Magontec hopes its long-delayed plans to buy raw material from a Chinese state-owned company will happen next year.
Speaking after the company’s annual meeting in Sydney on Thursday, executive chairman Nick Andrews said the company’s partner in China, the Qinghai Salt Lake Magnesium Company (QSLM), was under new management which was working to address production issues at its electrolytic magnesium smelter.
Magontec has had a magnesium alloy cast house facility in the area since 2018 and was buying liquid pure magnesium from QSLM.
The state-owned company produces magnesium from a giant salt lake in Golmud, a remote city on the Tibetan plateau.
But Magontec, which has operations nearby, has not received any raw material from QSLM since the first quarter of 2019 due to production problems.
Forced to use other less suitable sources of supply, the Magontec facility, which is next door to the smelter, has been operating at low volumes and low levels of profitability.
Magnotec CEO Nick Andrews.
But Mr Andrews said he hoped production at the QSLM smelter would resume next year, which would provide a significant boost to production volumes at Magontec’s china operations.
“When it comes on stream, the Qinghai project is expected to deliver a very strong boost to our primary magnesium alloy production volumes and group profitability,” he said.
“The project will also meaningfully impact our recycling facilities in Europe and our magnesium anode manufacturing businesses in Europe and China.”
QSLM, which is listed on the Shenzhen Stock Exchange, has a 29 per cent stake in Magontec.
QSLM parent company general manager Xing Cai Li was appointed to take charge of the magnesium production project in early 2022.
He joined the board of Magontec in September last year, and travelled to Australia to attend the annual meeting this week.
Mr Andrews said Mr Li was overseeing the remediation process at the operations and magnesium production was expected to resume, starting at lower voles from early next year.
“I am hopeful that 2024 will be the year when our investment in primary magnesium alloy production at Qinghai will start to deliver returns to shareholders,” he said.
Mr Andrews, who last month made his first trip back to China since 2020, said his company’s business there had not suffered as a result of the strains in political ties between Australia and China.
But he welcomed improving relations between the two countries under the Albanese government, including the current visit by Trade Minister Don Farrell.
“I’m pleased to see that the relationship between China and Australia has been put back on a much more even keel,” he said. “It has been well overdue for some time.
“China is a difficult place to do business at the best of times.
Magnesium alloy is an important component in “mag” wheels.
“You’ve got to have great people there who will run the business when you can’t go – and I couldn’t go for two-and-a-half years.
“But having the Australian government going to bat for Australian businesses and improve the relationship will be of great benefit to us.”
Mr Andrews said the QSLM Qinghai smelter had the potential to produce some of the lowest carbon dioxide-embedded magnesium in the world, as it was powered by regional hydro, solar and wind.
“The project is based entirely on renewables and will be the most environmentally friendly magnesium ever produced,” Mr Andrews said.
“There is a 100,000 tonne project which has been built but not yet turned on, and there is a capacity for another three to four hundred thousand tonnes in the years ahead.
“If we can produce this using this material then our customers in Europe and China will come running to our door. Material provenance is a key issue.”
Mr Andrews said the major buyers of magnesium alloy – the big car companies of the world – all wanted to know how much carbon dioxide emissions were used in its production.
He said alloy from the magnesium produced in Qinghai had the potential to be produced with less than a third of the carbon dioxide emissions than conventionally produced magnesium.
“When this production comes on stream, we will have a fantastic product to sell,” he said.
“I am confident we will sell every single kilo to magnesium alloy die casters all over the world.”
Magontec reported a net profit of $16.5m for the year to the end of December, which was a sharp rise from the $5m the year before, and with operating cashflow of $28m.