In 2013 Magontec Limited signed a series of agreements with the Qinghai Salt Lake Magnesium Co. Ltd (QSLM). These agreements committed Magontec to the construction of a new magnesium alloy cast house production facility and QSLM to the supply of 56,000 metric tonnes per annum of liquid pure magnesium

The agreements signed by Magontec and QSLM comprise a Magnesium Alloy Cast House Operating Agreement, an Off-Take Price Agreement and a Lease Agreement. These agreements describe and define the operating relationship between the two companies, provide Magontec Limited with a 10 + 10 year lease and the exclusive right to manufacture all types of magnesium alloy at QSLMs Golmud facility.

The Board and Management of Magontec Limited together with Executives from QSLM at the agreement signing ceremony in 2013 (above)

The financial relationship between QSLM and Magontec was also established in these agreements. QSLM is currently a 29% shareholder in Magontec Limited and has a seat on the Magontec Limited main board. The two companies enjoy a strong relationship and worked together for over three years during the construction phase.

The QSLM electrolytic magnesium smelter is located at Golmud in Qinghai Province PRC. The smelter has an output capacity of 100,000 metric tonnes per annum and produces the lowest CO2 embedded magnesium in the World. Energy for the complex is supplied from regional hydro facilities (75%), solar (9%) and wind as well as a local thermal power station. With support from the Qinghai Provincial Government and the national Government in Beijing, QSLM has plans to expand production of pure magnesium alloys from current levels to 150,000 mtpa in the near future and then to 450,000 mtpa.

QSLM is a subsidiary of Qinghai Salt Lake Industry Co Ltd (QSLI), a Chinese State Owned Enterprise that is listed on the Shenzen Stock Exchange (000792:CH).

Qinghai Salt Lake Industry Co., Ltd, formerly Qinghai Salt Lake Potash Co., Ltd., was founded in 1958 and is based in Golmud, China. It is principally engaged in manufacture and distribution of chemical fertilizers. The Company’s major product is potassium chloride. During the year ended December 31, 2010, the Company produced approximately 2.316 million metric tons of potassium chloride and distributed approximately 2.46 million metric tons of potassium chloride. The Company distributes its products primarily in Southwest, East, North and Northeast China.

Its products also include biurea, methanol, polyvinyl chloride (PVC), potassium hydroxide, potassium carbonate, magnesium chloride, lithium carbonate, urea, liquid ammonia and other chemical products. In addition, the Company is engaged in raw coal business, department store business, hotel operation, supervising operation, and manufacture and sales of cement products. The Company distributes its products primarily in domestic.

 

QSLI has been extracting potassium from the Chaerhan Salt Lake systems for over 60 years. The residue from this activity includes a high magnesium and chlorine containing deposit. Chinese Government estimates assess these deposits to contain around 4 bn metric tonnes of magnesium. Over the coming years QSLM is expected to grow its output of pure magnesium by building additional capacity at the Golmud site. Magontec Limited, as a close partner company, is expected to continue to operate as the magnesium alloy manufacturer at this site.

The man-made brine holding ponds (below) from which QSLI extracts potassium and the raw materials for its magnesium and chlorine manufacturing operations.

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