High energy consumption in the production of magnesium by molten salt electrolysis is mainly due to the recombination of magnesium and chlorine. The large interelectrode distance used, in conventional techniques, to reduce the extent of ‘back reaction’, results in a significant potential drop. A laboratory cell that enables the operation with smaller interelectrode distance and easy separation of electrode products has been used to study electrolytic magnesium production. The cell features a top inserted graphite anode and a Mg-Pb alloy cathode at the bottom. Current efficiency and power consumption were determined at 690° C using a current density of 0.48 A cm−2. Experiments were performed to study the effects of MgCl2 concentration and anode-cathode distance (a.c.d.) on cell operation. Results indicated that an electrolyte containing 20% MgCl2 (equiweight NaCl:KCl and 1 % NaF) with a 3 cm a.c.d. reduced the cell voltage to 3.72 V. This value corresponds to an energy consumption of 11.3 kWh kg−1 including the refining of Mg-Pb alloy produced at the cathode. This cell performance is more energy efficient compared to conventional magnesium cells.