MAGINDUSTRIES CORP. 2,3 (TSX-MAA C
.54) MKT CAP C$209.1 MILLION

RECOMMENDATION: SPECULATIVE BUY; TARGET: C$1.10

ANALYST: RUSSELL STANLEY

Sinohydro’s Exclusivity Expires; Discussions with Other Parties Initiated

Summary: Earlier today, MAA announced that it had started discussions with other potential strategic

investors, after electing not to extend the exclusivity provided to Sinohydro.

Impact: On a net basis, this is a negative development, as it represents added uncertainty regarding

project financing and construction/production timelines. As a silver lining, we note that the Company can

now negotiate freely with other parties and that the environment for potash investments has improved

somewhat since the original MOU with Sinohydro was announced in June 2009. As of writing, the stock’s

negative reaction has been relatively modest (down 7%); however, we believe the completion of the

proposed transaction with Sinohydro was never fully priced into the stock.

Additional Detail: The MOU with Sinohydro was originally announced on June 12, 2009. The MOU

contemplates a C$280 million equity investment in MAA by Sinohydro at C
.70/share. Sinohydro would

also stand ready to provide the debt required by the Company. If completed, this agreement would

finance Phase I construction of the Company’s potash project. In today’s press release, MAA indicated

that Sinohydro’s decision making process is continuing. The final decision now rests with Sinohydro’s

Board of Directors, whose priorities and timelines are unknown.

As noted, the Company indicated it has started discussions with several other parties – both within and

outside of China - for potential investment at either the corporate level (i.e. MagIndustries’ stock) or

project level. In terms of maintaining timelines for construction and eventual production, this represents a

potential step backward. However, we believe that the due diligence work done with Sinohydro to date

may help MAA in discussions with other parties.

We continue to rate MAA a SPECULATIVE BUY with a 12-month target price of C$1.10.

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