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The magnesium space is usually fairly quiet, but there was some news on the magnesite front from Australia on Wednesday. Korab Resources announced an offtake agreement for magnesite production from its Winchester mine over seven years, and the company’s stock shot up 50 percent on the news.
The company’s stock gained 50 percent, or just over one penny, to close at $0.036 on the news. Trading volumes sat around 897,000, more than 40 times the company’s average daily trading volume.
Korab hasn’t shared the name of its new partner, only stating that it’s a “well-known, respected unrelated entity.” Under the terms of the binding agreement, the partner will gain offtake rights for 25 percent of the magnesite produced from Winchester over seven years.
The entity will also have marketing rights for that same magnesite production, and will provide a range of managerial, operational and technical support to Korab and its subsidiary AusMag. On top of that, the partner will offer a loan facility on commercial terms to further support development of the Winchester magnesite mine, subject to due diligence to be completed over the next 60 days.
Magnesite can be used to produce magnesium, but it’s also an industrial material in its own right, commonly used as a refractory metal inside kilns, as well as in textiles and fertilizers. The Winchester project will supply raw magnesite in the form of crushed rock with no additional processing.
Currently, Korab is in the process of expanding its recently released feasibility study for Winchester to include further material factors — such as various additional costs and estimated selling prices for magnesite — to allow it to estimate the mine’s net present value as well as projected free cashflow from operations.
The company put out its prefeasibility study for the Winchester mine about a month ago, reporting capital costs of AU$4 million for the project and life-of-mine operating costs of AU$21 per tonne of magnesite (at an output capacity of 800,000 tonnes per year of saleable rock). Comparably, magnesite prices are currently sitting around US$80 to $120 per tonne, according to the company’s release.
It’s worth noting that magnesite isn’t Korab’s only focus — the company has a variety of projects in Australia and Europe, including a gold and silver deposit in Eastern Ukraine and a phosphate deposit in Australia’s Northern Territory. Still, with today’s announcement, critical metals investors might want to be keeping more of an eye on the magnesium space.
Korab’s share price has gained roughly 30 percent over the past year and 80 percent year-to-date.
Securities Disclosure: I, Teresa Matich, hold no direct investment interest in any company mentioned in this article.
