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It's an extremely simple mechanic. I literally figured it out the first time I encountered it while under pressure with radioactive rocks raining from the sky and a swarm of tourists all around me. Do you want the game to play itself for you?
Load 200 scrap into it. Boom, should now have all the magnets you'll ever need.
It's 3:1 scrap metal for magnets. The magnetizer itself has a limit on how many transmutations it can do.
I usually just bring 3 stacks of scrap metal (60 units) on my trips to the deep zone and exchange them when i see the opportunity.
Maybe don't whine about the game "making you look like a fool" when you can't figure out a simple mechanic, and you wouldn't get replies like these.
Nowhere. You gotta figure it out by yourself. As for the farming, once you locate the converter device in the deep zone, they usually need scrap metal (the display will tell you what it needs anyways). The blue icon is basically the minimum amount you need to put in order to produce the item, hence why it is likely it just spits scrap metal again for some people. IT works on ratios as someone mentioned above.
This makes LIM magnets a risky trade-off btw, unless you grinded a lot of scrap metal, you get the magnets but run out of an essential to build stuff on the go. Long story short, always plan ahead.
I did find LIM magnets in ARDA Investigator trucks in the Deep Zone. I didn't find many yet, but I found 1 and 4 in two different trucks.
https://www.youtube.com/watch?v=qa-IIB4MY1o