Friday, October 1, 2021 | Jea Yu
Sustainable metals The Metals Company (NYSE: TMC) stock has recently surged as high as $15.39 and collapsed over (-60%) to present a discounted entry for risk-tolerant investors. This reverse merger business combination pre-special purpose acquisition companies (SPACs) was originally called Deep Green. The Company plans to collect electric vehicle (EV) battery materials from polymetallic nodules on the ocean floor. Commercial operations are expected to start in 2024, therefore making it a highly risky speculative play. Mining the ocean floor for these particles is something out of a science fiction movie and the company is still in the concept stage. The Company has an ESG theme and falls in line with the global decarbonization movement which may command a premium as shares continue to collapse. This is a concept and them play for now until it can actually generate any revenues in 2024. The worldwide growth in EV production and penetration will be critical towards the sentiment for this Company. Risk-tolerant investors willing to give this one time to play out to fulfill its objective to become the planet's cheapest nickel producer as a steward that ushers in mainstream EV battery production can look for an opportunistic pullback in shares.
The Metals Company
The concept behind The Metals Company is that there exists a dearth of polymetallic nodules on the ocean floor just waiting to be mined. This nodules are essential for the production of EV batteries. The Company is still in an early stage. The Company holds exploration and commercial rights to three zones (1.1 million square km) in the Pacific Ocean called the Clarion-Clipperton Zone (CCZ). The Metals Company anticipates 23 billion dry tonnes of nodules in the CCZ, which is enough total resource to electrify the entire global car fleet several times over, according to its Deep Green March 2021 Investor Presentation. In essence, there should be enough cobalt, copper, nickel, and manganese over 280 million EVs and be the lowest cost nickel producer in the world. The Company estimates it will start commercial production of battery materials in 2024 with an estimated $251 million in revenues that climbs to $3.68 billion in annual revenues in 2027, representing a 144% compound annual growth rate (CAGR). Most importantly, it will be sustainable. Whether this is too ambitious or optimistic, time will tell. The Company can naturally expand beyond just supply EV battery materials as it plans to become a major producer of metal products. While the Company missed the SPAC and EV bubble earlier in the year, it’s experiencing its own bubble burst currently with its plunging share price. Originally, the SPAC deal was to have a $2.9 billion valuation with The Metals Company receiving $570 million in cash, but institutional investors in the PIPE deal scaled back investment to only $110.1 million shares. The Company expects to receive only $137.3 million cash and waive the terms that the Company needed to receive at least $250 million for the deal to happen. With much less cash than anticipated, the prospects for a secondary offering sooner rather than later (more dilution) has caused shares to plunge. The objective is ambitious, and things make sense on paper, but only the more risk-tolerant should consider scaling into shares of this part mining and part EV play as the concept potential materializes into production.
TMC Price Trajectories
Using the rifle charts on the weekly and daily times frames enable a precision view on the price action for TMC stock. The weekly rifle chart has peaked out near the $15.53 Fibonacci (fib) level highs. Shares collapsed violently breaking down below the weekly 5-period moving average (MA) falling at $8.98. The weekly 15-period MA is falling at $9.62. The weekly lower Bollinger Bands (BBs) were surpassed at $6.91 on the plunge powered by the weekly stochastic mini inverse pup. The daily rifle chart has yet to form a market structure low (MSL) buy trigger until a higher low is made. The daily rifle chart has a downtrend with a falling 5-period MA at $7.12 followed by the 15-period MA at $9.65. The daily lower BBs are expanding lower at $4.77 powered by the daily stochastic mini inverse pup. The panic selling is creating a lot of bagholders on the way down, therefore, only risk-tolerant investors willing to scale into a pure speculation play should even consider the opportunistic pullbacks levels at the $4.77 daily lower BBs, $4.52 sticky 5s, $3.99, $3.34 fib, and the $2.41 fib.