Sales are looking like they will ramp up nicely.I hold a...

Sales are looking like they will ramp up nicely.
I hold a few.

Regards

Operational Overview
The six months to 31 December 2005 was a watershed period for Advanced Magnesium
Limited (AML). The Company’s wholly owned subsidiary, Advanced Magnesium Technologies
Pty Ltd (AMT) received its first orders for AM-lite, demonstrated the product at 20 factory sites
around the world, made 60 presentations to potential customers and will have two reference
sites producing AM-lite products in commercial quantities, at HDO and Polmag, by the end of
February 2006.
The properties and performance of AM-lite under testing continues to validate the technology.
The Company has hired new team members to facilitate customer inquiries following the
successful capital raising in October 2005.
The initial order flow and the extraordinary level of interest from diecast manufacturers and
OEMs is likely to result in an acceleration of sales as new electroplating and painting technology
becomes more widely adopted.
Market Development
During the first half of the 2005/06 financial year priority was given to the commercial launch of
AM-lite into Japan, Korea, Taiwan, Europe and North America and the development of new
applications for AM-lite. This involved researching and prioritising target customers; the
ADVANCED MAGNESIUM LIMITED
ADVANCED MAGNESIUM LIMITED - HALF YEARLY REPORT | 5
preparation of promotional material and technical data sheets; presentations to over 60
diecasters and OEMs; the completion of 20 in-plant demonstration trials at customers’
diecasting plants; and the finalisation of agency arrangements for Japan, Korea and Taiwan.
As a result of the success of the demonstration trials, our customers are now working on
developing new applications using AM-lite with lead times varying from 2-24 months depending
on the complexity and the degree of testing required for the part before commercial release. By
the end of the period, AMT was aware of over 70 separate components that were either under
development or being evaluated by our customers. These include components such as
binoculars, bathroom accessories, various parts for a major truck manufacturer, gear shift
paddles, various home hardware items including door handles, tap handles, shower fittings and
furniture handles, projector housings, various items of trim for interior automotive applications,
wing mirrors, car door handles (interior and exterior), rear parcel shelf, stanchions for a rear
spoiler, mobile phone housings and laptop computer housings, gear shift cover plates, car door
grab handles, cylinder head covers and motorcycle side covers.
In December 2005, AMT announced its first commercial order for AM-lite from Polmag, a Polish
diecaster, to manufacture a well known brand of binoculars (previously made from aluminium),
and bathroom accessories (previously made from zinc). This order resulted from the
progressive clearance of all the manufacturing and testing hurdles required prior to commercial
acceptance. AMT continues to work with Polmag on other projects which it anticipates will lead
to further sales in the future.
One of the key factors identified during the period which has limited the rate of
commercialisation of AM-lite was the availability of experienced engineers to introduce AM-lite
and provide technical support to customer’s operators using AM-lite for the first time. AMT had
not expected such a high level of interest and found itself under-resourced. AM-lite behaves
very differently to existing magnesium alloys and customers generally require guidance from
AMT engineers in the initial stages to learn how to manage the metal in the diecasting process.
Since the capital raising in October, 2005, AMT has been able to address this issue by
recruiting two highly experienced engineers to supplement our existing teams in Asia and North
America, and is still actively looking for one more engineer for Europe. AMT has also retained
the services of a Korean company specialising in the development of new applications for
magnesium to support our activities in that region.
Another short term issue for AM-lite has been the availability of regional electroplating capacity
using the MacDermid process, and the completion by MacDermid of the full suite of its standard
corrosion tests. This is being addressed in the current half. During the six month period, the
MacDermid electroplating process was successfully installed and commissioned on a
commercial scale at HDO’s diecasting plant in Germany; it is currently being installed at another
European diecaster to meet their anticipated production orders for new AM-lite parts in the
coming months; and it is progressively being made available in Asia and North America to meet
expected demand in those regions. AMT and MacDermid will be participating in a number of
joint marketing activities in the coming months to promote the combined benefits of AM-lite
castings with MacDermid electroplated finishes.
Apart from AM-lite, the European diecasting industry continues to display a strong interest in
AMT’s award winning AM-converter technology, with sales to the end of December well ahead
of budget and projected sales for the rest of the financial year almost double the budget. The
North American diecasting industry has also continued to express a keen interest to trial this
new technology, and work is underway to introduce the first North American AM-converter
during the course of the 2005/06 financial year.

Future actions

Looking Forward
In the period to 31 December, 2005, AMT made presentations to over 60 targeted companies
about the cost saving benefits of AM-lite in comparison to existing production of decorative
components made from zinc, aluminium, plastic and the existing magnesium alloy, AZ91D.
During that period, 20 successful in-plant demonstration trials were completed at customer’s
plants and work was initiated on the development of over 70 new applications using AM-lite for
use in the production of electroplated, painted and powder coated components for the
automotive, motorcycle, home hardware and electronic industries.
Over the next 6 months, AMT plans to:
• support a further 20 in-plant demonstration trials, bringing the total in FY06 to 40;
• support the development of new and existing AM-lite applications that are currently forecast
to lead to the sale of at least 500 tpa AM-lite by the end of this financial year, at least 5000
tpa AM-lite sales by the end of next financial year, and at least 10,000 tpa by the end of
calendar year 2007;
• work with MacDermid to promote its new electroplating technology and establish
commercial electroplating capacity in all regional markets; and
• work with suppliers of conversion coatings for painted and powder coated products to
establish conversion coating services in all regional markets