Latrobe progresses magnesium plant as engineering and equipment packages near completion

Latrobe Magnesium (ASX: LMG) has made strong progress at its pilot magnesium production plant project in Victoria’s Latrobe Valley, with 55% of all engineering completed and 70% of equipment packages tendered to the market.

The pilot plant will initially produce 1,000 tonnes per annum of magnesium metal from fly ash waste at the nearby coal plant.

Latrobe said engineering teams would remain focused on the completion of mechanical and electrical packages for the pilot plant, before switching to the development of construction tender work.

Process engineering is 85% complete and entering the end stages with mass and energy balance, process flow diagrams and equipment lists finalised.

Piping and instrumentation diagrams are being revised prior to construction, while a completed reagent and consumption list will allow for the procurement of operational reagents in preparation for commissioning.

Mechanical engineering is 60% complete and heavily focused on the preparation of tender packages, technical evaluations and review of vendor data.

The mechanical team has reviewed packages for scope and specification in response to unprecedented market conditions which have resulted in industry-wide cost increases for equipment.

Latrobe said the review has delayed the awarding of some packages but has not substantially impacted the project schedule.

Long-lead items

Critical long-lead items such as the spray roaster and reduction furnace are progressing to schedule and vendor engineering and purchase of materials for fabrication has commenced.

Civil and structural engineering is 50% complete and 70% of the civil works is ready to be issued for the first construction package covering ash handling, leaching, impurity removal, spray roaster and reduction furnace areas.

Electrical and instrumentation engineering is 22% complete and focused on the award of motor control centres (MCCs) and process control system (PCS) hardware and software.

Upcoming works include the evaluation of switchroom tenders and the preparation of instrumentation packages for tender to the market.

Procurement progress

Procurement activities are progressing with a full award of the spray roaster to Austrian company Tenova and the reduction furnace to Australian-based Major Engineering.

Previously these contracts had been partially awarded to ensure the packages remained on schedule while final terms and conditions were negotiated.

A letter of intent was signed during the quarter with Rockwell Automation for the supply of MCCs and PCS hardware and software, allowing the contractor to ensure timely production of programmable logic controllers which are reported to be experiencing manufacturing challenges due to the impact of the global pandemic.

Award of the remaining packages has been delayed longer than planned due to challenging conditions in the global supply market as well as high inflation.

Latrobe said working closely with vendors to reduce pricing in line with the project’s budget had delayed the award of these packages.

Project construction

A civil and concrete works construction contract for the magnesium plant was awarded during the quarter to Stirloch Constructions which will mobilise to site in November.

The tender package was sent to eight contractors with only three choosing to submit quotes, reflecting market conditions and the unavailability of resources.

Latrobe said awarding the work to a Latrobe Valley contractor was reflective of the company’s desire to work with the community and contribute to the local economy.

SMPEI packages

The development of the structural, mechanical, piping and electrical and instrumentation (SMPEI) construction packages has commenced with award targeted for early next year.

The carpark and administration building were completed in the quarter, ready for the Mincore project team to mobilise to site for the construction phase.

Site security has been established with the completion of the security gatehouse and traffic management.

Offtake deal

In September, Latrobe signed a deal with Société Le Nickel for the supply of 450,000t per year of ferro-nickel slag offtake over 20 years once its larger proposed 100,000tpa magnesium plant is in production.

Latrobe undertook a pre-feasibility study during the quarter to determine whether to build the much larger plant in the Middle East or Malaysia. Further investigations are underway to make a final decision for the site.

New Caledonia-based Société Le Nickel has one of the largest ferro-nickel production plants in the world and makes 1.7 million tonnes of ferro nickel slag per year.

New Caledonia contains approximately 20% of the world’s nickel ore reserves, facilitating ferro nickel and slag production for decades to come.

Société Le Nickel has advised Latrobe that a proposed expansion of its port facilities would allow it to take an additional 150,000tpa from Latrobe’s operation.