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Latrobe Magnesium’s team. Source: Latrobe Magnesium / LinkedIn
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  • Shares in Latrobe Magnesium (LMG) rise after the company bolsters revenue forecasts for its Latrobe Valley project in light of key offtake deals and strong magnesium prices
  • Initial revenue estimates for the project were based on a June magnesium price of US$3250 (A$4472) per tonne; currently the price is US$6150 (A$8957)
  • Should this price level hold, Latrobe says it will increase earnings before interest, tax, depreciation, and amortisation (EBITDA) forecasts for the plant by roughly $56 million
  • Meawhile, Latrobe announces the details of offtake deals for a combined 80 per cent of the magnesium produced from the plant with MEC in the US and the AMCJ in Japan
  • Shares in Latrobe were up 4.17 per cent at 12.5 cents each at 11:27 am AEDT

Shares in Latrobe Magnesium (LMG) are up after the company bolstered revenue forecasts for its Latrobe Valley project in Morwell, Victoria, in light of some key offtake deals and strong magnesium prices.

Latrobe today told investors its initial revenue estimates for the project, which is being designed to extract magnesium from industrial fly ash, were based on the June 2021 magnesium price of US$3250 (A$4472) per tonne.

A September supply crisis in China has since lifted magnesium prices significantly, with prices touching as high as US$10,200 (A$14,000) per tonne and settling at US$6150 (A$8462) per tonne on November 17.

Latrobe said the International Magnesium Association (IMA), of which LMG is a member, expected this price level to hold.

According to Latrobe, if the current US$6150 price tag is held over the long term, it would increase the company’s earnings before interest, tax, depreciation, and amortisation (EBITDA) for the 10,000-tonne-per-year plant by roughly $56 million.

Meanwhile, Latrobe announced today the details of two key offtake deals for magnesium from the Latrobe Valley project.

Long-standing partners

Latrobe has locked in an offtake agreement for 40 per cent of the magnesium produced from its Victorian project through Metal Exchange Corporation (MEC) in the US.

Under the US deal, MEC has committed to buy 4000 tonnes of magnesium from the Latrobe Valley project per year, equating to 40 per cent of the Latrobe’s planned annual production.

While Latrobe stopped short of giving details of the pricing arrangement for the offtake deal, the company said the MEC contract will deliver “excellent prices” for LMG due to anti-dumping laws on Chinese imports into US markets.

While North and Central America use some 160,000 tonnes of magnesium per year, most of its supply comes from China.

The anti-dumping duties on Chinese imports, however, mean the US can pay up to double the free on board (FOB) Chinese price for magnesium.

Under a free trade agreement between Australia and the US, however, magnesium produced from Latrobe’s facility will be exempt from any import duties.

Meanwhile, Advanced Material Corporation of Japan (AMCJ) has signed a memorandum of understanding to purchase up to 4000 tonnes of magnesium per annum from the project Latrobe Valley project.

Latrobe said the AMCJ is the largest titanium and magnesium trading house in Tokyo.

On top of the offtake agreement, AMCJ has also agreed to consider providing some funding for Latrobe to expand its flagship plant and to help Latrobe lock in further funding from Japanese government-owned banks.

Latrobe flagged its offtake deals earlier this month, though at the time the details of the offtake partners were unknown. The company said it had received enquiries from potential buyers for the remaining 2000 tonnes of magnesium to be produced from its Victorian facility.

Shares in Latrobe were up 4.17 per cent at 12.5 cents each at 11:27 am AEDT. The company has a $173 million market cap.

LMG by the numbers
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