What a CRACKER day yesterday for LMG. I took the opportunity to double my holdings. And will buy more again this week if there is another good dip.
Why? Because I believe 2022 will be a historically important year for Latrobe Magnesium Group, with major multi-bag potential. With the threat of an imminent Russia/Ukraine war and increasing China/Taiwan tension within the same concerning context, secure magnesium supplies from countries who will not use supply as an economic weapon will become an urgent priority.
I have no doubt at all, that as shareholders, WE HAVE A TIGER BY THE TAIL. At Share Prices we will never see again.
Latrobe Magnesium is one of the most advanced Magnesium projects globally. With a centralised supply of Magnesium and a push for diversified and clean producers to reduce supplier risk, LMG is well positioned to supply the surging demand for magnesium globally. EPA and government approval have already been received for the demonstration plant. The company is completing process design work which will be finalised by the end of December, allowing the company to commence tendering the major equipment parcels for the demonstration plant.
As of 2020, Russia had the largest reserves of magnesite worldwide, amounting to some 2.3 billion metric tons. Compare that to magnesite reserves in Spain stood at approximately 35 million metric tons. Russia is also the second largest producer of magnesium. Even though China is a long way ahead as a producer, Russia holds the largest reserves but is now regarded as an economic threat by Europe. No one will will to rely solely on China, and no one at all will want to turn to Russia for magnesium.
USA Magnesium marketTraditionally the USA has only one (1) producer which is protected by an import duty of 141.9% placed on China imports. This US producer will be undergoing capital repairs in 2022. The USA market used in the order of 58,800 tonnesin 2019 which has increased to 63,800 tonnes in 2021.
LMG and a secure, reliable supply environment like Australia will come into their own. LMG also gets to double down where others don't. As the environmentally sustainable producer of Magnesium, I firmly beleive it will become a leader. LMG has decades worth of supply. It jas sufficient fly ash from the Yallourn Power Station to supply a 40,000 tpa plant for the next 20 years, which would cover lessthan 3% of the growth in demand for Magnesium that will occur over the same period.
LMG is also an ESG credentialled clean metals producer. LMG produces up to 50% less CO2than other Magnesium producers using their acid process and produces noCO2in the production of SCM. LMG uses waste material from the burning of coal as the primary feedstock, allowing for the recycling of hazardous materials.
Europe lost its last magnesium production plant in 2001, according to European Aluminium, which is calling for political action. Since 2011, magnesium has been listed as an EU Critical Raw Material, "yet, the EU's vision to preserve and boost European industries has been too focused on monitoring rather than action," said the representative for European Aluminium.
Overreliance on China has already proven to be a catastrophic issue. China and Taiwan, Russa and Ukraine, all pose new threats to supply that will have the world's largest users of magnesium rushing to contract secure new supplies. The same has happened with Lithium, with Tesla even securing a supply directly from Syrah Resources, something the EV carmaker has never done before.
In October and November, global manufacturers faced another headache in their supply chain after the price of magnesium spiked and highlighted their vulnerability to policy shocks in China, which accounts for 80% of the world's production.
UACJ, one of the biggest aluminium companies in the world, said it has secured only enough magnesium to produce the aluminum alloy it sells to its customers until March 2022. And that a change in procurement methods will be necessary. "While optimizing the inventory levels, we aim to diversify sources in the long run," said a representative for the company, which is also looking to research and development to cut magnesium consumption.
MARCH will be D-Day again for Magnesium supply with entirely new threats to consider.
Magnesium is an essential raw material for aluminum alloys, which are used in car parts such as gearboxes, steering columns and fuel tank covers. It is also widely used in steel production to help remove sulfur. But churning out magnesium is energy intensive, and China's late-September power crisis was a wake-up call to industry. As Chinese authorities imposed electricity cuts to meet environmental targets, operations were suspended in some areas of Shaanxi Province, home to 60% of China's magnesium output.Prices of coal and ferrosilicon, an alloy containing iron and other substances that is also used to produce magnesium, were soaring at the same time, driving magnesium prices to a record $10,000 per ton before power was restored and Beijing allowed more coal mining.
For magnesium buyers in Japan, whose users of magnesium include carmakers and steel producers, that equated to a peak of 1,050 yen (around $9) per kilogram.The last time magnesium prices surged was in 2008, when Beijing imposed restrictions on industry in the hopes of having a blue sky during the Olympic Games. The price rose to $6,500 per ton, a record high at that time.
The rest of global magnesium supply comes from Turkey, Israel, the U.S. and Brazil. The representative is in talks with suppliers in these countries but the competition is intense among buyers from across the world.
If you look at the fundamentals behind LMG, like me, you will be very happy with this one.
LMG's time is coming and it's 2022.
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