China Armco Metals Inc. (CNAM)

[viking86]

some thoughts about the Mar31 CC: I dont know about you guys but personally I found the Q&A session of the CC too brief and very uninspiring for a company with such an explosive growth potential ahead.

I am sure many investors would like to know for example why Mgmt decided to ramp up production much faster than the fulfillment of the $100M contract over a 10 Month period would necessitate. Ramping up to 100% capacity by 4Q means they would produce in 4Q alone 250K tons of scrap steel while the contract would require only 69K tons. Will they be able to sell it all? Obviously Mgmt thinks they will. Oherwise they would not have embarked on such a bold and costly project. We have got a clue about the insider thought process based on the conservative guidance they issued for 2010 revenues in the CC: AT LEAST 220M revenue (compared to 87M total for 2009 all coming from the distribution business). So I think they are expecting revenue from the recycling business to exceed 120M or so while leaving the door open for much more.

Another issue of interest is the potential for the distribution business to do much better this year than in previous years, both in volume and in margin. We know that imported metal ore prices will rise at least 40% in average this year. We also know that they just locked in 16 months worth of manganese ore supply
from Brazil, probably at a good price. So I am expecting them to realize fatter net margins this year than the 4-5 % they guided for the distribution business, considering they achieved net margins of 6% in both 2008 and 2009. I would probably want to know more about 2010 prospects and other pending deals in their distribution business. A good Q&A session should give additional valuable info other than the written word of the ER.