the impact of this change on tgs could range from very mild to totally disastrous depending on tgs ability to adapt their ops in the short/medium term (i.e. until their exew plant is built, commissioned and running close to spec). I'm expecting the impact for tgs will be closer to the "mild" end of this scale.
in the short term, i.e. beyond 90 days and up until the exew plant is a goer (likely mid 2014) tgs will need to make alternative arrangements for refining their conc. as has been posted above, they used to do this prior to exporting conc to zambia, so they would be familiar with the operation.
presumably, it was more cost effective to export conc to zambia for refining, so we can assume that the refining costs were higher in drc. unfortunately, it is likely the local drc refining costs will increase significantly as they will now have a captive market. Hopefully, there is enough competition between drc refiners to keep their rates competitive compered to the increased refining demand? i have no idea about this, perhaps someone else may? presumably, tgs will comment on this soon.
regardless, the local refining will only be required until their exew plant can take over. So tgs really only need to keep enough cashflow to keep their head above water until then. Given the huge cash profits they have recently been generating they will hopefully be able to tolerate significantly increased refining costs and still remain profitable in the short term?
let's wait and see what the coy has to say in their pending ann before getting too worried ...
TGS Price at posting:
27.5¢ Sentiment: Hold Disclosure: Held
