Latrobe upgrades magnesium distribution deal with Metal Exchange Corp
Latrobe Magnesium has exercised its option to purchase the currently leased site of its planned magnesium processing plant in Victoria.
Latrobe Magnesium (ASX: LMG) has upgraded an exclusive distribution agreement with US-based Metal Exchange Corporation to sell up to 80% of magnesium produced from its namesake project in Victoria’s Latrobe Valley to markets in north, central and south America and the Caribbean.
The contract is expected to deliver strong prices to Latrobe due to a US anti-dumping duty payable on magnesium imports from China, which currently supplies 88% of world demand.
Under a free trade agreement between the US and Australia, magnesium produced in Australia is exempt from any import duty.
Increasing output
The new deal builds on an initial distribution agreement signed between the two companies to accommodate Latrobe’s current plans to increase output from its magnesium demonstration plant to 10,000 tonnes per annum.
The upgraded agreement includes revised dates; a minimum firm commitment of 8,000tpa magnesium; a minimum initial term with a rolling annual renewal; and a minimum floor price for the purchase of magnesium.
Magnesium consumption
Studies show north and central America consume more than 160,000t of magnesium each year and this is projected to increase as motor vehicle manufacturers develop a greater reliance on the mineral.
There is currently only one magnesium producer in the US, which is undergoing a capital refurbishment and has been mostly out of commission since 2021.
The majority of the nation’s magnesium has been imported since then. Additionally, with magnesium exports from China banned for a period in September 2021, end-users are actively seeking alternative suppliers.
Project progress
In November, Latrobe confirmed it was making strong progress on construction at the Latrobe project, which will initially produce 1,000tpa of magnesium metal from fly ash waste at the nearby coal plant.
The plant is expected to generate $110 million in revenue and EBITDA (earnings before interest, taxation, depreciation and amortisation) of $42 million in 2024.
Offtake agreements have been locked in with two distributors in the US and Japan.