KUCHING: Australian-listed Latrobe Magnesium Ltd (LMG) will invest in a manufacturing plant in Samalaju Industrial Park in Bintulu, with an annual production capacity of 100,000 tonnes of magnesium.

According to chief executive officer David Paterson, LMG’s discussions with the Sarawak ministry officials and authorities, particularly the Bintulu Development Authority, were sufficiently advanced to agree on a 40-ha site location in Samalaju Industrial Park for the magnesium project.

LMG will immediately commence the land acquisition process to secure the land, he said.

Magnesium, said LMG, had the best strength-to-weight ratio of all common structural metals and was increasingly used in the manufacture of car parts, laptops, mobile phones and power tools.

“The Samalaju location has notable strengths comparable to the other two options that were being considered, namely, Ras Al Khair in Saudi Arabia and Duqm in Oman.

“The most significant benefit to this location is the presence of hydroelectric power generation.

“This means LMG will potentially be able to operate with 100% renewable energy, with the process plant operating with net-zero emissions immediately after commissioning, as opposed to achieving this goal over a much longer period of time,” Paterson said in a recent company announcement.

He said other advantages provided by Samalaju included the presence of major ferrosilicon producers there, as silicon was one of LMG’s largest reagent requirements.

Samalaju, a substantial modern bulk handling port, is able to cater to both the import and export of LMG products. It can also accommodate a large workforce as a substantial industrial employment base is already present in Samalaju Industrial Park and nearby.

In addition, there are significant supporting industries located nearby Bintulu that not only support Samalaju, but also the PETRONAS Liquified Natural Gas Complex, which is one of the largest in the world.

Paterson said Sarawak was a clear leader over Saudi Arabia and Oman in a thorough evaluation process undertaken by LMG to assess each location.

The assessments comprised technical (access to power, particularly renewable, access to water, workforce, port facilities, raw material and statutory regulations); financial (financial returns of the project, capital expenditure, capital cost and its ability to fund); risk (geopolitical, partners, operational and security) and investment scenario (investment partners, funding arrangement, tax horizons/benefits) elements.

“LMG has received favourable reactions in discussions with financiers in relation to funding the project in Sarawak.

“The selected location offers LMG the opportunity to deliver a project that will offer significant returns to shareholders, as well as position the group to be the world’s cleanest and largest magnesium producer by volume,” Paterson said.

LMG has not disclosed how much it will invest in the Samalaju plant project.

Sarawak Deputy Premier Datuk Amar Awang Tengah Ali Hasan said Sarawak welcomed LMG’s investment as it was high technology and environment friendly.

He said LMG was attracted by Sarawak’s availability of green energy that will power its manufacturing operation.

Additionally, State Minister for International Trade and Industry, Industrial Terminal and Entrepreneur Development, Aweang Tengah, said the LMG plant will benefit Sarawak in terms of job opportunities and economic impact.

LMG is constructing a 1,000-tonne per annum demonstration production plant in Victoria’s Latrobe Valley.

Following a successful feasibility study and project financing, development of the demonstration plant is well underway, including engineering, purchasing of equipment and construction works.

The first magnesium production is due in the second quarter of 2023.

With successful operation of the demonstration plant, LMG will develop a full-scale, commercial 10,000-plus tonne per annum plant in Latrobe Valley.

In January 2023, LMG signed an upgraded exclusive distribution agreement with Metal Exchange Corp to sell the majority of its Australian magnesium production into North, Central and South America and the Caribbean markets.

The contract, according to LMG, will deliver excellent prices to the company due to a US anti-dumping duty payable on magnesium imports from China.

LMG plans to sell the refined magnesium under long-term contracts to American and Japanese customers.

Currently, Australia imports 100% of the 8,000 tonnes annually consumed.