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24 October 2011, Sydney Australia: Latrobe Magnesium Limited (ASX:LMG) has signed a Confidentiality Agreement with RWE Power AG to investigate whether the LMG Hydromet Process is suitable to process brown coal fly ash in Germany to produce magnesium metal and other products.

LMG has identified one RWE Power brown coal mine near Cologne that it believes has the required MgO grade. The chemistry of the fly ash is comparable to the Hazelwood fly ash and better on some measures. LMG has conducted over 10 years test work on Hazelwood fly ash.

The Cologne mine produces about 100 million wet tonnes of coal per annum. The three mines in the Latrobe Valley produce about 80 million wet tonnes per annum. If the fly ash is suitable, this mine may have the capacity to produce over 36,000 tonnes of magnesium per annum.

German automobile parts manufacturers are world leaders in increasing use of magnesium in cars. Last year Georg Fischer Automotive AG used magnesium to substitute four aluminium parts in the new Porsche resulting in 40% weight reduction for those parts.

"Of 600,000 tonnes of magnesium produced each year, 500,000 tonnes are produced in China," said Mr David Paterson, Chairman of Latrobe Magnesium. "The prospect of producing large quantities of magnesium from waste material close to German auto manufacturers would be about a perfect business model."

RWE Power AG is part of the RWE Group in Germany. The RWE Group is a top 20 company listed on the German Stock Exchange (DAX). RWE Power is one of the leading energy production and generation companies in Germany. It uses a broad energy mix of brown coal, black coal, hydro, nuclear power and natural gas fired power stations together with wind farms. RWE Power is also a driver of innovation for coal fired power stations and CO2 avoidance. RWE Power employs about 15,000 people with operating profit of about EUR 3.6 billion in 2009.