The Metals Company and Low Carbon Royalties form strategic partnership
22 February 2023
Deepsea mining company TMC The Metals Company (earlier post) announced a strategic partnership with Low Carbon Royalties Inc. to finance the development and production of low-carbon fuels and energy transition metals. TMC and LCR have agreed to a purchase and sale agreementwhereby LCR has acquired a 2.0% gross overriding royalty on any future revenue derived from TMC’s NORI area in the Clarion Clipperton Zone of the Pacific Ocean.
In consideration for the NORI Royalty, TMC received a 35.0% strategic equity interest in LCR and US$5,000,000 cash. TMC will retain 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, LCR’s remaining gross overriding royalty on the NORI project revenue will be 0.5%.
The NORI Royalty has been added to the LCR portfolio that contains a 1.6% gross overriding royalty on a producing natural gas field in Latin America, providing exposure to a lower-carbon transition fuel aligned with government emissions reduction policies.
NORI and Low Carbon Royalties are a great fit. As the world’s #1 largest undeveloped nickel project, NORI can move the needle on energy transition metals both in terms of volume as well as low carbon cost of production, and the NORI Royalty can become the cornerstone asset as LCR builds its portfolio of other royalty streams in the coming years.
In the short term, this strategic partnership with LCR helps us progress the development of the NORI-D project by bolstering our cash balance without issuing new equity in TMC. In the coming years, LCR has the potential to be an important additional source of capital to bring NORI-D and other TMC projects into production. This transaction also offers TMC shareholders exposure to a royalty company that I am confident under Brian’s leadership will become a market leader.
—Gerard Barron, Chairman and CEO of The Metals Company
The world’s transition to a low-carbon future requires a generational change in our energy production and infrastructure. An unprecedented ramp-up in metal production and other low carbon energy sources is needed to enable this shift. However, relative to other parts of the value chain, global investment in mining of energy transition metals is lagging.
We believe TMC’s polymetallic nodules offer a promising low-carbon alternative source of energy transition metals. We are not naïve to the potential risks of pioneering new industries such as deepsea minerals and we are closely following NORI’s ongoing assessment of environmental and social impacts of their offshore operations. We applaud companies like TMC who strive to set a new standard in the metals industry by investing heavily in data and consultation to make informed decisions inclusive of all stakeholders. Our extensive experience in building, developing and financing natural resource assets and companies allows us to consider trade-offs of resource projects thoughtfully. We think TMC’s NORI project could provide a meaningful supply of energy transition metals and we are excited to serve as a source of long-term capital to TMC’s projects.
—Brian Paes-Braga, Chairman and CEO of Low Carbon Royalties
The Metals Company is an explorer of lower-impact battery metals from seafloor polymetallic nodules, on a dual mission: (1) supply metals for the clean energy transition with the least possible negative environmental and social impact and (2) accelerate the transition to a circular metal economy.
The company through its subsidiaries holds exploration and commercial rights to three polymetallic nodule contract areas in the Clarion-Clipperton Zone of the Pacific Ocean regulated by the International Seabed Authority and sponsored by the governments of Nauru, Kiribati and the Kingdom of Tonga.
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