STOCK EXCHANGE ANNOUNCEMENT
Dated: 16 May 2003

Magnesium International Announces 1:5 Entitlements Issue

The Directors of Magnesium International Limited (MIL) are pleased to announce a 1 for 5 non-renounceable Entitlement issue at 10 cents per B Share to raise approximately $8.3 million.

B Shares issued as a result of this Entitlements Issue will constitute a new class of securities. The B Shares will convert, at a minimum discount of 15%, into securities issued in the Company’s Major Capital Raising (currently anticipated to take place from the third quarter of 2003), or alternatively, if the major capital raising to fund the SAMAG Project has not occurred by 31 December 2004, the B Shares will automatically convert into Ordinary Shares at a 15% discount.

Directors decided to establish the new B class of shares believing it:

1. minimises the impact of dilution on existing shareholders;
2. ensures B shares receive the benefit of any upside movement in the price of ordinary shares; and
3. provides downside protection in the event of any decline in the price of the ordinary shares.

Funds raised are intended to be used as follows:

• to pay the costs of final due diligence investigations needed by banks, insurance companies and others in respect of the major capital raising to fund the SAMAG project;
• for working capital to enable MIL to carry on its activities , and
• to enable the funding of Stage 1 of its proposed venture with the CSIRO to manufacture magnesium sheet metal using CSIRO’s world leading twin roll casting technology

MIL’s Directors remain committed to becoming a major global force in the magnesium industry by building on the MIL’s technological edge arising from use of the Dow process technology. MIL intends to construct the SAMAG smelter in two modules to a final capacity of 84,000 tpa of magnesium metal, over a five-year period after Financial Close.

The Major Capital Raising to fund the construction of the first Module of the SAMAG smelter, is anticipated to proceed from the third quarter of this year .The actual date will depend on the state of the equity market and progress with cornerstone investors.

MIL recently announced the signing of a Term Sheet with the CSIRO to form a venture to commercialise the CSIRO’s highly innovative, magnesium sheet manufacturing technology. Magnesium sheet metal is a product which currently has a restricted supply base and is relatively expensive to produce. The CSIRO’s new twin roll casting (“TRC”) technology allows direct casting of molten magnesium into sheet products which have outstanding properties and are likely to cost significantly less than current magnesium sheet metal alternatives. MIL’s Directors believe that the immediate market for the venture’s products will be in the electronics area such as laptops, mobile phones and other products. Interest has already been received from a number of potential customers. With further development of the TRC technology, numerous transport industry uses for sheet metal products are also expected to be developed.

The Directors believe this Venture is a very exciting opportunity for MIL because:

• it is consistent with the corporate vision of investing in businesses which involve value-added uses of magnesium;
• the venture is intended to make MIL a profitable manufacturing company in its own right within a relatively short period of time, with potential to generate positive cashflow before the SAMAG smelter is commissioned;
• MIL believes that by starting now, it can grow the market for magnesium sheet metal products so that the venture’s products will consume a considerable annual volume of magnesium by the latter part of this decade when the SAMAG smelter is expected to be in full production; and very importantly, MIL values the collaboration with the CSIRO most highly and will look for other opportunities to commercialise the CSIRO’s technologies in the light metals area.

Key dates for the Entitlements Issue are as follows:

• Date of the Prospectus 15 May 2003
• Shares quoted ex-Entitlement 20 May 2003
• Record Date for determining Entitlements 26 May 2003
• Last day for despatch of Prospectus 29 May 2003
• Last day for accepting offer of B Shares 23 June 2003
• Allotment and issue of B Shares by no later than 14 July 2003

MIL expects further significant progress in the near term, including:

• announcements of cornerstone investors in the SAMAG Project;
• the results of the submission for assistance to the Federal Government;
• news on a by-product sales agreement;
• finalisation of a fixed price for the engineering, procurement and construction Module 1 of the smelter;
• completion of the Shareholder’s Agreement with the CSIRO in respect of the sheet metal manufacturing venture; and
• progress towards sales agreements with consumers of magnesium sheet metal.

The Directors believe that the company is at a very exciting stage and are highly supportive of the issue.

For further information:

Gordon Galt
Managing Director

In accordance with Australian Stock Exchange listing requirements, the geological information in this report has been based on information provided by geologists who are corporate members of the Australian Institute of Mining and Metallurgy or Australian Institute of Geoscientists and who have had in excess of 5 years experience in their field of activity.