Latrobe Magnesium gets potential export agency funding for stage 2 magnesium plant

Dec 23 (Reuters) - Australia's Latrobe Magnesium LMG.AX has received a non-binding letter of support from Export Finance Australia (EFA) to potentially fund the construction of a plant in Victoria, it said on Tuesday.

Stage 2 of the commercial magnesium extraction facility will be developed with support from the U.S., as part of an agreement with Australia to extend financial support to several Australian companies aimed at countering China's hold over the critical minerals industry.

Magnesium is used in the production of steel and titanium, and China is the world's leading producer.

The construction of the plant, which can process up to 10,000 tonnes of magnesium per annum, is estimated to cost around A$250 million ($166.70 million). Latrobe did not specify the potential support from EFA.

Shares of the Victoria-based magnesium plant operator rose as much as 15% to A$0.023 to their highest level since December 12, as of 0349 GMT, while the broader benchmark index .AXJO was 1.1% higher.

The letter of support does not represent a financing commitment and is subject to meeting the export agency's due diligence and eligibility criteria, the company said.

Australia’s export credit agency, EFA, indicated an interest in joining the U.S. Export-Import Bank in financing the stage 2 project, the company said in a statement.

In October, the U.S. Export-Import Bank provided a Letter of Interest to Latrobe to consider financing up to A$200 million ($133.26 million) for the stage 2 plant. All magnesium production from the stage 2 plant will be allocated to the U.S. market under an offtake agreement.

"The United States does not currently have a local primary magnesium producer, and LMG is ideally situated to fill this gap in the short and medium term," said Latrobe CEO David Paterson.

($1 = 1.5008 Australian dollars)