galaxy - doing biz in china?, page-5

Yes precisely, Rio Tinto is big enough. So if its adventure into China got burnt, Rio's share price still holds well. This may not be the case with small players - especially if its core operations depend on China (eg processing plant) - more of this later....

Firstly, I am not putting down any companies doing biz in China. If I am a shareholder, I would like to see proper risk management - and diversification of operations. If not, I may bring ideas to the General Meetings or write to them - that is what we can do. If I am an Analyst deciding what to invest, I would also consider its profit / loss if some major operation goes wrong, eg relationship with major foreign partners.

Secondly, just because everyone else is doing it, does not mean it is safe. China has only opened up in (not the last 2 years mate) the last 20 years - a short time by world standards. In the last 5 years, Westerners are rushing into it. Its Economic System is to the benefit of their Party first, citizens second, foreigners last. Once again, I am not putting down doing biz in China - just want us Aussies to be careful.

Thirdly, what can GXY do to mitigate risk - A WHOLE LOT. You are free to bring this idea to their Shareholder meeting. From my limited research so far, the only thing GXY is dependent on China is the fact that it is going to have a processing Plant in China. Most of its resources are dug up in our own Sunburnt Country - it Aussie minerals mate!

The reason they have their plant in China, according to its website http://www.galaxyresources.com.au/project_jiangsu.html
is "The main attributes of the location in China are a tighter supply chain and proximity to cement plants (residue disposal) and detergent plants for sales of sodium sulphate by-product."

The choice of plant location makes perfect economic sense. But the plant location being in China is not absolutely vital for their business. They can build the plant in some other nearby Asian country where it is also cheap. This would reduce the political risk by a whole lot, at the expense of slightly higher cost.

As I am writing this, I was just wondering has anyone ever raise this issue about plant location to Iggy. Is it really worth the risk? Perhaps shareholders should really voice this out to GXY management.

Basically I have very good opinion on GXY because of its very promising products in an emerging market. I hope it goes well as I am thinking of getting some.