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Alliance Magnesium aims to go public

Mar 05, 2014 | 03:17 PM | Michael Cowden

Tags  Alliance Magnesium, Joel Fournier, Asbestos, Quebec, U.S. Magnesium, China, duties, primary magnesium smelter


CHICAGO — Alliance Magnesium Inc. plans to become a publicly traded company by the end of 2014, around the same time that its pilot plant is expected to start production, the company’s top executive said in an exclusive interview with AMM.

The Brossard, Quebec-based company, which plans to produce primary magnesium from tailings left over from decades of asbestos production in the province, would probably look first to the Toronto Stock Exchange (TSX) but also may seek a listing in the United States, Alliance Magnesium president and chief executive officer Joël Fournier said in a telephone interview.

"Probably the TSX would be a natural. ... But definitely at some point we should be listed in the United States because that represents one of our natural markets for selling this metal, so having coverage from U.S. analysts could be a great advantage," he said.

Alliance Magnesium might consider either a reverse takeover or an initial public offering, Fournier said.

Part of the problem with drumming up investor interest in the United States is that there are no publicly traded magnesium producers, Fournier said. "We have discussions with U.S. investors and they say, ‘OK, but we know nothing about magnesium.’ It’s like the metal disappeared from the radar 10 years ago."

But while investors may take time to win over, potential customers are already warming to Alliance Magnesium as they seek to expand their base of magnesium suppliers domestically and abroad outside of China, which dominates production of the metal worldwide, Fournier said. Those potential customers include not only aluminum companies, which require magnesium as an alloy for products as diverse as can stock and auto body sheet, but also automakers and auto parts companies, one of which may be interested in working with Alliance on a magnesium rolling mill, he said.

Citing confidentiality agreements, Fournier declined to say which companies might be mulling working with Alliance Magnesium, although he acknowledged they include one of the top three aluminum producers.

Alliance Magnesium intends to supply consumers in the United States, Canada, Mexico and Europe, Fournier said. The company expects strong demand and prices for magnesium in coming years due to the increasing use of light metals in the automotive sector and smaller magnesium producers in China shutting down as their coal-intensive Pidgeon production process becomes increasingly unsustainable, both economically and environmentally, he said.

Given that outlook, Alliance Magnesium should avoid the fate of the shuttered Magnola plant in Quebec (amm.com, Sept. 5, 2007) and become a player comparable to Salt Lake City-based U.S. Magnesium LLC, currently the only producer of primary magnesium in North America, Fournier said. "We don’t want to start a war with U.S. Mag. We just want to introduce our metal to the market, naturally create more competition, and open up new markets and applications." He said that Alliance Magnesium would come to market with a "fair" price.

Alliance Magnesium plans to have a pilot project under way this year in Asbestos, Quebec, followed by a "pre-commercial" plant, which essentially would be one electrolytic cell so the company could introduce some product to market while it completed the rest of its planned primary magnesium smelter, Fournier said. Full-scale production won’t happen until 2017, he added.

"We’re bringing Canada back into the circle of producers of magnesium," Fournier said, which once included not only Magnola but also Norsk Hydro ASA’s plant in Bécancour, Quebec, which was sold off (amm.com, May 22, 2008).

Mississauga, Ontario-based engineering and consulting firm Hatch Ltd. is helping China’s Qinghai Salt Lake Group build a 100,000-tonne-per-year magnesium smelter—the largest in the world—based on the technology used at Norsk Hydro’s Bécancour plant, according to the company’s website.

While that plant may have an advantage on labor costs, Alliance Magnesium should be able to compete, given low electricity prices in Quebec that have been driven even lower by the boom in shale gas production in the United States, Fournier said. "It’s become very difficult to export hydroelectricity to the East Coast of the United States like we did 10 years ago. Now we have this massive surplus and the electricity price is dropping rapidly, so it’s another big advantage."

Alliance Magnesium also should benefit from its location near tailings from the former Jeffrey asbestos mine in Quebec, which was closed last year, Fournier said. The material—which looks like gray sand and has already been separated, crushed and removed of most asbestos fibers—contains 20 to 25 percent magnesium, much higher than salt from places like the Dead Sea or the Great Salt Lake, he said.

And Alliance Magnesium has access to 400 million tonnes of the material. "For a plant like us, that represents raw materials to produce for 1,000 years," he said.




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