This Ocean Mining Stock Just Got a Green Light From NOAA. Is it a Buy?

The United States is taking aggressive measures to reduce its heavy reliance on foreign nations for critical minerals and rare-earth elements. Research from The Motley Fool paints a concerning picture: China holds a near-monopoly over rare-earth elements, accounting for 70% of the extraction and 90% of the processing of these important resources. To counter this, the U.S. is investing heavily in revitalizing its domestic supply chains and exploring ocean-floor mining.

TMC The Metals Company (NASDAQ: TMC) is a company leading the charge and recently received an important regulatory green light to move forward with its ocean mining business. Here's what that means for the stock.

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NOAA recently approved TMC's expanded ocean-mining exploration license

In May, the National Oceanic and Atmospheric Administration (NOAA) formally certified TMC's USA B exploration license application for deep-sea activities. This approval covers the exploration of an additional 122,000 square kilometers in the ocean and is in addition to its USA A application, which covered the exploration and commercial recovery of a separate 65,000 square kilometer area.

This approval allows TMC to move forward with plans to explore this massive underwater territory on the Pacific Ocean seafloor between Mexico and Hawaii. The company's assessment estimates that this region could hold over 1 billion tonnes of polymetallic nodules, which are small rocks packed with valuable materials such as nickel, cobalt, copper, manganese, and rare-earth elements, all of which are crucial for electric vehicles, defense technologies, and other applications.

Now that the application is certified, NOAA will begin preparing an Environmental Impact Statement to evaluate how the proposed exploration activities might affect the deep-sea ecosystem. This EIS will include public comments and will be subject to intense scrutiny regarding sediment plumes, benthic toxicity, and biodiversity loss.

Deep-sea mining faces significant hurdles

TMC's certification from NOAA is a positive step forward, bringing it one step closer to mining the ocean floor for critical minerals and other rare-earth elements. That said, the project could face some significant scrutiny from environmental groups, who are concerned that deep-sea mining could cause permanent damage to ocean biodiversity.

In addition, the approach of using NOAA to approve deep-sea mining is facing scrutiny. Historically, operations in international waters are governed by the UN-backed International Seabed Authority, which has been slow-rolling approval of deep-sea mining, leading the U.S. to take an alternative approach.

TMC is still in its very early stages as a pre-revenue enterprise. The recent regulatory approval from NOAA is a step in the right direction, but the company still faces several hurdles before it can even begin mining the ocean floor.

Given the risks and potential difficulties of commercial deep-sea mining, most investors are best off watching TMC stock from the sidelines to see how the situation unfolds over the next couple of years.

Courtney Carlsen has positions in TMC The Metals Company. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.