Taiyuan Yiwei and China Direct construct joint magnesium facility

Taiyuan Yiwei Magnesium Co. Ltd., China Direct Inc. and Shanxi Senrun Coal Chemistry Co. Ltd., has begun joint construction on a magnesium facility in Shanxi Province, a Taiyuan Yiwei official told Interfax today.

On May 30, China Direct announced that an agreement to acquire a 52 percent stake in the joint magnesium facility, Shanxi Jinwei Magnesium Co. Ltd., had been signed. Taiyuan Yiwei and Shanxi Senrun hold the remaining 48 percent.

"Taiyuan Yiwei and Shanxi Senrun have agreed to contribute both their facilities that are currently under construction and energy resources for production, while China Direct has agreed to cash finance the joint venture," the Taiyuan Yiwei official, surnamed Shen, said.

Jinwei has a designed production capacity of 20,000 tons of magnesium per annum. The first phase of production is expected to start in the fourth quarter of this year, with an annual production capacity of 12,000 tons of magnesium. The second phase will commence production in 2008, producing an additional 8,000 tons of magnesium per annum.

Shen added that like Taiyuan Yiwei, the new Jinwei joint venture will also use coal gas for production, which is relatively environment friendly. China plans to phase out all magnesium facilities using coal by the end of this year.

Taiyuan Yiwei, a leading magnesium producer in China, can produce 64,000 tons of magnesium ingots, 10,000 tons of magnesium alloy and 10,000 tons of magnesium fines per annum.

"Magnesium prices increased between 20 percent and 30 percent in the second quarter of this year, and we believe this trend will continue as supply is removed from the marketplace faster than new government approved facilities can replace that supply," James Wang, CEO of China Direct, said in a company announcement.

U.S.-based China Direct is a management consulting company that aims to acquire controlling interests in small to mid-sized Chinese companies and expand their market share, which will allow China Direct investors to directly participate in the Chinese economy.