The Metals Company’s Pilot Program Proves It’s Worth Your Attention

Stock Market

Buzz around The Metals Company (NASDAQ:TMC) stock will remain high in the coming weeks and months. TMC stock has been volatile since its Sept. 10 SPAC (Special Purpose Acquisition Company) merger with Sustainable Opportunities Acquisition

A photograph of the ocean.

Source: Manu Galdamez/ShutterStock.com

The merger didn’t go exactly as planned, which has undoubtedly injected increased volatility into share prices. For better or worse, that has made TMC stock fodder for Twitter (NYSE:TWTR) meme stock proponents seeking to leverage their collective sway. 

But the truly interesting thing about The Metals Company is its business model. So let’s start there in understanding if TMC stock is worth investing in currently. 

Unique Battery Material Sourcing 

The Metals Company plans to source battery metals in what it believes to be the lightest touch method possible. The company is attempting to build a system to recover polymetallic nodules from the seafloor. 

Polymetallic nodules, aka manganese nodules, contain the four essential battery metals—cobalt, nickel, copper, and manganese—in a single ore. 

There are a few things which make seafloor polymetallic nodules unique. The ores themselves lie unattached to the seabed and are formed over millions of years. They absorb minerals from the seawater over these long periods of time.

The seafloor ores also differ from land ores in several important ways. Namely, their production results in 99% less solid waste than land ores and no toxic tailings. 

But the rub here is that The Metals Company is a young company developing battery metal production resources. 

If all goes to plan the returns could be massive. But of course, the opposite remains true. Choosing to invest in the company requires an understanding of the progress the company has made.

The Pilot Stage 

As I mentioned, The Metals Company is a young one. Very recently, on Sept. 24, the company released information related to its pilot processing project

The company’s onshore development team successfully segregated battery metals from seafloor nodules as a result of that project. The team was also able to separate manganese silicate which can be sold directly to the steel production market. 

It’s promising, but investors still need greater context to reasonably judge the company as an investment. So a good place to look is the company’s most recent quarterly report.

The Metals Company’s Financial Position

One of the clearest indications of the company’s operations can be found in this statement: 

“For the three and six months ended June 30, 2021, we had net (loss) income of ($17,175,554) and $14,694,066, respectively, which consisted primarily of ($13,705,000) and $21,175,000 for the three and six month periods respectively, related to the change in the fair value of the Company’s Warrants. The Company also incurred $3,475,137 and $6,490,059 of general and administrative expenses for the three and six month periods ending June 30, 2021.”

The most we can glean here is that TMC is inherently volatile. Its success hinges on the development of seafloor metal resources which will then potentially produce revenues and profits. 

The company does have rights to significant resources, but we really can’t say whether these will be profitable in the future or not. 

Verdict on TMC Stock

If the company is correct about the size of its resource base, it could become a major player in battery production. After all, the company did identify “more than 1.6 billion tonnes (wet) of nodules across two of its contract areas, containing battery metal resource sufficient for 280 million electric vehicles (EVs)—equivalent to the entire US passenger car fleet.”

But it’s very early in the game. Yes, TMC has proven that it can isolate metals from those ores. But investors have little idea of what that will equate to in revenues and profits in the longer term. 

I don’t see why TMC stock should rise immediately—it will take a long time to see results. So I wouldn’t invest now despite rosy projections that TMC will eventually rise above $20 per share.

On the date of publication, Alex Sirois did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Alex Sirois is a freelance contributor to InvestorPlace whose personal stock investing style is focused on long-term, buy-and-hold, wealth-building stock picks. Having worked in several industries from e-commerce to translation to education and utilizing his MBA from George Washington University, he brings a diverse set of skills through which he filters his writing.

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