China Magnesium Corporation’s Pingyao operations are in Shanxi Province.CHINA Magnesium Corporation has started semi-coke and magnesium production at its Pingyao operations in Shanxi Province, southwest of Beijing. This follows completion, installation and testing of the first semi-coke cracker at the plant, which enabled the company to use waste semi-coke gas instead of using the coal-to-gas facilities as originally envisaged when the plant was built.

The coal-to-gas units will effectively be made redundant due to the use of waste semi-coke gases in substitution for coal gas generated by the coal-to-gas units.

The new semi-coke cracker is another example of synergies being unlocked via China Magnesium’s investment and cooperation agreement with Shanxi Pingyao Fengyan Coal and Coke Group Company Ltd (Fengyan), which are now generating significant benefits.

Rather than building two completely new semi-coke crackers from scratch, Fengyan engineers have assisted China Magnesium to successful adapt one of the coal-to-gas units into a fully operational semi-coke cracker. This has significantly reduced the capex requirements to build the semi-coke crackers and China Magnesium has or will apply the surplus funds towards other capital equipment to further reduce operating costs at Pingyao.

For example, Chine Magnesium has purchased the necessary machinery and equipment to produce its own retorts in house. This machinery and equipment is being installed. Previously the retorts were leased.

China Magnesium has also purchased and installed a pneumatic loading and discharging machine. It has been working closely with the manufacturer to commercialize this machine and in this regard has signed a technology and cooperation agreement to secure the intellectual property rights. This is expected to significantly reduce labour costs associated with the manual loading and unloading of the retorts.

With the converted semi-coke cracker successfully tested, the conversion of the remaining coal-to-gas units has commenced. The company does not intend to use coal-to-gas units in production going forward.

Fengyan is providing the working capital required to get back into production. It is intended by both parties that this arrangement will continue until China Magnesium’s 91%-owned sino-foreign JV company Shanxi Yushun Magnesium Company (SYMC) secures direct working capital financing with a local bank.

In terms with China Magnesium’s investment and cooperation agreement with Fengyan, SYMC recently changed its name from Shanxi Luyuan Magnesium Company. In addition to the appointment of Wang Feng as chairman of SYMC, another Fengyan representative, Li Xiangmin, has been appointed as executive general manager of SYMC.

The ASX-listed company recently closed a right issue for proceeds of Aus$776,719. There was 52% of the offering taken up with applications then received for more than $71,500 of the shortfall. In addition the shortfall was partly underwritten by directors to a maximum of $162,000, resulting in a total of more than $1.01 million.


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