Archer’s Leigh Creek magnesite deposits, the largest resource of its type in the world, are just 20km from the Leigh Creek coal field.

The junior explorer is considering the potential of building a caustic calcined magnesia plant, that would require a secure energy supply. LCE believes that energy could come from its UCG project, which it is considering development for close to the mothballed Leigh Creek open cut coal mine.

LCE said Archer had the potential to become a major local user of energy, and a tie-up between the two companies is logical, not just for energy sales, but shared infrastructure.

The Leigh Creek magnesite project was studied in the 1990s and early 2000s by Magnesium Developments, however, after spending millions of dollars in exploration and studies to define a viable 50,000 tonne per annum magnesium metal project, high projected capital and operating costs and the collapse in metal prices due to China dumping cheap magnesium into the market killed it.

Archer secured the ground in 2010 and 2011 and, with it a JORC resource of 413 million tonnes grading 41.3% magnesium oxide, believes a caustic calcined magnesia or dead burned magnesia process could reduce costs and be a viable source of the metal for global markets.

The non-binding agreement is LCE’s second in as many months, following a potential development of a nearby chemical and fertiliser facility with AET Investments.

AET was founded by former Dyno Nobel executive Ian Smith. The company is planning on a 350,000 tonne per annum proposal utilising technology already being used in two existing Queensland-based ammonium nitrate manufacturing plants.

South Australia imports its 100% of its ammonium nitrate requirements and nitrate based fertiliser.

AETI is already in contact with potential strategic partners that wish to secure the supply of ammonium nitrate via long term offtake contracts, which is likely to include major mines such as Prominent Hill and Olympic Dam, and could take in the Western Australia’s Eastern Goldfields.