Greens question the financial disclosures of deep-sea miners

Transparency and environmental advocates worry that a company that promises to extract metals from the ocean floor is misleading investors through financial disclosures.

The Canadian company DeepGreen Metals Inc. wants to dig 3 miles below the surface of the Pacific Ocean to collect potato-sized rocks from the seabed containing nickel, cobalt, copper and manganese, all of which are major components of electric vehicle batteries.

In March, DeepGreen announced plans to go public from Nasdaq by merging with an already publicly traded shell company known as a special-purpose acquisition company.

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

Greenpeace and other groups say DeepGreen did not come forward in their disclosures to the U.S. Securities and Exchange Commission about the potential environmental impacts of deep-sea mining.

And the Campaign for Accountability, a transparency nonprofit, told the SEC yesterday that the company has not disclosed material background and litigation history of DeepGreen’s leadership.

DeepGreen, which will be known as The Metals Co. after its IPO, says seabed mining is the most sustainable way to extract metals for clean energy technologies.

It has three contracts to survey the ocean floor, issued by the International Seabed Authority, a Jamaica-based UN agency that is drafting the first-ever international deep-sea mining regulations.

DeepGreen says its exploration areas, sponsored by the Pacific countries of Nauru, Tonga and Kiribati, contain enough tubers to electrify 280 million EVs, or a quarter of the world’s passenger fleet. A polymetallic nodule is a battery in a rock, it says.

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

Our primary concern is that DeepGreens’ untested plans to mine the bottom of the deep ocean pose enormous environmental risks, and the company’s statements about how it will manage these risks are not credible, the letter says.

The nodules that lie on the seafloor have their own ecology, the groups say. Formed over millions of years, any disruption to these ecosystems by sucking up rocks with a vacuum-like machine could cause species, some undiscovered, to become extinct, the groups warn.

Hundreds scientists and major businesses as BMW Group and Google have called for a moratorium on deep-sea mining until more is known about the environmental impact of practices (green wire, March 31st).

DeepGreen did not respond to a request for comment. The company states 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 countries move away from fossil fuels.

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

On June 22 filing securitiesTwo months after the initial disclosures, DeepGreen told investors it’s unclear how its company could impact the environment, as much of the area it plans to mine is unexplored.

Effects on biodiversity and the ocean ecosystem can, and may never be, fully and definitively known, the company said.

A checkered past

Campaign for Accountability explored the history of DeepGreen’s leaders, including CEO Gerard Barron, in its complaint to the SEC yesterday.

The nonprofit said DeepGreen had not disclosed Barron’s role in Windward Prospects Ltd., a company that went bankrupt while responsible for cleaning up a river in Wisconsin polluted by a paper mill.

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

Documents in the case indicated last December that Windward managers were investigating the wine portfolio and trying to recover as much of the DeepGreen investment as possible for creditors.

Campaign for Responsibility questioned DeepGreen’s statement to the SEC that there are currently no pending material lawsuits, arbitration or governmental proceedings involving the company’s leaders.

Michelle Kuppersmith, executive director of Campaign for Accountability, said the information about whether DeepGreen will be a top-down player is relevant to the SEC, which has not yet approved the public listing.

It is deeply disturbing that the potential CEO of this company has such a troubled past running a business that was supposed to be doing environmental cleanup. Instead, it bought $2 million worth of wine, Kuppersmith said.

But Andrew Park, a senior policy analyst at Americans for Financial Reform, said the omission of past company bankruptcy information in SEC disclosures is generally acceptable. He noted that he was not well acquainted with this particular case.

You sure can. It’s basically selective secrecy, right? There’s nothing wrong with that, Park said.

SPAC bonanza

DeepGreen plans to go public through a merger with Sustainable Opportunities Acquisition Corp. (SOAC). The resulting entity, The Metals Co., will be worth an estimated $2.9 billion, the company says.

SOAC is known as a blank check firm or a Special Purpose Acquisition Company (SPAC). They are publicly traded shell companies that typically have two years to buy a separate company that is focused on the interests of their investors.

SPAC mergers have become extremely popular, even surpassing traditional public offerings as a way to enter the stock market, Park said.

The reason the SPAC route is popular is because it’s an attractive way for them to raise money for many companies with pre-revenue, so companies that don’t yet have a fully up-and-running business model, he said.

Going public through a SPAC merger is also beneficial, as less stringent regulatory guidelines allow companies to make speculative predictions about their future success. Companies gain much more control if they go the traditional first public offering route, Park said.

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

DeepGreen said in its first SEC disclosure it expects to be able to generate revenue from 2024 if the International Seabed Authority completes regulations and issues mining licenses.

Kuppersmith said DeepGreen’s SPAC merger caught the attention of her organization.

Deep green [is] using two almost experimental tactics. One, deep-sea mining, and two, SPACs, Kuppersmith said.