Australian Magnesium Corp. and U.S. car giant Ford Motor Co. have agreed to scrap a A$2 billion magnesium supply deal at the Stanwell magnesium plant in Queensland.
The near decade-old agreement called for AMC to supply Ford with half the output from the partially built 90,000-tonne-per-year plant for ten years. Start up was slated for late 2004 or early 2005.
The A$1.7-billion project, destined to be the world’s largest magnesium plant, was recently put on care and maintenance after the Brisbane-based company failed to find a partner to help fund the several hundred million dollars needed to complete construction. In May, AMC warned of cost overruns, idled construction and laid out a restructuring plan.
Under the latest agreement, each side is released from its obligations concerning the supply and off-take of magnesium from Stanwell. Also, in return for US$10 million, Ford has relinquished any rights to a refund of its US$30 million deposit payment. Ford chipped in the deposit in 1997 to help fund the Gladstone demonstration plant and project feasibility study.
Denver-based Newmont Mining (NEM-N) will foot the bill for the Ford payment, thanks to its 27.8% interest in AMC (an inheritance from its acquisition of Normandy Mining).
Earlier this year, Newmont said it would take a second-quarter, non-cash writedown on its investment in AMC. The value of the write down was not mentioned, but at the end of the first quarter, the book value was $95.8 million.
AMC says it will maintain a relationship with Ford, which will be determined over the coming months.
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