Australia to build world's biggest magnesium plant

Concern over car emissions is driving demand for lighter metals

By CNN's Grant Holloway

SYDNEY, Australia (CNN) -- The world's largest magnesium plant will be built in Australia later this year to help feed the booming global demand for the light-weight metal, particularly from the car industry.

Australian Magnesium Corp (AMC) secured $500 million (Aust. $932 million) in debt funding Tuesday to kick start the project, with a further $350 million (Aust. $680 million) to be raised later through a global stock issue.

AMC has already signed a 10-year contract with the Ford Motor Company to supply 45,000 tonnes of magnesium a year for use in its car manufacturing processes -- more than half the proposed annual output from the new plant.

Magnesium is growing in popularity with car makers because its combination of high strength and low weight -- it is 35 percent lighter than aluminum and 75 percent lighter than steel -- helps the car companies meet new environmental standards on gas emissions and fuel consumption.

The metal is also used in laptop computers, mobile phones and power tools.

The AMC plant at Stanwell in central Queensland will be the largest and lowest production-cost operation in the world. It will source its magnesite ore from the nearby Kunwarara deposit, the biggest known deposit of its type.

Birth of a new industry

Demand for the new metal is estimated to grow at about 15 percent a year to 576,000 tonnes per annum by 2009 of which Stanwell will supply around 90,000 tonnes a year.

Chairman of AMC, and former chairman of Shell Australia, Dr Roland Williams said Tuesday the project marked the birth of the modern magnesium industry in Australia after 10 years of research and development.

"If the international automotive industry is to meet regulatory standards and self-imposed fuel-efficiency targets … then magnesium will play a key role," he said.

A prospectus for the equity offer is expected to be lodged with the Australian Securities and Investment Commission later this month, while initial construction site work will begin on the Stanwell plant in October.