AU - Latrobe Magnesium moves to construction stage of new production plant, targets increased global demand

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Development company Latrobe Magnesium (ASX: LMG) is moving forward with construction of its proposed $54 million magnesium production plant in Victoria’s Latrobe Valley, as part of an agreement signed last year with EnergyAustralia Yallourn Pty Ltd.

In January 2018, Latrobe entered into the four-stage agreement whereby EnergyAustralia would supply industrial ash to the 3000 tonnes per annum plant.

Latrobe has completed two stages and is poised to move onto Stage 3 construction activities by year end, subject to confirmation of ash supply terms and other conditions.

The fourth and final stage will involve expansion of production capacity to 40,000tpa using Yallourn ash from its ash landfill site which will supply extended operations for 10 years.

Feasibility study
A recently-completed feasibility study for the magnesium plant estimated a $54m capital cost including design growth and contingencies of $6 million, plus an additional $2 million for working capital over a 20-year life.

The study showed an estimated earnings before interest tax depreciation and amortisation contribution of up to $5.6 million per annum when operating at nameplate capacity.

Chief executive David Paterson said he was “extremely positive” the plant would demonstrate a higher potential EBITDA on the back of a magnesium price jump over the past two years.

Plant process
Situated on an 11 hectare site in the centre of Victoria’s coal power generation precinct, Latrobe’s magnesium plant will employ a world-first process of combined hydromet and thermal reduction to harvest magnesium metal from industrial fly ash (a waste stream from brown coal power generation).

The first stage is expected to provide up to 75 construction jobs, with another 240 during the expansion phase.

The plant’s location will give Latrobe direct and constant access to feedstock, with first production scheduled for late 2020.

Latrobe has already signed agreements with Japanese and US distributors to sell all of its initial production and a significant part of its 40,000tpa expanded production.

Magnesium demand
Magnesium is 75% lighter than steel and 33% lighter than aluminium.

It has the best strength-to-weight ratio of all common structural metals, superior dimensional stability and high impact and dent resistance, making it an ideal component in the manufacture of car parts, laptop computers, mobile phones and power tools.

Worldwide demand for magnesium is approximately 1 million tonnes per annum and growing, led by China’s car industry which has previously announced its plans to increase the magnesium content in new vehicles from 8.6 kilograms in 2017 to 45kg by 2030.

Latrobe plans to sell refined magnesium from its plant under long-term contracts to Australian and overseas customers.

Australia currently imports all of the 8,000 tonnes it consumes per year.

Source: Imelda Cotton (