Share price forecast, page-123

Reading posts over the last few weeks, I thought I would do a little research and see if I could find a few answers to some of the questions that have been asked lately. This post only relates to the Australian plant processing fly ash.I will try to keep a flow but as I need to reference the sources, my post may be a bit disjointed.


Stage 1 = Demonstration Plant (Demonstrating the Hydromet process – NOT a commercial plant)

“LMG has sound but substantial growth strategy. LMG will start by proving its unique hydromet processes by successfully commissioning its 1,000 tpa demonstration plant by June 2023, followed by its 10,000 tpa in late 2024.”

“LMG has commissioned expert studies & will use learnings from the demonstration plant to determine the potential economic capacity of a commercial magnesium plant at its Hazelwood North site” (Note the final capacity has not been set as 10,000 tpa, multiple times LMG has stated 10,000 +)

Source: Community Presentation - November – 2022

There has been a change over the last year regarding the1000 tpa demonstration plant.In the Melbourne Mining Club Presentation in March 2022 the following statement was made regarding revenue from the demonstration plant.

“The demonstration plant will make an EBITDA of between $1M to $3M if the magnesium price stays between US$4,000 to US$5,000 per tonne. Current market price is between US$7,000 - US$7,500 per tonne.”

Source: Melbourne Mining Club Presentation – March – 2022

Compared to:
A change that I think many have missed in the November 2022 IMARC Presentation the financials of the demonstration plant are expressed as:

Demonstration plant commencingproduction June 2023.
Financials
• $39m capex
• $10m revenue
• EBITDA break even
• 8.2 tons of CO2 / ton of Mg

Source: November 2022 IMARC Presentation


Stage 2 – 10,000+tpa Commercial Plant

“The 10,000 tpa plant is expected to generate in the order of $110m in revenue and EBITDA of $42m in 2024. The offtake for this production is complete with LMG ‘s two distributors in the USA and Japan”

(So LMG are stating that 10,000tpa is already accounted for with existing offtakes)

Source: Melbourne Mining Club Presentation – March – 2022

Having the 10,000tpa accounted for in offtakes for USA and Japan is very interesting, especially when David Paterson in the last ********* interview said relating to an Australian Aluminium manufacturer approaching LMG for supply " We've been approached by one of those people who make the aluminium, to provide them with magnesium"

Source: https://*********.com.au/latrobe-magnesium-plant-engineering-equipment-packages-near-completion/

**** = *********
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The expansion of the 1000 tpa plant to 10,000+ tpa appears to happen concurrently/simultaneously according to the Gantt chart below (See last two events)


Source: Investment Presentation December – 2021


I have sought clarification from David Paterson regarding the likely shut down times of the 1000tpa plant to enable multiple stages of the production process to be modified for the higher capacity. I will share his reply once it is received.

After listening to the ********* interview from November last year, I picked up something to consider. I think the 10,000+ tpa plant could be a separate production line to the 1000tpa demonstration, i.e. two separate lines of production.

Time mark: 8.02

David is talking about the progression from the demo plant to the 10,000+ tpa plant and then 100,000tpa overseas.

"So the demonstration plant works, then we go to our 10,000 tonne, which we're talking about a commercial scale plant that a 100 million cost/capex and we get that up and operational by December 2024. We have enough area, we have our land at 320 Tramway Road which is a brown fields site, which is all ready to go now and insert our smaller demonstration plant and we build the 10,000 plant on the same site"

My hypothesis makes sense from the perspective that for the demonstration plant to continue to operate at the same time as the 10,000tpa plant is being developed according to the Gantt chart. As you can see in the chart, it shows the demonstration plant operating over at least 4 quarters (A year at least) while the 10,000+ tpa is being engineered and in construction.

https://*********.com.au/latrobe-magnesium-plant-engineering-equipment-packages-near-completion/


Expansion to 10,000+ tpa

The expansion of the plant is to be funded from five potential sources that I can identify. Given the $102m capex for the 10,000+ tpa plant, it is clear that the Critical Minerals fund should be a major element of finance.

1. State and Federal Government Funding

“Together with the Government’s National Battery Strategy and Electric Vehicle Strategy, Australia’swide range of critical minerals resource projects now have a clear framework and future vision.”“There are a range of supports to boost the development of the sector, and encourage continuedinnovation and research and development, including the $1 billion Value Adding in Resources Fund,to work alongside the $2 billion Critical Minerals Facility, as part of the Government’s NationalReconstruction Facility.”

“LMG will be looking to secure some of its future funding for its 10,000+ tpa plant from these facilities.”

Source: Quarterly Activities Report - 30 September 2022

One of the largest grants for the Critical Minerals Fund that I have seen was:“Australian Vanadium Limited (ASX: AVL) has been awarded a A$49 million grant under the Australian Government’s Modern Manufacturing Initiative Collaboration Stream towards the development of the Australian Vanadium Project near Meekatharra and Geraldton, to create an Australian green fuelled vanadium industry.”

“Critical Mineral Strategy - AVL’s Project is directly aligned with Australia’s Critical Minerals Strategy (2019). There are no currently operating vanadium mines in Australia, despite having the third largest economic vanadium reserves globally.

Source:https://australianminingreview.com.au/news/avl-awarded-a49-million-in-australian-critical-minerals-collaboration/

(I think the example above is comparable with LMG’s position and aspirations. AVL’s share price is currently 2.9c with a market cap very close to LMG’s)

2. Upfront payment from one of the offtake agreements

“LMG has asked for a $10M deposit against magnesium sales from one of its offtake providers to assist in the cost of expansion”

Source: Melbourne Mining Club Presentation – March - 2022

“MEC (700 employees globally) will become the exclusive distributor in the USA with commitments of a minimum 4,000 tonnes of magnesium/year”(Metal Exchange Corporation)

“AMCJ is one of the largest titanium and magnesium trading house in Tokyo committing to a minimum 4,000 tonnes per year. It is also willing to provide funding to LMG to expand its plant.(Advanced Material Corporation of Japan)”

Source: LMG’s Magnesium Market Update – 18th November 2021

3. Project Finance
"Plant to be expanded to 10,000+ tpa commencing production in Dec 2024. Expansion funded by project finance.”

Source: IMARC Presentation - Nov 2022


4. Magnesium and SCM from Demonstration plant

I will include this but do not see this as likely based upon the “EBITDA break even” for the demonstration plant. Again, I have also asked David Paterson to provide some clarity.

Source: Melbourne Mining Club Presentation – March – 2022


5. JV or Project Partner

Depending upon potentially outstanding results for the demonstration plant, some of the expansion costs to 10,000+tpa may be supported by the project partner for the 100,000tpa plant (Just a thought).

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10,000+ tpa. The final volume output has not been determined yet.

“LMG is undergoing a study on the amount of fly ash that is capable of being extracted from the Yallourn landfill. Once this work is completed LMG will determine whether the capacity of this plant is higher than 10,000tpa”

Source: Melbourne Mining Club Presentation – March – 2022

“The current production of Yallourn fly ash until it closes in 2028, is sufficient to provide feedstock for a 10,000tpa plant for 20 years. The mining of the Yallourn landfill could increase the size of the expanded plant. This next expansion will be decided by the end of 2023"

Source: Quarterly Activities Report - 30 September 2022

There are a number of indicators that suggest the production could increase to 15,000 tpa or more. Further expansion is dependent upon the recovery of fly ash from landfill (Not current waste from the electricity plant). The 10,000 tpa is from existng/current fly ash production but the further expansion need to determine the quality and feasibility of recovery of fly ash that has been placed in landfill into a hill. LMG are conducting studies on the landfill fly ash and we will find out this year if the quality is acceptable and recovery is feasible.

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Supplementary Cementitious Materials (SCM's) from the 10,000+ tpa plant

“The 10,000 tpa demonstration plant will potentially allow for ~41,000 tonnes of SCM to be produced as a by-product to the Magnesium production. This will allow LMG to build demand for its product prior to its expansion”

“Victoria has no local supplier of SCM and traditionally imports 100% of their 250,000 to 300,000 tpa use.”

Source: Investment Presentation – December 2021

The SCM's are extremely important due to them making up between 40 to 50% of the 10,000+tpa plants revenue per annum. As the SCM's are a by-product that are not attributed production costs as well as efficiencies from being local and not imported, the SCM's must be extremely lucrative. I remain puzzled as to why we do not know much more about the SCM values, marketing, sales and distribution network.

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Other requirements for the 10,000+ tpa plant

A new agreement will need to be entered into between LMG and Energy-Australia beforethe expansion of LMG’s plant can take place. The current agreement for the supply of fly ash from Yallourn covers for 3000tpa Mg production (Based upon the old demonstration plant scale that was revised to 1000tpa). Before the plant can expand to 10,000+tpa, LMG and Energy Australia will need to negotiate and agree upon increased volumes of fly ash and the terms of the agreement. Reading from previous announcements, the new agreement is well on track to be actioned once the demonstration plant has been commissioned and the feedstock and production metrics have been refined/calculated.

LMG will need to get a revised planning approval from Latrobe City Council for the expansion to the 10,000 tpa + plant. As a change in scale and intensity is required to go from 3000tpa (Still the current approval even though the demonstration plant was revised to 1000tpa) to an expansion of 10,000+ tpa, the change is a material change of use and therefore requires a new development application. LMG have commenced this process and the Latrobe City Council has progressively been consulted.

An additional approval from the EPA will be required for the 10,000 tpa + plant. The existing approval is based upon the 3000tpa (revised to 1000 tpa now but still approved for 3000tpa). For LMG to increase the plant capacity for production to 10,000+ tpa, extended environmental impact studies will have to be performed in regard to transport, leaching, soil and water contamination, air quality, noise, toxicity levels, prove emissions, etc. GHD consulting have been working with LMG.

I propose that all three of the above approvals will need to be finalised within ~ 7 months. All approved so that once the demonstration plant has been successfully commissioned, the 10,000+ tpa expansion can commence according to schedule and be production by December 2024

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All the best to holders. Should be a smashing year.

Regards

Ken