MAGONTEC LIMITED — Interim / Quarterly Report 2011

Oct 30, 2011

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Office No.10 Level 8 139 Macquarie St Sydney NSW 2000 Australia Ph: 61 2 8231 7085 FAX: 61 2 9252 8960

31 October 2011

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

Dear Sirs,

Appendix 4C – Quarter Ended 30 September 2011

The above quarterly cash flow report is attached.

Yours Sincerely

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John Talbot Company Secretary. Advanced Magnesium Limited

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QUARTERLY CASHFLOW - APPENDIX 4C

for the Period Ended 30 September 2011

Advanced Magnesium Limited

ABN: 51 010 441 666 Registered & Principal Office: Office 10, Level 8, 139 Macquarie Street, Sydney, NSW 2000 Australia

Tel: +61 2 8231 7085 Fax: +61 2 9252 8960 Website: www.am-technologies.com.au Email: corporate@amtechnologies.com.au

Independent Directors (as at 30 September 2011)

Zhongjun Li Non-Executive Director

Michael Brown Non-Executive Director (Resigned 5 October 2011)

Robert Shaw Non-Executive Director

Management Team

Nicholas Andrews Executive Chairman

Guenter Franke Executive Director and Chief Operating Officer)

John Talbot Chief Financial Officer

Issued Capital (as at 30 September 2011)

Ordinary Shares (ASX Code ANM) 337,779,753 fully paid Ordinary shares on issue

Unlisted Securities

Unlisted Options	**Number **	Grant Date	Expiry Date	Exercise Price $
Employee Share Option Plan	1,380,000	16 Aug 2010	16 Aug 2013	$0.10

Substantial Shareholders

Major Shareholders	No. of shares	Percent
KWE(HK)Investment Development CoLimited	55,797,298	17.971
Straits Mine Management Pty Limited	40,499,167	13.043
CiticorpNomineesPtyLimited	32,004,417	10.308

Share Registry Services

Boardroom Pty Limited Level 7, 207 Kent St Sydney NSW 2000

Postal:

GPO Box 3993 Sydney NSW 2001

Tel: 1300 737 760 or International: +61 2 9290 9600 Fax: 1300 653 459 Website: http://www.boardroomlimited.com.au

The current share price can be obtained from the ASX Website

Company Secretary John Talbot

Appendix 4C Advanced Magnesium Limited 30 September 2011 Quarterly Report Rule 4.7B

Appendix 4C

Quarterly Report

Introduced 31/3/2000. Amended 30/9/2001.

Name of entity

Advanced Magnesium Limited

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ABN Quarter ended (“current quarter”)
51 010 441 666 30-Sep-11
Quarter Ended
30 September Year to date
2011 (3 months)
$A $A
1.1 Operating Activities
a Sales $35,710,950 $35,710,950
b Materials purchase ($36,075,212) ($36,075,212)
c Marketing & Distribution ($555,341) ($555,341)
d Other income $786,585 $786,585
e Corporate ($1,564,371) ($1,564,371)
f Office expense ($577,640) ($577,640)
g Personnel ($1,446,363) ($1,446,363)
h Net interest & borrowing expenses ($678,019) ($678,019)
i GST ($13,036) ($13,036)
j Taxes ($75,135) ($75,135)
k Other operating expense ($701,065) ($701,065)
Total Operating Cash Flows ($5,188,647) ($5,188,647)
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+ See chapter 19 for defined terms

30 September 2011 Appendix 4C Page 1

Appendix 4C Advanced Magnesium Limited 30 September 2011 Quarterly Report

1.2 Financing Activities aProceeds from Capital Raising net of costs bReduction of loan to Straits Mine Management Pty Limited cOther Financing Activities Total financingcash flows	Current quarter $A $1,552,987 ($640,405) $6,966,132	Year to date (3 months) $A $1,552,987 ($640,405) $6,966,132
	$7,878,714	$7,878,714
Investing Activities 1.3 a.Loan to Related Parties b.Cash acquired upon acquisition of Magontec group of companies c.Investment In Fixed Assets Total investingcash flows	$69,919 $2,761,411 ($1,061,110)	$69,919 $2,761,411 ($1,061,110)
	$1,770,220	$1,770,220
Net increase (decrease) in cash held 1.4 Cash at beginning of quarter /year to date 1.5 Cash at end ofquarter /year to date	$4,460,286 $3,524,723	$4,460,286 $3,524,723
	$7,985,009	$7,985,009

Payments to directors of the entity and associates of the directors Payments to related entities of the entity and associates of the related entities

Current quarter $A 1.6 Aggregate amount of payments to the relevant parties Nil 1.7 Aggregate amount of loans to the relevant parties Nil 1.8 Explanation necessary for an understanding of the transactions This Cash Flow report includes the cash flow effects of AML’s 53% owned subsidiary Henan Keweier Alloy Materials Co Ltd. (HNKWE) and of AML’s 100% interest in the Magontec group of companies – the latter since 4 July 2011 This Appendix 4C is required to be completed on the principles of AASB 107. However, that standard addresses a cash flow statement in the context of one incorporating the total cash flow of its subsidiaries. The standard then requires the cash flow statement to be reconciled against the profit and loss statement adjusted for minority interests. No such adjustment for minority interests is made in a stand alone cash flow statement. Following the acquisition of Magontec in July 2011 AML announced that it anticipated a net profit for the period to 30 June 2012 that would be break-even or marginally positive. Over the first quarter of the current financial year Magontec and AML’s joint venture partner, HNKWE, have not been operating profitably. In the context of the recent disruption to financial markets and the resultant uncertain global economic environment, the operating businesses of AML have experienced volatility in alloy volumes and pricing that have negatively effected profit expectations. The AML group is currently in the process of negotiating supply contracts with die casters for the coming calendar year and the outcome of these negotiations (expected to be known shortly) will have a material bearing on profitability in the current financial year. AML will communicate the outcome and likely impact of these supply contracts in due course.

• See chapter 19 for defined terms

30 September 2011

Appendix 4C Page 2

Appendix 4C Advanced Magnesium Limited 30 September 2011 Quarterly Report

Non-cash financing and investing activities

2.1 Details of financing and investing transactions in the quarter which have had a material effect on consolidated assets and liabilities but did not involve cash flows.

On 4 July 2011 AML acquired a 100% interest in the Magontec group of companies. For details. For details of this acquisition shareholders are referred to Note 31 in the 2011 annual report and the Explanatory Notes to Item5 and Item 6 in the 2011 Notice of Annual general meeting.

2.2 Details of outlays made by other entities to establish or increase their share in businesses in which the reporting entity has an interest.

NIL

Financing facilities available

		Amount	Amount used
		available
		$A	$A
3.1	Loan facilities	$26,000,000	$26,000,000
3.2	Credit standby arrangements	NIL	NIL
Reconciliation of cash
Reconciliation of cash at the end of the quarter (as shown in the consolidated statement of		Current	Previous
cash flows) to the related items in the accounts is as follows.		quarter	quarter
		$A	$A
4.1	Cash on hand and at bank	$7,985,009	$7,985,009
4.2	Deposits at call	—	—
4.3	Bank overdraft	—	—
4.4	Other – Bank bills & Term deposits	—	—
	Total: cash at end of quarter(item 1.5)	$7,985,009	$7,985,009

Acquisitions and disposals of business entities

		Acquisitions	Disposals
5.1	Name of entity	Varomet Holdings Limited (holding company of	NIL
		Magontec GmbH)
5.2	Place of incorporation or registration	Cyprus	NIL
5.3	Consideration for acquisition or disposal	$5,595,501	NIL
5.4	Total net assets	$8,396,160	NIL
5.5	Nature of business	Magnesium alloy	NIL
		manufacture

• See chapter 19 for defined terms

30 September 2011

Appendix 4C Page 3

Advanced Magnesium Limited 30 September 2011 Quarterly Report

Appendix 4C

Compliance statement

1

This statement has been prepared under accounting policies which comply with accounting standards as defined in the Corporations Act 2001 (except to the extent that information is not required because of note 2) or other standards acceptable to ASX.

• 2 This statement does give a true and fair view of the matters disclosed.

Sign here:

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Date: 31 October 2011 Executive Chairman Advanced Magnesium Limited

Print

name: Mr Nicholas Andrews

Notes

1 The quarterly report provides a basis for informing the market how the entity’s activities have been financed for the past quarter and the effect on its cash position. An entity wanting to disclose additional information is encouraged to do so, in a note or notes attached to this report.

• 2

The definitions in, and provisions of, AASB 107: Cash Flow Statements apply to this report except for the paragraphs of the Standard set out below.

• Aus20.1 - reconciliation of cash flows arising from operating activities to operating profit or loss

• 39 - 42 - itemised disclosure relating to acquisitions and disposals • 48 - 52 - disclosure of restrictions on use of cash

• 3

Accounting Standards. ASX will accept, for example, the use of International Accounting Standards for foreign entities. If the standards used do not address a topic, the Australian standard on that topic (if any) must be complied with.

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• See chapter 19 for defined terms

30 September 2011

Appendix 4C Page 4