Magnesium Intl Ltd

Quarterly Report 30 Sep 2005

Magnesium International Limited
31 October 2005

Quarterly Report - Quarter ended 30 September 2005

1.         Egyptian Magnesium Smelter Project (EMAG)

The EMAG smelter project is MIL's major asset. This project involves the
construction and operation of an 88,000tpa primary magnesium smelter at Sokhna
Port on the Red Sea in Egypt.  The smelter will produce high quality magnesium
alloys for the automotive diecasting industry.  During the quarter EMAG
completed the following work:

The Environmental Impact Study for the smelter site was completed and submitted
to the Egyptian Environmental Assessment Agency and is currently under
assessment.  Formal feedback is expected in December 2005.

Engineering, Procurement and Construction (EPC).   MAN Ferrostaal and their
engineers, K. Home International, progressed the EPC pricing task during the
quarter.  Progress has been generally good but not all subcontractors have been
able to comply with the tight timetable allowed for bidding.  Most figures will
be available by mid November.  A round of value engineering will then be needed
before the final EPC price is established.  Work on the final EPC contract
documentation is well advanced.

Project debt.   German bank KfW, EMAG's appointed lead arranger, progressed the
debt arrangements.  Presentations were made to EIB and European ECA's.  Bids
have been received from potential Independent Technical Engineers (ITE's) and
are being considered by KfW.  Lawyers have been appointed for the lenders and
for EMAG.

Market Study.  Proper definition of the market for magnesium alloys is critical
to the successful financing of the EMAG project.  EMAG had previously appointed
Metal Bulletin Research and Clark & Marron in a joint venture to undertake the
market study required for the project. The report has been received in draft
form and will be finalised by early November for distribution to the debt banks.
Appropriate excerpts will be included in the prospectus which will be issued by
MIL to fund the equity element for the project.

Ore Supply.  The supply of magnesite to the smelter is a key issue.  MIL's
existing mining tenements at Myrtle Springs in South Australia contain adequate
and suitable magnesite feedstock for the EMAG smelter and are being used in the
BFS as they are well proven and can be firmly contracted to EMAG by MIL.  The
logistics of exporting this magnesite to Egypt have now been fully researched
ready for assessment by the ITE.

As MIL remains committed to achieving the lowest possible cost structure for the
EMAG smelter project, evaluations of magnesite deposits in both Egypt and Saudi
Arabia continued during the quarter.  Most work was undertaken on the Sul Hamed
deposit in southern Egypt, where a small magnesite mining operation already
exists.  EL Nasr Mining conducted an extensive mapping exercise during the past
quarter and samples are now being quality tested to define the most prospective
area for drilling.  Parallel evaluation of the other deposits, owned by Ma'aden
in Saudi Arabia and EL Nasr in Egypt, continued with samples from Saudi Arabia
now being quality tested.  The second Egyptian deposit will be sampled in
November/ December.

2. Magnesium sheet manufacturing venture (Magsheet)

Samples of 3mm sheet metal were shipped to manufacturers of electronic equipment
and auto component manufacturers in North America, Europe and Japan for
evaluation during the quarter.  All tests performed were successful and market
feedback provides evidence that the technology is ahead of competing production
processes on both quality and cost for many applications.

An initial commercial sale of magnesium sheet in coil form was made to a
Japanese manufacturer in October and further sales are expected in the next

3. Magnesium Market Update

Publicly available prices for magnesium metal (pure) and magnesium alloys
(alloys) are shown below. Magnesium alloys, in particular those qualified for
supply to the automotive diecasting sector, are sold under producer price term
contracts, the prices of which are not made public but are known to be at a
significant premium to pure magnesium prices.

During the quarter the market for pure in Europe remained weak with extensive
competition between Chinese suppliers.  Prices in the USA were slightly weaker
for pure.   High quality alloy prices were reported as stable to slightly

Date                         Sep 30/04   Jan 1/05  Mar  31     Jun 30     Sep/05

Pure Magnesium
US Spot import, USD/lb, DDP      1.55       1.50     1.50       1.45       1.40
China Price, FOB, USD/lb*        0.85       0.79     0.76       0.76       0.70
Magnesium Alloy
Hydro Mag List, €/kg, DDP        2.75       2.75     2.55       2.55       2.55
Hydro Mag List, USD/lb, DDP      1.55       1.60     1.50       1.40       1.40

* Note that duty, storage and transport from China to the customers' works are
to be added to the China FOB price to obtain the DDP price.  The approximate
cost of these items to a European customer is in the range of USD 0.12/lb at

Significant supplier announcements during the quarter included deferment of the
start-up of US Magnesium's previously announced capacity increase and the
acquisition of 38.1% of Solikamsk, Russia's second largest magnesium producer,
by Russian Aluminium (Rusal) to secure supply of magnesium alloy for aluminium
alloy production. Industry sources suggest that Rusal has now deferred plans to
construct a new, stand alone, magnesium smelter.

Also noteworthy is the fact that reported Chinese shipments for 2005 are
actually lower than 2004 on a YTD basis.  This is a marked change from past
years which have seen compound growth rates for China of +20% pa.

4. About Magnesium International

Magnesium International Ltd is the exclusive global licensee of electrolytic
magnesium smelting technology developed by Dow Chemical. Dow's technology is the
world's most proven magnesium smelting technology and was operated competitively
by Dow Chemical in the USA over a period of 60 years.  The Dow process has
produced 3.5mt of primary metal over this period, which greatly exceeds
production by any other primary magnesium technology.  MIL is currently engaged
in a Bankable Feasibility Study to construct and operate a new smelter based on
Dow technology in Egypt in conjunction with its local partner, Amiral.

Demand for magnesium is rising with a major driver being magnesium's intrinsic
merit as the lightest structural metal available for use in automobiles.
Magnesium alloys assist auto-makers to decrease greenhouse gas emissions and
fuel consumption by reducing overall vehicle weight.

MIL has a Metal Sales Agreement with ThyssenKrupp Metallurgie (TKM) under which
TKM will purchase 100% of the smelter's production.  The contract has a minimum
price provision which guarantees that all operating costs and senior debt
service costs will be covered.   Further information is included on MIL's

MIL's ordinary shares are listed on the ASX, the AIM market in London and on
XETRA in Germany.  The company rationalised its ticker codes during the quarter
and is now MGK in both Australia and the UK.  The symbol MIC still applies in

Dated:       31 October 2005

Gordon Galt
Managing Director
Magnesium International Limited

Sydney Office:
Level 6, 210 George Street
Sydney  NSW  2000
Tel:  02 9252 1505
Fax:  02 9252 1507

Magnesium International web site:

Please see website for more details on Quarterly Report.

                      This information is provided by RNS
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