China Armco Metals Inc. (CNAM)

[viking86]

I also talked to Andrew Worden today. We discussed sales expectations for Q1 and year 2011. He's expecting a very strong Q1 with about $70MM total revenue. For the year he expects about 60% capacity for the scrap plant at about $440-500/ton.

I subsequently checked the Company's recent PR's and came up with the following projections.

For Q1:

-ore trading : on Mar 14,2011 they announced the delivery of two orders for iron and chrome ore with a combined volume of 8,000 tons and aggregate value of $14.4MM. Plus they delivered 150,000 Tons of steel ore from the new brazilian supplier Usimina for an aggregate value of 19.8MM. Total ore delivery value for Q1= $34.3MM with an ASP of approx. $132/ton ores.

- recycled scrap: on Mar 14, they also announced 2 new orders from existing customers to produce and sell a combined volume of 10,000 tons of recycled metal worth approx. $5.4MM. The ASP for recycled metal is thus in the range of $440-$540/ton. This is on top of their existing 2010 order which was partially delivered last year and will continue into this year depending on their production capacity.

Including the above 10,000 tons, I would expect for Q1 a total production of about 10% annual capacity which is currently at about 100%=800,000 tons, or 80,000 tons recycled metal delivered in Q1.
Assuming an ASP of $500/ton, I get about 80K x 500 = $40MM scrap sales for Q1.

Add the $34.3MM trading revenue to the $40MM scrap revenue, I get a total estimate of approx $74MM rev for Q1, which agrees with Worden's estimate of 70MM.

Based on a rough estimate of net margin of 7.5%, the 70MM rev would yield a net inc of $5.25MM for Q1'11 compared to a net inc of $0.67MM in Q1'10, up almost 700% yoy. Or an eps of about $0.31 for Q1 alone which is probably more than twice the total expected eps of whole year 2010 (of about $0.13 acc. to my estimate).

All in all I am expecting a turnaround for CNAM this year which should continue well into coming years.


Through March, 2011 China Armco's trading business has completed and delivered two orders for iron and chrome ore with existing customers in China that include a combined volume of 8,000 tons with an aggregate value of approximately of $14.4 million.

The Company's also secured two new orders for its metal recycling business with existing customers to produce and sell a combined volume of 10,000 tons of recycled steel, with an aggregate value of approximately of $5.4 million.