Magnesium Alloy Corporation Enters Into Financing Framework Agreement
HALIFAX, Nova Scotia--Sept. 10, 2001--Magnesium Alloy Corporation ("MagAlloy" or the "Company") (YMY.U - CDNX) is pleased to announce that the Company has entered into a financing framework agreement (the "Agreement") with Amphora Group Holding Luxembourg S.A. ("Amphora"), a European-based group, for the implementation and development of the Company's 100%-owned Kouilou Project in the Republic of Congo.Under the Agreement, MagAlloy will form two Luxembourg-based companies, Magnesium Alloy Holding and Mag-Energy Holding (collectively, the "Joint Venture Companies"), to direct the development of the Kouilou Project and the associated energy requirements, respectively. Amphora will earn up to a 75% interest in each of Magnesium Alloy Holding and Mag-Energy Holding in consideration of arranging funding to the companies of US$520 million and US$200 million, respectively. Assuming completion of such funding in accordance with the terms of the Agreement, MagAlloy will hold a 25% interest in Magnesium Alloy Holding and a 20% interest in Mag-Energy Holding (with a 5% interest to be held by certain third parties).
The transactions contemplated by the Agreement are subject to receipt of all necessary regulatory approvals and, if applicable, shareholder approvals.
Under the Agreement, initial funding of US$30 million is to be arranged by Amphora as implementation capital for the Joint Venture Companies. Both the President of Amphora, David T.L. Ong, and the Vice President, Thomas Koning, are pleased to join with MagAlloy in the development of the Kouilou Project. The principals of Amphora are known by major European and international banks including Fortis Bank and Rabo Bank. It is intended that the Implementation Phase for the Kouilou Project will include detailed engineering studies to allow for the completion of a "fixed-price, lump-sum" contract with performance guarantees for the construction of the Kouilou Magnesium Plant. Mag-Energy Holding will proceed with the development of energy related infrastructure that will support the Kouilou Project. Energy is expected to be provided from gas powered plants to be owned and operated by Mag-Energy, as well as energy from existing hydroelectric facilities.
MagAlloy will be required to pay a finder's fee in the amount of 3% in respect of all monies received by the Joint Venture Companies, as and when such sums are advanced.
The Kouilou Project proposes the solution mining of the Company's extensive magnesium salt deposits and the subsequent extraction of magnesium metal utilizing proven "state of the art" technologies and the abundant low cost energy resources of the region. An independent feasibility study completed by Salzgitter Anlagenbau GmbH, a division of Babcock Borsig, indicates that the Kouilou Project could be the world's lowest cost producer of primary magnesium metal and high purity magnesium alloys. The world magnesium market continues to show strong growth particularly with respect to high purity magnesium alloys for automotive parts. Major automotive manufacturers, in their strategy to decrease vehicle weight, improve fuel efficiency and thus meet government emission targets, expect the magnesium content of each vehicle to increase from 5 pounds (2.25 kg) to as much as 300 pounds (145 kg) over the next ten years.
Magnesium Alloy Corporation is a Canadian company, the outstanding common shares of which are listed on the CDNX (Canadian Venture Exchange), and are traded in U.S. currency under the symbol "YMY.U". MagAlloy currently has 23,190,600 common shares outstanding on an undiluted basis. More information on the Company and the Kouilou Project is available on our web site www.magnesiumalloy.ca.
ON BEHALF OF THE BOARD William B. Burton (signed) President
The Canadian Venture Exchange has not reviewed and does not accept responsibility for the adequacy or accuracy of this release.