MAGONTEC LIMITED — Capital/Financing Update 2012

May 28, 2012

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29 May 2012

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

Dear Sirs,

Magontec Limited announces new magnesium alloy manufacturing joint venture in China with Dongfang Resources

Magontec Limited (MGL) is pleased to announce that it has concluded an equity joint venture with Dongfang Resources in Shanxi Province, PRC.

Under the terms of the agreement between the two parties MGL will become a 70% shareholder with the Dongfang Resources magnesium alloy manufacturing subsidiary, Yitong, in this new joint venture. MGL will assume full management control of magnesium alloy production at the Yitong facility.

Through guaranteed maximum cost inputs the joint venture will generate an underwritten profit on the manufacture of magnesium alloys and then sell its product exclusively to MGL under an agreed pricing formula. This pricing structure will enable MGL to better manage raw material price and supply volatility. It will also ensure that MGL achieves a magnesium alloy tolling cost that is competitive with other integrated Chinese manufacturers.

MGL will not make a capital investment in this project and will earn its 70% shareholding through its contribution of logistics, distribution, marketing and production expertise. MGL will invest RMB 7 million (A$1.1 million) of working capital in the project.

The joint venture will provide MGL with access to a consistent supply of high quality and low cost raw material sufficient for its current Chinese domestic and export market demand. The new joint venture will have magnesium alloy manufacturing capacity of 30,000 mtpa. MGL currently exports around 13,000 mtpa from China to Europe and has installed capacity at its existing facility in Xi’an of 18,000 mtpa.

The joint venture will produce generic alloys as well as MGL’s high technology alloys. While the joint-venture alloy plant is already qualified by a number of customers in China, Europe and North America, production will ramp up in the coming months as other customers complete qualification procedures.

Magontec Limited L8,139 Macquarie Street Sydney NSW 2000 AUSTRALIA

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Dongfang Resources

Dongfang is a family company based in Shanxi Province PRC. Over the last 10 years Dongfang has developed a major industrial base at Jishan County. The company has assets of over RMB 2 billion and is involved in the production of coking coal, ferro manganese and magnesium. The company also has a power station situated within its industrial complex.

In 2009 Dongfang constructed a modern ‘Pidgeon Process’ pure magnesium manufacturing plant with 20,000 metric tonnes per annum (mtpa) of production capacity. The magnesium alloy manufacturing plant adjacent to the pure magnesium plant has a production capacity of 30,000 mtpa. The pure magnesium production plant uses off-gas from the Dongfang coking coal manufacturing business as its primary source of energy.

Restructuring of MGL

In July 2011 MGL (then Advanced Magnesium Limited) acquired the magnesium alloy manufacturing assets of Straits Resources for A$5.5m. In November 2011 the name of the ASX listed company was changed to Magontec Limited.

Over the last 11 months the management of MGL has conducted a thorough review of the assets within the company and the strategic direction of the organization.

The primary objective of the company has been to secure access to a competitive magnesium alloy manufacturing base and to increase production efficiencies in Europe and China within both the magnesium alloying and CCP (cathodic corrosion protection) businesses. This builds on the both pillars of our business and provides MGL with a diversified revenue base across two uncorrelated industries.

The joint venture agreement with Dongfang Resources allows MGL to benefit from economies of scale and process associated with integrated pure and alloying magnesium production facilities and delivers a tolling cost that will be comparable with the best in the industry.

MGL has also focused on restructuring its European recycling and CCP manufacturing activities targeted at the global water heater industry.

In April the company announced the opening of a new alloy manufacturing facility in Romanian (MAR) and is pleased to further announce that MAR has now been qualified by its key regional customer and will be increasing production to 200 mt per month in the period to the end of September. Additional recycling contracts are under consideration and MAR has an ability to add an additional recycling unit within the confines of the existing factory building.

MAR will also become a CCP manufacturing location for MGL. Small-scale installation has commenced at MAR and will increase over the coming months allowing MGL to better compete in the Middle East and North America.

Magontec Limited L8,139 Macquarie Street Sydney NSW 2000 AUSTRALIA

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In Germany MGL has a world-class magnesium recycling facility at Bottrop in North Rhine-Westphalia (MAB). Profitability at this facility relies to a great extent on volume. MAB takes scrap magnesium alloys from magnesium die casters in Europe. Much of this scrap is generated from new magnesium alloys supplied by MGL from its operations in China. The volume of new alloys that MAB is able to import into Europe from China is highly sensitive to price. Having access to a more competitive alloying facility at Jishan is expected to generate better returns from MAB in the months ahead.

In China, MGL plans to relocate its CCP production assets from a leased factory outside of Xi’an to its central manufacturing facility in the Chinese city of Xi’an. In addition to reducing overheads associated with lease costs this will allow better coordination of the groups management and administrative functions in China. Xi’an is MGL’s administrative hub for China including the CCP manufacturing business and will be the holding company for the new joint venture with Yitong.

Strategic Context

The non-quantifiable assets acquired by MGL in its acquisition last year of the Magontec group of companies included

• Reputation

• Expertise

• Global market reach, and

• Project pipeline

The initiatives currently being developed by MGL (of which the joint venture announced above is the first) capitalises on these acquired benefits.

Success and profitability in the low-margin generic alloy manufacturing industry is dependent on

• Having an ability to supply a quality product;

• An ability to supply product at a consistent standard and on a timely basis;

• Being able to meet the industry low cost benchmark (consistent with quality), and

• Being of a size that commands market attention and consolidates the industry supply sources.

While participation in the generic alloy manufacturing industry is MGL’s “staple” activity, its dedication to magnesium alloy technologies is an insurance that underwrites its position in the market and a strategy that creates the potential for higher-margin products.

Having regard to the industry characteristics described earlier, the current strategy on which MGL has embarked has the following corporate objectives -

• The lowest cost producer of magnesium generic alloys;

• The lowest emitter of CO2 per tonne of production;

Magontec Limited L8,139 Macquarie Street Sydney NSW 2000 AUSTRALIA

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• The highest volume producer of generic magnesium alloys; and

• Industry leadership in the development of magnesium alloy technologies

These corporate objectives will be achieved by the following initiatives:

• Developing new relationships and joint-ventures with the primary magnesium sector.

• Utilising “state of the art” production technology.

• Debt reduction.

• Rationalisation of existing fixed assets that do not fit the strategic objectives.

• • Sourcing more Chinese capital.

The Company is currently in the process of executing these initiatives in the period to 31 December 2012.

Yours sincerely

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Nicholas Andrews Executive Chairman Magontec Limited

For more information please contact

Nicholas Andrews, on 0402 220 077 John Talbot (CFO) on 0405 317 594

Magontec Limited L8,139 Macquarie Street Sydney NSW 2000 AUSTRALIA