The next wave: Kiwi test-tubes produce marvel the world wants

By FIONA ROTHERAM

Deep in the heart of Onehunga, behind locked gates, lies a small laboratory where it is hard to imagine scientific breakthroughs of world significance being created.

Yet out of the test-tubes has sprung a magnesium-coating technology likely to reap millions in export receipts.

The German-based industrial conglomerate Henkel KgaA has just paid an undisclosed sum for a 24.9 per cent stake in Magnesium Technology, the Onehunga-based company commercialising the process.

As a major player in chemical supplies and surface treatment, Henkel will lend international grunt to marketing.

Magnesium Technology has already signed 17 non-exclusive licensing deals in a spread of countries. Those licensees are expected to have sales of $20 million to $30 million in the next couple of years. And talks are under way with the motor giant Ford.

The biggest licensee, Franz Galvanotechnik, of Germany, is coating 1000 units a day of magnesium seats for the Mercedes S-series luxury car.

Magnesium is increasingly used by the motor and electronics industries for weight reduction.

Because it is highly reactive with air and moisture, its use has been hampered until now by lack of an effective surface treatment to prevent corrosion.

The New Zealand-developed process is unique because it is environmentally friendly, avoiding the chrome fluoride or heavy metal waste left by traditional methods.

This is of particular importance to American car producers striving to design lighter vehicles to meet annual fuel-efficiency targets set by their Government.

Their focus has been on replacing steel components with lighter structural metals such as magnesium and aluminium. Magnesium is as strong as aluminium but can be up to half its weight.

Ford bought into the Australian Magnesium Corporation in 1996 to ensure a ready supply and plans to use up to 100kg of magnesium in every vehicle it builds in the next five years.

Magnesium is already found in a variety of everyday products such as soft-drink cans as an alloying element.

Half of all cellphones have a magnesium chassis. It is starting to replace plastic because it can be made thinner and lighter and has better conductivity.

The new technology is the first in the world to permit non-paint anodised colour finishes to the metal. This matters on style-conscious consumer products such as cellphones, skis, bicycle frames and computers.

One licensee, Taiwanese die-caster Gatech, has a $US30 million contract to supply magnesium cases for Acer and IBM laptop computers.

Each week Magnesium Technology has die-cast prototypes pour in from all over the world from companies wanting to test the process. The company is not even sure what some are used for. With a staff of only three, it struggles to keep up with world demand.

The process was first developed by the crown research institute, Industrial Research, in the early 1990s after it was approached by a local magnesium die-cast operator looking for an answer to corrosion.

American scientist Tom Barton invented and patented the technology while working for Industrial Research in New Zealand.

He experimented with research already under way at Auckland University into anodising magnesium and came up with a secret formula using extremely high-voltage power.

The crown research institute had the process sitting in the test-tubes but needed someone to commercialise it.

In 1997 it approached Auckland Anodisers, a leading aluminium anodiser.

Managing director John MacCulloch agreed to further investigate the commercial viability of the process and the result was a $50,000 joint venture company, Magnesium Technology.

Mr MacCulloch remains a shareholder along with Industrial Research and Auckland accountant David Ross.

Industrial Research reaps a royalty on revenue from the technology while Magnesium Technology's sister company handles licensing internationally.

Under the non-exclusive licensing deals signed so far, the licensees pay an upfront fee to use the process and an ongoing royalty based on per square metre throughput.

"This fits with what New Zealand ought to do. Make the technology that brings royalty streams back to New Zealand and builds up skills," said Mr Ross.

After being set up in 1997, Magnesium Technology started another two-year research round funded mainly by a $200,000 Technology for Business Growth grant from the Foundation for Research, Science and Technology.

Lack of venture capital for inventors is becoming less of a problem with the political commitment to a knowledge economy, says research and development manager Ian Mawston.

"It means there is a possibility of having more resources, better directed into this sector."

Magnesium Technology spends 90 per cent of its budget on research, contracting out 80 per cent of the work because the cost of buying its own sophisticated equipment would be prohibitive.

Mr Mawston and his team of scientists are refining Anomag Two, a new generation of the technology that will be even more environmentally friendly. They also research specific customer problems to maintain the company's edge.

"Our basic philosophy is to keep the company two years ahead. If we stay still in one year we would be dead. The company would not exist," said Mr Mawston.

Professor Graham Wright, the former dean of Auckland University science faculty, has been involved in the project since 1994 and continues to play an active role in the latest research efforts using money from Technology New Zealand.

He says the potential for the coating is enormous, though magnesium faces stiff competition from plastics.

"All that holds it back is that the magnesium industry is only just showing its head."