Sunday, September 26 2021

Transparency and environmental advocates fear that a company promising to extract metals from the ocean floor will mislead investors with its financial disclosures.

Canadian company DeepGreen Metals Inc. wants to dive 3 miles below the surface of the Pacific Ocean to collect rocks the size of a potato from the seabed that contain nickel, cobalt, copper and manganese, all of which are key components in electric vehicle batteries.

In March, DeepGreen announced its intention to go public on the Nasdaq by merging with an already listed shell company known as the Special Purpose Acquisition Company.

The increasingly popular process allows speculative firms that have never generated income to access the stock market while avoiding some of the regulatory hurdles associated with a traditional IPO.

Greenpeace and other groups say DeepGreen has not been clear about the potential environmental impacts of deep-sea mining in their disclosures to the United States Securities and Exchange Commission.

And the Campaign for Accountability, a nonprofit transparency organization, told the SEC yesterday that the company had not disclosed “important background information and criminal records” of the management of DeepGreen.

DeepGreen, which will become The Metals Co. after its public listing, says seabed mining is the most sustainable way to source metals for clean energy technology.

He has three contracts to explore the seabed issued by the International Seabed Authority, a United Nations body based in Jamaica that drafts the first international rules on deep-sea mining.

DeepGreen says its exploration areas, sponsored by Pacific nations Nauru, Tonga and Kiribati, contain enough nodules to electrify 280 million electric vehicles, or a quarter of the world’s passenger fleet. A polymetallic nodule is “a battery in a rock,” he says.

In one complaint to the SEC earlier this month, Greenpeace, the Deep Sea Conservation Coalition and Global Witness said DeepGreen downplayed potential environmental impacts and “threatened to mislead the investing public about the company’s future profitability.” .

“Our main concern is that DeepGreen’s untested plans to mine the deep ocean floor pose enormous environmental risks, and that the company’s representations of how it will be able to manage those risks lack credibility.” , indicates the letter.

The nodules lying on the seabed have their own ecology, the groups say. Formed over millions of years, any disruption of these ecosystems by sucking up rocks with a vacuum machine could lead to the extinction of species – some of which may still be unknown – the groups warn.

Hundreds of scientists and major companies like BMW Group and Google have called for a moratorium on deep seabed mining until more is known about the environmental impact of this practice (Green wire, March, 31st).

DeepGreen did not respond to a request for comment. The company argues that extracting minerals from the seabed is less harmful than traditional mining and will be a crucial source of metals that could become scarce as nations turn away from fossil fuels.

“Mainstream brands that refuse to consider alternative mineral sourcing will be complicit in increased deforestation, toxic residues, child labor (in the case of cobalt) and destruction of terrestrial habitats and carbon sinks.” , the company said. wrote in response to calls for a moratorium.

In a June 22 securities deposit, two months after its initial disclosures, DeepGreen told investors it is not clear how its business could affect the environment, as much of the area it plans to mine is unexplored.

“The impacts on biodiversity and the ocean ecosystem cannot, and may never be, fully and definitively known,” the company said.

“A turbulent past”

Campaign for Accountability examined the stories of DeepGreen executives, including CEO Gerard Barron, in his complaint to the SEC yesterday.

The nonprofit said DeepGreen did not disclose Barron’s role in Windward Prospects Ltd., a company that went bankrupt while tasked with cleaning up a paper mill polluted Wisconsin river.

Barron acquired a stake in Windward in 2013 and served as a director of the company until 2019, according to the complaint. Windward invested $ 7.9 million in DeepGreen, as well as a collection of fine wines that were subsequently sold at a loss of $ 2 million, according to bankruptcy cases United Kingdom.

Case documents said last December that Windward directors were investigating the wine portfolio and trying to recoup as much of the DeepGreen investment as possible from creditors.

Campaign for Accountability questioned DeepGreen’s statement to the SEC that “there is currently no litigation, arbitration or government proceeding pending” involving company executives.

Michelle Kuppersmith, executive director of Campaign for Accountability, said information on whether DeepGreen will be an “outboard player” is relevant to the SEC, which has yet to approve the public listing.

“It is deeply concerning that the potential CEO of this company has such a checkered past with the management of a company that was supposed to be doing environmental remediation work. Instead, he was buying $ 2 million worth of wine, ”Kuppersmith said.

But Andrew Park, senior policy analyst at Americans for Financial Reform, said omitting information about previous company bankruptcies from SEC disclosures is generally acceptable. He noted that he was not intimately familiar with this particular case.

“You sure can. This is essentially a selective non-disclosure, isn’t it? There’s nothing against it, ”Park said.

PSPC Deal

DeepGreen plans to go public through merger with Sustainable Opportunities Acquisition Corp. (SOAC). The resulting entity, The Metals Co., will have an estimated valuation of $ 2.9 billion, according to the company.

SOAC is known as a “Blank Check” or Special Purpose Acquisition Company (SPAC). These are publicly traded shell companies that typically have two years to purchase a separate company focused on the interests of their investors.

SPAC mergers have exploded in popularity, overtaking even traditional public offerings as a way to go public, Park said.

“The reason the PSPC route is popular is that for many pre-income type businesses – so businesses that don’t yet have a fully operational business model – it is an attractive way for them to raise funds, ” he said.

Going public through a PSPC merger is also advantageous because more lax regulatory guidelines allow companies to make speculative predictions about their future success. Companies face much more scrutiny if they go the traditional route of the initial public offering, Park said.

“Being able to use these very optimistic forward-looking statements is part of their marketing. This is how they can attract investors, ”he said.

DeepGreen said in its initial SEC disclosure that it “expects to be able to generate revenue from 2024” if the International Seabed Authority finalizes regulations and issues mining permits.

Kuppersmith said DeepGreen’s SPAC merger is what caught his organization’s attention.

“Deep green [is] using two almost experimental tactics. One, deep sea mining and two, PSPC, ”said Kuppersmith.


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