The case for Latrobe Magnesium 2022, page-81

Below is the letter I wrote and sent to David Paterson LMG CEO
I wrote this MS Word but often when I cut and paste from word the editing goes weird.
The 3 mins you get to correct are simply not enough, so please excuse formatting as much as you can.

When or if I get a response I will share as much as I am allowed.

Regards

Ken

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David Paterson

CEO Latrobe Magnesium

[email protected]

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14/05/2022

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Dear David,

I hope you and the team at LMG are all very well.

As a shareholder and one that reads prolifically, I have accumulated a number of questions I would ask you to kindly consider and respond please? I disclose that I wish to publish the responses on HotCopper (Where they can be not regarded as previously undisclosed Market Information), for the sake of many holders that have expressed their concerns and frustrations with a lack of detailed updates. If some answers cannot be provided at this time, would you please consider an exposition of the answers in the next Project Update? Please see this letter as a type of interview. Many would like to hear your responses.
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In past conversations I have mentioned a number of the wording anomalies and inconsistency of information. The response you provided was that you are very busy and do not have the time to debate wording. I respectfully put forward to you that as the CEO of a company owned by shareholders you have an obligation to provide correct communication that is consistent.
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In addition, I would like to point out that in the media interview last year you made a commitment to shareholders that regular project and market updates would be provided to ensure stakeholders are kept well informed. It is my belief that there have been irregular updates and also a lack of detail in many aspects of the project and schedule changes. There have been extended periods where no communication to shareholders has been provided at all.

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Following is a summary of themain themes:

1.Concerns for the lack of communication via progress reports

2.The lack of follow-up to many promises and commitment from yourself as CEO

3.The lack of communication regarding a number of very important previous notices

4.Disparity between the many tweets and LinkedIn post that are not communicated vi market updates and as such many investors are not privy to read.

5.The slippage/project creep that has developed and yet without of why and the impact upon the previous schedules.

6.Anomalies between information previously provided compared to recent (please look at the timeline and inconsistencies).

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All References have been taken from Reports and Presentations in the last 6 months, they have been listed in chronological order for the sake of comparison.
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Process Design Work

Investment Presentation - December – 2021 (9^th Dec 2021)

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.

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Updated Appendix 5B for the quarter ended 31 March 2022

Several design and engineering process milestones are complete including 40% design review and critical HAZOP workshops given the process, piping and instrumentation diagrams have been finalised and the plant layout frozen
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Comments and questions

Are the two process design statements regarding the same aspects of the project? If they are the same aspects, can you explain why there has been a delay of three and a half months in addition to only being 40% completed?

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Victorian Government Grant Application

Investment Presentation -December – 2021 (9th Dec 2021)

LMG has a $1M grant application with the Victorian State Government and expects to receive a decision in March 2022.

AGM Presentation - January 2022(20th Jan 2022)

State Government Grant $4million

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AGM Presentation - January 2022(20^th Jan 2022)

LMG has a $1M grant application with the Victorian State Government and expects to receive a decision in March2022.

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Melbourne Mining Club Presentation March -2022 (9th March 2022)

LMG has a $1M grant application with the Victorian State Government and expects to receive a decision in March 2022.

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Comments and questions

Can you please explain why there is a $4 million figure? Was the figure due to $4m being sort for the initially suggested 3000tpa plant that changed to 1000tpa?
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The funding application to the Victoria Government has been forecast to be decided by March 2022 (Nearly 2 months ago). Would you please explain how this is progressing and what now is the revised expectation of a decision?

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Demonstration Plant Scale

UPDATE ON REVISED TERMS OF $23MPROJECT FUNDING - 17th Dec 2021

Once confirmatory operating data from its 1,000 tpa initial plant has been generated over a 6-monthperiod.

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UPDATE ON REVISED TERMS OF $23MPROJECT FUNDING - 17th Dec 2021

1,000 tpa demonstration plant by 1st quarter of 2023

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AGM Presentation January – 2022(20th Jan 2022)

Once the 10,000 tpa demonstration plant is constructed and in production in the middle of 2024

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Melbourne Mining Club Presentation March -2022 (9th March 2022)

Once the 10,000 tpa demonstration plant is constructed and in production in the middle of 2024

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Comments and questions

Whilst I well understand that the decided scale of the demonstration plant is 1000tpa, there is significant contradictory information being presented. The point is not pedantic semantics it is about professional presentation of the project and the Company. How can such a simply matter that has been determined be subject to such poor editing?
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Demonstration Plant Construction

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Investment Presentation -December – 2021 (9th Dec 2021)

Start construction ofdemonstration plant Jan 2022

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AGM Presentation – January –2022 (20th January 2022)

Construction starts in 1stquarter of 2022 and it will be in production 12 months

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Updated Appendix 5B for thequarter ended 31 March 2022

Criticallong lead items have been tendered on schedule and mitigate the risk of thedemonstration plants scheduled completion which is still March next year.

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Commentsand questions

We are now nearly half waythrough May and we have crept major construction from January to a proposalthat it may start by the end of this month, over 5 months delay. Is the delaydue to the delay in the delivery of the first finance tranche of $10,000,000that was reported to be the 28^th of February? If the delay is mainlydue to the finance delay, why has the finance delay not been communicated andtherefore indicate the delay in procurement of equipment and construction?
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Demonstration Plant Finance

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LATROBE VALLEY PROJECT UPDATENOVEMBER 2021 (25th Nov 2021)

The loan facility will beavailable to be drawn in three tranches: (i) $10,000,000 in full, on before 28February 2022

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HALF YEAR FINANCIAL REPORT 31DECEMBER 2021 (15th March 2022)

The loan facility is availableto be drawn in three tranches: (i) $10,000,000 in full, on before 21 March2022; (ii) $10,000,000 in full, on or before 30 June 2022

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QUARTERLY ACTIVITIES REPORT 31March 2022 (29th Apr 2022)

The signing of the agreementshould take place within the next two weeks with the first $10 million drawdownschedule for May.

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Comments and questions

The financetranche is obviously absolutely critical to project progress for major plantpurchase construction, installation, etc. It is very concerning that a financialcontract with set timelines for the three tranches has continued to drift. Whyhas this drift and it cause not been communicated to shareholders given it is acritical matter for project progress? Again, the delay is over three months.

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Will thisdelay in finance and its impact upon progress be inevitably added onto theforecast construction completion date and therefore take the completion wellinto the second quarter of 2023?
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Administration Building

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LATROBE VALLEY PROJECT UPDATENOVEMBER 2021 (25th Nov 2021)

Tender of the administrationbuilding construction

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QUARTERLY ACTIVITIES REPORT 31 December 2021 (24th January2022)

Refurbishment of theadministration building at 320 Tramway Road and all these workshave now been completed.

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Updated Appendix 5B for thequarter ended 31 March 2022

Construction activities startedwith Security Gatehouse, Administration Building and carpark tenderedfor construction

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Comments and questions

Would you pleased explain whatis happening here? Is the administration building waiting for construction orhas it been refurbished and completed? It is not possible for both tohappening.

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Other Questions

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Latrobe Magnesium ProjectMarket Update (18th Nov 2021)

LMG has signed a Memorandum ofUnderstanding with Advanced Material Corporation of Japan

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Comments and questions

Are you able to give anyinsight to when the MOU may be changed to a binding offtake?

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Investment Presentation -December – 2021 (9th Dec 2021)

In the last month, LMG hasreceived enquiries for the supply of 20,000 plus tpa of magnesium

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Comments and questions

Are you able to give anyinsight to when and if you see these enquiries developing into offtakes?

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AGM Presentation – January –2022 (20^th January 2022)

In December 2021, LMG wasreported in the Austrade’s Critical Minerals Prospectus. The report willfeature in their worldwide investment attraction events in 2022

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Comments and questions

Would you please inform usregarding what investment attraction events the report will feature in thisyear and the scheduled timing of such events?

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AGM Presentation – January –2022 (20th January 2022)

LMG announces it will complete a prefeasibility study ona 100,000 tpa magnesium plant using ferro nickel slag as its feedstock in 2022
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Comments and questions

The PFS for the 100,000 tpa plant has many aspects thatwill be a considerable driver for LMG growth.

The locationbeing considered for the 100,000tpa plant will obviously be critical to a vastarray of objectives, logistics and costs. The partner will need to meet yourconsiderable criteria in order for the project to achieve efficiencies, Co2,feedstock, renewables, etc. Given that there is an offtake agreement withAmerican (Metal Exchange Corporation (MEC)) and an MOU with (Advanced MaterialJapan Corporation (AMJC)) Japan, are either of these countries and companies innegotiations for potential partners?

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Melbourne Mining ClubPresentation March -2022 (9^th March 2022)

LMG has asked for a $10Mdeposit against magnesium sales from one of its offtake providers toassist in the cost of expansion.

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Comments and questions

The $10M forthe expansion of the demonstration plant to a 10,000tpa plant is some way off.Nevertheless, the offtake partners above would have a vested interest insupporting the next development stage to achieve their offtake requirements. Isthere any further light that can be shed on this potential finance deposit?

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Melbourne Mining ClubPresentation March -2022 (9th March 2022)

LMG’s project remediates miningsites by recycling 100% of potentially hazardous wastes, i.e., fly ash, intovaluable saleable products.

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Comments and questions

As you wouldbe aware, the remediation of a site is far more than simply removing the toxicwaste. Is the full site remediation a responsibility and cost to LMG within thefly ash supply agreement? If so, the site treatment, earth works, drainage,siltation capture’s, revegetation, etc can be extremely expensive. Has the fullextent of remediation work been accounted for within costings and returns?

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QUARTERLY ACTIVITIES REPORT 31March 2022 (29th April 2020)

The longest lead time item, theSpray Roaster, has been issued for tender along with the Reduction Furnace withaward targeted for beginning of May.

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Comments and questions

Has the award and delivery ofthe Spray Roaster and Reduction Furnace seen to be further delayed due tofinance and if so, what impact will this have on project completion for nextyear?

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Finally, would you please be able to provide the most recent top 20 shareholders?

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Thank you very much for your time David. I appreciate you are very busy and my critique may not be seen as helpful at this time. I personally believe it very important for LMG to present themselves in the best light possible and so I hope the questions and concerns above may assist all.

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Kind Regards

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Ken

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Ken Matthews

LMG Shareholder and Advocate