Magontec Limited (MGL) is pleased to announce that it has concluded an equity joint venture with Dongfang Resources in Shanxi Province, PRC. Under the terms of the agreement between the two parties MGL will become a 70% shareholder with the Dongfang Resources magnesium alloy manufacturing subsidiary, Yitong, in this new joint venture. This pricing structure will enable MGL to better manage raw material price and supply volatility. It will also ensure that MGL achieves a magnesium alloy tolling cost that is competitive with other integrated Chinese manufacturers.
MGL will not make a capital investment in this project and will earn its 70% shareholding through its contribution of logistics, distribution, marketing and production expertise. MGL will invest RMB 7 million (A$1.1 million) of working capital in the project. The joint venture will provide MGL with access to a consistent supply of high quality and low cost raw material sufficient for its current Chinese domestic and export market demand.
The joint venture will produce generic alloys as well as MGL’s high technology alloys. While the joint-venture alloy plant is already qualified by a number of customers in China, Europe and North America, production will ramp up in the coming months as other customers complete qualification procedures.
Dongfang is a family company based in Shanxi Province PRC. Over the last 10 years Dongfang has developed a major industrial base at Jishan County. The company has assets of over RMB 2 billion and is involved in the production of coking coal, ferro manganese and magnesium. The company also has a power station situated within its industrial complex.