Exploration Licenses | 4. Exploration Licenses Significant Exploration Agreements NORI Exploration Contract: The Company’s wholly -owned 2 NORI has a right to renounce, without penalty, the whole or part of its rights in the exploration area at any time and therefore doesn’t have a fixed commitment with relation to the NORI License (Note 9) Marawa Agreements: On March 17, 2012 the Company’s wholly -owned As at June 30, 2021, Marawa had no amounts owing to DGE under the Marawa Services Agreement (defined below) and no purchase tenements had been granted to Marawa. On October 1, 2013, DGE entered into a services agreement (the “Marawa Services Agreement”) with Marawa and the State, which grants the Company the exclusive right to carry out all exploration and mining in the Marawa Area. Under this agreement DGE will pay to the ISA on behalf of Marawa the following dues: $47,000 annual exploration fees, the ISA royalty and taxes and the ISA exploitation application fee of $250,000. Also, DGE will ensure that the activities carried out in the Marawa Area by DGE and any other service contractor complies with the ISA regulations and any other required regulations. The Marawa Area is situated in close proximity to the 74,830 km 2 The Marawa Services Agreement grants DGE the right to recover any and all polymetallic nodules from the Marawa Area by paying the Republic of Kiribati a royalty per wet tonne of polymetallic nodules (adjusted for inflation from October 1, 2013 onwards). DGE has the right to terminate the Marawa Services Agreement at its sole discretion by giving written notice to Marawa and the State, and such termination shall take effect two months following the date of the termination notice, provided that DGE shall pay to the ISA on behalf of Marawa the fees or payments legally owed to the ISA by Marawa (including the annual ISA exploration fee and ISA royalties and taxes) that are outstanding at the date of termination or that are incurred within 12 months after the date of such termination. There are no other longer -term TOML Exploration Contract: The Company’s wholly -owned 2 Strategic Partnerships Marine Vessel Services: Effective March 15, 2017, the Company entered into a strategic partnership with Maersk to undertake the exploration, environmental base line and offshore testing required to support development of feasibility studies for economic production of polymetallic nodules from the CCZ. Under the agreement, Maersk provides marine vessel services and project management services, enabling DeepGreen to undertake the various marine cruises to support required prefeasibility studies. During these marine cruises DeepGreen undertook baseline studies required to complete an Environmental and Social Impact Assessment (“ESIA”), collected nodules for metallurgical test work and collected samples for resource evaluation. Up until February 5, 2021, the costs related to the marine vessel use was settled through DeepGreen Common Shares, the number of which was based on a contractual price of $1.25 per Common Share. Project management services provided by Maersk are paid in cash. Year of Service Invoiced amount Contractual Common # of Fair value of (1) Cost 2017/2018 2,565,500 1.25 2,052,400 0.75 1,539,300 2018 4,593,828 1.25 3,675,062 1.75 6,431,359 2019 5,615,480 1.25 4,492,384 3.60 16,172,582 2019/2020 5,120,013 1.25 4,096,011 3.60 14,745,639 2020/2021 (2) 4,582,834 1.25 3,666,267 7.00 25,663,869 22,477,655 17,982,124 64,552,749 __________ (1) The fair value of the Company’s Common Shares was determined based on the private placements completed around the time of Common Share issuances to Maersk, including the application of weighted average probability for the closing of the Business Combination. (2) During the six months ended June 30, 2021, the Company issued 3,666,267 Common Shares to Maersk of which, 3,577,516 pertained to the marine vessel use during the year ended December 31, 2020. These Common Shares were recognized at their estimated fair value of $7.00 (December 31, 2020 — $3.60 per Common Share). As at June 30, 2021, Maersk owned 17,982,123 Common Shares of the Company which constituted 10.53% of the total Common Shares outstanding. Maersk is considered a related party to the Company. Total cost incurred to Maersk for marine campaigns during the six months ended June 30, 2021 amounted to $22,056,802 (June 30, 2020 - $15,547,941). On March 4, 2021, the agreement with Maersk was amended whereby all costs incurred from February 5, 2021 pertaining to the use of the marine vessel would be paid in cash rather than through issuance of the Common Shares of the Company. The amended agreement is in place until early 2022, at which point the parties will finalize the potential offshore engagement beyond 2022. As at June 30, 2021, amount payable to Maersk was $5,904,606 (December 31, 2020 - $1,829,268). Pilot Mining Test Project On March 29, 2019, DeepGreen and Allseas entered into a strategic alliance to conduct a Pilot Mining Test System (“PMTS”), the successful completion of which would aid DeepGreen’s application for an exploitation contract with the ISA. Under the terms of this strategic alliance, Allseas subscribed for 6,666,668 Common Shares of DeepGreen for a total of $20,000,000 in cash (received during the year ended December 31, 2019) and in consideration for a successful PMTS, DeepGreen committed to paying Allseas $30,000,000 in cash and further issuing 10,000,000 Common Shares (with a contractual price of $3.00 per share) for an additional anticipated cost of $30,000,000 to Allseas. This additional payment is contingent upon successful delivery of the PMTS. Allseas will cover all the development cost of the project and will own all intellectual property used and generated in the development of the PMTS. Upon successful completion of the PMTS, DeepGreen and Allseas have also agreed to enter into a nodule collection and shipping agreement whereby Allseas will provide production services for the production of the first 200 million metric tonnes of polymetallic nodules on a cost plus 50% profit basis. DeepGreen and Allseas can terminate the strategic alliance without cause at any time subject to the following: • • • Upon termination without successful commissioning of the PMTS, Allseas will be compelled to either (at Allseas’ sole election): • • The fair value of the Company’s Common Shares at the time of the initial subscription of $20,000,000 by Allseas was determined to be $1.75 per Common Share, based on the recent private placements completed by the Company at the time. As a result, the difference between the fair value and the total proceeds of $8,333,335 (i.e. $1.25 per Common Share) was considered to be an additional initial contribution by Allseas during the year ended December 31, 2019. During 2020, the PMTS agreement was amended and DeepGreen paid an additional $10,000,000 in cash and issued 2,777,778 common shares valued at $3.60 per share for an additional $10,000,000 to allow for higher costs that had been incurred by Allseas. The expense related to the payment and issuance of shares was offset by the additional initial contribution by Allseas received in 2019. During the year ended December 31, 2020, Allseas subscribed for an additional 2,777,778 Common Shares for cash proceeds of $10 million. On March 4, 2021 and June 30, 2021, DeepGreen entered into an amended agreement with Allseas (the “Amendment #3 and “Amendment #4”, respectively”) whereby, upon successful completion of the Business Combination (Note 1), instead of issuing 10 million Common Shares to Allseas in connection with the PMTS, DeepGreen issued to Allseas, on March 4, 2021, a warrant to acquire 10 million DeepGreen Common Shares at a nominal value (the “Allseas Warrant”). The Allseas Warrant will vest and become exercisable upon successful completion of the PMTS and will expire on September 30, 2026. There are vesting conditions associated with the Allseas Warrant whereby a maximum of 10 million DeepGreen Common Shares would be issued if the PMTS is completed by September 30, 2023, gradually decreasing to 5 million DeepGreen Common Shares if PMTS is completed after September 30, 2025. The Allseas Warrant was assumed by SOAC at the closing of the Business Combination (Note 1) to become a warrant to purchase TMC common shares, adjusted for the exchange ratio for the transaction. If the market price of the TMC common shares on June 1, 2022 is higher than $15 per share (as adjusted based on the exchange ratio for the closing of the Business Combination), the aggregate value of the shares underlying the warrant above $150 million as at June 1, 2022 will automatically become a commercial credit from Allseas to TMC equal to the excess value. This commercial credit will be effective on the vesting date of the Allseas Warrant and the Company will be able to exchange this excess value for any future goods and services from Allseas under the nodule collection and shipping contract for one year after commercial production. The cash payment of $30 million in the original agreements was also amended to be paid as follows, provided that the Business Combination is completed: • • • As at June 30, 2021, Allseas has successfully reached the progress milestone for the construction of the collector vehicle and confirmed the order of the required equipment. The Amendment #3 and Amendment #4 became effective upon the completion of the Business Combination and will be payable within 10 days of the closing of the Business Combination (Note 12). As at June 30, 2021, Allseas owned 12,222,224 Common Shares of the Company which constituted 7.15% of total Common Shares outstanding. Exploration Expenses The breakdown of exploration expenses was as follows: For the six months period ended June 30, 2021 General NORI License Marawa Option TOML Total Exploration expenses Exploration labour — 846,167 353,119 338,382 1,537,668 Marine cruise — 16,883,359 2,053,866 2,053,866 20,991,091 Common Share options-based payments (Note 7) — 15,824,192 6,455,350 6,332,012 28,611,554 Amortization — 193,846 — 2,234 196,080 External consulting 511 2,084,525 419,941 446,390 2,951,367 Travel, workshop and other — 249,790 92,837 105,649 448,276 511 36,081,879 9,375,113 9,278,533 54,736,036 For the six months period ended General NORI License Marawa Option TOML Total Exploration expenses Exploration labour — 748,548 384,537 143,068 1,276,153 Marine cruise — 11,785,427 2,524,460 510,121 14,820,008 Pilot Mining Test — 9,333,333 1,166,667 1,166,666 11,666,666 Common Share options-based payments (Note 7) — 116,533 83,822 — 200,355 Amortization — 277,870 — 2,127 279,997 External consulting 20,550 1,537,775 337,650 236,455 2,132,430 Travel, workshop and other — 572,424 173,064 66,896 812,384 20,550 24,371,910 4,670,200 2,125,333 31,187,993 | 8. Exploration Licenses Significant Exploration Agreements NORI Exploration Contract: The Company’s wholly -owned 2 NORI has a right to renounce, without penalty, the whole or part of its rights in the exploration area at any time and therefore doesn’t have a fixed commitment with relation to the NORI License (Note 12) Marawa Agreements: On March -owned As at December On October 2 The Services Agreement grants DGE the right to recover any and all polymetallic nodules from the Marawa Tenement Area by paying the Republic of Kiribati a royalty per wet tonne of polymetallic nodules (adjusted for inflation from October DGE has the right to terminate the Services Agreement at its sole discretion by giving written notice to Marawa and the State, and such termination shall take effect two months following the date of the termination notice, provided that DGE shall pay to the ISA on behalf of Marawa the fees or payments legally owed to the ISA by Marawa (including the annual ISA exploration fee and ISA royalties and taxes) that are outstanding at the date of termination or that are incurred within 12 TOML Exploration Contract: The Company’s wholly -owned 2 Strategic Partnerships Marine Vessel Services: Effective March Common Shares transactions with Maersk since the inception of the strategic partnership with DeepGreen are as follows: Year of Service Invoiced Contractual # of Fair value (1) Cost 2017/2018 2,565,500 1.25 2,052,400 0.75 1,539,300 2018 4,593,828 1.25 3,675,062 1.75 6,431,359 2019 5,615,480 1.25 4,492,384 3.60 16,172,582 2019/2020 (2) 5,120,013 1.25 4,096,011 3.60 14,745,639 2020 (2) 4,471,895 1.25 3,577,516 3.60 12,879,057 22,366,716 17,893,373 51,767,937 ____________ (1) The fair value of the Company’s Common Shares was determined based on the private placements completed around the time of Common Share issuances to Maersk. (2) As at December 31, 2020, 3,577,516 (2019 – 1,780,632) Common Shares were yet to be issued by the Company for total value of $12,879,057 (2019 – $6,410,275) (Note 16). As at December Total Maersk project management fees incurred during the year ended December Pilot Mining Test Project On March Upon successful completion of the PMTS, DeepGreen and Allseas have also agreed to enter into a nodule collection and shipping agreement whereby Allseas will provide production services for the production of the first 200 DeepGreen and Allseas can terminate the strategic alliance without cause at any time subject to the following: • • • Upon termination without successful commissioning of the PMTS, Allseas will be compelled to either (at Allseas’ sole election): • • The fair value of the Company’s Common Shares at the time of the initial subscription of $20,000,000 by Allseas was determined to be $1.75 per Common Share, based on the recent private placements completed by the Company at the time. As a result, the difference between the fair value and the total proceeds of $8,333,335 ($1.25 per Common Share) was considered to be an additional initial contribution by Allseas during the year ended December During 2020, the PMTS agreement was amended and DeepGreen paid an additional $10,000,000 in cash and issued 2,777,778 common shares valued at $3.60 per share for an additional $10,000,000 to allow for higher costs that had been incurred by Allseas. The expense related to the payment and issuance of shares was offset by the additional initial contribution by Allseas received in 2019. During the year ended December As at December Reconciliation — Exploration Licenses A reconciliation of the Company’s exploration licenses is as follows: NORI Marawa TOML Total Balance at December 31, 2018 and 2019 250,000 198,855 — 448,855 TOML Acquisition ( Note 3 — — 42,701,464 42,701,464 Balance at December 31, 2020 250,000 198,855 42,701,464 43,150,319 Exploration Expenses The breakdown of exploration expenses incurred during 2020 and 2019 is as follows: For the year ended December 31, 2020 General NORI Marawa TOML Total Exploration expenses Exploration labour — 1,557,966 721,940 500,828 2,780,734 Marine cruise — 23,119,404 2,618,512 2,255,172 27,993,088 Pilot Mining Test — 9,333,334 1,166,666 1,166,666 11,666,666 Common Share options-based payments (Note 10) — 449,405 275,813 108,170 833,388 Amortization (Note 7) — 555,740 — 6,382 562,122 External consulting 39,968 2,829,200 650,168 649,263 4,168,599 Travel, workshop and other — 663,684 191,056 22,108 876,848 39,968 38,508,733 5,624,155 4,708,589 48,881,445 For the year ended December 31, 2019 General NORI Marawa Total Exploration expenses Exploration labour — 1,635,858 895,165 2,531,023 Marine cruise — 27,039,041 1,120,737 28,159,778 Common Share options-based payments (Note 10) — 769,175 508,385 1,277,560 Amortization (Note 7) — 336,990 — 336,990 External consulting 19,578 4,834,170 563,210 5,416,958 Travel, workshop and other — 785,638 322,281 1,107,919 19,578 35,400,872 3,409,778 38,830,228 |