Latrobe Magnesium lifts revenue forecasts as metal’s price rebounds

Latrobe Magnesium ASX LMG revenue forecast metals price rebound Yallourn Victoria brown coal offtake
If the current magnesium price holds long-term, Latrobe predicts it could boost its EBITDA estimate by $56 million.

Demand for magnesium metal remains strong with the price rebounding and allowing emerging producer Latrobe Magnesium (ASX: LMG) to lift its revenue forecasts.

The company says if the current price holds that will increase earnings before interest tax depreciation and amortisation (EBITDA) on its initial forecasts by $56 million.

Latrobe plans to produce magnesium metal from fly ash, a waste by-product of the giant, 1,480 megawatt Yallourn power station in Victoria which burns brown coal.

The company reports that the latest advice from the International Magnesium Association (IMA) is that on Wednesday the magnesium metal price rose back above US$6,150 per tonne.

Chinese plants lifting demand for magnesium 

Last week IMA reported that the recent fall in the price had stabilised and then began rising on increased demand from Chinese downstream processing plants.

Last month Beijing’s mouthpiece, The Global Times, warned to expect global shortages.

That is because China now supplies 87% of the world’s magnesium metal and, due to the chronic electricity shortages, Beijing recently ordered closed 25 magnesium plants to close.

Some of these have gradually reopened while others have lifted output.

Of late, the magnesium metal price has hit US$10,200/t and then dropped to a low of US$5,400/t as markets were roiled by production interruptions in China.

The company says Latrobe’s revenue estimates are based on US$3,250/t which was the magnesium price last June, three months before the Chinese supply shortage hit.

It adds that, if the current US$6,150/t holds, that would increase Latrobe’s EBITDA by $56 million based on the planned 10,000t per annum production at the Morwell plant.

Two offtake agreements in place

The magnesium supply crisis has led to predictions that Europe’s aluminium refining sector — which supplies that key element to automakers — expects to exhaust stocks of magnesium metal, a vital feedstock, by the end of November.

Magnesium metal hardens that aluminium is used in gearboxes, engine blocks, frames and other parts of cars.

Latrobe Magnesium has two key offtake agreements.

St Louis, Missouri-based Metal Exchange Corporation will be the exclusive US distributor of Latrobe’s output with a minimum commitment of 4,000tpa.

The Tokyo-based titanium and magnesium trading house Advanced Material Corporation of Japan is also committed to buying 4,000tpa from the Morwell plant.

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