Latrobe Magnesium upgrades demonstration plant construction strategy

Latrobe Magnesium (ASX: LMG) has taken a strategic decision to update the construction strategy for its unique magnesium production pilot plant in Victoria.

Faced with almost unparalleled business conditions and external financial market issues, the company has elected to change its strategy to the self-perform model.

The move to a self-perform hire strategy replaces the original plan to use fixed price structural, mechanical, piping, electrical and instrumentation (SMPEI) packages.

Latrobe Magnesium believes this will have the benefit of removing construction contractor overhead costs and profit margins.

Remains on budget

Remarkably the project remains on budget despite facing a number of external financial issues, including global inflationary pressures and local construction costs which have risen by up to 30%, thanks to prudent cost management.

The ability for the project to remain on budget has required the project team to continually optimise the project strategy to rein in cost increases and this has included new measures to expand the construction planning.

Around 2,000 activities were added to the construction schedule to meet the new strategy.

These changes have also led to an expansion of the construction timetable with the demonstration plant now expected to reach construction completion by the end of the 4th quarter of 2023 with first magnesium production by March 2024.

$30M in contracts awarded

To date, approximately $30 million has been spent on the demonstration plant with all equipment packages fully awarded and a total of $17.5 million committed to more than 35 suppliers around the world.

Recent contract awards include agreements for electrical and instrumentation labour hire, while structural, mechanical and piping work is expected to be awarded this month.

While a range of major procurement packages have been completed and delivered to site, project procurement is now focused on the purchase of miscellaneous items and supporting plant operations.

Wrapping up activities across the project

The Latrobe Magnesium team is continuing to successfully finalise construction activities across the project.

The engineering and design phase is rapidly approaching completion, with efforts directed towards supporting the construction team and closeout of equipment vendor documentation.

On the civil and concrete works fronts the remaining large scale civil works have commenced, while the labour hire process for structural, mechanical and piping activities is at an advanced stage with contract awards expected to be made imminently.

Other upcoming activities include the installation of the motor control centres in the switch rooms, followed by the main cable pulls from the main switchboard to the area switch rooms.

While the construction phase is starting to wind down, Latrobe Magnesium is ramping up its investigations into product sales opportunities.

It has undertaken a number of product trials for potential clients, with numerous others planned to demonstrate the commerciality of the by-product materials produced by the demonstration plant.

World first concept

Latrobe Magnesium’s world first and patented extraction process provides for the removal for sale of magnesium metal and cementitious material from industrial fly ash.

If successful, the technology has the potential to create significant profits while answering an environmental issue as the fly ash is currently a waste resource from the nearby Yallourn brown coal power generation.

A feasibility study has validated the potential of the combined hydrometallurgical/thermal reduction process that extracts the metal.

The next stage of confirmation is the stage 1, 1,000 tonne per annum magnesium plant.

A commercial plant will then be developed via the construction of a 10,000 tonne per annum plant if the initial phase 1 plant proves successful.