On December 16th, we mentioned China Shen Zhou Mining and Resources, Inc. (Ticker: SHZ) for the 1st time in our SMC 15MinuteStocks Market Update and placed it on our SMC Watchlist.  Yesterday – Dec. 27th – we highlighted that SHZ was now looking better.  Click here for the SMC Daily Chart of SHZ. This morning SHZ roared +21% higher…

Here’s what we know about the company and its stock –

1. The company is Chinese – primarily a micro-sized fluorite mine with zinc and copper also mined along with the fluorite.  Fluorite is used in steel processing and other industries.
2. The primary mining assets appear to be in inner-Mongolia.
3. The company issued a press release on December 3rd highlighting revenue growth of +164% expected for next year.  They are expecting to  increase production to 60,000 metric tons of fluorite powder and 40,000 tons of fluorite lumps in 2011.  For perspective – In the first nine-months of 2010, the Company sold 8,800 metric tons of fluorite powder and 20,356 metric tons of fluorite lumps.  These expectations for next year’s production and revenue growth is therefore very significant.
4. The Chinese government is also doing its part to make this one interesting.  China is restricting the amount of fluorite that can be mined in China to approx. 10 million metric tons.  Fluorite prices have since doubled on this news.  (Information courtesy of Briefing.com).  For the sake of perspective, if SHZ produces 100,000 metric tons of fluorite, and China establishes a mining quota of 10 million metric tons, then SHZ is expecting to produce approx. 1% of the Chinese output of fluorite in 2011.  SHZ is a very, very small producer.  If the other producers aren’t publicly traded or publicly traded in America, this may be the only means of participating in this type of investment for the global investment community.
5.  This company is tiny.  Its 2010 revenues are expected to be $14.5 million.  Next year this number is expected to be $38 million.  Net income for 2011 is expected to be $11 million.  With approx. 28 million shares outstanding – of which perhaps 89% is held by insiders – > 11 million in net income is approx. $2.50/share.  At a little over $5/share in stock price, this data makes the stock look pretty cheap.
6. From its balance sheet, the company appears to have debt of about $16 million, and stated plant and equipment value of approx. $34 million.  Overall, assets appear to outweigh debt by a factor of more than 2:1.  Who knows however how accurate this information is.

Friends – this company and its stock is NOT a Cisco Systems, Bank of America, Bank of Ireland, Apple Inc. … or anything remotely like it.  It is a very small mining company in China, with stock that trades on the American Stock Exchange.  The stock has already moved from around $1/share in October to over $5/share today.  It’s shares outstanding at approx. 28 million puts it in our experience in a categorical “sweet spot”.  It can really move UP when investors get behind it AND it can SINK like the Titanic when investors decide to cash in their profits.

For a good picture of where the stock price is today relative to its recent past and what we like – Here is our SMC Daily Chart of SHZ.

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