Magontec has concluded three agreements that provide the economic and operating basis for its future endeavours at Golmud in Qinghai Province, China. These agreements are the basis upon which Magontec will invest $11 million in the magnesium alloy cast house equipment adjacent to the Qinghai electrolytic magnesium smelter. Magontec raised the capital required for this investment through a Rights Issue concluded in January 2014. The agreements provide:

• Exclusive rights to manufacture magnesium alloy from liquid pure magnesium produced at this facility with these rights having a 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, Qinghai Salt Lake Magnesium Co. Ltd. (QSLM).

The QSLM smelter, when completed, will be the largest electrolytic magnesium facility ever constructed. It will use renewable energy for over 75% of its total requirements.

Nic Andrews, Executive Chairman of Magontec said “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”.

The magnesium project in Qinghai is currently under construction and the magnesium alloy cast house is expected to be completed and ready for the installation of Magontec’s plant and equipment in the fourth quarter of 2014.

The development of the Qinghai salt lake magnesium resource is among the most challenging projects ever undertaken in the magnesium industry.

This major project in the Chinese province of Qinghai, based on the vast Chaerhan Salt Lake, aims to extensively develop the local mineral resources. The project represents an investment of over $9.0 billion by the shareholders of the Qinghai Salt Lake Industries Co. Among the resources are sodium, potassium, magnesium and lithium. The current development plan will see the production of large quantities of magnesium chloride. This product will be separated into its constituent parts as feedstock for nine different industrial processes including the 100,000 t/y (first stage) electrolytic magnesium smelter.

QSLM, a subsidiary of the Qinghai Salt Lake Industries Co, is responsible for the production of pure magnesium at Golmud. While the technology is derived from the proven Norsk Hydro process used in Canada and Norway, the scale of this project is significantly larger than its predecessor plants generating opportunities for greater economics of scale.

Energy for the Qinghai project is principally sourced from hydroelectric and solar power stations. As a result of its clean energy and electrolytic process it is anticipated that this new magnesium production unit will generate considerably reduced CO2 emissions by comparison with current magnesium industry standards. Industry research shows that magnesium from Pidgeon Process plants (all Chinese plants are currently Pidgeon) generate on average 26.2 kg of CO2 per kg of magnesium. By comparison the electrolytic Qinghai magnesium smelter is expected to generate just 6.5 kg of CO2 per kg of magnesium produced.

Under a Cooperation Agreement between QSLM and Magontec, Magontec has an exclusive right to produce generic and specialist magnesium alloys from liquid pure magnesium produced in Golmud by QSLM. On commencement QSLM will directly supply Magontec with 56,000 t/y of liquid pure magnesium. The size of the Qinghai project and the volume of new production of clean and high quality product is expected to promote further development of magnesium applications, say the management of QSLM and Magontec.