TMC The Metals Company Is Poised to Surge: 2 Catalysts That Could Drive Gains Over the Next Year
TMC The Metals Company is the epitome of a speculative small-cap mining stock, but it could reward risk-tolerant investors.
By Todd Shriber
The landscape of mining stocks is often a study in contrasts. There are large, well-heeled multinational companies with established, even somewhat dependable business models, growing mid-tier players aspiring to join the top ranks, and smaller, often volatile mining outfits focused on extracting critical minerals or precious metals.
On the really, really speculative side of the ledger, there are companies such as TMC The Metals Company (TMC 5.39%), a Canadian company focusing on deep-sea extraction of small nodules rich in critical minerals.
This sounds like an interesting story because it is one. While this stock isn't for the squeamish, it could reward investors with a flair for risk -- emphasis on "could."
Catalyst No. 1: Any tangible form of progress
Since its 2020 initial public offering (IPO), TMC has shed 47%, and the stock is off 24% over the past year. Compounding those woes is the point that this is just a $2.2 billion company, which arguably amplifies the speculative posture. As one of my Foolish colleagues points out, TMC is a money-losing, pre-revenue company.
Attributes like those compel many investors to take passes, and that speaks to the need for TMC to show, not tell. Some of that progress has already been achieved. In late May, the National Oceanic and Atmospheric Administration (NOAA) signed off on a TMC application to probe a 122,000-square-kilometer region of the Pacific Ocean for critical minerals.
That catalyst is accounted for, but that approval is meaningful in at least two ways. First, if TMC lands another related approval for another part of the Pacific (or any other ocean, for that matter), the stock may be in for a nice short-term pop.
Second, and perhaps more importantly, if TMC can prove to investors that it is making progress in the area where it landed the NOAA approval -- getting close to extracting nodules from the ocean floor -- the stock could surge because the company would be showing investors that it's on to something, and that it can execute.
TMC proving it has the goods is vital because it is addressing a segment with multi-billion-dollar potential, but investors need more than hope. They need and want results.
Catalyst No. 2: More government support
Government meddling in private enterprise is often viewed negatively, but in the case of TMC, the U.S. government is a viable catalyst. So, yes, I'm ringing the bell on a known quantity here, but it bears repeating.
The White House has made it clear that it wants to loosen China's stranglehold on the global rare-earth market and the country's control of other critical minerals. One way to do that is to expedite mining approvals for companies such as TMC, as the Commerce Department has done.
As with the broader TMC thesis, it's speculative whether the U.S. government will increase its involvement to aid this company and its peers. However, it may happen, and if it does, it will likely be a rally starter for this materials stock.