Returning from Beijing

Posted on July 3, 2006 , filed under Stocks | Print This Post

I’ve returned from Beijing this afternoon and will be concentrating on several exciting opportunities. I have been given the unique opportunity to work on the expansion of two of China’s state owned ethanol companies. One of the companies has been funded with $1.25 Billion USD and the other has been funded with $5 Billion USD. The opportunity I see will be to find a privately owned ethanol or energy company looking to gain an entry point into China’s ethanol market. China tightly controls the availability of ethanol licenses. Only 6 ethanol licenses are being given out in 2006 and the limited number of available licenses prevents competition in China from privately owned companies. The state owned ethanol companies have been made so large by the Chinese government that competition from smaller private local firms or foreign companies is unlikely to succeed.

I will likely propose an M&A plan to foreign ethanol and energy companies. The state owned companies have long-term contracts with the Chinese government to purchase ethanol. The contracts are valuable as a long-term source of recurring revenue. China has many contracts such as this in place with Orimulsion suppliers in Venezuela.

I have also been given a similar opportunity with China’s state owned gold mining companies. A few of China’s state owned gold miners are struggling to expand operations as the price of gold rises. The state owned gold miners face daunting technology issues that I believe a foreign miner would be able to tackle. I see an opportunity to merge several small state owned gold miners into a single larger state owned gold producer or under a holding company. I also see an opportunity to bring in private funding and technology to improve the yield from China’s existing gold deposits.

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