A Reality Check on TMC’s U.S Gambit

This April, a small Canadian start-up The Metals Company (TMC) caused international outrage by applying to the United States (U.S.) to mine the deep seabed. Several different companies have already applied to explore, and sometimes mine, in national and international waters. However, this application caused alarm  because it is proposing deep sea mining (DSM) unilaterally in international waters.

For all the outrage generated, there is however one key question – what are the chances that TMC will be granted a U.S. licence to start mining? TMC has a well-documented history  of over-promising and under-delivering. To answer that question the Deep Sea Mining Campaign (DSMC) have published a briefing paper, which provides a reality check on the likelihood of TMC swiftly gaining U.S. permission to mine in international waters.

Read the full briefing: Shifting Tides, The Metals Company U.S. Pivot.

A Fractured Regulatory Landscape

The International Seabed Authority (ISA) is the multilateral body that is mandated to manage mineral resources in international waters. It was set up under the United Nations Convention on the Law of the Sea (UNCLOS) and has issued 31 contracts for exploration in the world’s oceans, including to TMC via its sponsoring states of Nauru and Tonga. 

However, the ISA has yet to finalise the regulations that would enable DSM mining. The 170 State parties are still negotiating these, with important environmental management, financial and liability questions unresolved. 

The U.S. has never ratified UNCLOS and so claims a unilateral right to issue DSM licenses. U.S. interest in DSM has been fuelled by the return of Donald Trump to the White House, and his vision for American self-sufficiency in minerals. This April the President issued an executive order aimed at making it easier for U.S. companies to mine the deep seafloor, both in its own national and in international waters. 

TMC, which has claimed credit for much of the pro-DSM sentiment in the Trump Administration, took advantage of this with its U.S. subsidiary applying for two exploration licenses and one commercial recovery permit a week after the executive order. TMC has claimed this is a response to ISA procrastination, and has boasted to investors that this gives them the surety they were previously lacking with the ISA. The truth is very different.

Complex, Slow, and Legally Fragile

Far from providing surety, the U.S. process is complex and untested. Shifting Tides explores the process, noting that even without bureaucratic delays – including requests for further information – the process will take at least 18 months. This doesn’t even consider potential legal challenges, which are made more likely by both the novel process and proposed changes to the process that are simultaneously happening because of executive requests for streamlining. 

TMC also has a big problem with getting a commercial recovery permit, because this can only be granted to an applicant who has a current U.S. exploration license, and TMC only has a licence issued by the ISA. There may be governmental pressure to find a ‘quick fix’ to this problem, but any such fix is likely to invite legal objections.

TMC’s own legal filings at the Security Exchanges Commission (SEC) acknowledge the above uncertainty, as well as their dependence on political support in Washington; any bureaucratic or legal delays are problematic for TMC beyond just cash flow, because of their reliance on political support from the current Presidency. 

The filings also recognise the potential for regulatory and legal conflict with the ISA, as well as the potential for ISA member states to deny legal recognition of a U.S. permit. The legal filings note that “UNCLOS parties and the ISA are under a legal obligation … not to recognize any commercial recovery permit issued to us [by the US Government, which …] could have implications for logistics, processing, and market access.”

Finally, Shifting Tides notes that even if TMC obtains a license to mine it is not clear that the project will be profitable. Analysis of recent TMC documents question the methodology used to calculate income and expenses, with dubious assumptions, including that there will be no royalties payable to the U.S.

A Quote from Shifting Tides

“TMC’s pivot does not guarantee progress toward mining; it instead introduces new political, legal, and reputational risks as the

company operates under an untested national regime.”

Read the full briefing: Shifting Tides, The Metals Company U.S. Pivot.

A Solution to a Problem That Doesn’t Exist

It is worrying that the move by the U.S. Government to bypass multilateral processes, and TMC’s opportunistic grasping of that opportunity, lay bare concerning regulatory and legitimacy gaps in global DSM governance. 

DSM is an idea that needs to justify itself. UNCLOS notes that mining in international waters must benefit (hu)mankind as a whole. The companies promoting DSM, like TMC, have previously argued that they will provide metals for the energy transition. Those arguments have been refuted, and so TMC has allied itself with a vision of mining the high seas for U.S. security; to supply the U.S. with metals for its re-industrialisation and for national security reasons. It is difficult to see how these arguments can benefit of (hu)mankind as a whole.

Also, of concern is how much the tail is wagging the dog. TMC, like other would-be seabed miners, is a small speculative venture. Yet they boast about how their lobbying has created this market for DSM, even when there are questions as to whether TMC will provide the U.S. Government with the critical minerals it really needs. As an Op-Ed in Newsweek noted, “deep-sea mining is not the answer to a mineral security crisis – it’s a solution to a problem that does not exist.” 

Tight Cashflow and a High-Risk Bet

TMC, as a small start-up company, has once more been forced to take a big risk in circumventing an agreed international process it had until recently engaged in, primarily because of the time constraints caused by its tight cash flow. 

Their international mining application via the U.S. is a reminder to investors what a high-risk industry DSM is. Similar players to TMC, such as Nautilus Minerals and Loke Marine Minerals have gone bankrupt as their financial limitations hit the buffers of technical, financial and bureaucratic reality. The U.S. is taking a big risk for little reward.

Read the full briefing: Shifting Tides, The Metals Company U.S. Pivot.