LATROBE MAGNESIUM LIMITED — Capital/Financing Update 2012

Jul 22, 2012

Magnesum

ABN 52 009 173 611

LMG Reduces Capital Costs for Latrobe Valley Magnesium Plant to $35-40m

23 July 2012, Sydney Australia: Latrobe Magnesium Limited (ASX:LMG) has substantially reduced the capital costs of its first commercial magnesium plant in Victoria’s Latrobe Valley from $100 million to $35-40 million.

The reduction is due to a reduced size of its first commercial plant from 10,000 tonnes to 5,000 tonnes of magnesium metal per annum. It is also due to the confirmatory and optimisation work over the past six months.

The test work has also indicated a decrease in plant operating costs by about 10%.

LMG’s prefeasibility study identified a number of process assumptions that needed to be confirmed with subsequent hydromet and retort test work. LMG has named this work the adjustment study.

The highlights of this test work completed to date, which have led to reduced capital and operating costs may be summarised as follows:

• reduced size of tanks used in the hydromet circuit due to less reaction time of chemicals

• less reagents used in the hydromet process

• increase in the removal of iron, up from 55% to 74%, producing savings in reductant costs

• improved MgO content achieved in retort feed stock increasing productivity

• reduced size of the thermal reduction process.

This work has been responsible for the reduction in the capital cost estimate of its 10,000 tonne plant from $100 million to between $65 million to $70 million.

The full results of the adjustment study will be announced upon its completion.

LMG believes that with support from both state and federal governments, banks and its stakeholders, that funding of $35-40 million is achievable in the current economic climate.

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Kevin Torpey Director

Suite 601, 20 Barrack Street, Sydney, NSW 2000 Postal Address: GPO Box 4729, Sydney, NSW 2001

Phone: +61 (0)2 9251 0400 Fax: +61 (0)2 9262 5666

Latrobe Magnesium Limited

23 July 2012

The information in this statement that relates to the laboratory results is based on information compiled by Mr Kevin Torpey, who is a member of the Australasia Institute of Mining and Metallurgy. Mr Torpey is a Director of Latrobe Magnesium Limited and has sufficient experience which is relevant to the style of mineralization and type of deposit and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves”. Mr Torpey consents to the inclusion in this statement of the matters based on his information in the form and context which it appears.

About Latrobe Magnesium

Latrobe Magnesium is developing a magnesium production plant in Victoria's Latrobe Valley using its world-first patented extraction process. LMG intends to extract and sell magnesium metal from industrial fly ash, which is currently a waste stream from brown coal power generation.

LMG recently completed a pre-feasibility study validating its combined hydromet / thermal reduction process that extracts the metal. Construction of the production plant is due to start in July 2013 with production to begin a year later. The plant will be in the heart of Victoria’s coal power generation precinct, providing immediate access to feedstock.

LMG plans to sell the refined magnesium under long-term contracts to Australian and American users. Currently, Australia imports 100% of the 10,000 tonnes annually consumed.

Magnesium has the best strength-to-weight ratio of all common structural metals and is increasingly used in the manufacture of car parts, laptop computers, mobile phones and power tools.

The LMG project is at the forefront of environmental benefit – by recycling power plant waste, avoiding landfill and as a low CO² emitter.

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