STOCK EXCHANGE ANNOUNCEMENT
Dated: 5 June 2003

PRESS RELEASE

PROPOSED PROJECT REVIEW UPDATE BY SOUTH AUSTRALIAN GOVERNMENT

Magnesium International Limited (MIL) was informed by the South Australian Government last week that the Government had received a letter from the Head of the South Australian Economic Development Board, Mr. de Crespigny, suggesting that the South Australian Government undertake a review of the SAMAG project. MIL’s Directors understand that the Government has now decided that it will conduct an update of their initial review of the SAMAG project, which was undertaken by an independent consultancy firm.

MIL will provide full co-operation in this exercise, confident that the outcome will be a confirmation of the attractiveness of the SAMAG project.

MIL’s Directors expect that the review update will be completed quickly, as the current uncertainty is not in the best interests of any of MIL’s shareholders, the Port Pirie community, or indeed the South Australian Government. While the timing of the review update is unfortunate given that MIL is currently undertaking a rights issue, Directors are confident that the conclusion of the review update will allay any concerns about the project.

Directors affirm their belief that there are no matters of significance that have not been disclosed to the market concerning the SAMAG project.

The SA Government has proposed a $25 million infrastructure support package for the Port Pirie region when the SAMAG project achieves financial close. It is important to stress that this package is for multi-user infrastructure support, which will provide benefits not just to the SAMAG project, but also to other industries seeking to develop within the Port Pirie area. Directors have no reason to doubt that this support will remain when the Government completes its review update.

The SAMAG project has received no public encouragement or acknowledgement from Mr de Crespigny. Mr de Crespigny has previously been an advocate of the Australian Magnesium project which was owned by Normandy Mining, of which he was the Executive Chairman and substantial shareholder. Given that the Australian Magnesium project could be a competitor to SAMAG, anyone who is or was associated with that project could be seen to have a conflict of interest in relation to any comments regarding SAMAG.

The SAMAG project will establish a fixed price contract for the construction of the smelter, along with allowances for additional funding in case there are unforseen problems, prior to financial close. MIL will not proceed to financial close until a fixed price construction contract is in place.

SAMAG also has contracts with a number of ex-Dow employees who have significant operational experience as well as experience in plant construction and commissioning.

The amount of ore needed to produce 84,000 tonnes of magnesium is only 400,000 tonnes per year. The cost of hauling ore from Leigh Creek is fully accounted for in a bankable feasibility study released last year. The cost of ore supply to the project is less that 6% of the total operating cost. MIL has also announced that it has identified further ore sources within 30 km of the proposed plant site which, subject to further analysis, have the potential to reduce ore costs even further.

The Environmental Impact Statement for this project underwent all necessary scrutiny, including full public consultation, and was approved in July 2001. The SA Government recently extended the Development Approval to July 2004.

SAMAG has a long-term power contract with a credible provider and has obtained a lower than market price for power by negotiating power interruptibility into the contract. This is valuable to the provider as it allows the provider to harvest the peak prices from the National Electricity Market.

MIL has involved experienced and well-respected parties, in the development of the project, including Thiess and German industrial conglomerate ThyssenKruppMetallurgie, and has focused on minimising the risk profile of the project.

Leading commodities forecaster CRU stated recently at the annual meeting of the International Magnesium Association in Stuttgart that it believes that 220,000 tonnes of additional Western World magnesium production capacity will be needed in the next ten years.

With only three significant producers now left in the Western World, the Directors of MIL believe that there is plenty of market potential for SAMAG. Even if the Chinese penetrate the market more than CRU expects there is still significant unmet demand. Furthermore, the SAMAG project intends to bring its capacity on line over an extended period to meet expected demand growth.

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.