SHAREHOLDER LETTER
Dated: 19 June 2003

Dear Shareholder

I am sure that you are aware that we have extended the closing date for our Entitlements Issue by one week. The new closing date is Monday 30 June 2003 at 5.00pm.

We decided to extend the closing date following unprecedented demand from shareholders for the shareholder meetings I have been conducting in many capital cities around Australia. Follow-up meetings had to be arranged and these could not be accommodated within the original offer period.

You may have seen an important announcement (available from our website www.mgil.com.au) we made regarding the SAMAG project earlier today. We are delighted that Thiess, who will undertake the construction of the first module of our proposed smelter at Port Pirie, has agreed to be a cornerstone equity investor in the project. Thiess will contribute up to $20 million during the project’s first stage.

Thiess has undertaken a detailed review of our project assumptions and its commitment to become a major equity investor is a strong endorsement of the project and the work we have jointly undertaken.

The equity contribution from Thiess is a key component in our funding package. As the first cornerstone investor, Thiess will be helpful in attracting further investors and will provide significant market credibility. We can build upon this contribution to achieve our aim of raising $80 million from a group of cornerstone investors.

Recently a number of shareholders have raised concerns about the SAMAG project, based on the current difficulties being faced by the Australian Magnesium Corporation’s project in Queensland. While I don’t intend commenting on AMC’s project, I think it’s important to stress the low-risk approach we have taken with the SAMAG project. This includes a commitment to a fixed-price construction contract, the use of proven technology, and the off-take agreement for the purchase of all of our magnesium production. Our decision earlier this year to use a two stage construction strategy is further evidence of our low-risk approach.

I would also like to take this opportunity to draw your attention to the magnesium sheet venture with the CSIRO. Details are provided in the Entitlements Issue prospectus, but it is important to reiterate our belief that the sheet venture will be very profitable and will, in due course, provide a new outlet for production from the SAMAG smelter.

The company’s directors believe that the company’s major projects offer investors potential for a significant increase in shareholder value. We hope that you will take up your entitlement to B shares. If you have any queries, please call our Company Secretary, Neil Hooper.

Yours faithfully

Gordon Galt
Managing Director

For further information:

Gordon Galt
Managing Director