How To Make Thermite:

Now, I am not going to tell you guys what thermite is, or what you can do with it. Just do a Google search and you’ll find tons of sites telling you a bunch of uses for it. I will however, tell you how to make the stuff.

Obtaining the Aluminum

1. Go to a machine shop. They will usually give you aluminum powder for sweeping the floor or something.

2. Break open an Etch-A-Sketch, the stuff inside is pure aluminum powder.

3. Go to a paint store, they usually have powdered aluminum that people use to mix into paints to give it pigment.

4. Get a grinder, and something made of aluminum. Good ideas are soda cans, bike frames, and lacrosse sticks. Start grinding the aluminum and collect the sparks in a container.

5. Search eBay, they sell it for pretty cheap.

Obtaining the Iron Oxide (Rust)

1. Take some steel wool then put it in a jar and then cover it wool with water. Use a magnet to make sure the steel wool doesnt float during the reaction process. Next, put in 5 tablespoons of regular bleach into the water and 5 tablespoons of regular vinager. Wait a day or so and then filter the brown paste with a coffee filter. Leave it out to dry overnight.
   2) Go to a paint store, they usually have powdered iron oxide that people use to mix into paints to give it pigment.

2. Connect wires to a direct current (9-volt battery), strip both ends and put them into a saltwater solution. Let them sit for five minutes. One of them will start bubbling more than the other. This is the POSITIVE(+) wire. Put a nail tied to the positive wire into the jar. Now put the negative wire in the other end. Now let it sit overnight and in the morning scrape the rust off of the nail & repeat until you have a bunch of rust on the bottom of the glass. Let it dry out, and crush it into a powder.

3. Search eBay, they sell it for pretty cheap.

Mixing the Stuff
Thermite is 8 grams of iron oxide to 3 grams of aluminum. The formula is by weight but because aluminum is very light, it will appear to be approximately a 50-50 mix. Put them together in a container and mix them until it is an even mixture. If you want, mix four parts thermite with one part clay or Play-Doh and knead thoroughly for moldable thermite.

Igniting

Thermite needs a lot of heat to light, that means magnesium. Find some magnesium ribbon, or a sparkler that contains magnesium and put it into a pile of thermite. Light it with a torch, and run!

Source http://how2dostuff.blogspot.com/2006/01/how-to-make-thermite.html