Latrobe Magnesium Faces Funding and Execution Risks Amid Commercial Expansion

Equity Raising to Accelerate Production

Latrobe Magnesium Limited (ASX – LMG) has announced an $8 million equity capital raising, comprising a $4 million institutional placement and a $4 million underwritten entitlement offer priced at 2.3 cents per share. The raise is designed to fund the commissioning and operation of its 1,000 tonnes per annum (tpa) Demonstration Plant in Victoria, Australia, and to commence a Bankable Feasibility Study (BFS) for a larger 10,000 tpa Commercial Plant.

The placement price represents a discount of approximately 15% to the last traded share price, reflecting the company’s strategy to attract sophisticated and professional investors while balancing shareholder dilution concerns. Shaw and Partners Limited is acting as sole lead manager and underwriter for the offer.

Pioneering Sustainable Magnesium Production

LMG’s core innovation lies in its patented hydrometallurgical process that extracts magnesium metal from brown coal ash, a waste product abundant in the Latrobe Valley. This process significantly reduces carbon dioxide emissions, by more than 60% compared to traditional Chinese magnesium producers, who dominate 90% of global supply.

The Demonstration Plant, which has already produced the world’s first sustainable magnesium oxide (MgO) from coal ash, is on track to produce its first magnesium metal ingots by the first quarter of 2026. This milestone will validate LMG’s technology at scale and de-risk the transition to commercial production.

Pathway to Commercial and International Expansion

Following the Demonstration Plant, LMG plans to build a 10,000 tpa Commercial Plant in Victoria, with offtake agreements already signed for 100% of its capacity. The BFS is scheduled to commence in 2025, targeting a final investment decision in 2026 and production start in 2027.

Looking further ahead, LMG is exploring a 100,000 tpa International Plant in Sarawak, Malaysia, utilizing ferro nickel slag as feedstock and powered by hydropower granted by Malaysian authorities. This facility aims to position LMG as a global-scale, low-emissions magnesium producer.

Diversified Revenue and Strategic Positioning

In addition to magnesium metal, LMG’s process yields valuable by-products such as supplementary cementitious materials, iron oxide, agricultural lime, and char, expected to contribute around 25% of revenue. This multi-commodity approach diversifies the company’s income streams without additional production costs.

With $70 million invested in the Demonstration Plant and over $20 million in intellectual property developed in collaboration with CSIRO, LMG presents a compelling value proposition amid rising global demand for critical minerals. Magnesium’s lightweight and high-strength properties make it essential for automotive, aerospace, electronics, and emerging battery technologies.

Risks and Market Outlook

Despite the promising outlook, LMG faces typical industry risks including capital requirements, operational execution, commodity price volatility, regulatory approvals, and environmental compliance. The company’s ability to secure additional funding and successfully scale production will be critical to its future performance.

Investors should also consider potential dilution from the equity raise and the inherent uncertainties in transitioning from demonstration to commercial scale. Nonetheless, LMG’s unique technology and strategic positioning in a critical mineral market dominated by China offer a differentiated investment opportunity.