Latrobe Magnesium to reap significant savings from new lease arrangements

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By Colin Hay - 
latrobe magnesium ASX LMG reap significant savings new lease arrangements

Latrobe Magnesium (ASX: LMG) expects to gain a number of benefits from a new financing arrangement for its innovative magnesium production pilot plant in Victoria’s Latrobe Valley.

The company has inked an agreement to lease finance some $10.4 million of its demonstration plant equipment for the life of its project.

The lease finance is projected to reduce Latrobe’s ongoing debt levels to around $5.1 million from 1 January 2024.

This takes into account repayment of debt of around $12.6 million from Latrobe’s R&D tax rebate, relating to the year ending 30 June 2023.

The company said the lease finance has a lower effective cost of funds compared to those of its existing project finance facility and other funding options Latrobe has considered.

There is no obligation to buy the equipment at the end of the lease.

Targeting early 2024 production

The new leasing arrangement is just one of a number of cost saving actions Latrobe has introduced as it closes in on its first commercial production from the pilot plant.

The company has also incorporated an early cash flow opportunity once the pilot plant comes online.

The company is fast-tracking an option to on-sell smaller amounts of magnesium oxide (MgO) and has recently purchased a magnesium oxide bagging plant and other essential components to allow it to quickly commercialise this bonus cash earning option.

The introduction of the early MgO offtake is also expected to assist the Latrobe team to familiarise itself with the company’s patented hydromet process.

Latrobe’s pilot magnesium production plant in the Latrobe Valley will utilise a world first patented extraction process.

The plant will feature the extraction and sale of magnesium metal and cementitious material created from an industrial fly ash waste resource obtained from the nearby Yallourn brown coal power generation facility.

Major increase in workforce

Latrobe recently confirmed that it expects initial production from the plant to commence in March 2024 after it was successful in significantly boosting its work force.

The additions to the development team included fitters, welders, riggers, scaffolders, electricians, instrument technicians, supervisors, technical assistance, completions work pack engineers and quality assurance /quality control inspectors from two major local contractors.

The project is currently focused on fast-tracking the construction of key areas within the plant, including ash handling, leaching, pyrohydrolysis, and magnesite and the production of the one-ton bulk bags of MgO.

Making good progress

Latrobe has also made significant recent progress in a number of areas as it leads up to commissioning of the pilot plant including the completion of the primary civil and concrete works.

Civil work for the LPG tank and gases (oxygen, carbon dioxide and argon) installation has also been completed.

A local contractor has completed the fabrication and assembly of the project’s spray roaster reactor vessel, which has now been transported to the project site for final installation. Elsewhere, the fabrication of the oxide bin is expected to be completed by end of November.

Structural steelwork erection has been successfully completed, allowing for the positioning and installation of the spray roaster reactor vessel in its designated location.

This progress has now paved the way for the commencement of piping and electrical work, commencing with the installation of pipe and cable tray supports and concluding with pipe installation and equipment termination.

Concurrently, the installation of mechanical equipment, including tanks, pumps, blowers, fans, absorber towers, and stack, is in progress.