For me, this is a key part of the announcement."The Company...

For me, this is a key part of the announcement.

"The Company notes that major resource projects worldwide are experiencing significant cost pressures due to various factors including the disruption of supply chains due to the COVID-19 pandemic, higher energy costs (including from the impact of the Ukraine-Russia conflict), long lead times, logistical delays, higher labour costs due to workforce shortages and escalated costs of steel and concrete, which directly affect both equipment and construction costs.

The Company previously indicated that a revised cost estimate for the Mount Peake integrated operation would be prepared by Clough, but given the factors referred to above, which have created delays in sourcing the market based quotes, this work remains ongoing."

The CEO & board have invited plenty of criticism in the past, but to take them to task over something they have no way of controlling seems futile at the least.

Clough were tasked with the job of "a revised cost estimate", that they have not yet been able to complete, but was due by mid 2022.

When prioritising their workload, potential supplier/contractors that Clough approached, would probably have asked themselves, "is this just a budget exercise or will we potentially get work/an order out of it?". In the current business and workforce climate, more work and less resources, the first jobs to get pushed down the queue would be such scoping exercises as the "revised cost estimate", especially in light of increased effort required to stay on top of the "factors referred to above".

It seems TNG has taken a step to mitigate the effect of this by "preemptively" signing a Heads of Agreement with Clough for a "binding fixed-price, lump sum EPC proposal (“EPC Proposal”) for delivery of the Project".Suppliers may be more highly motivated to respond when approached on this basis, rather than "please provide a budget price/estimate +/-10% and estimated lead time for XYZ equipment".

It may also reduce duplicated effort, as Clough ,after going through the actual formal tender process, could then use the same information towards completing a "revised cost estimate". This could be released before tenders/contracts have necessarily having been fully assessed or awarded.

Another potential advantage is carrying out this part of the overall "project schedule" now. I expect there will be a significant amount of work to produce detailed engineering drawings and specifications, on which tenders can be based. It appears this can commence now, although I am wary of the "subject to completion of any works" part.

AIMO