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14 Jul | On the Radar – China Biodiesel

Ready for some good old-fashioned penny stock speculation? This one’s got the lot!

After floating on AIM in June ’06 at an initial price of 85 pence, China Biodiesel traded in a range just above and below a quid for roughly 12 months before plummeting to a low touching on 2 pence in February 2009. Yep, 2 pence.

Why? Well any number of factors really. The market’s reluctance to take Chinese AIM shares to the altar, the questionable ethics of biofuels in general (using food for fuel), the increasing cost of feedstock required to produce biofuels, the ensuing lower than expected profits, etc, etc.

But if you had have taken your chance on China Biodesel at, lets say 3 pence – where it traded between February and April of this year – you would have doubled your cash in the past few months. And from a purely chartish point of view, the past couple of days have seen the price nudge above pretty much any moving average you’d care to track (including the 200 day).

But China Biodiesel ain’t just another biodiesel player. It owns a proprietary process that allows it to turn feedstock from waste vegetable oil and animal fat into biodiesel. The management team has proven itself to be quick and flexible in harsh times – switching away from the production of biodiesel fuel to the manufacture of non-toxic biomaterials when profitability in biodiesel temporarily dried up.

And this from their chairman, Huodong Ye at the AGM in June of this year suggests that things are back on the mend:

The challenges faced by the Company in 2008 resulting from the international financial crisis have continued into 2009. However we are pleased to report that shipments have started to rise since March. Production at the Longyan plant has returned to the average level of 2008 and the Xiamen plant was reopened in April. Both plants focus on the production of BII, which is used as a substitute for petrochemical material and thus has a higher added value over normal biodiesel fuel. The total shipment for the first four months of 2009 was 7,601 tons, this compares to 8,010 tons shipped during the first four months of 2008.

Please do your own research as this should be considered a highly speculative play at best. But that’s the way we like ’em here at Investor Trader.