agreement signed to acquire chinese pure magne

ASX RELEASE
31 August 2007 ASX Code: QMG
QUAY MAGNESIUM LIMITED
AGREEMENT SIGNED TO ACQUIRE CHINESE PURE MAGNESIUM PLANT
Quay Magnesium Limited (Quay or Company) has signed a heads of agreement (MOU) with a major
Chinese manufacturer of pure magnesium to acquire the business over 2 years. The acquisition is
proposed in two stages; initial purchase of a 52.5% interest with an option to move to 100% within 2
years of closing on the same terms.
This heads of agreement is exclusively with Quay but is subject to local regulatory approvals, full due
diligence to Quay�fs satisfaction and arrangement of funding. Quay proposes to enter into a formal
agreement with closing targeted for late November 2007. The pure magnesium plant has a capability
around 20,000 tonne per year and will supply the Quay�fs Nanjing magnesium alloy plant.
Quay will raise around $20 million, subject to shareholder approval, to fund the acquisition and inject
working capital into the merged business. The Company is currently in discussion with several
potential sources of finance but at this stage cannot be definitive as to what form the raising might
take.
Quay currently produces high quality magnesium alloys for die-casting customers at its Nanjing plant
in China from sourced pure magnesium. The purchase of this primary magnesium metal plant will
vertically integrate the Company and result in a lower risk business model that will improve operating
margins. This acquisition will ensure that Quay has the ability to compete in the current global market.
With the closure of Norsk Hydro�fs Becancour facility this year, Chinese manufacturers now dominate
the global pure magnesium supply chain and prices have increased 30% YTD. This is causing
widespread disruption in the market with buyers choosing to delay orders anticipating prices easing,
this has not eventuated and prices are anticipated to increase further.
On completion of the full acquisition, should Quay exercise its option, Quay will have approximately
doubled its current investment in China. The preliminary forecast EBITDA performance of the merged
entities is indicated in the table.
Quay China Operations 2007-8 2008-9 2009-10
Magnesium Alloy (tonne) 18,000 24,000 25,000
Pure Magnesium (tonne) 5,818 9,975 21,000
Pure Magnesium price RMB / tonne ��19,500 ��20,500 ��21,000
Revenue (incl VAT) ��407,160,000 ��570,720,000 ��609,000,000
Consolidated EBITDA RMB ��39,644,670 ��82,465,350 ��136,920,000
For further information contact:
Mr Peter Stuntz
Chairman
Quay Magnesium Limited
www.quaymagnesium.com