The invention belongs to the field of resource recycling, and relates to a method for extracting magnesium from heavy metal sludge, refining, recycling aluminum salt from water supply sludge, then mixing precipitation, ageing and preparing magnesium hydroxide and aluminum hydroxide high-purity composite flame retardants. The method effectively realizes comprehensive recovery of valuable metal magnesium from the heavy metal sludge, and meanwhile guarantees the high recovery rates of noble metal cobalt and nickel. The recovery rate of aluminum in the water supply sludge can reach 85 percent or higher. The primary recovery rate of magnesium reaches 84.8 percent or higher; the product purity is greatly increased to be greater than or equal to 99.3 percent, and the thermal decomposition temperature reaches 365 DEG C. The composite flame retardants have regular shapes, and are easy to disperse when being added as flame retardants.