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Magnesium Intl Ltd (MGK)

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Thursday 28 July, 2005

Magnesium Intl Ltd

Quarterly Report-30 June 2005

Magnesium International Limited
28 July 2005

           Quarterly Report - Quarter ended 30 June 2005

1.            Egyptian Magnesium Smelter Project (EMAG)

The smelter project is MIL's major asset. The project involves the construction
and operation of an 88,000tpa primary magnesium smelter at Sokhna Port on the
Red Sea in Egypt.  The smelter's production will be mainly high quality
magnesium alloys for the automotive diecasting industry.

1.1          Work Completed during the Quarter

During the quarter MIL completed the following work

•        Smelter site/ EIS.  The final site for the smelter within the port
boundary was established and the plant layout within the site was completed.
The EIS has been completed in draft form and is being discussed with the Red Sea
Ports Authority prior to a second public presentation and then submission to the
Egyptian Environmental Assessment Agency.

•        Engineering, Procurement and Construction (EPC).   MAN Ferrostaal and
their engineers, (K. Home International) are progressing the EPC pricing task on
schedule.  Completion is expected at the end of October 2005.  Major
subcontractors, all of which have world class experience in their respective
areas, have been appointed as follows

o       ThyssenKrupp Udhe for the wet plant (leaching and purification).  TKU
worked on the SAMAG project in Australia for MIL and will use aspects of their
Australian design for the plant in Egypt

o       Andritz has been appointed for the fluid bed dryer, which will be built
in accordance with the Dow design

o       AbiSimon (Australia) has been appointed for the acid plants, again to
the Dow design

o       Zublin was appointed for civils.  Subsequently, geotechnical drilling of
the site was completed satisfactorily and foundation engineering is now

     Other contractors are being appointed progressively.

•        Project debt.   German bank KfW was appointed as lead arranger and is
currently assessing project information prior to more detailed discussions with
other debt providers who have previously expressed interest in the project.
These include the European Investment Bank, Hypoveriensbank and CIB (Egypt).
The potential for mezzanine debt is also being explored at present.  KfW is
currently assessing potential appointees to the task of Independent Technical
Engineer (ITE).

•        Market Study.  Proper definition of the market for magnesium alloys is
critical to the successful financing of the EMAG project.  EMAG has appointed
Metal Bulletin Research and Clark & Marron in a joint venture to undertake the
market study required for the project. The joint venture will take an in-depth,
first principles approach to the study and will utilise specialist skills from
magnesium consultant Brian Coope and auto consultants Knibb Gormezano and
Partners, both from the UK.  Metal Bulletin Research (MBR) is one of the world's
leading metals research companies.  Its affiliate, Metal Bulletin, publishes
extensively on base metals supply and demand.  Clark & Marron is an independent,
Australian based metal research company specialising in light metals industrial
research, with extensive experience in magnesium, including the key Chinese
supply area.

The work is scheduled to be completed in September 2005 for inclusion in the

•         Ore Supply.  The supply of magnesite to the smelter is a key issue.
MIL has existing mining tenements in Australia, which are suitable for
feedstock, but remains keen to prove suitable feedstock in the region of the
smelter site to ensure that the smelter operates with the lowest possible cost
structure.  During the quarter MIL decided to base the Bankable Feasibility
Study on magnesite feedstock from Myrtle Springs in South Australia and has
subsequently rationalised it tenements by relinquishing tenements which are no
longer needed.  The logistics of exporting this magnesite to Egypt have now been
researched and costed and concepts and costs are now ready for assessment by the

EMAG has been evaluating four local deposits during the quarter, with two in
Saudi Arabia and two in Egypt.  Most work has been undertaken on the Sul Hamed
deposit in southern Egypt, where a small magnesite mining operation already
exists.  Testing and mapping to date indicates that the magnesite in the deposit
should be suitable for magnesium production and that the resources should be
sufficient to supply the smelter over an extended period.  The deposit is 14km
from the coast of the Red Sea and 40km from the nearest loading port.  Travel
distance to Port Sokhna would be approximately 700km. The deposit is held by El
Nasr Mining, which is a wholly owned subsidiary of the Egyptian Government.
EMAG will be commencing the negotiation of a suitable Heads of Agreement with El
Nasr in the coming month, with a view to resource evaluation and potential
mining arrangements.  Parallel evaluation of the other deposits, owned by
Ma'aden in Saudi Arabia and EL Nasr in Egypt, will continue in the next two

•        EMAG's legal team has been appointed.  Leading Australian firm
Mallesons will undertake the necessary work in conjunction with Shalakany Law
firm in Egypt.

2.            Corporate

MIL's ordinary shares are now currently tradable on the ASX, the AIM in London
and in Germany.  The company rationalised it ticker during the quarter and this
is now MGK in both Australia and the UK.  The symbol MIC still applies in

Trading has been good on all three exchanges.

3.            Magsheet

MIL entered into an agreement with the CSIRO in Australia during the quarter.
Pursuant to the agreement, MIL will evaluate CSIRO's method of production of
magnesium sheet metal by twin roll casting with a view to commencing commercial
production in late 2005 via the CSIRO's current plant in Victoria.  Details of
the agreement are available on MIL's website.  A number of samples were shipped
to manufacturers of electronic equipment, photo engravers and auto component
manufacturers in North America, Europe and Japan for evaluation.

4.            Magnesium Market Update

Publicly available prices for magnesium metal (pure) and magnesium alloys
(alloys) are shown below. It should be noted that magnesium is not an LME traded
commodity and that few public price lists are available.  Magnesium alloys in
particular are priced in term contracts, which are not made public.

During the quarter, consolidation of the Chinese industry continued in response
to Government decrees to phase out smaller producers.  Recent reports indicate
that 40 small producers have ceased production in 2005 to date after 80 such
producers stopped in 2004.  New Chinese capacity has been added to replace these
closures, however.  The revaluation of the yuan late in July has increased the
Chinese cost structure and the potential also exists for the removal of the
export duty rebate currently paid to producers.

A small quantity of new western smelting capacity is being brought on line in
Canada and the USA, with both US Magnesium and Norsk Hydro announcing small
increases.  A previously closed smelter in the Ukraine has been recommissioned
and is ramping up towards a 10,000 tpa production rate.

The US antidumping duty, which was confirmed in the March quarter, continued to
affect the market.  Chinese metal can no longer access the US market due to the
duties imposed and is being sent to the European and eastern markets.  As a
result, in Europe, prices for Chinese pure metal further decreased.  The alloy
price was also lower at $1.40/lb, driven by a markedly lower euro exchange rate.
  In the USA, pure magnesium prices ended the quarter in the range $1.40 - 1.50/
lb for both Russian and Western quality.  Magnesium alloy contracts are in the
same range.  Price variations in the last year are shown below.

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

Pure Magnesium

US Spot import, USD/lb, DDP    1.50        1.55          1.50       1.50          1.45

China Price, FOB, USD/lb*      0.84        0.85          0.79       0.76          0.76

Magnesium Alloy

Hydro Mag List, €/kg, DDP      2.75        2.75          2.75       2.55          2.55

Hydro Mag List, USD/lb, DDP    1.50        1.55          1.60       1.50          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

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

Dated:... 28 July 2005

Gordon Galt

Managing Director

Magnesium International Limited

In accordance with Australian Stock Exchange listing requirements, any
geological information in this report has been based on information provided by
geologists who are corporate members of the Australian Institute of Mining and
Metallurgy or Australian Institute of Geoscientists and who have had in excess
of 5 years experience in their field of activity.

Sydney Office:

Level 6

210 George Street

Sydney  NSW  2000

Tel:  02 9252 1505

Fax:  02 9252 1507

Magnesium International web site:

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                      This information is provided by RNS
            The company news service from the London Stock Exchange                                                                                                                                                                                                               

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