Now we're moving on to Latrobe Magnesium. They're developing a low-cost, low-emission process to produce magnesium metal from industrial waste. With its demonstration plant in Victoria, it's progressing towards full commissioning in 2026. The company is targeting commercial production in Australia by 2028, while advancing plans for a large-scale magnesium project in Malaysia to meet growing global demand for this critical metal. To tell us more, please welcome Ronan Gillen, Chief Operating Officer at Latrobe Magnesium. Over to you, Ronan.
Thank you, Rachel. Thank you for the invite to the webinar today, thank you to everybody for joining us today. In the interest of time, I've dispensed with the standard disclaimer and corporate snapshot. Happy to provide that information if requested. Looking to move on to the next slide. Great. Thank you. What I want to talk about today about our story, some key components of that, is firstly, we are a critical mineral. That's underpinned by really strong structural tailwinds at the moment. It's a critical mineral all over the world, whether it's typically third or fourth on everybody's list. What is driving that is the heavy supply concentration in China.
It produces over 95% of the world's magnesium metal, the geopolitical risk around that is what's driving that really urgent diversification efforts led by ourselves as the only Western supplier coming on stream in the near future. What have we achieved so far? We've achieved a big milestone recently this year in that we achieved continuous production of high-grade magnesium oxide, which is the interim step before we move to magnesium metal production. We were able to do this in our demonstration plant at the Latrobe Valley in Victoria, I'll talk a little bit more about what that looks like and where we go from this point. In terms of what we've done recently, you may have recently seen we've secured a strategic investor, Long State Investment.
They've supplied an initial AUD 6 million for us to move to the next step of our staged approach, that's to provide an AUD 6 million to complete construction of the back half of our process plant to produce magnesium metal with an additional facility to build that metal capacity and refining. We think we're an incredible story. We're a very compelling value proposition for everybody out there. We've invested heavily, not only in the R&D to get to this point, but also really our demonstration plant, I'll talk more about that. Not only do we produce magnesium metal, we produce additional valuable products from our feedstock, from our resources, I'll talk more about those and how they help us, importantly, in the market today.
One final thing I want to talk about really is that our technology is brand new, it's state-of-the-art, and allows us to be really low emissions in basically in a market which is extremely high emissions. Magnesium is one of the highest emitting metals to produce in the world, and this is a bit of a game changer for us and helps us move forward. Just talking about why we are a critical metal. As I said, over 95% of the supply is based in China. It's a small market, only about one million tons of metal per annum, primarily used in die casting and alloying it for parts. I've talked a lot about our emissions. As you can see, we're very low emissions compared to conventional industry. Why is it so important?
From a strategic perspective, it's absolutely critical for mainly light weighting, particularly in aerospace and defense, but also being driven heavily by electric vehicles. There's been a closure of supply, particularly in the U.S. The fact that it is a lighter structural metal in the world makes it very critical for EVs, as I've said, but also aerospace now, and the defense markets, which are very, very strong. We are the only game in town at this point in time. As I highlighted before, it is a critical mineral on everybody's list and pretty much near the top as driven by the geopolitical risks associated with the majority of the world's production in China and the remainder in Russia. What is it used for? I get this question a lot. It's primarily used for alloying with aluminum and aluminum sheet.
There's an increasing usage for magnesium, not only alloy in parts for electric vehicles, but driven also by just reducing the range of electric or I'm sorry, increasing the range of electric vehicles, reducing the weight, and with magnesium parts in particular with die-cast components. It's not just there that its potential lies. A big use in aerospace. It's been approved by the FAA in the U.S. for use in aerospace and conventional passenger planes. There's a big uptick there. Heavily used in defense for vehicles, aerospace, munitions in particular. It's got some interesting potential down the track. Firstly, in hydrogen storage. It's the best candidate for hydrogen storage, which is an ongoing proposition for the energy markets. Magnesium batteries, now that's a very interesting one.
Very recently, Harvard developed the first solid-state magnesium battery, which outperforms lithium batteries in terms of energy density, charging cycles, and so on. Importantly, it doesn't catch fire. That's a watch this space and has potential to really supercharge the magnesium market. We expect the market to double over the next four to five years with limited supply coming on stream, particularly from Western markets or Western companies, which we are really the only one ahead of the game. Just a little bit about our pathway and what we are doing. I'll talk a bit about our demonstration plan shortly and where we are at, but that currently has been in operation this year and currently in construction to move to the back half of the process plant to produce magnesium metal.
We have our commercial stage development up to about 10,000 tons per annum of metal production. We're looking to commence a feasibility study on that as soon as we can. We already have offtake agreements in place, and that's fully funded, and that's really key. We've got a lot of support from the likes of Export Finance Australia and EXIM, the import-export bank of the U.S., who are willing to provide AUD 200 million towards the construction of that process plant. Rachel talked about our international project that we currently have based in Malaysia for a very large process plant right very nearby our resource. We have our land in place. We're currently underway with our permitting for the import of ferronickel slag into Sarawak in Malaysia, and we have our power access that's already been granted. That project is moving along.
Just a little bit more about our process so people understand what we do. I wanted to touch on the secondary products that we make. It's really important to outline now that when you're coming up against the main magnesium market being China, when you control the market, you control the price. This has driven our strategy of producing secondary products. Not only does it avoid the need for a tailings dam, which we're different to conventional mining industry. It's where ultimately we believe, and I personally believe the industry needs to go. We need to solve the tailings problem eventually. We're ahead of the game in that space. We produce additional byproducts that allow us to de-risk our exposure to the market. It accounts for about 25% of the revenue.
These additional products, along with our exposure to the U.S. market, fully offtaked to the U.S. price, which is tariff free, and we're able to sell into the United States tariff free, allows us to compete with the Chinese market. If there's any market pressure, we're able to ride that out and absorb that. That's what makes us different from those in the past, which have not survived. We make a few products here I want to talk about very quickly. Basically, a supplementary cementitious material. It's like a cement, very similar to Portland cement, only performs better. We make a high-grade silica used for glass manufacturing, which has got the interest of companies such as Visy and the like.
We make a very strong and high-grade in terms of calcium carbonate with a little bit of magnesium in it, which is loved by the farmers, particularly in Australia, with the soils in Australia. We make a high-grade char product, which can be used in many different applications. Finally, we make an iron oxide, which is effectively just a hematite, again, used in many different applications that we already have done a lot of work with customers for, who are looking forward to us being into commercial production. Our demonstration plan, the jewel in the crown at the moment. As you can see, this is a significant investment that we have made in order to de-risk our technology, de-risk our process, and particularly the front end of the process, the first half, what we call the hydromet section.
It's where the majority of our IP is, and it's been an important step to do this. As I said, it was a significant investment. You can see some of the photos there. It's roughly the size of a small gold plant, and it catches people by surprise when you come to visit our facility. Most people, when they think of pilot or demonstration plant, they think of beakers and buckets, but we're significantly bigger than that. We're an industrial scale. We felt it was important to do that to not only de-risk the technology but allow us to de-risk the scale-up, which is another important step as you move to a commercial project. You can see in the bottom left-hand corner, we've commenced construction of the next stage of our project to produce magnesium metal, and we expect to be producing metal in the back half of this year.
Just some catalysts for our growth. I think it's important to talk about what we've done recently and where we are headed. As I said, we've achieved continuous production of high-grade magnesium oxide. We ran for three months, and then we stopped because the process plant itself is not economic, or it doesn't break even until we move to metal production. We wanted to conserve cash flow. That cost us about AUD 1 million per month in operation. That's been achieved now, and we've had some challenges through that period, but we've learned a hell of a lot, and we will apply that moving forward, and not only that, into the commercial scale.
I talked a little bit about the Long State investment, but also we have investment from our distribution partner in the U.S., Metal Exchange Corporation, who would be responsible for distributing all of our metal into the U.S. market. The future, what does it look like for us? Well, we're looking to move to a feasibility study for a commercial plant to do a commercial operation in the Latrobe Valley in Victoria. As I said, already fully funded. We'll be moving into magnesium metal production, so metal production in the back half of this year, and that's on track. From that, the first sales of metal straight to the U.S. market. Of course, our strategic partnership, which is with EFA and EXIM, as I discussed, fully funded for the commercial plant. To wrap it up, just a summary of our story.
As I said, we've achieved our continuous production. We've validated the technology, ready to move to the commercial phase. We are moving to the magnesium metal production, but this is very low technical risk. It's effectively off-the-shelf process, similar to what's practiced in China. Off-the-shelf equipment. We're just enhancing automation, operability, and engineering around that. Very low risk from our perspective, but an important step that we have to move towards. We've strengthened our balance sheet with investment by Long State and significant support for the next commercial phase. As I said, it's a critical mineral, concentrated China supply. Getting a lot of interest, particularly with the recent movement that China's made around rare earths, and the recognition that the same applies to magnesium. We have a pathway to the commercial plant. We've de-risked the technology. We've proven it now.
We're now just completing the magnesium metal component to take some risk out of that. Even though it is low risk, we want to do that to make sure we satisfy ourselves with that step, and that underpins the movement towards a commercial plant with a clear strategy. Ultimately, why you should invest. We're a very compelling value proposition. With diversified revenue streams, not just magnesium metal, limiting our exposure to the market, but also the significant investment we've put in to date. We've got to an amazing point now. We're at a very critical point in our growth where we look to move the needle by making metal production, and from there, our future is very bright. Thank you for listening to me today, and I'm happy to take some questions.
Thank you so much for that presentation, Ronan. We do have time to squeeze in one question from our audience, and that is: Is the grade quality of magnesium suited to military applications?
Thank you, Rachel. Great question. Absolutely. Post-refining, when we bring in the refining step, we will produce magnesium metal, what we call three nines or 99.9% purity, which is the standard for any commercial application. The advantage of our process is that prior to the refining step, we will already be able to produce crowns, which are, we believe, up to 98% or even higher purity, compared to the standard Chinese production at 95% purity. That gives us a massive leg up, both in energy costs, but also the refining step is incredibly simple. It's off-the-shelf, an off-the-shelf proven process, off-the-shelf equipment. We'll move to that step following the successful step of producing crowns.
In terms of the application to the military space, as I said, the defense sector is very important to us, particularly in the U.S., and that grade is completely suitable for use in vehicles, and that's military vehicles. The airplanes themselves, as I said, it's also been certified for the FAA for use in aerospace and particularly munitions. A very strong application in munitions, bombers and missiles of the sort, particularly in the defending equipment, defending ships, et cetera, and that sort of space. That's highly regarded and perfectly suitable, and that's a strong avenue of growth for us.
Absolutely. There's certainly some interesting markets there for Latrobe. Ronan, thank you so much for your time today.
Thank you very much, Rachel, and thank you for everybody to joining us.