Living Well on Scraps: China Armco Metals

Earlier touted on the Jaded Consumer as a buy because its fortunes were being mis-assessed on the basis of prior-year operations as a metal distributor despite its preparation to enter higher-margin business as a steel recycler, and because its new AMEX listing would make it a higher-profile, more followed, more liquid investment, China Armco Metals Inc. (AMEX:CNAM) saw its stock leap over 40% in the pre-market on news of its first scrap metal contract to put into use its new recycling facility.

Kexuan Yao, the company's Chairman and CEO, described the $100,000,000 contract as having "essentially pre-sold the first several months of production from our newly opened facility as we ramp up capacity over the coming quarters." The contract calls for the company to supply 230,000 tons of steel to a major Chinese steel producer over a 10-month period beginning in March, 2010.

Shortly after its AMEX listing, CNAM rose over $4 then rushed past $5. After closing yesterday at $5.30, pre-market bid and ask were in the neighborhood of $7.50, though current prices are a little closer to $7. Assuming the company doesn't announce unhappy surprises, its future is looking good as it pursues more of the same business over the year.

Getting a mispriced business is nice, eh? Now, if only prices would rationalize over at American Capital ....

UPDATE: Okay, close at $8.50 the day of this post, up over 50%.