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Magnesium tie-up to target China
By Geoff Hiscock
SYDNEY, Australia (CNN) -- Australian Magnesium Corporation (AMC) has allied with Hong Kong-based metals trader Lee Kee Group to target the Chinese market for magnesium. AMC chief executive Rod Sharp said Friday that China presented a marketing challenge because of its own large-scale magnesium production. But he said China's rapidly growing automotive industry meant it was also an opportunity for offshore suppliers. China is expected to lift annual car production from 2 million units a year now to 7 million units by 2005, as makers such as Audi, Volkswagen, GM, Toyota and Honda seek to extend their reach in a fast-growing market. Most of these overseas makers are in joint ventures with Chinese companies. Because of its light weight, strength and castability, magnesium is regarded as a metal that increasingly will be used by carmakers. Sharp said AMC and Lee Kee initially would focus on China's fledgling magnesium automotive die-casting industry. He said China had the potential to become the world's largest magnesium market, but the company was also looking at opportunities in Japan, South Korea and Taiwan. Sharp said Lee Kee already traded in Hong Kong and China in markets such as zinc, aluminium, copper, tin, nickel, stainless steel and magnesium. First production in 2004AMC will become the world's largest magnesium producer once it completes a 97,000-ton annual capacity plant in late 2004 at Stanwell in the Australian state of Queensland. AMC has a 10-year "take or pay" contract for half of Stanwell's output with the Ford Motor Co. worth more than Aust. $2 billion ($1.12 billion). Last month it signed a contract with a European metals group to supply 5,000 tons a year for three years from 2005 -- a deal potentially worth A$60 million. AMC chairman J. Roland Williams said the Stanwell plant was on schedule to produce metal in the December quarter of 2004. He revealed Friday that the cost of the plant was now estimated at Aust. $1.155 billion ($647 million), up from an initial price of A$987 million. In addition to the new alliance with Lee Kee in China and Asia, AMC has tied up with auto supplier Wagon Plc to jointly development magnesium components for the European auto industry. But the company's share price has languished this year, touching a record low of A$0.41 on October 10, down from A$0.69 a year ago. It closed Friday at A$0.46, unchanged from Thursday's close.
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