MAGONTEC LIMITED — AGM Information 2013

May 16, 2013

!

==> picture [521 x 111] intentionally omitted <==

Office 10 Level 8 139 Macquarie St Sydney NSW 2000 Australia Ph: 61 2 8231 7085 Fax: 61 2 9252 8960

Company Announcements Office Australian Stock Exchange Limited 20 Bridge Street Sydney, NSW, 2000

Dear Sirs,

17 May 2013

Magontec Limited (Company) – Executive Chairman’s Address to 2013 Annual General Meeting

The Executive Chairman’s address attached will be delivered to the Company’s Annual General Meeting to be held at 1:00pm this afternoon.

In accordance with ASX Listing Rule 3.13.3, the address is released ahead of the meeting.

Yours Sincerely

==> picture [147 x 62] intentionally omitted <==

John Talbot Company Secretary

==> picture [571 x 111] intentionally omitted <==

Executive Chairman’s Address to Annual General Meeting 1.00pm Friday 17[th] May 2013

Ladies and Gentlemen,

Before we move to the formal business of the Annual General Meeting I would like to give you a short presentation to bring you up to date with the progress that the company has made in the period under review.

In the six months since our last AGM, Magontec has continued to restructure its businesses seeking to restore profitability in its main activities.

We have commenced production of magnesium anodes in Romania, addressed excessive inventory stockpiles in Germany, completed the relocation of our Chinese anode activities and upgraded the our new primary alloy facility in Shanxi Province so that it can be qualified by major international customers.

Since our last meeting in November we have also completed an $11m equity capital raising and a debt restructuring that has resulted in a reduction in net interest bearing debt of $13.1m since 30 June 2012.

A focus of our activities has also been on the new project in Qinghai Province where our major shareholder and partner, Qinghai Salt Lake Magnesium Company, is constructing a new electrolytic magnesium smelter and Magontec is preparing to install machinery in the adjacent new magnesium alloy cast house.

Firstly I want to briefly review the company’s activities and remind shareholders of the size and scope of your business.

Magontec Limited

Global distribution, logistics, production, R&D

==> picture [294 x 163] intentionally omitted <==

----- Start of picture text -----

Toronto Bottrop Santana Golmud Shanxi
HQ Xian
Production
Suzhou
Sales Office
Technology Centre
Cast House Project
Alloy/Recycling Capacity
Anode Capacity
planned
Bottrop Santana Xi‘an Suzhou Shanxi Sydney
1 CAST is a Technology Association 2 kt = thousands of tonnes 15 kt 1 kt [2 ] 3 kt 1 kt 5 kt 1 kt 7,5 kt 30 kt CAST [1 ]
----- End of picture text -----

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Magontec has a global footprint that is now preparing itself for the commencement of production in Qinghai.

The Company has manufacturing operations at five different locations and customers on every continent. We also have a commitment to developing new magnesium technologies in the alloy and anode sectors as well as commercializing technologies in our existing portfolio.

Your company is the only magnesium alloy manufacturing, recycling and down-stream value-adding company that offers a global and integrated supply chain to the magnesium die cast and water heater industries. That is why the Qinghai Salt Lake Magnesium Company chose to partner with Magontec for its major new project.

Operationally Magontec is now divided into two divisions – Europe and China – run by Christoph Klein-Schmeink and Tong Xunyou respectively.

Magontec operational structure

==> picture [286 x 148] intentionally omitted <==

----- Start of picture text -----

Magontec Limited (ASX Code: MGL)
Europe / N America China
Xian, Shanxi,
New Mg alloy
(Golmud from 2014)
Mg alloy recycling Bottrop, Santana Suzhou
CCP (anodes) Bottrop, Santana Xian
----- End of picture text -----

In Europe we sell primary magnesium alloys manufactured in China and recycle magnesium scrap returned to us by our regional customers. We also make magnesium anodes for the water heater industry.

In China we manufacture and sell primary magnesium alloys, recycle magnesium scrap and manufacture magnesium anodes.

Mr Klein-Schmeink, Mr Tong and their management teams have worked extremely hard over the last 12 months to implement our restructuring plan while managing and stream-lining the on-going production activities of the company.

We expect to have completed all restructuring under the current plan by 30 June 2013.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

The cash costs of restructuring will cease to burden the company from this time forward and the full benefit of restructuring will emerge over quarters 3 and 4 of 2013.

Moving now to the financials.

Magontec Financials Profit & Loss – First Quarter 2013 and 6 months to 31 December 2012

REPORTED 31-Dec-12 $'000 ADJUSTED 31-Dec-12 $'000 REPORTED 31-Mar-13 $'000 % Change (Adjusted to 3 months)	REPORTED 31-Dec-12 $'000 ADJUSTED 31-Dec-12 $'000 REPORTED 31-Mar-13 $'000 % Change (Adjusted to 3 months)	REPORTED 31-Dec-12 $'000 ADJUSTED 31-Dec-12 $'000 REPORTED 31-Mar-13 $'000 % Change (Adjusted to 3 months)
Sale of Goods 61,607 61,607 29,262 -5% Cost of Sales -58,431 -58,431 -26,549 -9%
Gross Profit 3,176		3,176 2,713 71%
Other Income 5,469 304 185 22% Interest Expense -1,223 -713 -270 -24% Impairment of inventory, receivables & other financial assets -686 0 0 Travel accommodation and meals -281 -281 -138 -2% Research, development, licensing and patent costs -204 -204 -277 172% Personnel -2,755 -2,367 -1,108 -6% Depreciation & Amortisation -697 -697 -372 7% Office Expenses -274 -274 -47 -66% Corporate -1,480 -1,277 -602 -6% Other operating costs, IT, Promotions etc -190 -195 -2 -98%
Profit/(Loss) before income tax expense from continuing operations 855		-2,528 82

In the period to 31 December 2012, the period under review, Magontec recorded a profit before income tax from continuing operations of $855 thousand dollars. While this was a welcome profit after a period of negative results, the underlying operations were loss making.

Profit in this period was principally generated as a result of debt forgiveness of $5.1 million (shown in Other Income).

In the result to 31 December we also included $500 thousand dollars of capitalized interest on Convertible Loan Note 2 (issued to Straits Mine Management) and expensed inventory and residual ownership value in HNKWE (a joint venture in Henan Province that we have now exited).

The net effect of all these adjustments was an underlying loss of $2.528 million in the period.

While profitability has continued to be impacted by restructuring costs in the three months to 31 March 2013, these costs have been less than in the period to 31 December.

In the quarter to 31 March the group recorded a profit before tax of $82 thousand dollars, reflecting a marked improvement in the performance of our operating activities as the early impact of restructuring is felt.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

This is best reflected in a Gross Profit increase of 71% and an increase in the Gross Profit margin from 5.16% to 9.27%.

We are also focused on General & Administrative costs where we expect to see further reduction as the restructuring programs reach completion. We are already seeing an improvement in this area as personnel and corporate costs are reduced.

Moving on to the balance sheet we can see the impact of the rights issue and debt forgiveness, although as the debt to Straits was repaid and the debt forgiveness concluded prior to the close of the 2012 Financial Year the contrast does not show in this balance sheet comparison.

Magontec Financials

Balance Sheet – First Quarter 2013 and 6 months to 31 December 2012

		31-Mar		30-Dec				31-Mar		30-Dec
	Assets	2013		2013			Liabilities	2013		2013
		$'000		$'000				$'000		$'000
	Current assets						Current liabilities
	Cash and cash equivalents	7,919		13,540			Trade & other payables	17,476		19,804
	Trade & other receivables	23,533		22,991			Borrowings	17,242		21,030
	Inventory	21,106		25,727			Borrowings from related parties			49
	Other	443		125			Provisions	1,770		2,704
	Total current assets	53,001		62,383			Total current liabilities	36,488		43,586
	Non-current assets						Non-current liabilities
	Other receivables	341		476
	Property, plant & equipment Future income tax benefit	14,274 1,600		14,001 1,642			Owing to Straits Mine Management Pty Ltd	8,969		10,968
	Intangibles	3,157		3,186			Provisions	6,732		6,826
	Total non-current assets	19,372		19,305			Total non-current liabilities	15,701		17,794
	TOTAL ASSETS	72,373		81,688			TOTAL LIABILITIES	52,189		61,380
							NET ASSETS	20,186		20,308

What we can see in the balance sheet is the impact of improved inventory management as well as reduced trade and other payables and net assets down marginally.

So in summary the financial results are beginning to show the benefits of operating and financial restructuring.

• New production facilities are beginning to make a contribution

• Decommissioned facilities are ceasing to be a drag on profitability, and

• The restructuring of the balance sheet has delivered a much more sustainable financial platform for Magontec’s future growth and prosperity.

I want to move on to discuss the magnesium industry and what is happening in Magontec’s markets.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Magnesium alloys

Pure Mg metal price has been relatively stable

==> picture [268 x 137] intentionally omitted <==

----- Start of picture text -----

Mg 99.9% China RMB/mt
21000
20000
19000
18000
17000
16000
15000
14000
13000
Source: Asianmetal
4/01/10 4/03/10 4/05/10 4/07/10 4/09/10 4/11/10 4/01/11 4/03/11 4/05/11 4/07/11 4/09/11 4/11/11 4/01/12 4/03/12 4/05/12 4/07/12 4/09/12 4/11/12 4/01/13 4/03/13
----- End of picture text -----

The price of magnesium, certainly by comparison with other metals, such as aluminium and zinc, has been relatively stable over the last 2 years.

As an alloy manufacturer Magontec generally passes price increases and decreases to its customers, although significant volatility can impact profitability on longer-term contracts.

In our view the most important factor in determining magnesium consumption is not price; it is the reliability and predictability of the supply chain and purchasing terms.

The major customer groups continue to be wary about supply chain reliability and contract terms of more than 6 months are extremely difficult to achieve.

In our view the Qinghai smelter will address these issues, allowing Magontec to offer longer-term contracts and greater supply certainty. As we can see on this slide China remains the World’s largest supplier of magnesium.

Pure Magnesium and Magnesium Alloy Magnesium supply

==> picture [286 x 167] intentionally omitted <==

----- Start of picture text -----

- QSLM initial capacity of 100,000mt (rising to 450,000mt)
China - + new Pidgeon of more than 200,000mt new capacity
Rest Of World - Minimal new capacity forecast
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12
----- End of picture text -----

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

The Qinghai smelter is forecast to produce terminal capacity of 450,000 metric tonnes per annum, equivalent to more than 60% of current global consumption of around 700,000mt in 2013.

It is an industrial development that is backed by the Provincial Government of Qinghai and the magnesium industry has been specifically identified by the Chinese Government in the 12[th] 5 Year Plan as a targeted growth sector.

As a result of the Qinghai project we think growth in capacity outside of China is now less likely to find support.

On the demand side automotive companies, principally in Europe, Japan and North America, consume nearly 70% of magnesium alloy production.

Pure Magnesium and Magnesium Alloy Magnesium demand

==> picture [316 x 144] intentionally omitted <==

----- Start of picture text -----

Industrial uses of Magnesium Die Cast Magnesium
Alloy Applications
Die Cast
Magnesium Automotive
Alloys
Aluminium
Alloying Powertool
Iron & Steel
Electronics
Other
Other
----- End of picture text -----

While automotive sales figures in aggregate are flat-to-down in many parts of the World, the shift to lighter weight materials is expected to see a continued growth in demand for magnesium alloys.

In China, where there are over 17 million cars made every year, there is very little magnesium used in automotive manufacturing. The Chinese are becoming as focused on environmental issues as many western countries and we expect to see a steady increase in magnesium usage in Chinese automobiles in the coming years.

This next chart shows the expected growth in pure magnesium by all industry groups. It shows that the largest increase in usage is expected to come from die-cast magnesium alloys.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Automotive die cast alloys Magnesium's growth sector

==> picture [305 x 170] intentionally omitted <==

----- Start of picture text -----

1,500"
Forecast#93yrs#CAGR#at#7.2%#
Global#supply#
1,250"
1,000"
750"
500"
250"
0"
2005" 2006" 2007" 2008" 2009" 2010" 2011" 2012" 2013" 2014" 2015" 2016" 2017" 2018" 2019" 2020" 2021"
Aluminium"Alloying" Iron"&"Steel" Metal"ReducAon" Die"CasAng"E"Auto" Die"CasAng"E"Other" Other"
Source: CM Group
Mg#demand#(kt#Mg)#
----- End of picture text -----

Clark & Marron, a Melbourne-based magnesium industry research company, forecast that the market for magnesium alloys is likely to increase by almost 100% between 2013 and 2021.

Magontec is well positioned to supply this additional demand from its current and future primary alloy manufacturing facilities in China.

Magnesium – Primary Alloys & Recycling Market size and MGL market share estimates

==> picture [297 x 162] intentionally omitted <==

----- Start of picture text -----

N America
Market 20k mt Europe
MGL share 5k mt Market MGL share 60k mt 10k mt Total market 5k mt Japan
MGL share 3k mt
Europe
Market N America 10k mt Market MGL share 40k mt / 14k mt Market 40k mt / China
MGL share 1k mt MGL share 15k mt China
Market 70k mt
MGL share 7.5k mt
----- End of picture text -----

Magontec’s current primary magnesium manufacturing capacity is over 30,000mt per annum and will rise to 56,000mt when the Qinghai facility is opened.

From our Chinese base we export into Europe, Japan and North America and we also sell increasing volumes into China. In each of these markets Magontec has a strong presence.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

We are also well placed to provide recycling services to our customers in Europe and Asia. As magnesium alloy die-casting generates scrap rates of 50% or more, Magontec’s network of recycling facilities can expect to see increased volumes as global magnesium sales grow in the coming years.

I now move on to the Cathodic Corrosion Protection – the anode business.

Anode manufacturing is a downstream, value-adding business for Magontec. Our CCP manufacturing activities are co-located with our magnesium recycling facilities, which supply the principal raw material for anode manufacturing.

We anticipate a further improvement in profitability in Europe as assets and activities are shifted from Germany to Romania. However in China heavy discounting has resulted in a decline in volumes over the last three months and margins under pressure.

==> picture [314 x 199] intentionally omitted <==

----- Start of picture text -----

Cathodic Corrosion Protection
(CCP – anodes)
Magnesium anode market and MGL market share estimates &
Recycling
N America
Market 4500 mt Europe
MGL share 50 mt Market 2160 mt
MGL share 812 mt
China
Market 2500 mt
MGL share 1000 mt
----- End of picture text -----

Looking further out, the western world CCP markets offer a number of very attractive opportunities as consumers become increasingly focused on other functions within the water heater and in water storage generally, in addition to cathodic protection.

Magontec’s high-end CCP products are becoming more complex and capable of performing more varied tasks such as determining water temperature and water quality.

Moving on to the Qinghai project.

On this slide we see a photo taken at the end of March on my last trip to Golmud, the city where our new project is being constructed.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Qinghai Magnesium Project Magontec Cast House

==> picture [307 x 93] intentionally omitted <==

Project under construction - March 2013

The main buildings for the electrolytic smelter are now close to 50% completed.

Just to briefly re-cap on this project, the first stage involves an investment of $3 billion dollars by Qinghai Salt Lake Magnesium Company and $10.5 million by Magontec.

Qinghai Salt Lake Magnesium Project statistics

==> picture [296 x 151] intentionally omitted <==

----- Start of picture text -----

The QSLM Magnesium Project ~ US$3.2 bn
First stage
Electrolytic production technology
= 100,000 metric tonnes pa
= Norsk Hydro (Bécancour)
Energy source Final capacity 450,000 mtpa
= 75% hydroelectric = 64% of current World consumption
Magontec Cast House Project ~ US$11.0 million
Magnesium alloy cast house Commencement Mg alloy capacity
= generic and specialist alloys = 56,000 mt pa
Energy source Lowest Mg GHG/CO2 footprint in China
= 75% hydro electric = less than aluminium
----- End of picture text -----*

The first stage of this project will be 100,000 metric tonnes per annum of which Magontec will convert 56,000 mt into magnesium alloys.

The production technology and some of the equipment is derived from the decommissioned Norsk Hydro plant in Canada and the energy source will be principally from hydroelectric power.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

This facility will produce the World’s greenest magnesium and, we believe, make a very attractive product for our customers in the automotive, powertool and electronics industries.

In June last year Magontec signed a cooperation agreement with QSLM. Since then Mr Xie, the Chairman of QSLM, has joined the Magontec Board and QSLM have invested $8m in Magontec by way of new equity.

Cooperation Agreement

Cooperation Agreement	Cooperation Agreement
Magontec Limited and Qinghai Salt Lake Magnesium Co (QSLM)
Agreement completed June 2012
Under this agreement:
QSLM will
A major shareholder of Magontec Appoint a Director to the Magontec Board	Pricing flexibility so that Magontec may offer its customers
�DONE
	� longer-term contracts
Supply Magontec with 56,000 mtpa of pure magnesium	& � incentives for volume
Magontec will
Raise new capital to finance and construct a 56,000 mt pa alloy casting facility	Exclusive manufacturing and commercialisation rights at Golmud
�DONE	Pure magnesium distribution rights

This agreement provides Magontec with an opportunity to improve margins and increase market share in generic magnesium alloys. It will also offer Magontec customers access to metal on terms that are currently not available in the export market.

We think Qinghai will transform the global markets for magnesium die-cast alloys and that Magontec will be very well placed to benefit from those changes.

I have discussed the outlook for magnesium consumption in previous presentations, but I think that this slide provides a good illustration of the underlying driver that is pushing automotive manufacturers, our largest customers, to develop new and more complex applications from magnesium alloys.

By 2020 European automobiles are required to have an average fleet CO2 emission of 95 grams per kilometer. Currently they are around 130 – 140 gms/km.

In this chart the size of the company is indicated by the size of its logo and the closer it is to the top right hand corner the more CO2 it’s fleet produces on average.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Incen%ves(for(EU(Vehicle(CO2(Emission(Reduc%on*( Automobile(manufacturers(need(to(shed(vehicle(weight(

==> picture [258 x 166] intentionally omitted <==

----- Start of picture text -----

160
150
2010 EU
140
Average
130 2015 target
2020 target
120
1200 1300 1400 1500 1600 1700
Average weight of cars registered in 2010 (kg)
95 gCO2/km
EU Federation of Transport & Environment 2010; published 09.2011
�
EU CO2 target
Emissions of cars registered (g/km)
Ave CO2
----- End of picture text -----*

One way to reduce CO2 emission is to shed weight. Magnesium is 2/3 the weight of aluminium and 1/3 the weight of zinc. Every 100kg of weight reduction generates on average a 10% CO2 emission reduction.

The heaviest parts in an automobile are in the powertrain: the gearbox, the engine block etc. Automotive manufacturers are now actively pursuing magnesium alloys for these applications and this has generated increased enquiry for Magontec’s proprietary technology alloys.

Finally I wanted to make a comment on Magontecs share register and the securities that are currently on issue and a further brief comment on the share price relative to the net tangible assets of the company.

Magontec Issued Capital Shares, Options and CLNs

==> picture [274 x 165] intentionally omitted <==

----- Start of picture text -----

Securities on issue as at 17 May 2013
Ordinary Shares 648,987,372
Options
- 2c exercise, expire 4 Jan 2014 440,656,012
Convertible Loan Notes (CLN’s)
- to Straits Mine Management 131,312,646
MGL Ordinary Share MGL Ownership if all options and
QSLM Ownership CLNs converted to shares
Allan Gray
KWE (HK)
SMM
Other
----- End of picture text -----

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

Magontec is fortunate that it has a number of strong and long-term shareholders. QSLM, Allan Gray and KWE account for nearly 50% of the shares on issue.

As a result of the Rights Issue we conducted last year there are now 440 million options on issue that expire on 4 January 2014. If all the options were converted the theoretical holdings of those three groups would rise well above 50%, although this is unlikely to happen, as QSLM is currently limited to a 30% holding by the FIRB.

Nonetheless, at the end of this year option exercise is likely to further boost Magontec’s cash reserves. This is important for Magontec as the company’s debt/equity ratio (net debt to net tangible assets) at 31 March 2013, while significantly down from previous levels, stands at 107%. Furthermore the commencement of production at Qinghai will put more demands on working capital.

My final slide shows the share price and the underlying net tangible assets per share.

MGL Share price performance versus Net Tangible Assets per share

==> picture [305 x 161] intentionally omitted <==

----- Start of picture text -----

Share price NTA per Share
$0.060
$0.050
$0.040
$0.030
$0.020
$0.010
$0.000
3-Jan-12 3-Feb-12 3-Mar-12 3-Apr-12 3-May-12 3-Jun-12 3-Jul-12 3-Aug-12 3-Sep-12 3-Oct-12 3-Nov-12 3-Dec-12 3-Jan-13 3-Feb-13 3-Mar-13 3-Apr-13 3-May-13
----- End of picture text -----

It is not my place to comment on why the share price is where it is, except to observe that the market is pricing Magontec at a discount to NTA while profitability is on an improving trend.

We have made no profit forecast for the 2013 financial year, nor for the period after the completion of the Qinghai magnesium cast house. The margin for error in such long-term forecasts is too great for the Board to be comfortable with such projections.

It remains for me to say that the Board and management of Magontec have worked hard over the last 12 months to place the company in the best

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!

==> picture [571 x 111] intentionally omitted <==

possible condition to take advantage of the positive trends in the magnesium industry and in an alliance with the industry’s most important new player.

Magontec!Limited,!L8,139!Macquarie!Street! Sydney!NSW!2000!AUSTRALIA!