In the Advanced Magnesium Limited (AML) 2005 Annual Report, I advised you that the next stage of corporate restructuring to be undertaken by the Board and Management was to prepare the Company for investment by new shareholders, who would support the new business direction of commercialising magnesium technologies and expertise. A program of converting market enthusiasm into commercial orders for the magnesium technologies was a priority task.

AML was launched at our Extraordinary General Meeting in October 2005 after shareholders ratified a capital reconstruction and placement of shares to a new group of technology investors. The Company then had the financial resources to advance its market development program for its magnesium technologies and alloys, particularly the Company’s flagship alloy AM-lite ®. The work undertaken since then has been directed at developing market acceptance for the value proposition offered by the Company’s magnesium alloys and metal handling technologies and developing firm orders to underpin future growth.

The Management team of AML’s wholly owned subsidiary, Advanced Magnesium Technologies (AMT), has worked diligently to introduce AM-lite to more than 150 international customers over the past 12 months. As a result, 44 production trials of the alloy have been undertaken by 33 customers and these were resoundingly successful.

The target markets for AM-lite are diecasters, who supply cast products to the automotive, electronic and hardware markets. These business sectors are undergoing major structural change in response to significant cost pressures, as China becomes the workshop of the world. Diecasters in western countries have to consolidate, restructure, relocate to countries with lower costs of production and seek new technological and cost reduction breakthroughs.

Diecasters are currently utilising zinc, aluminium and magnesium alloys, as their core materials. Each of these materials either has manufacturing or marketing limitations or has undergone significant increases in input costs during the commodity price boom. AM-lite offers improved casting and finishing properties over existing metals and significantly reduced costs for finished products over all other materials. The fact that so many producers have chosen to interrupt their production lines and undertake AM-lite trials is testament to their interest in the value proposition this new alloy presents.

This global exposure of AM-lite is progressively translating into detailed product development programs and sales orders. For zinc and aluminium diecasting customers, who choose to introduce the AM-lite alloy, some capital investment, retooling and retraining is required. These diecasters have to be certain the products made from AM-lite are acceptable to their customers and that all product liability issues have been resolved. These developments take time and involve considerable buy-in by the major diecasters.