Latrobe Magnesium to expand magnesium plant amid increasing enquiries and global shortage
Latrobe Magnesium will evaluate increasing the proposed demonstration plant’s capacity from 3,000tpa of magnesium to 10,000tpa.
Latrobe Magnesium (ASX: LMG) is looking to expand its proposed magnesium demonstration plant in Victoria to 10,000 tonnes per annum as the world faces a critical shortage.
Following a decision from the board, Latrobe will now investigate the viability of increasing the initially proposed 3,000tpa plant to 10,000tpa to maximise the labour economics and boost profit.
A feasibility study estimated the initial plant would cost between $40-45 million to establish, and the capital expenditure for the expanded plant is forecast at $123 million.
The projections have been extrapolated from Latrobe’s feasibility and engineering studies for the 3,000tpa plant.
Further evaluation of the costs involved will be assessed over the next nine months.
Offtake agreements
Prompting the decision to look at increasing the plant is the 8,000tpa of magnesium already allocated in offtake agreements, and enquiries for a further 2,000tpa.
Latrobe said about $75 million of the plant’s capital costs will be funded through offtake agreements.
It is anticipated the expanded plant will generate about $110 million in revenue, and earnings before tax depreciation and amortisation of $42 million.
Critical magnesium shortage
The decision comes as the world’s largest magnesium supplier China restricted output to just enough to meet its own needs.
In September, Chinese authorities ordered the closure of 18 magnesium plants in Shaanxi and output of the remaining 30 to be halved.
About 65% of the world’s magnesium production arises from Shaanxi.
As a result, a worldwide shortage is looming, and magnesium users are chasing alternative supply sources.
It is anticipated German car manufacturers will run out of magnesium by the end of this month.
Latrobe’s demonstration plant
Latrobe hopes to become an alternate magnesium supplier to meet global needs.
The company has developed a patented processes that extracts magnesium metal and cementitious material using waste from burning brown coal.
Once the demonstration plant has been established and the commercial viability of Latrobe’s process proven, its capacity will be grown to 40,000tpa of magnesium.
Latrobe plans to establish the plant in the heart of Victoria’s coal power generation precinct where it will have access to feedstock, infrastructure and labour.