SAN MATEO, Calif., May 22, 2013 /PRNewswire/ -- China Armco Metals, Inc. (NYSE MKT: CNAM) ("China Armco" or the "Company"), a distributor of imported metal ore and a metal recycler with a state-of-the-art scrap metal recycling facility in China, today announced that Armco (Lianyungang) Renewable Metals, Inc., the Company's wholly owned subsidiary, has signed a long-term sales contract with CNBM International Corporation, a subsidiary of a Hongkong Stock Exchange listed (HKEx, stock code 3323) and state-owned Chinese building material company, China National Building Materials Group Corporation. According to the contract, Armco (Lianyungang) will provide CNBM International monthly supplies of scrap metals and waste plastics for the next three years starting May 15, 2013.
Under the contract, the Company will supply approximately 15,000 MT (subject to 20% up-or-down adjustment) of scrap metals of various types and waste plastics to CNBM International every month from May 15, 2013 to May 14, 2016. The contract calls for a separate single sale agreement to be formed prior to each monthly supply, and CNBM shall make full payment for each supply at the time of such single sale agreement. With the prepayment arrangement under a pre-selling model, China Armco could increase its recycling production and sales significantly without additional working capital. This contract will increase the Company's recycled scrap metals sales, and is also expected to improve the Company's profit margin as a result of a lowered idle capacity cost accompanying the increased production.
"We are pleased to establish the business cooperation with CNBM International Corporation. This 3-years contract is a very important part of our efforts to build a pre-selling model for recycled scrap metals, which is expected to provide us with a relatively consistent and stable sales performance. In addition, with a higher output at our recycling facility, we expect to see an improved profit margin as a result of the lowered idle capacity cost. We are hoping to explore more business cooperation opportunities with CNBM International in the future. We believe that, with our brand building initiates, we will be able to continue to expand our client base," commented Mr. Kexuan Yao, Chairman and CEO of China Armco.