Ron: I received this write-up via e-mail today. It's the same write-up that was sent by fax last week:
NATURAL RESOURCE INVESTOR
& WORLD GOLD STOCK REPORT
ALERT #14, Vol. 1998
BUY: Magnesium Alloy Corp. (CDN: MGAC.U)
PRE-FEASIBILITY WORK STARTS ON
GIANT MAGNESIUM DEPOSIT = STRONG SPECULATIVE BUY
FAX HOTLINE FOR MARKET HOURS 7/7/98
Magnesium Alloy Corp. (CDN: MGAC.U) holds the rights to what's believed to
be one of the world's largest deposits of magnesium salts, from which
magnesium is extractable at potentially world-beating production prices.
The project is in the Republic of Congo (the Brazzaville Congo, not the
Kinshasa/Zaire-turned-Congo). The deposit holds an estimated 80 billion
tonnes of contained magnesium, worth trillions if it were all mined and
processed. For some idea of the size, management estimates that just the
first 2.5% of this project's reserves (2 billion tonnes) gives Maggie (as
we like to call MGAC.U) an NPV per share of $US5 to $US14 at the high end.
The company recently put the final development of this Maggie project into
high gear by announcing the start of a final pre-feasibility study. This
will be led by two related world-class German engineering and mining
consulting firms and two Russian firms which specialize in magnesium
extraction technologies. The technical pre-feasibility study will evaluate
the economics and technologies of a major magnesium extraction facility at
the Congo project, and a final pre-feasibility report is planned for
completion in the first quarter of 1999.
Specifically, Maggie has:
- Contracted Salzgitter Anlagenbau GmbH (SAB), the engineering and
general contracting division of Preussag AG of Germany; and Kavernen
Bau-und Betriebs (KBB), also a member of the Preussag Group with
extensive experience in solution mining, brine extraction, modeling of
reserves and transport. (KBB is also currently involved with two
solution mining operations with geological similarities to the Congo
project.)
- Entered into consulting and technology transfer agreements with an
agency of the Russian National Aluminum and Magnesium Institute
(VAMI), as well as with the Zaporozhie Titanium Institute. These two
groups have state-of-the-art technical expertise worldwide in
magnesium extraction and will conduct studies evaluating advanced and
improved modifications to proven extraction techniques.
VAMI and the Titanium Institute took part in the design and implementation
of the magnesium extraction technology for the Dead Sea Works Magnesium
facility, the world's newest magnesium extraction plant. They also took
part in the technical design for a proposed magnesium facility in Iceland
in conjunction with Salzgitter. VAMI developed the technology and took part
in the design construction of all the magnesium extraction plants in the
former Soviet Union (Berezniki, Solikamsk, Kalush, Zaporozhie,
Ust-Kamenogorsk). VAMI's preliminary evaluation of Maggie's Congo project
indicates that, subject to the availability of low-cost energy as currently
indicated, the proposed facility would be the world's lowest cost magnesium
metal producer. Maggie anticipates a first phase annual production rate of
58,000 tonnes with a second phase of over 116,000 tonnes. A production
decision is anticipated in late-1999 with production possible by 2001.
The company's low-key performance in the markets shouldn't fool anyone.
Though the stock is trading at about the US$0.50 level while long-term
private placement stock comes out, volume has been very good and we expect
the share price to get better each week. The stock closed on Monday, July 6
at US$0.50 and should continue to tighten up as the loose stock cleans out,
and to then move to significantly higher levels based on Maggie turning
some key corners in the near term. With 14 million shares outstanding, 8
million of which are escrowed, the odds of this happening soon makes entry
at current levels an attractive proposition.
Here is why:
- Management says that automotive manufacturing demand for magnesium and
magnesium alloys is so great there's no indication that supply can
catch up with demand in the next decade. Automotive consumption alone
could rise 250%, to 800,000 tonnes/yr. in the next 5-6 years. As a
pure-play deal, Maggie would benefit materially from this surge.
- Automotive end-users of magnesium are in the position of having to buy
up magnesium supplies at the source. There are no commodity exchanges
for the metal. Several auto manufacturers have begun a trend of buying
up magnesium plant production directly. From initial discussions,
Maggie's management knows that its project could be a strong
candidate.
- Maggie's management team is a blend of highly accomplished technical
mining managers and financial pros. This includes president Bill
Burton and director Stephen Dattels, former director and exec VP for
finance at Barrick, as well as CEO of TSE-listed International Pursuit
Corporation.
Outlook
We look for continuing strong fundamental developments out of Maggie. Based
on this outlook, the current share price makes it an aggressive buy up to
US$1.00 for medium-term speculative investors. NRI/WGSR
For corporate information, call toll-free 877-647-3117.
A knowledgeable U.S. broker is Ben Johnson at 800-547-4898.
Published by NRI/WGSR
501 W. Glenoaks Blvd., Suite 340, Glendale, CA, 91202.
Except for free trial issues, cost for subscribers is set at $449/year,
with frequency as events dictate. For subscription information, call
818-542-6899 or fax 818-249-7024. The Fax Alert Service is classed as an
advertisement and its direct expenses of production and distribution are
paid for by the companies covered. Publisher and affiliates also have paid
marketing consulting agreements with such companies and receive PR monthly
fees, as well as stock options, for their services. Data herein is provided
by the company covered, and text has been approved by the company.
Publisher is not an investment advisor. The information herein is believed
to be reliable but its accuracy cannot be guaranteed. Investing in junior
securities is speculative and carries a high degree of risk.
Forward-looking statements are subject to risks and uncertainties that may
cause actual results to differ materially. The company has no obligation to
update any such statements. Readers should consult their own investment
counselor regarding information or editorial viewpoints expressed herein.
NRI/WGSR has no affiliation with any broker.
Copyright 1998 NRI/WGSR
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