Amid mounting demanding and customer enquiries for its proposed magnesium products, Latrobe Magnesium (ASX: LMG) has completed an $11.5 million placement – enabling it to fast-track construction of its initial plant.
The company announced today that Peak Asset Management had led the oversubscribed placement that raised $11.5 million via the issue of 115 million shares to sophisticated, institutional and professional investors.
Shares were issued at $0.10 each, with an attaching option on a one-for-four basis and exercisable at $0.04 within the next two years.
Placement brings financial closure decision forward
The official decision to construct the plant will be made when Latrobe secures the $20 million it is applying for via debt funding.
Latrobe is in discussions with three lenders, which have presented term sheets for the debt facilities.
According to the company, the placement has brought forward the financial closure decision for the proposed plant by at least three months.
Additionally, Latrobe no longer needs to rely on finalising investments from its two potential cornerstone investors.
Funded to construct initial magnesium plant
In addition to the $11.5 million placement funds and the $20 million in debt funding, Latrobe also has $3.6 million in existing cash, and a $4 million Victorian Government grant.
After completing value engineering studies, Latrobe now estimates the 1,000 tonne per annum plant will require $39 million in capital expenditure – down from the previous $45 million.
The company pointed out further cost savings may be identified from completion of the design and engineering activities that are underway as well as additional test work results.
Latrobe has already outlaid $2.5 million on advancing the plant, with the remaining $36.5 million to be financed from the company’s debt (once secured), government grant, placement proceeds and cash at hand.
The company expects construction to begin in January 2021.
Looking ahead to expanding the plant to 10,000tpa, Latrobe said it has already been in discussions regarding financing the required $75 million estimated capital cost through offtake deals.
Latrobe’s magnesium production and critical supply shortage
Latrobe has developed a patented process that extracts magnesium metal and cementitious material from a waste that is produced by burning brown coal for electricity.
The plant will be constructed in the heart of Victoria’s coal power precinct where it will have access to feedstock, infrastructure and labour.
It is expected Latrobe’s magnesium metal production will arise at a time when there is a critical global shortage due to China restricting output to just meeting its own requirements.