China Direct (CDII) Enters Into Letter of Intent to Acquire Additional Magnesium Production Facilities

October 5, 2009 4:11 PM EDT

China Direct Industries, Inc. (NASDAQ: CDII) announced today that it has entered into a letter of intent with Taiyuan Yiwei Magnesium Group, LTD., an entity controlled by Yiwei Huang, an executive vice president and member of the China Direct Industries Board of Directors, to acquire the remaining interest in its Chang Magnesium, Golden Magnesium and Baotou Changxin Magnesium subsidiaries as well as acquire certain additional facilities owned by Yiwei. In an effort to focus its magnesium production efforts with its key Chinese partner, the company also intends to sell its majority interest in its Pan Asia subsidiary. The company has begun preliminary discussions with several potential buyers and will account for the subsidiary as discontinued operations until such time as a sale is completed.

The non binding letter of intent entered into between China Direct Industries and Yiwei Magnesium contemplates the creation of what China Direct Industries believes will be the largest producer and distributer of pure magnesium and related products in the world. In addition to the acquisition of the minority stake in China Direct Industries magnesium subsidiaries owned by Yiwei Magnesium, China Direct Industries is seeking to acquire up to five additional magnesium facilities from Yiwei Magnesium. These new facilities have an annual production capacity of a total of 40,000 metric tons of pure magnesium ingots, 10,000 metric tons of magnesium powder, and 10,000 metric tons of magnesium alloy.

Upon completion of the proposed acquisitions and sale of its Pan Asia subsidiary, management estimates it will have a total annual production capacity of approximately 100,000 metric tons of pure magnesium and 20,000 metric tons of other magnesium related products in addition to its distribution capabilities. This will also place all of China Direct Industries' magnesium holdings branded as IMG under the centralized management of Yiwei Huang.

The finalization of the proposed acquisitions is subject to completion of all necessary due diligence, execution of definitive agreements, financing, and China Direct Industry's board of directors approval. While there is no timetable for completion of the transaction, both parties have agreed to work expeditiously to reach a conclusion.

Commenting on this strategy, Dr. James Wang, Chairman and CEO of China Direct Industries stated, "As our company moves into the consolidation phase of its growth plan in our magnesium segment, we are confident that this industry has a bright future and now is the time to position ourselves as the definitive industry leader and create a platform for stability and expansion for the years to come. It is also equally important to have a clear and unified vision within our organization and the steps we are taking now will enable all of our core magnesium holdings to be under the direction of one of the most experienced industry veterans in Chairman Huang. We are more excited than ever to take on this bold initiative and make our IMG brand known as the only U.S. publicly held source for large quantities of high quality magnesium products."

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