Monday, September 3, 2007

Adding Green Energy Resources to the Portfolio

I've long been searching for the perfect green commodity play, because I think commodities still have years of boom time ahead of them (the current 16-20 year bull cycle started in 1999) and because China's still growing... and will continue growing for some time to come.

What I wasn't looking for was a micro-cap stock. But unfortunately, that's what I've found.

Luckily, this micro-cap has solid fundamentals, a solid business that just issued a 10% dividend in the first quarter of 2007... and ridiculous upside. But before I tell you all about it, let me first make this confession...

Please Allow Me to... Contradict Myself

Last year I vowed never to add another penny stock to this portfolio. The company that had me so riled up was CECO, which shot up 150% in a single trading session last week, coincidentally.

Anyway, we're dipping into the micro-cap well once again. But this time we've got better fundamentals and a solid track record behind us...

This time it's a company called Green Energy Resources, based in New York. GRGR is a complete buyer, processor and shipper/seller of what could be the next big commodity: biomass woodchips, or Ecogreen Coal.

These are byproduct woodchips, basically, that burn well for fuel purposes, and come entirely from second-hand trees: trees that were being cut down anyway for road building, construction and development, etc.

The company, unlike CECO, actually has an income, which is a bonus. I'll get into the fundamentals in a later article, but a really good sign is that the company just paid a 10% dividend for the first quarter.

Besides decent fundamentals, GRGR could soon find itself at the nexus of a very big problem, and a very profitable solution...

The Emperor Has No Trees

After decades of deforestation, development, pollution and naturally arid lands, China finds itself in a strange position: it's a land that's relatively devoid of large trees, and therefore large amounts of wood for construction and fuel.

As WorldWatch reported August 21, 2007:

"Today, large trees are rare in China. The country will need to take efforts to nurture them in the years ahead."

In its article "A Country with No Big Trees," WorldWatch reporter Yongfeng Feng describes a deforestation problem going back centuries.

"The exploitation of trees in China dates back thousands of years. Before the 20th century, the major destructive force was the elite ruling class of a highly centralized society, including emperors and their families, officials, and rich businesspeople.

"They constructed luxurious palaces and houses, and extravagant tombs. Those structures required huge quantities of timber. Places that served as political and economic centers were the first to be denuded."

Emperors building palaces, tombs and estates have historically sucked up every bit of lumber-quality forest in areas around Beijing, for example. For more on China's wood shortage, click here:

Using Wood to Offset Coal Pollution

The sad thing is, China's 85%-plus reliance on coal-fired powerplants could be causing much less pollution were it able to blend that coal with fuel-grade wood chips... Blending wood chips with coal creates much less CO2 emissions... and can lower fuel costs.

GRGR: Already Negotiating with China and India

And right now, Green Energy Resources is negotiating with both China and India to import their wood fiber fuels into both countries -- the two most dynamic major economies in the world. In fact, GRGR has gone so far as to negotiate a number of ships being built to move its supplies to China from the U.S.

"It's a growing market," says GER CEO Joseph Murray, who has led negotiations with the Chinese government that could lead to 10 wood-transporting ships being build in China to transport GER's goods there.

"They want to expand their co-production. We have a product that is environmentally certified that we could export to China."

Some are referring to this product as Ecogreen Coal, and it could soon become a tradeable commodity on a major exchange in Chicago or New York according to one article ( wlthough this article is from two years ago!

The point is, the company's performance has been solid of late, and since it's trading well off its historic high -- and since China stocks have continued to surge this year, and this could soon be a direct China green energy play, similar to LDK Solar -- let's move now.

Action: Buy Green Energy Resources at GRGR.PK at $0.20... We won't use a TS on this position.

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