China Direct Industries to Acquire 80% Interest in Ruiming Magnesium for a Combination of $6.6 Million in Cash and Stock

2010-07-16

China Direct Industries, Inc., a U.S. owned holding company operating in China in two core business segments, pure magnesium production and distribution of basic materials, announced today that its board of directors has approved the acquisition of an 80% interest in Taiyuan Ruiming YiWei Magnesium Industry Co., Ltd. from Pine Capital Enterprises, Inc. and Taiyuan Yiwei Magnesium Industry Co., Ltd. for a combination of cash and stock of approximately $6.6 million. In addition, Pine Capital and Yiwei Magnesium are entitled to receive an additional RMB 5.5 million (approximately $808,824) in cash or 622,172 shares of our common stock if Ruiming Magnesium achieves gross revenues of at least RMB 100 million (approximately $14.7 million) during its fiscal year ending September 30, 2011 with EBITDA of no less than RMB 1,200 per metric ton of goods produced during that fiscal year.

Ruiming Magnesium, an entity controlled by Yuwei Huang, an executive vice president and member of the China Direct Industries Board of Directors, will add 14,000 metric tons of annual magnesium production capacity, with the potential to generate up to $35 million in revenue per year at current price levels, for the IMG branded operations of China Direct Industries. Additionally, there is sufficient land for future expansion in the event of demand increases. Ruiming Magnesium currently has an annual production capacity of 10,000 metric tons of magnesium powder and 4,000 tons of magnesium ingot enabling IMG to offer a wider array of magnesium products to its customers. The acquisition of Ruiming Magnesium is part of the previously announced letter of intent between China Direct Industries and Taiyuan Yiwei Magnesium Group, Ltd. to acquire certain additional facilities owned by Yiwei Magnesium.

Commenting on the acquisition, Dr. James Wang, Chairman and CEO of China Direct Industries, stated, "We continue to move forward with our consolidation plan to have our IMG branded magnesium operations emerge as the definitive industry leader and create a platform for stability and expansion in for the years to come. This represents another step forward for us in partnership and under the centralized direction of Chairman Huang, one of the most experienced magnesium industry veterans. We are more excited than ever to continue on our bold initiative and make our IMG brand known as the only U.S. publicly held source for large quantities of high quality magnesium products."