LMG: PFS NEAR COMPLETE - POTENTIAL TO SIGNIFICANTLY REDUCE CO2 EMISSIONS FROM MAGNESIUM IN UNIQUE OPPORTUNITY DUE TO VICTORIA's BROWN COAL's HIGH MAGNESIUM CONTENT By Jenny Prabhu and Gerald Stanley
Latrobe Magnesium Ltd, supported through most of its 10 year-odd history by a small band of believers offers a unique opportunity for large scale magnesium production that costs less, has Nil environmental impact or is even beneficial after production of a by-product - and will as a corollary reduce the heavy carbon footprint of the power stations in the Latrobe Valley.
Latrobe Magnesium has nearly completed its Pre Feasibility for its remarkable project - the extraction and production of magnesium metal from the brown coal fly ash produced in the generation of power from coal deposits in the Latrobe Valley in Victoria. The ash from the brown coal is unique in having significant magnesium content, which is extracted using LMG?s own technology. Current ash production in the Latrobe Valley plus the existing ash tailings has the potential to support a 40,000 tpa magnesium metal project for a minimum life of 20 years (global magnesium supply was around 600,000 tonnes in 2009 and is forecast to reach 1 million tonnes next year).
Global supply of magnesium is dominated by China, where costs have been increasing - substantial Chinese production closed in 2009/10 due to rising costs.
Meanwhile, demand for magnesium is also increasing particularly from the m/v industry, where it enables lighter cars to be built with lower emissions that are also easier to recycle and therefore less damaging to the environmental.
Remarkable global environmental and cost benefits Magnesium from the fly ash will cost far less than mining magnesium which is usually in the form of magnesium carbonate or magnesite (MgCO3) where as the magnesium content in fly ash is magnesium oxide (MgO). CO2 is sequestered in the LMG manufacturing process rather than being emitted as with MgCO3 feedstock, and the residual ash after magnesium oxide is removed can also be used in cement, saving up to 5 tonnes of CO2 emission for every 6 tonnes of cement - with the manufacturing process for cement the third highest cause of CO2 emissions on the planet.
Executive chairman is David Paterson, who has been with LMG since 2002 and together with fellow director Kevin Torpey holds some 19% of LMG. The Top 20 hold some 40%.
While funds will need to be raised to complete a BFS, the company is talking to interested parties and also expects to receive government support.
LMG's Share Purchase Plan at 1.5c closed in November last year over subscribed 8 times and was scaled back.
LATROBE MAGNESIUM LTD - A SNAPSHOT Magnesium Investments Pty Ltd, whose owners had more than 25 years experience in the magnesium industry, was acquired by Rambora Technologies Ltd (a name and direction change for MoneyMining) in 2001. The company already had held an agreement with Hazelwood Power for over a decade for supply of its unique fly ash - with its plant situated within Hazelwood's grounds, owned by IPR-GDF Suez, one of the largest international European power station owners - currently renewed up until December this year.
A deal has also been struck with Yallourn Energy for another 140,000 tonnes of fly ash a year, should tests reveal the Yallourn fly ash is also suitable for magnesium production.
There is estimated to be some 1 million tonnes of magnesium in the fly ash lying in waste ponds, however because this would have absorbed CO2 from the atmosphere over time, it is expected it would have higher operating costs than handling fresh ash, requiring some sort of reconditioning.
Reduction of the calcination requirement is expected to result in LMG's magnesium product being more cost competitive with Chinese producers who use the Thermal Reduction Process.
Environmental and cost benefits Magnesium from the fly ash will cost far less than mining magnesium which is usually in the form of magnesium carbonate or magnesite (MgCO3) where as the magnesium content in the Latrobe Valley fly ash is magnesium oxide (MgO). CO2 is sequestered in the LMG manufacturing process rather than being emitted as with MgCO3 feedstock, and the residual ash after magnesium oxide is removed can be used in cement, saving up to 5 tonnes of CO2 emission for every 6 tonnes of cement - with the manufacturing process for cement the third highest cause of CO2 emissions on the planet.
When the initial PFS in 2002 to recover magnesium from the fly ash ran into a technology roadblock, the company went back to the drawing boards, and invented its own (in conjunction with Ecoengineers Pty Ltd) - a (patent applied for) hydromet process which has resolved the problems and added to the environmental benefits, so that the manufacturing process is now not only CO2 neutral, but also sequesters CO2 in the manufacturing process of a by-product, Meanwhile, the fact that the fly ash from the power stations is in the form of a very fine powder, with an average particle size of less than 40 microns means there is no need to mine, crush and grind it. The material can be fed to the plant as a slurry via a pipeline, rather than having to be transported by truck or rail and is also easier to process. Most of the manufacturing process is standard for magnesium, including soft calcining, briquetting, reduction, refining and casting with the novel step being the up front hydromet process.
The hydromet patent application On September 1 LMG announced it has entered into a Technology Agreement with Ecoengineers Pty Ltd whereby they have jointly applied for an International Patent for the hydrometallurgical process developed by Ecoengineers for converting brown coal fly ash into a form suitable for subsequent conversion into magnesium metal. Latrobe will have the exclusive worldwide licence to use and exploit the technology and any improvements for magnesium metal production. The technology has successfully reduced the K20 and Na20 components in the fly ash and also reduced the sulphur, iron oxide and silica levels, achieving acceptable levels of metallic Mg recovery following these reductions. The Hydromet process in retort work, announced in December last year, repeated its previous recovery rates of 78% to 94% vs the traditional thermal reduction process, using dolime as a source material is in the range of 73/78%. The retort work was conducted without using CaF2 as a flux in the retort. The cost of CaF2 usually adds up to 5% of total magnesium production costs. Over the last two years some 70 Hydromet trials were completed.
The pre-feasibility study While the Pre-Feasibility Study has been delayed from the initial March 2011 completion to the end of this month, it is now on track to meet the new deadline.
Clark & Marron were appointed in July to provide consulting services on the pre-feasibility study for the Hazelwood project. C&M is an expert business consultancy specialising in supply side commodity analysis. Headquartered in Australia, C&M established an office in Beijing in 2002 and has been assessing the global magnesium value chain and China's domestic magnesium industry in particular. C&M have been retained to provide consulting services relating to the acquisition and analysis of data and information relating to the construction and operation of a Chinese originated primary magnesium facility based on the Pidgeon Process with a nameplate capacity of 10,000 tpa. C&M has already retained the services of a Chinese technical provider for the initial data package. A beneficiated sample has been sent to China to be processed through a commercial retort to verify the production of magnesium as part of the PFS.
In June LMG announced the appointment of GHD Pty Ltd as their consulting engineers on the PFS for their Hazelwood Project. GHD is one of the world's leading engineering, architecture and environmental consulting companies. Established in 1928, GHD employs 6,000 people across five continents. It has an office in the Latrobe Valley and well established relationships with both Hazelwood and Yallourn Power Stations.
Other projects Last year LMG's uranium exploration projects in the Northern Territory were relinquished, however it recently acquired the option to acquire an early stage exploration property for rare earths at Errida Creek in Western Australia. (Rare earths and magnesium is being used together in alloys to produce car parts with a 40% weight reduction when compared to aluminium). This exploration area is expected to be granted within the next three months and should be a low cost alluvial project.
LATROBE MAGNESIUM LTD FINANCIALS Last Traded price 2.7c. Shares Issued 688 m Market Cap $18.6 m Year ended June 30, Values in $000?s INCOME 2011 Int 2010 2009 Op Revenue 77 1 2 Op Profit (loss) (343) (276) (515) Net profit (loss) (343) (276) (515) EPS (Cents) (0.05) (0.05) (0.09) BALANCE SHEET 2011 Int 2010 2009 Current Assets 1043 146 162 Non Current Assets.. 5684 5806 5805 Current Liabilities 63 196 102 Non Current Liabilities - - - Net Assets & Shareholders' Funds 6664 5756 5865 Intangibles 5684 5684 5684 Net Tangible Assets 980 72 181 Gearing (Net of Cash) % Nil Nil Nil NTA per share (cents) 0.1 0.0 0.0 Shares Issued (m?s) 688.2 603.2 590.1
Cash Flows: 2011 Int 2010 2009 Cash on hand (at open) 10 12 197 Operating Activities (113) (89) (352) Investing - (2) (8) Financing Activities 1028 89 175 Cash on hand at Year end 925 10 12 Cash on hand as of June 30, 2011: $723,000.
1/ The company raised $750,000 in a placement at 1.5c followed by an SPP at the same price for up to $2,100 for each applicant. The SPP was oversubscribed 8 times, raising $444,100. 2/LMG received a R&D Grant of $224,423.
Directors: David Oliver Paterson, 57,exec chairman, first appointed a director in 2002. David is a Chartered Accountant. He was a founding partner of Europacific in 1990 and has held an Investment Dealers Licence since 1990. He was earlier Group Manager of the Corporate Services Division of Tricontinental Corporation Ltd responsible for NSW and Queensland and has also worked for Coopers & Lybrand in Brisbane and Sydney. Philip Francis Bruce, 59, non exec director, appointed a director in September 2003. Philip, a mining engineer with over 30 years resource industry experience in Australia, South Africa and Indonesia, formerly CEO of PT BHP Indonesia, MD of Triako Resources and GM development for Plutonic Resources Ltd. He is a director of PF Bruce & Associates which provides corporate and project management services. He is also MD of Hill End Gold Ltd. Kevin Anthony Torpey, 72, non exec, appointed a director on April 11 2002. Kevin is a Chartered Professional Engineer who has been involved in the development of many diverse major projects over the last40 years including Consolidated Goldfields, EZ Industries, Alcan, International Nickel, Tara Minerals Ltd (Ireland), Noranda, Denison Mines (Canada), Toyota, Mitsubishi and Iwatani. John Lee, non exec director, a director since December 2010. Mr Lee has held senior management roles in the Federal Department of Employment and Industrial Relations. He was also senior private secretary and principal adviser to Tony Street, a senior federal cabinet minister as well as with Henry Jones IXL, Elders Building Supplies and Woolworths Ltd. Jim Siemon appointed Hazelwood Project Director In March this year LMG appointed Jim Siemon, a chemical engineer, as its Hazelwood Project Director. He has taken responsibility for all technical and engineering aspects of the pre-feasibility, feasibility and other studies for LMG's Hazelwood magnesium project through to plant design, construction and commissioning. Jim's industrial experience includes roles with CRA, Rio Tinto, Pasminco, Zinifex and Nyrstar. His early professional experience was in process engineering R&D with CSIRO. Company Secretary: David Hughes, appointed August 14 2002. He is also company secretary of Imperial Corporation Ltd, Hudson Investment Group Ltd, Hudson Resources Ltd, Tiaro Coal Ltd, Sinovus Mining Ltda nd Fall River Resources Ltd.
Major shareholders: David Paterson and Kevin Torpey together have some 19% Top 20 holds approximately 40%.
LMG Price at posting:
2.6¢ Sentiment: Buy Disclosure: Held
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