A new chapter is unfolding in the Latrobe Valley, where Latrobe Magnesium’s innovative technology has propelled the region from a coal-fired past to a critical minerals future.
It’s a long way from Victoria’s Latrobe Valley to Washington, D.C. – both geographically and industrially.
Not far from the site of the former Hazelwood Power Station, Latrobe Magnesium (LMG) operates a pilot plant that symbolises the region’s transformation from coal to critical minerals. Hazelwood, once fuelled by the Morwell open-cut mine, was decommissioned in 2017, a blow to a community shaped by decades of energy transition.
But in October, the Latrobe Valley and Washington, D.C. crossed paths in a moment that could reshape a region and a resource.
From the historic Lafayette Building, just around the corner from the White House, the Export–Import Bank of the United States (EXIM) announced seven Letters of Interest (LOIs) worth more than $US2.2 billion. The aim: to advance US-aligned critical minerals projects in Australia under the landmark US–Australia critical minerals framework agreement.
The LOIs were extended to seven Australian companies: Arafura Rare Earths, Northern Minerals, Graphinex, VHM, RZ Resources, Sunrise Energy Metals, and LMG.
For LMG chief executive officer David Paterson, the EXIM announcement was a milestone moment and the culmination of more than 15 years of persistence.
“It’s recognition of all the foundational work we’ve put in,” Paterson told Australian Mining. “We were there [in Washington] alongside the big companies like Alcoa, Nyrstar and Iluka. I think the smaller companies like ours got picked on the back of what they produce and how they produce it.”
The recognition underscores the strategic importance of magnesium, and the unique position LMG occupies within that market. China currently produces about 90 per cent of global magnesium. Russia contributes another six per cent, with the balance coming from smaller, less reliable sources.
With magnesium crucial to lightweight alloys, green manufacturing and defence applications, the US has every reason to diversify supply. The metal was added to the US critical minerals list in 2018 and remains there today.
Australia currently imports all 8000 tonnes of the magnesium it consumes each year. The country’s Critical Minerals Strategy 2019 did not initially include magnesium, but the 2023 update identified it as an emerging mineral of interest.
Rewriting the magnesium playbook
Paterson said interest in LMG stems from three key factors: magnesium’s importance to advanced manufacturing; China’s dominance of the market; and the scarcity of reliable Western producers. That interest, however, would count for little if LMG was not delivering results. The company has spent years on research and development, refining its processes and progressing to the point where it can now reliably produce a commercially viable product.
“Firstly, it’s a good product,” Paterson said. “We’re using a completely new process; no one anywhere else in the world is close to what we’re doing.”
LMG’s patented hydrometallurgical extraction and thermal reduction process extracts magnesium metal from fly ash generated by brown-coal-fired power stations, including the nearby Yallourn power station, which has enough fly ash to supply LMG for up to 50 years of operation.
The low-emission process converts almost 100 per cent of the ash into saleable materials, producing valuable by-products such as supplementary cementitious material (SCM), silica and iron oxide. In simplified terms, the process involves dissolving magnesium, iron and calcium minerals from fly ash using acid, removing impurities, and converting the resulting magnesium solution into magnesium oxide (MgO). The acid is recovered and reused, creating a circular system.
In 2024, LMG produced its first MgO from brown-coal fly ash at its 1000-tonnes-per-annum (tpa) demonstration plant in Hazelwood North, a landmark that validated the hydromet process and confirmed its potential to reduce production costs and emissions by up to 60 per cent.
Scaling up
Paterson recounted the whirlwind year that brought LMG to the attention of Washington.
“We put in a [US] Department of Defense whitepaper back in June, and we spoke to probably 50 Pentagon people in one sitting,” he said.
“Then there were more meetings with the Department of Commerce.”
That exposure ultimately opened doors to some of the world’s largest industrial manufacturers.
“We spoke to all the majors when we were there: Lockheed Martin, Boeing, GE, Raytheon, and others,” Paterson said. “After I spoke, they all just came and grabbed me and asked when they could come down to see our plant.”
As one of the only new Western producers of magnesium, LMG’s progress carries global weight.
“There’s a small producer in Israel with pollution problems, and another in Turkey but they’re not expanding and it’s done in a very archaic way,” Paterson said.
LMG’s next step is to build a 10,000tpa commercial plant in the Latrobe Valley, leveraging its breakthrough technology and material-handling systems to achieve globally competitive costs and low emissions.
In the longer term, the company has partnered with Bechtel to plan a 100,000tpa international magnesium mega-plant using ferro-nickel slag feedstock, with Malaysia emerging as a likely location. The favoured site – Samalaju Industrial Park in Sarawak – offers access to hydroelectric power, potentially enabling fully renewable operations.
LMG has already completed the first phase of a pre-feasibility study for this project and signed a binding memorandum of understanding with Société Le Nickel (SLN) to supply 450,000 tonnes of slag per year over 20 years. The company is now seeking joint-venture partners to bring the project to fruition within five years.
The EXIM LOI has significantly raised LMG’s profile, as well as its credibility among institutional investors looking for sustainable producers in high-growth markets.
On the back of that support, the company can now accelerate its expansion plans, a welcome development for the company and a region preparing for the closure of the Yallourn power station in 2028 and Loy Yang in 2032.
Paterson said construction of the demonstration plant employed about 100 locals, directly and through contractors, and he hopes LMG’s next stages can deepen that impact.
“We want to make sure it stays as local as we can,” he said. “We’re very mindful of locals and our place in the region, and we’ve talked directly to green groups in the Valley. We discussed emissions and everything else. We had no objections at the EPA and none locally, which is amazing for any project of our size and what we do.”
Forecasts for sustained demand for magnesium are consistent across analysts. IndustryARC projects the global magnesium metal market will reach $US9.12 billion by 2030, growing at around 6.7 per cent annually. Coherent Market Insights forecasts almost $US10 billion by 2030, tracking almost 10 per cent annual growth.
None of these projections come as a surprise to Paterson.
The tight-knit LMG team set out on this path almost two decades ago and has faced more than a few setbacks along the way. But through it all, the company maintained faith in its technology and in the future of magnesium.
“We’re very much long-term focused, and that’s why we’ve taken it slow,” Paterson said.
Following the announcement in Washington, momentum is building for LMG as it prepares for what looks to be an accelerated phase of growth, and a new chapter for the Latrobe Valley.
This feature appears in the December issue of Australian Mining magazine.