Latrobe Magnesium Hits Safety Milestone While Facing $19M Legal Battle

Safety and Construction Milestones

Latrobe Magnesium (ASX: LMG) has reported a significant safety milestone, completing over 90,000 construction workhours on its Demonstration Plant project without a single Lost Time Injury. This achievement underscores the company’s commitment to safe operations as it progresses through critical construction and commissioning phases.

The Magnesium Oxide (MgO) section of the Demonstration Plant has now been fully constructed and commissioned, positioning LMG to commence ore commissioning shortly. This phase is pivotal as it will generate essential operational data and produce saleable magnesium oxide, a key precursor to magnesium metal production.

Operational and Financial Challenges

Despite these advances, LMG faces headwinds from higher-than-expected operating costs, primarily due to labour expenses linked to legacy enterprise agreements from the power station industry. The company is actively negotiating with contractors and unions to align labour rates with mining industry standards, aiming to reduce costs and extend the plant’s operational timeline sustainably.

LMG also received formal infringement notices from EPA Victoria related to administrative matters during a site visit. While the company acknowledges the notices and is appealing, it maintains that there was no risk to the community and that the plant complies with environmental standards.

Legal Dispute with Mincore

On the legal front, Latrobe Magnesium is embroiled in a dispute with Mincore Pty Ltd. Mincore has issued a Statement of Claim for $1.37 million, which LMG disputes and seeks to reduce. More notably, LMG has lodged a substantial counterclaim of $19.39 million for breach of contract and negligence. This legal battle adds a layer of uncertainty that investors will be watching closely.

Funding and Future Development Plans

To support ongoing operations and the plant restart, LMG plans to sell approximately 4.3 hectares of excess land at its Tramway Road site, expecting to raise around $5 million. This move aims to bolster working capital and fund the next stages of magnesium oxide production.

Looking ahead, the company is advancing its Stage 2 Commercial Plant feasibility study with Bechtel Australia, targeting a 10,000 tonnes per annum magnesium metal facility. However, the current Tramway Road site is deemed too small for this expansion, prompting evaluation of alternative locations.

LMG is also awaiting a critical power allocation decision from Sarawak Energy for its Stage 3, 100,000 tpa international plant, expected by the end of February 2025. Securing this allocation is essential for the project’s progression.

Government Support and R&D Incentives

The Victorian Government has recognized LMG’s progress by approving a $240,000 grant payment linked to the MgO stage completion. Additionally, LMG’s research and development rebate for 2024 reached a substantial $13.2 million, which has been applied to reduce outstanding facility balances, highlighting the company’s strong innovation credentials.

LMG is also exploring eligibility for the US Department of Defence’s Critical Minerals Program, leveraging its low carbon footprint and strategic partnerships to potentially access further funding.