Sydney-based Latrobe Magnesium Limited (ASX:LMG) has reported “extremely positive” results from a successful completion its feasibility study to supply its proposed magnesium plant.
The company said that while the study results are subject to further experimental and equipment testing, they showed a higher potential EBITDA owing to increases in the magnesium price over the past two years.
The 3,000 tpa magnesium plant is estimated to make an EBITDA of up to $5.6 million per annum when it is operating at its name plate capacity and will provide the necessary information and confidence for LMG to proceed to a 40,000 tpa plant. The initial plant is estimated to employ up to 54 on-going direct employees and contractors and the expanded plant is estimated to employ approximately 370 people during operations. Between 50-75 construction jobs will be needed with the initial plant and up to 240 to construct the expanded plant.
According to Latrobe, the demand for magnesium has increased to approximately one million tonnes per annum over the past two years, largely due to increasing use of magnesium alloys in cars that reduce weight with reduced energy consumption and emissions.
In January 2018 the company entered into a Memorandum of Understanding with EnergyAustralia Yallourn Pty Ltd to supply its ash to LMG’s proposed 3,000 tonnes per annum magnesium plant. The project was divided into four stages. It has now completed two of those stages and is moving into stage 3 “the construction of a 3,000 tpa plant”.
Subject to agreeing terms of ash supply with EnergyAustralia and other conditions, LMG expects to make a final investment decision and commence construction of stage 3 by December 2019. The fourth stage involves the expansion to a 40,000 tpa plant.
A forward work plan has been developed to schedule the design, build and testing of the equipment selected in the feasibility study. This plan details what is required to be completed so that construction can start on the Tramway Road site in December 2019.
LMG will need to submit a research, development and demonstration approval with the EPA and will hold a community briefing within the next month.
The feasibility study estimates the capital cost to be in the order of $54 million. This estimate includes design growth and contingencies of $6 million. LMG has estimated that it will require a further $2 million for working capital. The total funding required will therefore be $56 million.