Ann: April Progress Report, page-6

Latrobe Magnesium to begin ore commissioning tomorrow at Stage 1 Demonstration Plant

Published: 15:45 18 Apr 2024 AEST
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Latrobe Magnesium Ltd (ASX:LMG, OTC:LTRBF) will begin ore commissioning tomorrow at its Stage 1 Demonstration Plant in the Latrobe Valley of Victoria, Australia, as financing for the development and construction of the Stage 2 Commercial Plant takes shape.
Ore commissioning will begin after the company overcame a number of minor issues not uncommon during the commissioning process. These included minor leaks from pipes, replacing failed valves, updating control logic sequencing, vendor software issues and replacement of lubrication fluids.
First ash delivery

Each of these issues was addressed by the company’s team as plant commissioning progressed with the first delivery of ash scheduled for Friday, April 19, ahead of the ore commissioning.
During the next week, the Demonstration Plant will be further tested and ramped up, with acid addition expected early next week and the spray roaster being heated ahead of magnesium oxide production in the coming days.
Societe Generale appointed

Importantly for LMG and its plans for a larger Stage 2 10,000 tonnes per annum Commercial Plant, Societe Generale has been mandated as Sole Coordinator, Structuring Bank and Mandated Lead Arranger in respect of the financing.
Societe Generale is a multi-national corporate and investment bank with market-leading experience in structuring, advising and financing mining and downstream metals production projects in Australia and globally.
Latrobe Magnesium chief financial officer John Collier said, “We are thrilled to announce the appointment of Societe Generale as our partner with respect to the debt financing of our Stage 2 Commercial Plant.
"Their dedicated team which has extensive experience across financing development projects, is a very strong testament to the quality of the project and the works completed to date, and positions us as an organisation very well to deliver a great project result for all stakeholders.”
Societe Generale was recently awarded 'Global Financial Adviser of the Year' at IJGlobal 2023 Awards and 'Investment Bank of the Year for Infrastructure and Project Finance' at The Banker Investment Banking Awards 2023.
Financing approach

LMG intends to target debt funding from a variety of sources including government and commercial lenders, with the majority expected to come from the Federal Government initiatives for funding critical minerals.
This funding is further supported by the 10,000 tonnes per annum offtake secured from Metal Exchange Corporation in the United States of America.
It is expected that all relevant regulatory approvals and the delivery of the Commercial Plant’s BFS will be completed by the end of 2024.
Ash deposit work

The company has also finalised its scope with GHD to carry out the work required on the Yallourn ash deposit, including:

• Hydrogeology – hydrogeological and hydrogeochemical data gathering, a hydrogeological flow model and assessment of the hydrogeological/hydrogeochemical environmental impact and protection requirements.
• Geotechnical – undertaking a geotechnical assessment, including any geotechnical drilling or testing, to develop a geotechnical domain model including geotechnical design parameters and input to mining.
• Mine closure – a detailed rehabilitation and mine closure study.
• Mine planning – develop a mine design, for incorporation in a detailed mine schedule along with equipment and cost study.

This work will provide the necessary scope and cost inputs into the upcoming BFS to ensure a final investment decision can be made on the Commercial Plant this year.
Geological assessment and development of a JORC-compliant mineral resource will be undertaken in 2025 due to the time required to undertake a drilling program and test the samples.
However, LMG is very confident that there is significant upside to what will be the maiden resource based on past and current power station data.
Strategic Supplier Program

A Strategic Supplier Program (SSP) for the Stage 2 Commercial Plant has been designed to fast-track its development ahead of planned production in 2026.
SSP suppliers will have direct input into the Commercial Plant’s BFS, ensuring that their intellectual capacity will directly influence and optimise the ultimate design of the plant, with an intended design life of 30 years.
LMG expects greater transparency from SSP suppliers on technological and financial matters by removing the competitive tension of a tender process, and this expectation is already being borne out via a number of commercial-in-confidence discussions with SSP vendors.
The discussions include new technology access, the initiation of long-lead R&D activities by SSP suppliers in support of Stage 2 equipment demands and future opportunities for the strategic co-location of facilities with SSP partners.
Strong mix

A strong mix of Gippsland, domestic and international suppliers have been engaged under the SSP via individual Letters of Intent, following which formal contractual agreements are to be negotiated and executed. Additional parties are under consideration by LMG for inclusion in the SSP.
SSP participants selected to date are:

• Coregas Australia (industrial gas);
• Fast Automation Pty Ltd (furnace automation);
• Mechanical and Maintenance Services Pty Ltd (SMP services);
• O&M Pty Ltd (electrical and instrumentation services);
• Rockwell Australia Pty Ltd (plant automation);
• Steuler-KCH Australia Pyu Ltd (refractory installation);
• Stirloch Constructions Pty Ltd (civil services);
• Tenova (spray roasting equipment); and
• Custom Agency Services Pty Ltd (logistics & freight forwarding).

LMG chief operating officer Ronan Gillen said: “We are delighted to be able to work with such a reputable group of local and international suppliers within the SSP.
“I look forward to partnering with each organisation and leveraging their intellectual and technical capability to deliver superior results for LMG and a world-class critical minerals project in the Latrobe Valley.”
“Emphasis on real-world outcomes”

Procurement and Contracts manager Brett Trigger said: “It is rewarding that each of these companies see the value to continue partnering with LMG.
“All these organisations have and/or continue to provide outstanding capability and service to LMG on our Demonstration Plant project.
"When you already understand their respective capabilities and cost structures in comparison to the rest of the market, it only makes sense to properly recognise their performance and continue the relationship.
"I’d prefer to direct supplier resources towards the delivery of production capability for LMG rather than tender responses.
"The SSP program will undoubtedly place the emphasis on real-world outcomes and save time and cost for all parties concerned.”
Timeline

LMG is confident that the ash generated by the time the Yallourn power station closes in 2028 will provide an adequate supply for the Stage 2 production capacity throughout the projected life of mine.
The project will be designed to allow for expansion in trains of 10,000 tonnes capacity increments as the resource is further validated.
This strategy offers the benefit of accelerating commercial production while allowing flexibility for future increases in capacity.
The expected timetable for the Commercial Plant is to have all relevant approvals obtained, study and financial close completed by December 2024 with production commencing in the first quarter of 2026.