In an effort to reduce debt levels and overall cost of funding, Latrobe Magnesium Ltd (ASX:LMG, OTC:LTRBF) has signed an agreement to lease finance around A$10.4 million of its demonstration plant equipment for the life of its project.
Through the agreement, LMG should experience a significant decrease in its ongoing debt levels to approximately A$5.1 million starting January 1, 2024.
This reduction follows the projected repayment of around A$12.6 million of debt from LMG's Research & Development (R&D) tax rebate for the year ending June 30, 2023.
The lease finance arrangement secured by LMG is noted for its lower effective cost of funds compared to the existing project finance facility and other funding options previously considered by the company.
Note, leasing companies are under no obligation to buy the equipment at the end of the lease.
Production strategy on track
Meanwhile, LMG is steadily progressing with its production strategy, aiming to start its first magnesium production in March 2024.
The company is in the process of developing a magnesium production plant in Victoria's Latrobe Valley using its world-first patented extraction process.
LMG’s innovative approach involves extracting and selling magnesium metal and cementitious material from industrial fly ash, a byproduct of Yallourn brown coal power generation that has been largely considered waste until now.
The company LMG plans to sell refined magnesium under long-term contracts to USA customers. Currently, Australia imports 100% of the 8,000 tonnes annually consumed.