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CHINA Magnesium Corporation (ASX: CMC) will acquire a dolomite quarry in northern China for $730,000 to progress the vertical integration of its supply chain from dolomite supply through to magnesium and magnesium alloy production.
The Quarry is located at the foot of Tianzhong Mountain and approximately 30km from CMC’s magnesium ingot production plant located at Pingyao, Shanxi Province.
To exercise the option, CMC must pay RMB5,000,000, (AUD$730,000) less the option fee of RMB300,000 (AUD$44,000) which was paid at the time of entering the option agreement in 2008.
The purchase is planned to be funded from a mix of existing funds and from a Chinese bank debt facility which is currently being negotiated.
In order to complete the acquisition, conditions include the renewal, extension and assignment of the mining permit for the quarry and the assignment of the Land Use Agreement by the relevant local authorities - expected by the end of October 2011.
Managing Director of CMC Tom Blackhurst (pictured) says the company will continue to lock down opportunities that make good economic sense.
“CMC is confident of its existing supply chain for magnesium production but will continue to take opportunities to vertically integrate within the industry when the acquisitions make good economic sense,” he says.
“Dolomite is not a rare or complex raw material but it is fundamental for the production of magnesium, and control over supply requirements is another positive for the company as we progress our expansion plans.”
CMC shares last traded at 33 cents.
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