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Item 2. Properties

2025-03-27 compared with 2024-03-25 · 21 added, 171 removed, 575 unchanged (25% of the section changed)

119 unchanged sentences

The estimated mineral resources were determined in 2021 as of December 31, 2020 and also reflect the estimated mineral resources as of December 31, 2024, as none of the mineral resources in these areas were depleted by mining or any other activities.

NORI December 31, 2023 In-Situ Mineral Resource estimate for NORI Area D at 4 kg/m 2 abundance cut-off

We do not believe there have been any other material changes to the estimated mineral resources since the 2021 determination thereof.

NORI Area D December 31, 2024 In-Situ Mineral Resource estimate at 4 kg/m 2 abundance cut-off

(wet kg/m 2 )

23 unchanged sentences

We do not believe there have been any other material changes to the estimated mineral resources since the 2021 determination thereof.

NORI Area A, B and C December 31, 2024 In-Situ Mineral Resource estimate at 4 kg/m 2 abundance cut-off

33 unchanged sentences

These RKEF plants were originally built to convert nickel laterite to nickel pig iron and could be converted to smelt polymetallic nodules with minor modifications.

● In Project One, a purpose-built process plant would be constructed, including pyrometallurgical (~50% of Project One production, with the other ~50% tolled through existing RKEF facilities) and hydrometallurgical circuits (100% of Project One production).

Furthermore, in November 2023, we entered into a binding MoU with PAMCO whereby they must complete a feasibility study (anticipated to be completed in mid-2025) to toll treat 1.3 million tonnes of wet polymetallic nodules per year at its Hachinohe, Japan smelting facility.

PAMCO’s Hachinohe facility is located on the coast in northern Japan and is equipped with port and processing infrastructure required to receive and process polymetallic nodules and to ship products to customers.

● In Project One, a purpose-built process plant may be constructed, including pyrometallurgical (~50% of Project One production, with the other ~50% tolled through existing RKEF facilities) and hydrometallurgical circuits (100% of Project One production).

Nodule production would be increased in phases by treatment in this new plant and existing RKEFs.

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Nodule recovery efficiency is the product of nodule entrainment efficiency, subsea concentrator recovery, and dewatering system efficiency.

The estimate of dewatering recovery used in the NORI Technical Report Summary is higher than indicated by the 1970s test work because data that has come to light recently suggests the amount of breakup during lifting the nodules up the RALS may be significantly less than previously assumed (Kennecott (1978), DRT (2015)).

Expected Mineral Resource modifying factors

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NORI has commenced the ESIA process in support of an application for an exploitation contract for the commercial collection of deep-sea polymetallic nodules.

A comprehensive program of metocean and biological data acquisition is largely complete, required to characterize the baseline conditions at a designated Collector Test site and control sites in the NORI Contract Area.

A comprehensive program of metocean and biological data acquisition was completed, which required to characterize the baseline conditions at a designated Collector Test site and control sites in the NORI Contract Area.

NORI intends to manage the project under the governance of an Environmental Management System (“EMS”), which is to be developed in accordance with the international EMS standard, ISO 14001:2004.

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For more information on environmental studies, permitting and social or community impact, see Section 17 of the NORI Technical Report Summary.

Economic analysis

We developed in-house a financial model based on estimates of future cash flows derived from extraction of nodules from the NORI Area D project.

AMC reviewed the logic, input assumptions and integrity of the calculations and forecasts.

The financial model is for NORI Area D only, which is at a preliminary level of planning and design.

We do not believe there have been any material changes to this model since AMC’s review.

For the initial assessment, the offshore cost estimates were developed based upon the guidelines of the AACE (Association for the Advancement of Cost Engineering) International Recommended Practice No.

Based on engineering studies performed previously by Deep Reach Technology (DRT) for Deep Green Resources and the experience in trial mining of deep-sea nodules by DRT personnel, the cost estimate was considered to be a class 4.

Offshore capital costs were estimated to accuracy levels of -30% +40%.

Onshore capital costs were estimated according to an AACE Class 5 level of accuracy (–35% +50%).

A contingency of 25% was applied to the offshore and onshore capital cost estimates.

The collection plan considered in the NORI Technical Report Summary contemplates a 23-year production period.

The expected production period is within the expected duration of a NORI Area D ISA Exploitation Contract which would be thirty (30) years (with possible extensions by periods of ten (10) years) as outlined in the current draft of the regulations for exploitation of mineral resources in the CCZ (ISBA/25/C/WP.1).

After the initial 23-year period, substantial resources will remain in the other NORI Areas that could support future collection (combined inferred mineral resource in NORI Areas A, B and C of 510 Mt (wet) at 1.28% Ni, 0.21% Co, 1.04% Cu, 28.3% Mn, at an average abundance of 11 kg (wet)/m 2 ).

The proposed project schedule is shown in the Gantt chart in Figure 19.1 of the NORI Technical Report Summary.

In Project Zero, NORI expects to toll treat the nodules in third-party pyrometallurgical plants and sell the RKEF products into the alloy market.

This will be expected to generate revenue while the pyrometallurgical and hydrometallurgical facilities are planned to be built.

In Project One, NORI expects to stage the construction of its multiple pyrometallurgical and hydrometallurgical lines to flatten out capital expenditure requirements.

Nodule production is expected to be directed preferentially to the NORI pyrometallurgical plants as this is expected to be the lowest operating cost option.

Whenever these facilities are at maximum capacity (particularly during the ramp-up phase), the surplus nodules are expected to be sent for toll treatment.

NORI expects that it will ensure that its own hydrometallurgical refineries are filled up to maximum capacity, as this is expected to produce the highest value products.

Whenever its own hydrometallurgical refineries are at full capacity, NORI expects to sell the surplus product from its pyrometallurgical plant directly to the matte market.

While the matte is not as valuable as the refined products from the hydrometallurgical plant (nickel sulfate, cobalt sulfate, and copper cathode), it still provides a consistent revenue stream and assists for periods when the refineries are at full capacity.

Some of the alloy production from toll treatment of NORI nodules are expected to be shipped to the NORI hydrometallurgical plants to make use of spare capacity.

This will require the alloy from the third-party RKEF to be sulphidized prior to hydrometallurgical treatment.

Based on preliminary discussions with potential buyers, NORI believes that there is sufficient demand for the alloy and matte over the life of the project.

The analysis was performed on a 100% ownership basis and excludes consideration of financing costs and forward metal sales.

The analysis assumes the economic parameters listed in the table below.

Assumed Economic Inputs

Hydrometallurgical plant Ni recovery

Hydrometallurgical plant Cu recovery

Hydrometallurgical plant Co recovery

Pyrometallurgical plant Ni recovery

Pyrometallurgical plant Cu recovery

Pyrometallurgical plant Co recovery

Mn silicate grade

Cu cathode grade

Payability of Cu content in cathode

Nodule moisture content

Onshore tax rate

% of taxable income

Average offshore tax (to ISA)

% of taxable income

Commodity Prices

Project revenues will come from the following sources:

● a nickel sulfate product;

● a copper cathode product;

● a cobalt sulfate product;

● a manganese silicate product;

● an ammonium sulfate product;

● a nickel alloy product containing copper and cobalt;

● a matte product from the NORI pyrometallurgical plants containing nickel, copper and cobalt, which would be sold to the matte market.

NORI has used the following payable percentages for the alloy:

80% of in-situ value in the alloy;

40% of in-situ value in the alloy;

80% of in-situ value in the alloy.

The following estimates for treatment charges and refining charges for the alloy product were used in the NORI financial model:

● a refining charge of $1,697/tonne of contained nickel in the alloy;

● a refining charge of $800/tonne of contained nickel in the alloy;

● a refining charge of $6,700/tonne of contained nickel in the alloy;

● a treatment charge $300/tonne of alloy.

For the matte product, NORI has used a payables figure of 83% of the market metal price of nickel, copper and cobalt.

The metal recoveries for the matte and alloy are those from the pyrometallurgical plant, whilst the refined products (nickel sulfate, copper cathode and cobalt sulfate) are from the hydrometallurgical refinery metal recoveries.

The prices forecast by CRU and adopted for use in the economic analysis were derived from a report prepared by CRU dated October 23, 2020 and are listed in the table below.

The Qualified Person considered the metal price assumptions underpinning the analysis to be reasonable.

Commodity prices

Ni metal, LME cash (/t)

Ni Sulfate (/t)

SiMn, China import, 44% Mn (/dmtu)

Cu, Grade A cathode – LME cash (/t)

Co, EU Co 99.8% min (EXW) (/t)

Co Sulfate premium over Co metal (ex-China) (/t)

Production schedule

The production schedule on which the economic analysis is based was developed on an annual basis.

The Qualified Person cautioned that a prefeasibility study has not been undertaken and that the seafloor production schedule is preliminary in nature and should not be interpreted as a mineral reserve.

Approximately 96% of the mineral resource within NORI Area D is classified as indicated and a further 1% is classified as measured resource.

The life of mine (“LOM”) production sequence includes 6 Mt (wet) of nodules that are classified as inferred mineral resources.

This is approximately 2% of the total LOM production.

The production schedule assumes staged operation initially of the Hidden Gem , then Drill Ship 2 and finally Collector Vessel 1, as outlined in Section 16.1 of the NORI Technical Report Summary.

The nodule metal grades and nodule abundance varying annually according to the LOM schedule.

The grades and nodule abundance for the mine plan were derived from a preliminary production schedule developed by AMC as outlined in Section 16.7 of the NORI Technical Report Summary.

The higher abundance areas were targeted by the production schedule.

The metal grades and abundance used in the schedule (the “IA”) are compared to the averages (of all mineral resource categories) for NORI Area D in the table below.

Comparison of IA mine plan to Mineral Resource for NORI Area D

(all categories)

Tonnage (Mt wet)

Nodule abundance (kg/m 2 )

The production ramp-up discussed in Section 17 of the NORI Technical Report Summary was adopted for the production schedule.

The Qualified Person considered the assumptions underpinning the initial assessment and economic analysis to be reasonable.

Capital and operating costs

The capital cost estimates for the Project are summarized below.

Pre-project items include data gathering and studies that will occur prior to construction.

Offshore project costs include the procurement and integration of the PSVs, the collector support vessel, the fabrication of the collectors, and the RALS.

Onshore project costs consist principally of the construction of the minerals processing pyrometallurgical plant and hydrometallurgical refinery.

Sustaining costs are for both onshore and offshore assets, and closure costs are principally for rehabilitation of the onshore minerals processing site.

Cost estimate

Pre-project costs

Project costs

Offshore project costs

Onshore project costs

Total project costs

Sustaining capital costs (onshore and offshore)

Closure costs

Operating costs have been estimated at $1.8 billion per annum during steady state production (from 2030 onwards).

Expenditures of a total of $37.5 billion over the life of the project on operating costs is expected.

Onshore processing is the most significant operating cost.

Average operating cost estimates during steady state operation (from 2030 onwards)

Operating Cost

Cost (/t – wet

Cost (/t – dry

tonne nodules

($ million pa)

For more information on capital and operating costs, see Section 18 of the NORI Technical Report Summary.

Cash flows analysis

The economic analysis set forth in Section 19 of the NORI Technical Report Summary presents a post-tax, real (uninflated) cash flows analysis.

The valuation date is January 1, 2021.

The analysis was performed on a 100% ownership basis and excludes consideration of financing costs and forward metal sales.

The initial assessment indicates a positive economic outcome.

Undiscounted post-tax net cash flows of $30.6 billion is expected.

An internal rate of return of 27% has been estimated from the financial model.

Discounted cash flow analysis of unleveraged real cash flows, discounting at 9% per annum, indicates a pre-tax project net present value (NPV) of $11.2 billion and a post-tax project NPV of $6.8 billion, which includes the LOM production of polymetallic nodules that are presently classified as inferred mineral resources, representing approximately 2% of the total LOM production.

Excluding the inferred mineral resources from the economic analysis, the post-tax project NPV is estimated at $6.7 billion, which is not a significant difference from the economic analysis that includes the inferred mineral resources.

The project reaches its lowest cumulative undiscounted cash flow figure of $4.0 billion in 2026.

Undiscounted payback period is 6.6 years after commencement of production.

The total cash flows are summarized below:

Cash flow item

Ammonium sulfate revenue

Total revenue

Pre-project capital

Offshore construction

Onshore construction

Offshore sustaining capital

Onshore sustaining capital

Closure costs

Total capital

Offshore operating costs

Shipping costs

Onshore operating costs

Corporate costs

Total operating costs

Taxes and royalties

Net undiscounted cash flow

Project revenues are expected to come from the following sources:

(a) a nickel sulfate product;

(b) a copper cathode product;

(d) a manganese silicate product;

(e) an ammonium sulfate product;

(f) a nickel alloy product containing copper and cobalt;

and (g) a matte product from the NORI pyrometallurgical plants containing nickel, copper and cobalt which would be sold to the matte market.

The discounted cash flows and progressive NPVs are shown below:

The date of the investment decision, as outlined in the initial assessment contained in the NORI Technical Report Summary was expected to be on or around June 30, 2023.

The analysis assumes NORI spending of $237 million on pre-project activities between 2021 (which were progressed in 2021) and 2024.

The future value of the project on June 30, 2023 (after the pre-project expenditure is sunk and time has elapsed) is expected to be $8.6 billion and the initial rate of return from that point is expected to be 29%.

The sensitivity of project economics to changes in the main variables was tested by selecting high and low values that represent a likely range of potential operating conditions.

The variables with the biggest negative impact on NPV are all metal prices, total OPEX, collector speed, nickel sulfate price and development capex.

In general, revenue drivers have the biggest impact, followed by OPEX variables and then CAPEX variables.

Tornado diagram of NPV sensitivity to variables

The initial assessment is preliminary in nature, and further planning, engineering studies, design, cost estimation and seafloor tests are required before mineral resources can be converted to mineral reserves.

There is no certainty that the proposals and results presented in the initial assessment will be realized.

A prefeasibility study has not yet been undertaken.

Mineral resources are not mineral reserves and do not have demonstrated economic viability.

The initial assessment included in the NORI Technical Report Summary indicates that the NORI Area mineral resource is potentially economic.

The Qualified Person recommended that further data gathering, analysis, design and cost estimation be undertaken to advance the project.

2021 economic analysis and non-reliance thereon

In connection with the preparation of the NORI Technical Report Summary, we developed in-house a point-in-time financial model based on estimates of future cash flows derived from extraction of nodules from the NORI Area D project, which AMC reviewed the logic, input assumptions and integrity of the calculations and forecasts.

This preliminary point-in-time economic analysis set forth in Section 19 of the NORI Technical Report Summary presented a post-tax, real (uninflated) cash flows analysis as of a valuation date of January 1, 2021 based in part on the estimated capital and operating costs set forth in Section 18 of the NORI Technical Report Summary.

As part of its review of the economic analysis, AMC cautioned that a pre-feasibility study had not been undertaken and recommended that further data gathering, analysis, design and cost estimation be undertaken to advance the project.

We have continued to define our resource in the NORI area, with the goal to develop project economics to pre-feasibility level and are working towards a pre-feasibility study, which is nearing completion.

As part of our ongoing refinement of our business plans and resource definition work, we are now pursuing a low-CAPEX approach to our development and commercialization of operations for our NORI Area D project where we reuse existing production assets opposed to the high-CAPEX approach where the majority of offshore and onshore production assets would be newly built by us as assumed in the 2021 economic analysis included in the NORI Technical Report Summary.

As a result of these changes and the general passage of time since the valuation date of January 1, 2021, the 2021 point-in-time economic analysis included in Section 19 of the NORI Technical Report Summary and the estimated capital and operating costs set forth in Section 18 of the NORI Technical Report Summary, including any references thereto throughout the NORI Technical Report Summary, should no longer be relied upon or used by investors for any reason.

We note that we do not believe that there have been any material changes to the abundance cut-off grades used throughout the NORI Technical Report Summary or the Qualified Person’s opinion that the mineral resources included in the NORI Technical Report Summary have reasonable prospects of economic extraction.

Internal controls and data verification

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Location of the TOML Contract Area and access

The TOML Area is located within the CCZ of the northeast Pacific Ocean.

The TOML Contract Area is located within the CCZ of the northeast Pacific Ocean.

The CCZ is located in international waters between Hawaii and Mexico.

The western-end of the CCZ is approximately 1,000 kilometers south of the Hawaiian island group.

From here, the CCZ extends over 4,500 kilometers east-northeast, in an approximately 600 kilomeers wide trend, with the eastern limits approximately 2,000 kilometers west of southern Mexico.

From here, the CCZ extends over 4,500 kilometers east-northeast, in an approximately 600 kilometers wide trend, with the eastern limits approximately 2,000 kilometers west of southern Mexico.

The region is well-located to ship nodules to the American continent or across the Pacific to Asian markets.

45 unchanged sentences

The exploration methods used to explore and delineate the mineral resources in the TOML and NORI areas were essentially the same.

Multibeam echo-sounding system (MBES) was used to determine the depth of water (bathymetry) and the acoustic reflectance (backscatter) of the seabed.

MBES was used to determine the depth of water (bathymetry) and the acoustic reflectance (backscatter) of the seabed.

Nodule coverage was interpreted using the backscatter data.

42 unchanged sentences

The estimated mineral resources were determined in 2021, as of December 31, 2020, and also reflect the estimated mineral resources as of December 31, 2024, as none of the mineral resources in these areas were depleted by mining or any other activities.

We do not believe there have been any other material changes to the estimated mineral resources since the 2021 determination thereof.

Mineral Resource Estimate December 31, 2024, In-Situ, for the TOML Contract Area within the CCZ at a 4 kg/m 2 nodule abundance cut-off

163 unchanged sentences

The two methods for doing this are estimating the nodule percent coverage (percent of exposed nodule surface area within the photo) and measuring each individual nodule long-axis and then using these measurements to calculate abundance using variants of the formula defined by Felix (1980).

The long-axis estimation (LAE) method is the most accurate and preferred method but comes at a cost in the time to manually process each photo — limiting the number of photos that can be used for estimating abundance.

The LAE method is the most accurate and preferred method but comes at a cost in the time to manually process each photo — limiting the number of photos that can be used for estimating abundance.

The benefit of using photographs is being able to demonstrate continuity between physical sample location and accurately quantify nodule abundance.

3 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 2. Properties