Phew, what a big day .
Just out of hospital this afternoon after surgery. All is well but groggy. At home now and recovering well. Just some large screws removed that were fixed in my ankle over 18 years ago, from when I broke the tibia and fibula. After surgery the pain was intense, just like I had broken it all over again
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All good now
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This morning I had a good chat for an hour and ten minutes with David Paterson. A very good yack about all manner of topics. David was highly accommodating.
I also received an email from Mr. John Lee (Director and Company Secretary Chairman, Audit & Risk Committee Latrobe Magnesium Limited). The email response was to the letter sent to the board that was written by
@tropic and myself, and also on behalf of shareholders.
The main part of the email that I can share is: "David has asked me to acknowledge receipt of the letter and to let you know that we are preparing a detailed response to your 33 questions."
The letter will be tabled at the next General Meeting of the Board. It's great to see some action and I am highly encouraged by the response.
In the conversation with David we discussed a few snippets of information that will be announced soon, likely next week. I have an inkling that the letter has had a positive impact. I will dot point the topics.
* The Demonstration plant remains on schedule for the 16th of April (11 days away). There is little likelihood for any further delay until the first MgO production.
* David believes there will be a significant re-rate of share price after first MgO production as there is great interest waiting in the wings.
*The first production of MgO will be a catalyst for Government financial support.
* There is a media 'Road Show' planned for the interim period between MgO and Mg production.
* The period of time between MgO and Mg production is forecast to only be about 3 months and then another re-rate is expected.
* The ATO rebate is still in negotiations regarding the size ($12.6M). Apparently there is a great deal of difficulty in raising the ATO's understanding of all the research and development aspects of the largest claim LMG have ever made. There is confidence the claim will need approved but the protracted approval is frustrating to say the least.
* If the ATO claim is delayed for much longer, David assured that they have other options for operational funds. I asked if the option was most likely another c.r. Whilst David said he could not divulge the source of alternative funds ATM, I certainly have the impression that it will be another c.r.
* I asked about share consolidation and timing. David was quite positive there would be a consolidation of 10:1, once the commercial plant is operating.
* There continues to be progress made towards the new new approvals required with Local Government and the EPA for the plants expansion towards 10,000tpa. David was clear in saying the process is straight forward and in order. There is still a need to also address the upgrade of the agreement with Yallourn regarding fly ash supply but again, it is not an area of concern.
* We talked about where renewable energy could still come from for the 10,000tpa plant to be able to reach emission targets. David said the solar farm down the road in the valley did not go ahead because it was not financially viable. David also said the lack of renewables for the plant energy needs does not have a significant impact upon project EBITDA (Earnings before interest, taxes, depreciation and amortization), as LMG have been conservative in their calculations.
* Sarawak Malaysia plant is continuing to be developed. David has met the Malaysian Prime Minister and there is tremendous support for the project.
* I talked about SLN (New Caledonia) and their current financial status. David was confident that there are other stocks of feasible and readily available ferro nickel slag in New Caledonia if necessary.
*We also discussed the likelihood of the port capacity opening to further volume due to SLN reducing production or being put into hibernation. David agrees that the allocation of higher volume capacity export of slag from the port is a distinct possibility if nickel exports reduce.
* Hydro electricity allocation
The pending approval of electricity allocation from the hydro is getting close. Apparently it is a competitive bid and LMG is well placed among two other applications.
David said the person making the decision is a nice chap and an Australian from Tasmania. David was very upbeat about the prospect of approval.
* Partners
There are extensive prospects for partners for the 100,000tpa plant. Potential partners from across the globe waiting for proof of process. A few are extremely keen to jump on board. Some very big and prominent companies that we all would know are champing at the bit! David said there companies will be a solid reason for the excitement of shareholders.
* Patent protection and extension
I mentioned the renewal of patents that lapse in 2026. David talked about all being in progress and progressing very well.
* Malaysian Advantage
I asked why LMG had not planned to progress the Australian plant to 100,000 tpa based purely on Latrobe Valley brown coal fly ash. I mentioned that LMG had first considered 100,000 tpa back in 2007 and again in 2018 but changed strategy. David responded by saying there is a stark difference between Malaysiaj and Australian labour costs and that profitability from the Malaysian project is subsequently greater.
I can't remember the exact figures per tonne of Mg but the difference is massive.
The original strategy was when LMG had a letter of intent from Hazelwood for the supply of fly ash in combination with fly ash from Yallourn. The fly ash from Hazelwood is actually higher in magnesium content than Yallourn (18 to 20%). Loy Yang in comparison has a dismal magnesium content, although It too was included as a distinct prospect.
We discussed Hazelwood for a while as I have written a lengthy review of Hazelwood over last month or so. Hazelwood are in a twisted mess in relation to how they will deal with their ginormous fly ash dam remediation requirements. (If anyone would like a read my paper, I'd be happy to post it sometime.)
* Other plants
David also mentioned that Malaysia is only the beginning and that there is a very strong likelihood of multiple plants in various locations across the globe, developed in partnership with major industry stakeholders that are pressing for access to LMG's tech. (Royalties galore).
* Davids retirement
I asked about Davids health and expectations for his retirement. David and I have talked about this in the past and nothing had changed. The board has already been in discussions about his replacement in the future and the capabilities they will be looking for. David said his retirement is likely to be within a few years at the most.
* Site tours
I asked when there could be tours of the Latrobe Valley plant for shareholders. David responded by saying LMG are keen to offer tours once they are producing magnesium and will invite stakeholders (Sausage holder here though. hahaha I will need one of the first in line when the opportunity arises.
* SCM's
As I have mentioned before, the supplementary cementitious materials (SCM's) are a crucial element of LMG's profitability. Without SCM's LMG is a dead duck. The SCM's equate to 35% to 40+% of all revenue and are the key to viability. David responded by saying that they are extremely well positioned to sell every single tonne of SCM's produced and have forward sales in the bag.
I for one really needed a yarn with David, as I am heavily invested in relative terms and had some slight nervousness creeping in.
Sending my regards to all holders with a smile on my dial.
Regards
Ken
(20min delay)
