I Wouldn't Touch The Metals Company Yet -- Here's the One Number I'm Waiting On

The United States desperately needs to secure critical minerals and reduce reliance on Chinese-sourced supplies, and TMC The Metals Company (NASDAQ: TMC) is one mining company looking to fill that gap. The company is exploring deep-sea mining, which could unlock a wealth of critical metals crucial to many of today's modern technologies.

TMC is seeking regulatory approval to start commercial mining operations in the Pacific Ocean, which could be a massive catalyst for the stock. That said, the company is still in its early stages and isn't an ideal pick for most investors right now. Here's one number investors should watch closely to gauge whether TMC stock is a buy.

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Keep an eye on this production volume metric

For prospective TMC investors, the metric to monitor closely is wet tonnes per year, which the company uses to measure its long-term production volume target. Specifically, TMC is targeting 3 million wet tonnes of polymetallic nodules per year. That's the production capacity of the company's commercial collection system with Allseas.

With that in mind, deep-sea mining is no easy feat. For one, there is no regulatory precedent for deep-sea mining. Under the UN Convention on the Law of the Sea (UNCLOS), the International Seabed Authority (ISA) regulates international waters.

However, the U.S. is not a party to UNCLOS and is not a voting member of the ISA. Instead, the U.S. is relying on the Deep Seabed Hard Mineral Resources Act (DSHMRA), which authorizes the National Oceanic and Atmospheric Administration (NOAA) to issue deep-sea exploration licenses and commercial recovery permits to U.S. corporations in international waters.

In addition, the deep ocean is a harsh environment that requires specialized, heavy-duty machinery that can operate at depths of 11,000 to 18,000 feet and withstand the high pressure and near-freezing temperatures of those depths. Processing the resource-rich polymetallic nodules also requires specialized equipment with high initial capital costs, and it has not yet been done at a commercial scale.

Look ahead to what's next for TMC

Looking ahead, TMC is still awaiting final approval from NOAA for its deep-sea commercial mining permit. The company projects that this regulatory review could be completed by the first quarter and hopes to begin commercial mining as soon as the fourth quarter of 2027.

TMC's partner, Allseas, redesigned the offshore system to use two subsea collector vehicles alongside the Hidden Gem production vessel, and it hopes to hit the ground running at 3 million wet tonnes per year. Longer term, TMC projects it could expand to 10.8 million wet tonnes per year by 2031.

TMC is forging its own path to help the U.S. secure domestically sourced critical minerals, and deep-sea mining could provide vast resources if it proves successful. The company's initial undiscounted assessment estimates the potential for $369 billion in total revenue and over $200 billion in earnings before interest, taxes, depreciation, and amortization (EBITDA) over the life of the project.

TMC's upside is huge, but so is the risk, and investors should proceed with caution until the company proves it can mine the deep sea at scale.

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.