agreement signed to acquire 49 of chinese mag

ASX RELEASE ASX Code: QMG
25 March 2008
QUAY MAGNESIUM LIMITED
AGREEMENT SIGNED TO ACQUIRE 49% OF CHINESE MAGNESIUM PLANT
· Provides Quay Nanjing with guaranteed magnesium metal supply
· Vertical integration will significantly improve profitability
· Acquisition will allow long term sales contracts for Quay’s customers
Quay Magnesium Limited (Quay) is pleased to announce it has signed a Heads of Agreement with a major
Chinese pure magnesium producer to acquire 49% of the issued shares in the company. The plant owned and
operated by the company has a capacity of 12,000 metric tonnes per annum (tpa) and is in the process of being
rebuilt
and expanded to 40,000 tpa of pure magnesium. Construction is well underway and the expansion is
expected to be completed by the December quarter of this year.
If it proceeds, the acquisition will supply Quay with approximately 20,000 tpa of pure magnesium for its Nanjing
Alloy Plant.
The Heads of Agreement confers exclusivity on Quay for three months. Completion of Quay’s due diligence is
scheduled to occur within 40 days. On confirmation of satisfactory due diligence Quay will enter into a definitive
sale and purchase agreement and a shareholders agreement governing the management of the company postacquisition.
Completion of this transaction will be subject to Chinese regulatory approvals, approval by Quay’s
board and Quay securing finance.
The planned acquisition is of an established facility that meets current and future environmental operating
regulations. The new construction will utilise energy saving technology and has the security of its own dolomite
(the main raw material) source with mining rights for fifty years.
“This acquisition is expected to be highly profitable and will secure 80% of our Nanjing plant’s 25,000 tonne
feedstock requirement. Quay will also have an option over unsold pure magnesium from its partner’s share of
production,” says Mr Stuntz, Chairman of Quay. Mr Stuntz continues, “The current market price and demand for
pure magnesium continues to increase. This access to stable supply will allow Quay to enter into large, longer
term contracts with our customers. The risks associated with buying in the volatile spot market for pure
magnesium will be largely mitigated”.
Demand for magnesium alloys is growing rapidly, exports from China grew 24% yoy in 2007 and domestic
growth was 59% for the same period. Prices and margins for magnesium alloys have increased significantly over
the past year.
Quay will seek to raise around AUD 20 million for this acquisition. The Board of Quay is currently considering
financing options and any transaction may be subject to shareholder approval depending on the level of equity
raised. Quay will make a further announcement regarding financing in due course.
Quay’s Nanjing plant produces high quality alloys for the automotive supply chain where demand for fuel
efficiency and lower emissions is stimulating demand for lighter weight vehicles.
For further information contact:
Mr Peter Stuntz
Chairman
Tel: 02 8274 0900
www.quaymagnesium.com