration Contract
On July 10, 2026, TOML applied to the ISA for a five-year extension of its exploration contract, which is due to expire on January 11, 2027. The ISA’s Legal and Technical Commission (“LTC”) is scheduled to consider the application in February and March 2027. Because that is after the contract’s expiry date, TOML expects the contract to be deemed extended from January 12, 2027 under the transitional provision of the ISA’s extension procedures until the Council is able to act on the Commission’s recommendation.
TMC USA Executes a Master Services Agreement with Mariana Minerals Co.
On July 21, 2026, TMC USA entered into a Master Services Agreement (“MSA”) with Mariana Minerals Co. for project development services for a phased program commencing with mobilization and concept development, for the proposed development of a U.S.-based polymetallic nodule processing and refining industry park. The parties are finalizing the first work release under this MSA for the technical design activities required to establish plant feasibility, design basis and a tradeoff and opportunity assessment program for Phase 1, Stage 1 of the proposed onshore nodule processing facility in the Port of Brownsville, Texas.
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Regulation of Mining of Deep-Sea Polymetallic Nodules by the United States
The Deep Seabed Hard Mineral Resources Act of 1980 (“DSHMRA”)
DSHMRA establishes a domestic legal regime for U.S. citizens to explore for and commercially recover hard mineral resources from the seabed in areas beyond U.S. national jurisdiction. DSHMRA affirms that deep-sea mining is a lawful exercise of the freedoms of the high seas, subject to a duty of reasonable regard to the interests of other states in their exercise of those and other freedoms recognized by the general principles of international law, and provides a regulatory structure administered by NOAA, an agency under the U.S. Department of Commerce. DSHMRA’s implementing regulations detail the criteria and conditions for NOAA’s issuance of deep seabed exploration licenses and commercial recovery permits to U.S. citizens, including any individual, corporation, or other entity organized under the laws of a U.S. state or territory.
The purpose of DSHMRA is to promote the development of seabed minerals by U.S. citizens while ensuring environmental protection, avoidance of conflict with other high seas uses, and consistency with international law. Before any license or permit is issued, NOAA must determine that the proposed activities meet a series of statutory requirements, including that the activity: (i) will not unreasonably interfere with the lawful use of the high seas by other states; (ii) is consistent with U.S. foreign policy and international obligations; (iii) does not create a risk to international peace and security; (iv) is not expected to result in significant adverse environmental effects; and (v) does not pose undue risk to the safety of life or property at sea. These findings reflect NOAA’s mandate of advancing U.S. commercial interests in seabed minerals while minimizing environmental, diplomatic and safety risks.
We believe NOAA has historically adopted a cautious and science-based regulatory approach under DSHMRA, coordinating with other U.S. federal agencies and supporting environmental studies to inform future decisions. In the 1980s and 1990s, the United States entered into reciprocal recognition arrangements with other nations with similar domestic seabed mining laws, in order to avoid overlapping claims prior to the establishment of the ISA. Once the ISA became operational in the 1990s, most reciprocating states transitioned to the UNCLOS/ISA regime. The United States, however, remains outside that framework.
Exploration licenses under DSHMRA grant exclusive rights to conduct technical studies in a defined area and are issued for ten-year terms, subject to extension. Commercial recovery permits authorize full-scale extraction for a period of 20 years subject to extension and enhanced environmental and operational requirements. To date, NOAA has issued exploration licenses over four areas. Two of these licenses (USA-1 and USA-4) remain active and are currently held by Lockheed Martin. These licenses have been renewed until 2027 in accordance with DSHMRA’s statutory provisions, which require NOAA to grant extensions if the licensee has substantially complied with license terms. NOAA has not issued any commercial recovery permits under DSHMRA as no U.S. citizen had applied for a commercial recovery permit prior to TMC USA.
The review process under DSHMRA involves three stages: (i) a determination that the application is in compliance with applicable requirements; (ii) certification of the applicant and the proposed program; and (iii) an environmental review and determination of terms and conditions. The certification process includes an interagency consultation with other U.S. government departments (including the Department of State, the Department of War, and the Environmental Protection Agency). Following certification, an Environmental Impact Statement, or EIS, is expected to be prepared, and a public comment period, including a public hearing, will be provided. Following the public comment period, NOAA will determine whether to issue the requested licenses and permit, and if so, under what terms and conditions. All licenses and permits issued under DSHMRA are subject to oversight, periodic reporting, and potential suspension or revocation for noncompliance.
DSHMRA and its implementing regulations do not include a statutory deadline for application review. However, the Executive Order signed by President Trump on April 24, 2025, directs the Secretary of Commerce to implement an expedited process for reviewing and issuing licenses and permits under DSHMRA.
DSHMRA’s implementing regulations for commercial recovery permits requires that all mining vessels and at least one transport vessel be U.S.-flagged (15 C.F.R. § 971.205). TMC USA will ensure all vessels contracted for commercial recovery comply with relevant laws pertaining to vessel standards and crew safety. DSHMRA’s implementing regulations for commercial recovery permits also require that recovered minerals be processed in the United States unless a waiver is granted, in which case the permittee is required to provide assurances that processed materials are returned to the United States (15 C.F.R. § 971.209). We are currently evaluating U.S.-based vessel and processing options to satisfy this requirement as well as working with Japan and South Korea-based supply chains to ensure processed materials can be returned to the United States in the event the permit to process outside the United States is granted for an initial period. If necessary, we expect to seek a waiver based on the statutory criteria and applicable regulations.
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We expect to become subject to additional U.S. laws and regulations as development progresses and are in the early stages of analyzing their applicability and potential impact on our operations.
Existing ISA Exploration Contracts
NORI and TOML currently hold exploration rights to certain polymetallic nodule areas in the CCZ, sponsored by the Republic of Naoero and the Kingdom of Tonga, respectively.
NORI, our wholly-owned subsidiary, holds exploration rights to four blocks (NORI Area A, B, C, and D, the “NORI Contract Area”) covering 74,830 square kilometers in the CCZ that were granted by the ISA in July 2011. That contract was concluded on July 22, 2011 for an initial term of 15 years and, following Council approval on July 20, 2026, has been extended to July 21, 2031. NORI is sponsored by Naoero pursuant to a certificate of sponsorship signed by the Government of Naoero on April 11, 2011. In September 2017, Naoero and NORI entered into a sponsorship agreement formalizing certain obligations of the parties in relation to NORI’s exploration and potential collection of nodules in the NORI Contract Area, which was revised in May 2025.
TOML, our wholly-owned subsidiary which we acquired in March 2020, holds exploration rights to an area covering 74,713 square kilometers in the CCZ that were granted by the ISA in January 2012 (the “TOML Contract Area”). That contract was concluded on January 11, 2012 for an initial term of 15 years and is due to expire on January 11, 2027. TOML has applied for a five-year extension, which the ISA’s LTC is scheduled to consider in February and March 2027. On March 8, 2008, Tonga and TOML entered into a sponsorship agreement formalizing certain obligations of the parties in relation to TOML’s exploration and potential collection of nodules in the TOML Contract Area, which was most recently revised in August 2025.
The ISA has an ongoing inquiry into the possible non-compliance of NORI and TOML with their respective exploration contracts. NORI and TOML maintain that they have complied and have commenced proceedings before the Seabed Disputes Chamber challenging the process of that inquiry. An adverse outcome could affect their exploration contracts and their ability to obtain contracts for exploitation from the ISA. See Note 17 to our unaudited condensed consolidated interim financial statements and “Risk Factors” in Item 1A of Part II of this Quarterly Report on Form 10-Q.
Key Trends, Opportunities and Uncertainties
We are currently a pre-revenue company, and we do not anticipate earning revenues (other than potential service revenue) until one of our wholly-owned subsidiaries receives an exploitation contract or commercial recovery permit and we are able to successfully collect and process polymetallic nodules into saleable products on a commercial scale. We believe that our performance and future success are subject to risks and challenges, including those related to the final issuance of a commercial recovery permit by NOAA, development of environmental terms, conditions and restrictions associated with our application and development of our technologies to collect and process polymetallic nodules. While NOAA has determined that our consolidated application is in full compliance with the applicable requirements under DSHMRA (a procedural milestone that advances the application to the certification review stage), this determination does not constitute, and should not be construed as, a grant or approval of the requested licenses or commercial recovery permit. The permit issuance remains subject to the successful completion of all remaining review stages under DSHMRA, including certification (with interagency consultation), preparation of an Environmental Impact Statement, a public comment period, and NOAA’s final determination as to whether to issue the licenses and permit and, if so, under what terms and conditions. The timing of NOAA’s final decision remains uncertain and is outside the Company’s control. Actual timelines for certification, environmental review and potential issuance of licenses or permits may differ materially from management’s current expectations.
In addition, an adverse outcome in the ISA’s inquiry into NORI’s and TOML’s possible non-compliance with their exploration contracts, or a failure by the ISA to extend TOML’s exploration contract, could adversely affect our rights under the ISA regime. These risks, as well as other risks, are discussed in the section entitled “ Risk Factors ” in Item 1A of Part I of the 2025 Annual Report on Form 10-K, as filed with the SEC, and in Item 1A of Part II of this Quarterly Report on Form 10-Q.
Basis of Presentation
We currently conduct our business through one operating segment. As a pre-revenue company with no commercial operations, our activities to date have been limited. Our results are reported under Generally Accepted Accounting Principles in the United States (“U.S. GAAP”) and in U.S. dollars.
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Components of Results of Operations
We are in the development stage with no revenue to date and a net loss of $60.1 million and $80.7 million for the three and six months ended June 30, 2026, compared to a net loss of $74.3 million and $94.9 million in the same periods of 2025. We have an accumulated deficit of approximately $1,032 million from inception through June 30, 2026.
Our historical results may not be indicative of our future results for reasons that may be difficult to anticipate. Accordingly, the drivers of our future financial results, as well as the components of such results, may not be comparable to our historical or projected results of operations.
We align our operating expenses based on activity performed by our personnel, which allocates these costs under Exploration and Evaluation expenses and General and Administrative expenses. This alignment is adjusted throughout the year to reflect changes in business activities.
Revenue
To date, we have not generated any revenue. We expect to generate revenue once we receive a commercial recovery permit and we are able to successfully collect and process polymetallic nodules into saleable products on a commercial scale. Any revenue from initial production is difficult to predict.
Exploration and Evaluation Expenses
We expense as incurred all costs relating to exploration and development of mineral claims. Such exploration and development costs include, but are not limited to, regulatory approvals, exploration mineral title management, geological, geochemical and geophysical studies, environmental baseline studies and process development activities. Our exploration expenses are impacted by the amount of exploration work conducted during each period. The acquisition cost of polymetallic nodule mineral title will be charged to operations as amortization expense on a unit-of-production method based on proven and probable reserves should commercial production commence in the future.
General and Administrative Expenses
General and administrative (“G&A”) expenses consist primarily of compensation for employees, consultants and directors, including wages and salaries, share-based compensation, consulting fees, investor relations expenses, expenses related to advertising and marketing functions, insurance costs, office and sundry expenses, professional fees (including legal, audit and tax fees), travel expenses and transfer and filing fees.
Share-based compensation costs from the issuance of stock options and restricted share units (“RSUs”) are measured at the grant date based on the fair value of the award and are recognized over the related service period. Share-based compensation costs are charged to exploration expenses and general and administrative expenses depending on the function fulfilled by the holder of the award. In instances where an award is issued for financing related services, the costs are included within equity as part of the financing costs. We recognize forfeiture of any awards as they occur.
Interest Income/Expense
Interest income consists primarily of interest earned on our cash balance.
Fees and Interest on Borrowings and Credit Facilities
Fees and interest on borrowings and credit facilities represent interest charged on our short-term debt and interest and underutilization fees associated with our credit facilities.
Foreign Exchange Loss/Gain
The foreign exchange income or loss for the periods reported primarily relates to unrealized gain or loss due to revaluation of foreign-denominated accounts payable and accrued liabilities.
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Change in Fair Value of Warrant Liability
The change in fair value of warrant liability primarily consists of the change in the fair value of the 9,500,000 Private Warrants issued to Sustainable Opportunities Holdings LLC concurrently with Sustainable Opportunities Acquisition Corp.’s (“SOAC”) initial public offering (the “Private Warrants”). For accounting purposes, we were considered to have issued the Private Warrants as part of the Business Combination, and we are required to re-measure the fair value of our Private Warrants at the end of each reporting period.
Results of Operations
The following is a discussion of our results of operations for the three and six months ended June 30, 2026 and 2025. Our accounting policies are described in Note 3 “Significant Accounting Policies” in our financial statements filed as part of the 2025 Annual Report on Form 10-K.
Comparison of the Three and Six Ended June 30, 2026 and 2025
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
(Dollar amounts in thousands, except as noted)
2026
2025
% Change
2026
2025
% Change
Exploration and evaluation expenses
$
56,088
$
10,496
434
%
$
69,345
$
20,011
247
%
General and administrative expenses
15,629
11,479
36
%
36,354
19,979
82
%
Nauru warrant cost
—
33,079
(100)
%
—
33,079
(100)
%
Charge on Allseas settlement
7,868
—
100
%
7,868
—
100
%
Equity-accounted investment loss (income)
1,525
(89)
1,813
%
4,523
(54)
8,476
%
Gain on dilution of investment
(18,469)
—
100
%
(23,071)
—
100
%
Change in fair value of warrant liability
(2,162)
16,229
(113)
%
(12,824)
16,670
(177)
%
Foreign exchange loss (gain)
(146)
2,461
(106)
%
(836)
3,556
(124)
%
Interest income
(1,040)
(147)
607
%
(2,176)
(166)
1,211
%
Fees and interest on borrowings and credit facilities
714
833
(14)
%
1,379
1,854
(26)
%
Tax expense
116
—
100
%
160
—
100
%
Loss for the period after tax
$
60,123
$
74,341
(19)
%
$
80,722
$
94,929
(15)
%
Three Months ended June 30, 2026 compared to Three Months ended June 30, 2025
We reported a net loss of approximately $60.1 million in the second quarter of 2026, compared to a net loss of $74.3 million in the same period of 2025. The following explains the major reasons for the decrease in the net loss in the second quarter of 2026.
Exploration and Evaluation Expenses
Exploration and evaluation expenses for the three months ended June 30, 2026 were $56.1 million, compared to $10.5 million for the same period in 2025. The increase of $45.6 million includes a total of $37.2 million for charges owed to Allseas recorded in the second quarter of 2026 following the signing of a development and operating agreement, which consists of $32.8 million for the settlement of initial costs and $4.4 million for other negotiated costs. The increase also reflects $3.9 million of higher ongoing development and operating costs to recognize the full charge of ongoing development, operating and vessel costs as compared to the same period in 2025. The remaining $4.5 million increase is due primarily to higher share-based compensation expense of $3.0 million due to the amortization of the fair value of RSUs granted to the officers in the third quarter of 2025 and an increase of $1.8 million in prefeasibility study costs related to the expanded scope of the prefeasibility study refresh. The increase was partially offset by lower environmental costs, as the scope of activities related to Campaign 8 was completed in the prior year.
General and Administrative Expenses
G&A expenses for the three months ended June 30, 2026 were $15.6 million compared to $11.5 million for the same period in 2025. The increase of $4.1 million in G&A expenses was mainly due to the result of an increase in share-based compensation of $5.9 million due to the amortization of the fair value of RSUs granted to the directors and officers in the third quarter of 2025, higher amortization of the grant-date fair value of LTIP awards granted in 2026 and an increase in payroll costs.
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Nauru Warrant cost
In the three months ended June 30, 2025 and as part of the signing of a revised Sponsorship Agreement with the Government of the Republic of Naoero on May 29, 2025, we issued 9,146,268 warrants to the Republic to purchase common shares of the Company. We recorded the fair value of the Nauru Warrants, calculated using a Black-Scholes valuation model, which valued each warrant at $3.62 for a total value of $33.1 million. For further details on this non-recurring item, refer to Note 12 in the Company’s second quarter 2025 interim financial statements.
Charge on Allseas settlement
In the three months ended June 30, 2026 and as a result of the execution of the Agreement with Allseas (Note 6), we remeasured the share-settled obligation based on the contractual pricing mechanism, resulting in a $7.9 million charge representing the difference between the carrying amount of the obligation and the remeasured share-settled obligation.
Gain on Dilution of Investment
During the three months ended June 30, 2026, The Metals Royalty Company issued a total of approximately 7 million common shares in relation to a financing offering, compensation expenses and a royalty purchase. The Company participated in the offering, acquiring 77,889 shares, resulting in a net decrease of its ownership interest from 27.2% to 22.4% (December 31, 2025: 27.2%). As the shares were issued at a price higher than The Metals Royalty Company’s book value per share, the Company recorded a non-operating, non-cash dilution gain of $18.5 million.
Change in Fair Value of Warrant Liability
The fair value of the 9,500,000 Private Warrants liability at June 30, 2026 of $0.5 million, represents a decrease of $2.2 million in the second quarter of 2026, results from the decrease in the price of the Company’s shares and the price of our public warrants over this same period (-24% and -57% respectively). Refer to Note 12 in the Company’s second quarter of 2026 interim financial statements for further details on this non-operating, non-cash decrease.
Fees and Interest on Borrowings and Credit Facilities
There were no outstanding drawn amounts under the Company’s credit facilities during the three months ended June 30, 2026, and no interest expense was incurred compared to $0.1 million interest expense in the same period of 2025. Underutilization fees on these facilities were $0.7 million for the second quarter of 2026, remaining unchanged from the same period in 2025. The second quarter of 2025 also included interest of $0.1 million on the Company’s short-term debt borrowings which were terminated in 2025.
Interest Income
The operating loss was offset by interest income of $1.0 million reflecting higher cash balances beginning in the second quarter of 2025.
Six Months ended June 30, 2026 compared to Six Months ended June 30, 2025
We reported a net loss of $80.7 million in the first half of 2026, compared to a net loss of $94.9 million in the same period of 2025. The following explains the major reasons for the decrease in the net loss in the first half of 2026.
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Exploration and Evaluation Expenses
Exploration and evaluation expenses for the six months ended June 30, 2026 were $69.3 million, compared to $20.0 million for the same period in 2025. The increase of $49.3 million includes a total of $37.2 million for charges owed to Allseas recorded in the second quarter of 2026 following the signing of a development and operating agreement, and an increase of $2.1 million to recognize the full charge of ongoing development, operating and vessel costs as compared to the comparative period in 2025. The remaining $10.0 million increase is due primarily to higher share-based compensation expense of $6.6 million due to the amortization of the fair value of RSUs granted to the officers in the third quarter of 2025, higher amortization of the grant-date fair value of LTIP awards granted in 2026, reflecting their higher grant-date fair value compared to LTIP awards granted during the same period in 2025, an increase of $3.7 million in prefeasibility study costs related to the expanded scope of the prefeasibility study refresh and higher payroll cost, partially offset by a decrease of $2.4 million on environmental studies as the scope of activities related to Campaign 8 were completed in the prior year and, accordingly, the associated costs did not recur in the current period.
General and Administrative Expenses
G&A expenses for the six months ended June 30, 2026, were $36.3 million, compared to $19.9 million for the same period in 2025. The increase of $16.4 million in G&A expenses in the first half of 2026 was mainly the result of an increase in share-based compensation of $17.1 million due to amortization of the fair value of RSUs and options granted to the directors and officers in the third quarter of 2025, higher amortization of the grant-date fair value of LTIP awards granted in 2026, reflecting their higher grant-date fair value compared to LTIP awards granted during the same period in 2025 and an increase in payroll costs, partially offset by a decrease in professional and consulting costs of $1.8 million.
Nauru Warrant cost
In the first six months ended June 30, 2025, we recorded $33.1 million representing the fair value of common shares issued to the Government of the Republic of Naoero, as part of the signing of a revised Sponsorship Agreement on May 29, 2025. For further details on this non-recurring item, refer to Note 12 in the Company’s second quarter 2025 interim financial statements.
Charge on Allseas settlement
In the first six months ended June 30, 2026 and as a result of the execution of the Agreement with Allseas (Note 6), we remeasured the share-settled obligation based on the contractual pricing mechanism, resulting in a $7.9 million charge representing the difference between the carrying amount of the obligation and the remeasured share-settled obligation.
Gain on Dilution of Investment
During the six months ended June 30, 2026, The Metals Royalty Company issued a total of approximately 11.1 million common shares primarily related to a financing offering, compensation expenses and a royalty purchase in the second quarter of 2026. The Company’s limited participation in the second quarter 2026 offering, resulted in a net decrease in its ownership interest from 27.2% to 22.4% (December 31, 2025: 27.2%) and the recording of a non-operating, non-cash dilution gain of $23.1 million, as the shares were issued at a price higher than The Metals Royalty Company’s book value per share.
Change in F air V alue of W arrant L iability
The significant movements in the fair value of the 9,500,000 Private Warrants liability in the first half of 2026 (decrease of $12.8 million) and 2025 (increase of $16.7 million), results from the significant movements in the price of the Company’s shares and the price of our public warrants, mainly over the same periods. Refer to Note 12 in the Company’s second quarter 2026 interim financial statements for further details on this non-operating, non-cash increase.
Interest Income
The Company recorded interest income of $2.2 million in the first half of 2026 reflecting higher cash balances beginning in the second quarter of 2025. In the same period of 2025, interest income of $0.2 million was recorded.
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Liquidity and Capital Resources
Our primary sources of financing have come from private placements and public offerings of Common Shares and warrants, and the issuance of convertible debentures. As of June 30, 2026, we had cash on hand of $98.7 million.
The decrease in our cash balance of $21.0 million in the second quarter of 2026 included $9 million of withholdings related to equity awards collected at the end of March 2026 and remitted in early April 2026.
In light of the significant deficit in expected funding following the closing of the Business Combination in September 2021, we adopted what we call a “capital-light” strategy whereby we removed any allocation of funds to capital expenditures that were not deemed necessary to support the submission of an application for an exploitation contract for the NORI Area D and then the applications of exploration licenses and commercial recovery permits with NOAA under DSHMRA, and by negotiating the settlement of program expenditures with our equity whenever possible, and by utilizing existing assets for offshore and onshore production.
We have yet to generate any revenue from our business operations. We are a development company and the recovery of our investment in mineral exploration contracts and attainment of profitable operations are dependent upon many factors including, among other things, the development of a commercial production system for collecting polymetallic nodules from the seafloor as well as the development of our processing technology for the metallurgical treatment of such nodules, the establishment of additional mineable reserves, the demonstration of commercial and technical feasibility of seafloor polymetallic nodule collection and processing systems, metal prices, and securing approvals under the U.S. regulatory regime or ISA exploitation contracts or provisional approvals. While we have obtained financing in the past, there is no assurance that such financing will continue to be available on favorable terms, in sufficient amounts, or at all.
We expect to incur significant expenses and operating losses for the foreseeable future, particularly as we advance our application to NOAA for a commercial recovery permit and prepare for potential commercialization. Based on our cash balance and availability of borrowing under our credit facility with ERAS Capital LLC and Gerard Barron, when compared with our forecasted cash expenditures, we believe we will have sufficient funds to meet our obligations that become due within the next twelve months. Our forecasted cash expenditures include amounts payable to Allseas under the Agreement, under which we are required to reimburse 50% of eligible development work costs as they are incurred, payable within ten business days of receipt of an invoice for amounts we have approved, with the remaining 50% deferred and repaid based on future production volumes. The Agreement permits us to defer or withhold approval of a work plan and budget to the extent we do not have sufficient financing or liquidity to fund the relevant work, in which case the affected work is treated as a permissible suspension under the Agreement. Our estimates used in reaching this conclusion are based on information available as at the date of filing this Quarterly Report. Accordingly, actual results could differ from these estimates and resulting variances may result in our need for additional funding in an amount greater or earlier than expected, due to changes in business conditions or other developments, including, but not limited to, deferral of approvals, capital and operating cost escalation, currently unrecognized technical and development challenges, our ability to pay certain vendors or suppliers in our Common Shares or changes in the external business environment.
We will, however, need and are seeking additional financing to fund our continued operations over time. These financings could include additional public or private equity, debt financings, equity-linked financings or other sources of financing, including through government-based funding, non-dilutive asset, royalty or project-based and/or asset-based financings. If these or other financing sources are not available, or if the terms of financing are less desirable than we expect, or are available only in insufficient amounts, we may be forced to delay our exploration and/or exploitation activities or further scale back our operations, which could have a material adverse impact on our business and financial prospects.
On September 16, 2022, we filed a registration statement on Form S-3 with the SEC, which the SEC declared effective on October 14, 2022, to sell up to $100 million of securities. In addition, on November 30, 2023, we filed an additional registration statement on Form S-3 with the SEC, which the SEC declared effective on December 8, 2023, to sell up to an additional $100 million of securities. As previously disclosed in 2025, remaining capacity on the two previously filed Form S-3s has been nearly extinguished following various equity and warrant transactions. We filed a new registration statement on Form S-3 on March 31, 2026, following the filing of our 2025 Annual Report. Securities that may be sold under the registration statements include common shares, preferred shares, debt securities, warrants and units. Any such offering, if it does occur, may happen in one or more transactions. Specific terms of any securities to be sold will be described in supplemental filings with the SEC.
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On December 22, 2022, we entered into an At-the-Market Equity Distribution Agreement (the “Sales Agreement”) with Stifel, Nicolaus & Company, Incorporated (“Stifel”) and Wedbush Securities Inc., as sales agents, allowing us, from time to time, to issue and sell common shares with an aggregate offering price of up to $30 million. In 2025, we issued 7,542,996 common shares at an average share price of $2.02, for net proceeds of $14.8 million under the Sales Agreement. The Sales Agreement expired in October 2025.
On March 22, 2023, we entered into the 2023 Credit Facility with Argentum Cedit Virtuti GCV, the parent of Allseas Investments S.A. and an affiliate of Allseas, which was amended on July 31, 2023 and March 22, 2024, pursuant to which we were able to borrow from the Lender up to $25 million in the aggregate, from time to time, subject to certain conditions. All amounts drawn under the 2023 Credit Facility bore interest at the 6-month SOFR, 180-day average plus 4.0% per annum payable in cash semi-annually (or plus 5% if paid-in-kind at maturity, our election) on the first business day of each of June and January. We agreed to pay an underutilization fee equal to 4.0% per annum payable semi-annually for any amounts that remain undrawn under the 2023 Credit Facility. We had the right to pre-pay the entire amount outstanding under the 2023 Credit Facility at any time, before the 2023 Credit Facility’s stated maturity of August 31, 2025. The 2023 Credit Facility also contained customary events of default. No amounts had been drawn under the 2023 Credit Facility. Pursuant to the Letter Agreement we entered into on March 24, 2025, we and Argentum Cedit Virtuti GCV agreed to cancel the 2023 Credit Facility with no outstanding amounts remaining, other than our obligation to pay the underutilization fee thereunder.
On March 22, 2024, we entered into an Unsecured Credit Facility (the “2024 Credit Facility”) with Gerard Barron, the Company’s Chief Executive Officer and Chairman, and ERAS Capital LLC, the family fund of one of the Company’s directors, (collectively, the ”2024 Lenders”), pursuant to which we may borrow from the 2024 Lenders up to $20 million in the aggregate ($10 million from each of the 2024 Lenders), from time to time, subject to certain conditions. All amounts drawn under the 2024 Credit Facility will bear interest at the 6-month Secured Overnight Funding Rate (SOFR), 180-day average plus 4.0% per annum payable in cash semi-annually (or plus 5% if paid-in-kind at maturity, at our election) on the first business day of each of June and January. We will pay an underutilization fee equal to 4.0% per annum payable semi-annually for any amounts that remain undrawn under the 2024 Credit Facility. The 2024 Credit Facility also contains customary events of default. On August 13, 2024, we entered into the First Amendment to the 2024 Credit Facility with the 2024 Lenders, to increase the borrowing limit of the 2024 Credit Facility to $25 million in the aggregate ($12.5 million from each of the 2024 Lenders). On November 14, 2024, we entered into the Second Amendment to the 2024 Credit Facility with the 2024 Lenders, to increase the borrowing limit to $38 million in the aggregate ($19 million from each of the 2024 Lenders) and to extend the maturity of the 2024 Credit Facility to December 31, 2025. As per the Second Amendment, the rate of underutilization fee was retroactively increased from March 22, 2024, to 6.5% on any undrawn amounts under the 2024 Credit Facility. On March 26, 2025, we entered into the Third Amendment to the 2024 Credit Facility with the 2024 Lenders, to, among other things, increase the borrowing limit to $44 million in the aggregate ($22 million from each of the 2024 Lenders) and extend the maturity of the 2024 Credit Facility to June 30, 2026 with the 2024 Lenders having an option to extend the maturity date by up to two additional one year periods. As per the Third Amendment to the 2024 Credit Facility, the underutilization fees are to be paid quarterly in cash or shares at the 2024 Lenders election and the 2024 Lenders have an option to terminate the credit facility upon certain financing events. On March 25, 2026, the 2024 Lenders extended the maturity date of the 2024 Credit Facility by one year, expiring on June 30, 2027, subject to further extension to June 30, 2028 at the election of the 2024 Lenders.
On September 9, 2024, we entered into a Working Capital Loan Agreement with Allseas Investments, a company related to Allseas. In accordance with the Working Capital Loan Agreement, Allseas Investments provided a loan to us amounting to $5 million (the “Working Capital Loan”) on September 10, 2024, to be used towards general corporate purposes and the repayment of all outstanding amounts under the short-term loan between us and the Lender. The Working Capital Loan was payable to the Lender on or before the earlier of (i) the occurrence of certain financing events and (ii) April 1, 2025 (the “Repayment Date”). The Working Capital Loan bore interest based on the 6-month Secured Overnight Financing Rate, 180-day average plus a margin of 4.0% per annum payable in two installments on January 2, 2025, and the Repayment Date (or plus a margin of 5.0% if we deferred all interest payments to the Repayment Date). On October 18, 2024, we entered into the First Amendment to the Working Capital Loan Agreement with Allseas Investments, resulting in a further draw of $2.5 million by us and a total Working Capital Loan drawn amount of $7.5 million. On March 24, 2025, we entered into the Letter Agreement with Allseas Investments and Argentum Cedit Virtuti GCV, pursuant to which the repayment date under the Working Capital Loan Agreement was extended to September 30, 2025. In the second quarter of 2025, the entire Working Capital Loan amount along with the interest payable was repaid and the facility was cancelled.
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On November 14, 2024, we entered into a securities purchase agreement (the “2024 Purchase Agreement”) with certain new and existing institutional investors for the sale of an aggregate of 17,500,000 common shares (the “Shares”) and accompanying Class B warrants (the “Class B Warrants”), in a registered direct offering. The offering price was $1.00 per common share, with each common share including an accompanying Class B Warrant to purchase 0.5 common shares. The Class B Warrants are exercisable immediately upon issuance at a price of $2.00 per share and expire five years from issuance. On November 26, 2024, we entered into the First Amendment to the 2024 Purchase Agreement, pursuant to which we agreed to sell and issue an additional 2,400,000 common shares and accompanying Class B Warrants to purchase 1,200,000 common shares to new investors on the same terms and conditions as initially offered. Including the First Amendment to the 2024 Purchase Agreement, we agreed to sell and issue in aggregate 19,900,000 common shares and Class B Warrants to purchase 9,950,000 common shares. We received gross proceeds in the offering, exclusive of warrant exercises, of $19.9 million (net proceeds of $14.2 million, after offering expenses), of which $5 million was received on February 6, 2025.
On May 12, 2025, we entered into a securities purchase agreement with certain new and existing investors, including an existing strategic investor, for the sale of an aggregate of 12,333,333 common shares and accompanying Class C Warrants, in a registered direct offering, for gross proceeds, exclusive of warrant exercises, of $37 million (net proceeds of $36.7 million, after offering expenses). The offering price was $3.00 per common share, with each common share including an accompanying Class C Warrant to purchase one common share. The Class C Warrants are exercisable immediately upon issuance at a price of $4.50 per share and expire three years from issuance.
On June 16, 2025, we entered into a Securities Purchase Agreement with Korea Zinc, pursuant to which in consideration of gross cash receipt of $85.2 million, we agreed to issue and sell to Korea Zinc 19,623,376 of our common shares and accompanying warrants to purchase an aggregate of 6,868,181 common shares. The purchase price per share and accompanying warrant was set at $4.34. The Korea Zinc Warrant is exercisable at an exercise price of $7.00 per share and expires on June 25, 2028. Pursuant to this Securities Purchase Agreement, subject to certain exceptions, Korea Zinc will have a right to participate in any public offering or private placement of any of our common shares or common share equivalents primarily for capital raising purposes (each a “Proposed Offering”) up to such amount of securities to maintain its percentage ownership at the time of such Proposed Offering. Such right to participate in future financings will expire upon the earlier to occur of (i) June 16, 2030, (ii) the date on which Korea Zinc owns less than all of the common shares it purchased and subscribed pursuant to this Securities Purchase Agreement and (iii) immediately after a closing of a Proposed Offering where Korea Zinc does not exercise its participation right in full. The funds raised under this Securities Purchase Agreement are to be used for general corporate purposes.
We may receive up to approximately $432.5 million in aggregate gross proceeds from cash exercises of the Public Warrants, the Private Warrants, the Class A Warrants, the Class B Warrants, Class C Warrants, and Warrants issued to Korea Zinc, Naoero and Tonga based on the per share exercise price of such warrants. However, the exercise price for the outstanding Public Warrants and Private Warrants is $11.50 per common share and there can be no assurance that such warrants will be in the money prior to their expiration, and as such, such warrants may expire in September 2026 worthless. In certain circumstances, the Public Warrants and Private Warrants, Class A Warrants, Class B Warrants and Class C Warrants may be exercised on a cashless basis and the proceeds from the exercise of such warrants will decrease. Furthermore, even if the warrants are in the money, the holders of the warrants are not obligated to exercise their warrants, and we cannot predict whether holders of the warrants will choose to exercise all or any of their warrants. The warrants issued to the Republic of Naoero and Kingdom of Tonga can only be exercised after the commercial recovery permit is received and commercial production commences and there can be no assurance that the exercise conditions will be met prior to their expiration. In addition, the exercise price to purchase one common share under the outstanding Class A Warrants and Class B Warrants is $2.00 each, Class C Warrants is $4.5, warrants issued to Korea Zinc is $7.00, warrants issued to Republic of Naoero is $4.72 and warrants issued to Tonga is $5.87 (subject to customary adjustments) and there can be no assurance that such warrants will be exercised prior to their expiration, and as such, such warrants may expire, and we will not receive any proceeds from the exercise thereof.
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Cash Flows Summary
Presented below is a summary of our operating, investing and financing cash flows:
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
(thousands)
2026
2025
2026
2025
Net cash used in operating activities
$
(20,100)
$
(10,662)
$
(20,715)
$
(20,009)
Net cash generated (used in) investing activities
$
(881)
$
296
$
(916)
$
226
Net cash provided by financing activities
$
56
$
123,776
$
2,775
$
132,069
(Decrease) increase in cash (1)
$
(20,925)
$
113,410
$
(18,856)
$
112,286
(1) Excluding foreign exchange movement.
Six Months ended June 30, 2026 compared to Six Months ended June 30, 2025
Cash flows used in Operating Activities
For the six months ended June 30, 2026, major operating activities included initial work on pre-feasibility studies update and work to advance our permit applications, resulting in net cash used in operating activities of $20.7 million. This consisted of $7.8 million on payroll costs, $3.5 million on legal and consulting fees, $3.3 million on prefeasibility studies, $2 million on stakeholder engagement, $2.3 million on business development, communications, investor relations and IT costs, $1.4 million on various environmental work, $1.2 million on underutilization fees paid to the lenders of the 2024 Credit Facility, $0.3 million on mining, technological and process development costs, and an additional $1.1 million for various expenses. The outflow was offset by receipt of interest income of $2.2 million.
Cash used in operating activities in the second quarter of 2026 of $20.1 million included $9 million of withholdings related to equity awards that were collected at the end of March 2026 and remitted in early April 2026.
For the six months ended June 30, 2025, major operating activities over this period included advanced work on pre-feasibility studies and work to advance our permit applications, resulting in net cash used in operating activities of $20 million. This consisted of $5.4 million on payroll costs, $4.9 million on various environmental work, $2.1 million on stakeholder engagement, $2.1 million on legal and consulting fees, $2 million on business development, investor relations and communications, $1.7 million in interest paid on 2024 credit facilities and working capital loan, and $1.8 million for various expenses.
Cash flows used in Investing Activities
Net cash used in investing activities for the six months ended June 30, 2026 of $0.9 million includes the investment of $1.0 million to purchase shares in the Company’s equity investment in TMCR (refer to Note 7 in the Company’s second quarter 2026 interim financial statements) and the purchase of equipment and software development. A total of $0.2 million was spent on the development of software in the comparative period of 2025.
Cash flows provided by Financing Activities
Net cash provided by financing activities for the six months ended June 30, 2026 was $2.8 million, which consisted of proceeds from the exercise of stock options.
Net cash provided by financing activities for the six months ended June 30, 2025 was $132.1 million, which consisted of net cash proceeds received from the Korea Zinc investment of $85.2 million, net proceeds from the 2025 Registered Direct Offerings of $30.0 million, the remaining net proceeds from the 2024 Registered Direct Offerings of $4.5 million, proceeds from shares issued from ATM of $14.8 million and proceeds from exercise of stock options and warrants of $6.9 million. This increase was partially offset by repayments totaling $9.3 million on our credit facilities and on the Allseas Working Capital loan.
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Contractual Obligations and Commitments
NORI Exploration Contract
As part of the NORI Exploration Contract with the ISA, NORI submitted a periodic review report to the ISA which included a five-year plan covering 2022 to 2026. NORI is currently implementing its approved five-year plan. NORI submitted an application to the ISA on January 19, 2026 for a five-year extension of the contract, which the Council of the ISA approved on July 20, 2026: the extended contract expires July 21, 2031. The application included a programme of activities and anticipated annual expenditures for the extension period. Work plans are reviewed annually by NORI, agreed with the ISA and may be subject to change depending on their progress to date.
TOML Exploration Contract
As part of the TOML Exploration Contract with the ISA, TOML submitted a periodic review report to the ISA which included a five-year plan covering 2022 to 2026. TOML is currently implementing its approved plan, which included an estimated five-year expenditure of up to $44 million. The five-year estimated expenditure is indicative and subject to change, TOML will review the program regularly and TOML will inform the ISA of any changes through its annual reports. TOML’s exploration contract is due to expire on January 11, 2027. On July 10, 2026, TOML applied to the ISA to extend its exploration contract for a further five years. The ISA’s LTC is scheduled to consider the application in February and March 2027, and TOML expects the contract to be deemed extended from January 12, 2027 under the transitional provision of the ISA’s extension procedures until the Council is able to act on the Commission’s recommendation.
Regulatory Obligations Relating to Exploration Contracts
Both TOML and NORI require sponsorship from their host sponsoring States, Tonga and Naoero, respectively. Each company has been registered and incorporated within the applicable host State’s jurisdiction. The ISA requires that a contractor must obtain and maintain sponsorship by a host state that is a member of the ISA, and such state must maintain effective supervision and regulatory control over such sponsored contractor. Each of TOML and NORI is subject to the registration and incorporation requirements of these nations. In the event the sponsorship is otherwise terminated, such subsidiary will be required to obtain new sponsorship from another state that is a member of the ISA. Failure to obtain such new sponsorship would have a material impact on the operations of such subsidiary and us.
Sponsorship Agreements
NORI is sponsored by Naoero pursuant to a certificate of sponsorship signed by the Government of Naoero on April 11, 2011. NORI is a Naoeroan incorporated entity and is subject to applicable Naoeroan legislation and regulations. In 2015, the Naoeroan government established the Nauru Seabed Minerals Authority to regulate activities carried out by companies sponsored by Naoero.
Throughout the period of the NORI Exploration Contract, NORI must be sponsored by a State that is party to UNCLOS. If the nationality or control of NORI changes or NORI’s sponsoring State, as defined in the ISA Regulations, terminates its sponsorship, NORI must promptly notify the ISA. In either event, if NORI does not obtain another sponsor meeting the requirements prescribed in the ISA Regulations and fails to submit to the ISA a certificate of sponsorship for NORI in the prescribed form within six months, the NORI Exploration Contract will terminate.
On July 5, 2017, Naoero, the Nauru Seabed Minerals Authority and NORI entered into a sponsorship agreement (the “NORI Sponsorship Agreement”) formalizing certain obligations of the parties in relation to NORI’s exploration and potential collection of nodules within the NORI Contract Area of the CCZ. On May 29, 2025 the Republic of Naoero and NORI signed a revised Sponsorship Agreement, updating the terms of the Agreement signed between the parties in 2017.
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The revised Sponsorship Agreement will remain in force unless terminated by mutual agreement of the parties or earlier terminated in accordance with its terms, including in the event of a material breach by either party or upon the assignment of NORI’s rights and the transfer of sponsorship to another sponsoring State. Under the agreement, NORI will pay Naoero a seabed mineral recovery payment of $2 per tonne of polymetallic nodules recovered under an ISA contract, subject to annual inflation adjustment. In addition, NORI will pay an annual administration fee, initially set at $500,000, which may increase by 5% annually, to support Naoero’s administration of its sponsorship and regulatory oversight. The agreement also provides for potential continuity payments to Naoero if a subsidiary other than NORI develops nodules in the NORI Contract Area under the U.S. regulatory regime with the applicable payment amounts and schedule to be determined in accordance with the terms of the agreement. During any period in which such continuity payments are made, NORI has agreed to maintain an office in Naoero and make annual investments in local presence, community initiatives and training and capacity-building programs for Naoeroan nationals. In connection with the Sponsorship Agreement, Naoero holds warrants to purchase 9,146,268 of our common shares at an exercise price of $4.72. In connection with the revised Sponsorship Agreement, we also executed a Deed of Guarantee and Indemnity in favor of Naoero, under which we guarantee certain financial obligations of NORI under Naoeroan law and the Sponsorship Agreement and provide limited indemnification.
On March 8, 2008, Tonga and TOML entered into the TOML Sponsorship Agreement formalizing certain obligations of the parties in relation to TOML’s exploration and potential exploitation of a proposed application to the ISA (subsequently granted) known as the TOML Area. TOML updated the sponsorship agreement with Tonga in September 2021 and again on August 4, 2025.
The revised Sponsorship Agreement between Tonga and TOML will remain in force unless terminated by mutual agreement of the parties or earlier terminated in accordance with its terms, including in the event of a material breach by either party. Under the agreement, Tonga will continue to sponsor TOML’s seabed mineral activities in the ISA contract area. Upon commencement of commercial recovery of polymetallic nodules under an ISA contract, TOML will pay the Tonga Seabed Minerals Authority a commercial recovery payment of $2 per tonne of polymetallic nodules recovered from the contract area, subject to annual inflation adjustment. In addition, TOML will pay an annual administration fee of $90,000, which may increase by up to 5% annually, to support the administration of Tonga’s sponsorship and regulatory oversight. The agreement also provides for potential continuity benefit payments to Tonga if a subsidiary other than TOML develops nodules in the TOML Contract Area under the U.S. regulatory regime. The applicable payment amounts and schedule will be determined in accordance with the terms of the agreement. During any period in which such continuity benefits are provided, TOML has agreed to maintain an office in Tonga and make annual investments in local presence, community initiatives and training and capacity-building programs for Tongan nationals. In connection with the Sponsorship Agreement, Tonga holds warrants to purchase 1,000,000 of our common shares at an exercise price of $5.87. In connection with the revised Sponsorship Agreement, we also executed a Deed of Guarantee and Indemnity in favor of Tonga, under which we guarantee certain financial obligations of TOML under Tongan law and the Sponsorship Agreement and provide limited indemnification.
Allseas Agreements
On March 29, 2019, we entered into a strategic alliance agreement with Allseas to develop a system to collect, lift and transport nodules from the seafloor to shore and agreed to enter into a nodule collection and shipping agreement whereby Allseas would provide commercial services for the collection of the first 200 million metric tonnes of polymetallic nodules on a cost plus 50% profit basis, which arrangement has been superseded by the Agreement described below. In furtherance of this agreement, on July 8, 2019, we entered into a Pilot Mining Test Agreement with Allseas (“PMTA”), which was amended on five occasions through February 2023, to develop and deploy a PMTS, successful completion of which is a prerequisite for our application for an exploitation contract with the ISA. Under the PMTA, Allseas agreed to cover the development cost of the project in exchange for a payment from us upon successful completion of the pilot trial of the PMTS in NORI Area D.
On March 16, 2022, NORI and Allseas entered into a non-binding term sheet for the development and operation of a commercial nodule collection system, which has been superseded by the Agreement described below. The pilot nodule collection system developed and tested by Allseas is expected to be upgraded to a commercial system with an expanded targeted production capacity of up to an estimated 3.0 million tonnes of wet nodules per year, to be delivered in stepped increments.
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Through December 31, 2025, we have made the following payments to Allseas under the PMTA: (a) $10 million in cash in February 2020, (b) $10 million through the issuance of 3.2 million Common Shares valued at $3.11 per share in February 2020, (c) issued Allseas a warrant to purchase 11.6 million Common Shares at a nominal exercise price per share in March 2021, (d) $10 million in cash in October 2021, following the closing of the Business Combination and meeting certain progress targets on the PMTS and (e) on February 23, 2023 issued 10.85 million Common Shares to Allseas. On August 9, 2023, 11,578,620 common shares were issued to Allseas upon the exercise of the warrant that was granted to Allseas in March 2021, and receipt of the exercise fee of $115.8 thousand. The warrant vested and became exercisable on successful completion of the PMTS in November 2022.
On November 11, 2022, our board of directors approved the successful completion and testing of the PMTS in the NORI Area D and payment of the third milestone amounting to $10 million and additional costs owed to Allseas under the PMTA by issuing 10.85 million Common Shares to Allseas priced at $1.00 per share on February 23, 2023.
On August 1, 2023, we entered into an Exclusive Vessel Use Agreement with Allseas pursuant to which Allseas will give us exclusive use of the vessel (“ Hidden Gem ”) in support of the development of the Project Zero Offshore Nodule Collection System until the system is completed or December 31, 2026, whichever is earlier. In consideration of the exclusivity term, on August 14, 2023, we issued 4.15 million Common Shares to Allseas.
On May 11, 2026, we entered into a Contract for Development Work and Commercial Production (the “Agreement”) with Allseas Deepsea Marine Contractors, a wholly owned subsidiary of Allseas, for the design, development, build, testing, commissioning and operation of an integrated offshore polymetallic nodule collection and production system in our license area. The commercial system is designed for a nameplate production capacity of 3.0 million wet tonnes of nodules per annum, with commissioning targeted to begin in the fourth quarter of 2027. The commencement of commercial production is subject to, among other matters, receipt of a commercial recovery permit from NOAA, completion and acceptance of the collection system and approval of the applicable work plan and budget. Under the Agreement, we are required to reimburse Allseas for eligible costs incurred in performing the development work in accordance with approved work plans and budgets, with 50% of such costs payable as incurred and the remaining 50% deferred and repaid based on future commercial production volumes. The Deferred Amounts remain payable regardless of whether commercial production commences and would become payable upon expiration or termination of the Agreement. The Agreement has an initial term ending five years following the commencement of commercial production and may be extended by mutual agreement (refer to Note 6 of these Interim Condensed Consolidated Financial Statements). The Agreement supersedes the strategic alliance agreement entered into on March 29, 2019 and the non-binding term sheet entered into on March 16, 2022
Offtake Agreement
On May 25, 2012, DGE and Glencore entered into a copper offtake agreement and a nickel offtake agreement. DGE has agreed to deliver to Glencore 50% of the annual quantity of copper and nickel produced by a DGE-owned facility from nodules derived from the NORI Area at London Metal Exchange referenced market pricing with allowances for product quality and delivery location. Either party may terminate the agreement upon a material breach or insolvency of the other party. Glencore may also terminate the agreement by giving twelve months’ notice.
Borrowing with Company Related to Allseas
2023 Credit Facility
On March 22, 2023, we entered into the 2023 Credit Facility with Argentum Cedit Virtuti GCV, an affiliate of Allseas, under which we may borrow up to $25.0 million pursuant to the terms and conditions of the 2023 Credit Facility, as amended. Pursuant to the Letter Agreement entered into on March 24, 2025, we agreed to cancel the 2023 Credit Facility with no outstanding amounts remaining, other than our obligation to pay Argentum Cedit Virtuti GCV the underutilization fee thereunder.
2024 Short-Term Loan and Working Capital Loan
On May 27, 2024, we entered into a short-term loan agreement with Argentum Cedit Virtuti GCV whereby we borrowed $2 million (the “Loan”) on May 30, 2024. The Loan matured on September 10, 2024 (maturity date) and accrued interest at a rate of 8% per annum. On the maturity date, we repaid the entire Loan amounting to $2 million and the accrued interest.
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On September 9, 2024, we entered into a working capital loan agreement (the “Working Capital Loan Agreement”) with Allseas Investments, a company related to Allseas. In accordance with the Working Capital Loan Agreement, Allseas Investments provided a loan to us amounting to $5 million (the “Working Capital Loan”) on September 10, 2024, to be used towards general corporate purposes and the repayment of all outstanding amounts under the Short-Term Loan between us and the Lender. On October 18, 2024, we entered into the First Amendment to the Working Capital Loan Agreement with Allseas Investments, resulting in a further draw of $2.5 million by us and a total Working Capital Loan drawn amount of $7.5 million. On March 24, 2025, we entered into a Letter Agreement with Allseas Investments and Argentum Cedit Virtuti GCV, pursuant to which the Original Repayment Date under the Working Capital Loan Agreement was extended to September 30, 2025, with principal and interest repayable on that date. During the second quarter of 2025, we repaid the entire outstanding loan and interest, amounting to $7.5 million and $0.5 million, respectively, and cancelled the Working Capital Loan Agreement.
2024 Credit Facility with ERAS Capital LLC and Gerard Barron
Under the 2024 Credit Facility with ERAS Capital LLC and Gerard Barron we may borrow up to $44 million in aggregate ($22 million from each of the 2024 Lenders). On March 25, 2026, the 2024 Lenders extended the Maturity Date by one year for any borrowings under the 2024 Credit Facility, expiring on June 30, 2027. See above for a further description of the 2024 Credit Facility. As of June 30, 2026, we had no borrowing under the 2024 Credit Facility and are only incurring the underutilization fee.
Off-Balance Sheet Arrangements
We are not party to any off-balance sheet arrangements.
Critical Accounting Policies and Significant Judgments and Estimates
Our condensed consolidated interim financial statements have been prepared in accordance with U.S. GAAP. In the preparation of these financial statements, we are required to use judgment in making estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities as of the date of the financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about items that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
Except as described in Note 3 to our condensed consolidated interim financial statements included in this Quarterly Report on Form 10-Q, there have been no material changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in our 2025 Annual Report on Form 10-K.
Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.