Australian resource and mineral processing technology company TNG has warned of higher-than-expected expenditure at its proposed Mt Peake vanadium/titanium/iron project in the Northern Territory.
Cost blowouts have been experienced by the Clough Group, which had been appointed to develop an optimised plant layout for the project, which was completed in November 2021. Clough was also engaged to provide an updated capital expenditure estimate on the basis of this new layout and the FEED study deliverables.
However, Clough’s ability to progress updated equipment pricing and the capital expenditure estimate had been adversely impacted by unprecedented market conditions, largely driven by the ongoing impact of the post COVID pandemic, the escalating armed conflict in Ukraine, congested supply chains, labour shortages and the general global macro-economic environment.
Clough has advised TNG that while this work is ongoing and in progress, the estimates of equipment pricing received to date are significantly higher than anticipated, but are (in Clough’s opinion) unreliable and not accurate or reflective of likely future market conditions.
As a result, Clough is not yet in a position to provide TNG with a definitive overall pre-production capital expenditure estimate for the project and further work is required to complete this, with a completion target of mid-2023.
TNG reports that Clough has submitted a proposal to work with the company to reduce and optimise equipment requirements across the project through a detailed value engineering exercise, and to undertake further commercial processes to attempt to reduce and optimise pricing, with the objective of minimising the overall capital expenditure.
TNG will seek to mitigate any upward cost impacts wherever possible and will provide relevant updates as the potential financial impacts of the capital cost estimates are more comprehensively understood, noting that until work relating to the capital expenditure definitive pre-production estimate.
The company said it would not be in a position to make a final investment decision until after this work has been completed, and subject to Clough then being able to prepare and submit an EPC proposal which is acceptable to TNG.