The Qinghai Magnesium Project under construction. Magontec’s plant and equipment will be installed in the cast house.

The Qinghai Magnesium Project under construction. Magontec’s plant and equipment will be installed in the cast house.

MAGONTEC Ltd has signed three agreements with Qinghai Salt Lake Magnesium Co (QSLM) that provide for Magontec to invest US$11 million in equipment for the Magnesium Alloy Cast House adjacent to the Qinghai electrolytic magnesium smelter at Golmud in Qinghai Province.

The magnesium project is under construction and the cast house is expected to be completed and ready for installation of Magontec’s plant and equipment by the end of 2014. The QSLM smelter, when completed, will be the largest electrolytic magnesium facility ever constructed. It will use renewable energy for more than 75% of its total requirements.

The Magnesium Alloy Cast House Operating Agreement defines the working relationship between the two parties and establishes Magontec Qinghai Ltd (MAQ) as owner, manager and operator of the Magnesium Alloy Cast House equipment within the Golmud Cast House building.

The Offtake Price Agreement defines the economic relationship between the two parties including the pricing formula under which MAQ will acquire liquid pure magnesium from QSLM. The Lease Agreement specifies the terms under which Magontec will lease and occupy part of the Golmud Cast House building.

Magontec raised the capital required for the investment through a Rights Issue. The agreements provide:

  • Exclusive rights to manufacture magnesium alloy from liquid pure magnesium produced at this facility with the rights having 10-year duration.
  • A guaranteed supply of liquid pure magnesium under a pricing formula that would generate a strong profit under current magnesium pricing conditions.
  • A detailed roadmap for future cooperation for Magontec and its partner QSLM.

These agreements provide Magontec with a high level of comfort that it will be able to profitably operate this major new facility. QSLM, as the largest investor in Magontec, will enjoy access via Magontec to an experienced and established global magnesium alloy manufacturer and recycler and a global sales and distribution network.

In coming years QSLM plans to expand the Qinghai facility in a second stage to 150,000 tonnes/annum and finally to 450,000 tonnes. When completed, QSLM’s Golmud facility will be the world’s largest electrolytic magnesium plant.

Magontec’s executive chairman Nic Andrews says, “This new project in Qinghai is the largest and most important investment by Magontec for many years. It will re-establish Magontec as a leading magnesium alloy manufacturer and recycler and is expected to deliver a significant boost to group profitability when fully operational.

“These agreements represent the foundations on which both Magontec and QSLM will work together and build future prosperity for shareholders of both companies.”

Magontec is an ASX-listed global magnesium alloy manufacturing and recycling business with downstream activities in magnesium anode production.

 

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