DHI aims to secure FDI for Bhutan’s first Magnesium factory using Dolomite

2026-02-16 - 07:57

Druk Holding and Investments (DHI) is planning a magnesium production project aimed at producing refined magnesium ingots with an annual capacity of 10,000 tons using the Pidgeon process. The project is positioned as Bhutan’s first large-scale magnesium value-addition initiative. The project is currently at the feasibility study stage. The envisaged ownership structure is a 50:50 joint venture between DHI and a foreign direct investment (FDI) partner. Following completion of detailed technical and market feasibility studies, construction is expected to take place between 2025 and 2027, with commercial operations targeted for 2028. The final project site size will be confirmed upon completion of the feasibility study. Currently, Bhutan exports raw dolomite to India without domestic value addition. The proposed project aims to convert dolomite into high-value magnesium metal, aligning with Bhutan’s Economic Development Policy and Mineral Resources Development Plan (JICA, 2021). The initiative is intended to support economic diversification, import substitution, and green industrialization. The total project investment is estimated at Nu 2 billion (USD 22.47 million), with the ownership structure set as a 50:50 joint venture between DHI and the foreign investor. The project will produce refined magnesium ingots with an annual production capacity of 10,000 tons. India currently imports approximately 290,000 kg (290 tons) of magnesium annually, valued at around Nu 130 million in 2024, with no domestic production. The global magnesium market is projected to reach USD 9 billion by 2033, with a compound annual growth rate (CAGR) of 6.1 percent. Key demand sectors include automotive, aerospace, electronics, and defence. Bhutan offers a carbon-negative, duty-free export base to India and South Asia, and the EU Critical Raw Materials Act (2030) may create additional export opportunities for green magnesium. According to founder projections, the project is expected to achieve an internal rate of return (IRR) of 26.02 percent, or 6.87 percent annualised, with a net present value (NPV) of Nu 1,628 million (USD 18.28 million). Potential risks for the project include technical, market, environmental, and financing challenges. Technical risk is mitigated through the adoption of the globally proven Pidgeon process, while market volatility is addressed by access to reliable and low-cost electricity in Bhutan. Environmental risks are managed through full compliance with Bhutanese Environmental Impact Assessment (EIA) and Environmental Management Plan (EMP) standards. Financing risks are handled through joint venture equity and concessional financing supported by DHI. Bhutan possesses over 13.5 billion metric tons of high-purity dolomite reserves, and the project benefits from proximity to SMCL’s Chunaikhola mine and local FeSi producers (BFAL, BCCL), ensuring raw material security. The project will also have access to 100 percent renewable hydropower, with energy costs of approximately USD 0.028 per kWh. The joint venture includes experienced international magnesium specialists, and the project is designed to be scalable with access to regional and global markets. The plant’s 10,000 TPA capacity can expand to 20,000 TPA using modular kiln design. Duty-free access to India (Bhutan India free Trade Agreement) and competitive logistics to Bangladesh and ASEAN markets make Bhutan the lowest-cost magnesium exporter in South Asia.