MAGNESIUM ALLOY CORPORATION
Trading Symbol: MGAC.U
Exchange: Canadian Dealing Network
Cusip: 558914 10 7
PRESS RELEASE
TORONTO, CANADA: October 5, 1999
FOR IMMEDIATE RELEASE
Magnesium Alloy and Adviser- Warburg D. R. - Seek Partner for
Kouilou Magnesium Project
Magnesium Alloy Corporation ("MagAlloy" or "the Company") (MGAC.U- CDN) wishes to announce that the Company is in the process of soliciting joint-venture interest for its Kouilou Magnesium Project in Congo (Brazzaville). Warburg Dillon Read, a division of UBS AG., is advising the Company in the identification of and negotiation with potential partners. To date meetings have occurred or are planned with major international companies who have expressed interest in the Kouilou Project.
A positive independent feasibility study (the"Study") for the Kouilou project was recently completed by Salzgitter Anlagenbau GmbH ("SAB"), a division of Babcock Borsig AG of Germany. The Kouilou project proposes the solution mining of extensive magnesium salt deposits and the subsequent extraction of magnesium metal utilizing proven technologies and the abundant energy resources of the area. SAB indicates that the project could be one of the world?s lowest-cost producers of primary magnesium metal and magnesium alloys.
Details of the Study indicate a total cash operating cost of US$0.55 per pound of magnesium. This price assumes electrical rates of US$0.017/kWh as indicated in a recent pre-feasibility study for the Company by SNC-Lavalin. Significant operating cost reductions could be achieved by taking into account by-product sales of salt and potash. Management of MagAlloy believes that operating costs below US$0.50 per pound magnesium are achievable utilizing these by-product sales. SAB has offered to complete the entire project with consortia partners on a fixed-price due to their confidence in the mining and process technology. As well, SAB would provide full process guarantees and ensure the implementation of an operating team.
The extensive magnesium salt resources were outlined by earlier exploration programs for potash and oil. The magnesium salts underlay the majority of the Company?s 4,800 square kilometer license in the Kouilou area. The Study is based on an annual production rate of 60,000 tonnes of magnesium alloys, and shows a capital cost of US$514 million. The plant will be located in the industrial port city of Pointe Noire, Republic of Congo. Neighbouring, oil-industry facilities are owned by Shell, ELF Aquitaine, AGIP, CMS Nomeco and Chevron.
Demand for magnesium has been growing rapidly, especially in the automotive driven die casting sector, where annualized growth rates are forecast to continue in the 20% per annum range. The major auto manufacturers have recently indicated that they intend to increase magnesium content in cars from the current 5 pounds to 250 pounds per car over the next 20 years. To meet this demand and to assist in the continued growth of the magnesium industry MagAlloy intends to be a cost competitive leader. Magnesium Alloy Corporation is currently in discussions with major auto manufacturers for long-term, sales agreements.
The Company is also pleased to announce the appointment of Bryan M. Benitz as Chairman of the Board of Directors and Marcel P. Rigny as Executive Vice-President following the Company?s Annual and Special Meeting of Shareholders, held in Toronto on September 22nd, 1999,
Magnesium Alloy Corporation is a Canadian company, whose shares are quoted on the Canadian Dealing Network Inc. (CDN), in Toronto and traded in U.S. currency under the symbol "MGAC.U". MagAlloy has 18,588,595 shares outstanding on an undiluted basis. More information on the project is available on our web site www.magnesiumalloy.ca.
On Behalf of the Board of Directors
William B. Burton
President and Chief Executive Officer
Telephone (416)360-4646, Fax (416) 360-8669
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