TMC The Metals Company (TMC -3.20%) is a money-losing start-up in the mining industry. However, it is a particular focus that sets it apart from other miners, as it aims to build and operate a deep-sea mining operation. There are notable positive developments, but investors need to recognize how much work remains to be done.
The Metals Company is an industry cheerleader
When The Metals Company received word that its application to NOAA was in substantial compliance, it trumpeted the news. Only, substantial compliance just means NOAA didn't require the company to make revisions before it started considering that application. Sure, that's good news. But it says little about whether the application will be approved or not.
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But The Metals Company has a vested interest in highlighting every piece of good news it can. Which is why the agreement between the United States and Japan to cooperate on deep-sea mining is also being talked up by The Metals Company's CEO. It is most certainly a positive development for deep-sea mining, but it doesn't change the near-term challenges the company faces.
You have to be in for the long haul with The Metals Company
Building a mining operation is expensive, time-consuming, and difficult. Building a mining operation underwater is even more expensive, time-consuming, and difficult. And The Metals Company is still nowhere near the point where it will produce material revenues. In fact, the income statement starts with expenses now because The Metals Company isn't generating any revenue. It is just spending money in the hope that it will eventually build a deep-sea mining business.
NASDAQ: TMC
Key Data Points
And yet, the stock has risen by 150% over the past year. However, it is equally notable that the stock is down more than 50% from its 52-week high. Emotions and newsflow appear to be driving The Metals Company's share price. That suggests that investors need to tread with caution and think long-term if they buy the stock.
Yes, good things are happening
It is certainly good news that the United States and Japan are going to cooperate around deep sea mining. However, The Metals Company still has to build its deep-sea mining operation even after it receives final regulatory approval. And that will be a costly, difficult, and time-consuming effort. At the end of the day, positive news is good, but The Metals Company is likely to remain a money-losing start-up for at least several more years, if not longer. You shouldn't buy it if you aren't prepared to hold it through the start-up process and through both good and bad industry news.
