ASX-listed TNG has terminated a life-of-mine offtake agreement with Gunvor Singapore for 40% of the vanadium pentoxide to be produced from its Mount Peake vanadium-titanium-iron project.
The company on Friday said that the termination followed an ongoing review of offtake agreements for the project and resulted from the conditions precedent to the offtake agreement not having been satisfied.
Furthermore, an agreement has been reached with Vimson Group, through its Singapore-based, wholly-owned subsidiary V.M. SALGAOCAR & Bro to extend the life-of-mine offtake and marketing agreement for 100% of high purity iron products intended to be produced from the project.
“The review that is currently underway is all-encompassing and focused on defining a coherent and credible strategy for project delivery at Mount Peake. It is fundamentally necessary to include the company’s offtake and financing arrangements as part of the review, and to ensure that the company abides strictly by its legal obligations in making decisions,” said chairperson Grant Wilson.
“It is also important that such arrangements play a strongly facilitative role in advancing project delivery. And that the company’s posture in offtake and project finance is highly attuned to shifting global dynamics in respect of critical minerals and sustainability. I am looking forward to progressing these areas on behalf of the company next year.”
TNG in October warned of a cost blow-out at Mount Peake, following updated equipment pricing and capital expenditure estimates from Clough Projects Australia.
TNG in September last year made the strategic decision to move to a single, consolidated and integrated mining and processing operation for the Mount Peake Project, with all processing operations to be co-located at the Mount Peake Mine Site rather than being split across two separate sites.
The company said at the time that the fully integrated operation would result in a reduction in construction requirements, solid waste and tailings disposal handling costs, an optimised processing lay-out and an expected lower-risk final permitting process.
TNG appointed Clough to develop an optimised plant layout for the integrated project, which was completed in November last year, and Clough was also engaged to provide an updated capital expenditure estimate for the project on the basis of this new layout and the front-end engineering and design (FEED) study deliverables.
However, Clough’s ability to progress updated equipment pricing and the capital expenditure estimate for the project have been adversely impacted by unprecedented market conditions, largely driven by the ongoing impact of the post Covid-19 pandemic, the escalating armed conflict in Ukraine, congested supply chains, labour shortages and the general global macro-economic environment, TNG previously warned shareholders.
The contractor has now 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 were, in Clough’s opinion, unreliable and not accurate or reflective of likely future market conditions.
As a result, Clough has further advised it 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.
To make matters worse, Clough was recently placed into voluntary administration as the company underwent a restructure of its business. The TNG board is reviewing the engineering strategy and contractors involved with the Mount Peake project which extends to Clough and all major contractors.
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