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Executives

Richard Galterio - Vice President

Hernan Welch - Chief Financial Officer

Analysts

Karl Burke (ph) - Burke Asset Management (ph)

Deepak Talwari (ph) - Private Investor

Michael Barrentine (ph) - Barrentine Investment Advisors (ph)

Presentation

China Direct Industries, Inc. (OTCPK:CDII) F1Q2012 Earnings Call February 14, 2012 4:30 PM ET

Operator

Welcome to the fiscal 2012 first quarter earnings conference call for China Direct Industries Incorporated. For those of you who maybe new to the company, we are in the process of changing our corporate name to CD International Enterprises as we expand our operations globally. We trade on the NASDAQ global market under the symbol CDII.

CD International is a U.S. based company with operations in China and the Americas, focusing on pure magnesium productions, distribution of basic materials and metal ores and cross border corporate advisory services. Headquartered in Deerfield Beach, Florida, CD International has a unique infrastructure that provides a platform to expand business opportunities globally, while effectively and efficiently accessing the U.S. capital markets. For more information on the company, please visit its website at www.cdii.net.

Our call today is hosted by Mr. Hernan Welch, CFO; and Richard Galterio, Vice President. A Q&A session will follow the management’s discussion of the first quarter ended December 31 2011.

At this time I would like to refer to the Safe Harbor statement under the Private Securities Litigations Reform Act of 1995. During this conference call management may discuss financial projections, information or expectations about the company’s products or markets or otherwise make statements about the future, which statements are forward-looking and subject to a number of risks and uncertainties, that could cause actual results to differ materially from the statements made. These risks and uncertainties are detailed in the company’s filings with the Securities and Exchange Commission, including its most recent Form 10-K.

At this time I would like to introduce Mr. Richard Galterio, Vice President of CD International. Mr. Galterio, you may begin your call.

Richard Galterio

Thank you operator and all of you who are joining us for our first quarter fiscal 2012 conference call. CD International recorded revenues of $36.9 million for the first quarter of fiscal 2012 with gross profit of $5.6 million and net income of $3.1 million. This compares to revenue of $45.8 million, with gross profit $6.5 million and net income of $3.5 million recorded in the same period of fiscal 2011.

Earnings per basic and diluted shares were $0.08 in the first quarter of fiscal 2012 on 40.6 million basic weighted average shares and 41.1 million of diluted weighted average shares. Earnings per basic and diluted shares were $0.11 on 31.8 million weighted average shares in the first quarter of fiscal 2011.

While overall sales declined as compared to the first quarter of fiscal 2011, we did see improvement in several key areas, including gross margins, which improved to 15.2% up from 14.3% and net margins, which improved to 8.4% compared to 7.5%.

In our magnesium segment we witnessed a continued improvement in pricing in comparison to the first quarter of fiscal 2011, with average prices of $2,833 per metric ton as compared to $2,280 per metric ton. However, prices declined by about 9% during the course of the quarter as compared to our fiscal fourth quarter of 2011 and this was a rebuild of the short term demand declines due to global concerns of the European debt crisis, coupled with the tightening credit in China, which forces some undercapitalized competitors to liquidate inventory to raise year-end cash balances.

Management elected to reduce it’s marketing efforts mainly in trading, resulting in a volume decrease of 32% and a revenue decrease of about 15.5% compared to the first quarter. Total magnesium revenue was approximately $18 million in the quarter as compared to $21.3 million recorded in the comparable period of fiscal 2011. It’s important to note that this segment remains profitable on an EBITDA basis despite the decline in volumes.

During the period we also began to build inventory in anticipation of the demand effect associated with the issues availing (ph). Prices have subsequently stabilized in the beginning of 2012 and we anticipate a firming of demand as we move into the second half of fiscal 2012.

In our basic materials segment, revenues totaled $13.8 million, declining by $5.4 million compared to the same period in fiscal 2011. The decline in revenues was mainly a result of lower sales at our CDI Beijing subsidiary compared to the same period in fiscal 2011, due to reduced demand from slower urban infrastructure expansion and tightening credit in China.

In our consulting segment we achieved strong performance with revenues reaching $5.2 million in the first quarter of fiscal 2012 and similar to the $5.3 million reported in the same period in fiscal 2011. We added one new client in the first quarter of fiscal 2012, bringing the total number of clients we service on a continuous basis to six and we are confident that we will continue to add additional clients leading to further growth in this segment.

Overall, we continue to push forward with first quarter earnings improving from the fourth quarter of fiscal 2011 and having now reported three consecutive quarters of profitability for the first time since 2008. We are well positioned in all of our business segments to continue to build on that momentum as we move through fiscal 2012.

In an effort to expand our revenue growth, we have deployed about $6 million in capital at the end of the first quarter to ramp our commodities business in the Americas and expand our Magnesium inventories in anticipation of increases in demand. While that temporarily reduced our cash balance, we received $1.6 million in cash early in January from one of our consulting clients to repay a note and pay for previous services rendered. We anticipated an increase in cash as we really began to turn our business in the Americas and sell magnesium inventories in the coming quarters.

Overall, our balance sheet continues to strengthen with working capital, total access and shareholder equity, all increasing from fiscal 2011-year end. We will continue to execute on our strategy of being a global leader in the magnesium industry and to globally diversify our revenue through commodities business and consulting operations.

I would now like to turn the call over to our Chief Financial Officer to discuss the quarter in more detail. Hernan.

Hernan Grant Welch

Thank you Richard. For the first quarter of fiscal 2012, CD International, we recorded consolidated revenues of approximately $36.9 million compared to $45.8 million recorded in the first quarter of fiscal 2011. Gross profit for the period was $5.6 million compared to $6.5 million recorded in the same period in fiscal 2011.

After including other income and operating expenses we recorded a net income attributable to common shareholders of $3.1 million compared to the $3.4 million recorded in the same period for fiscal 2011. It is important to note that our net income was up more than 100% sequentially from the fourth quarter of fiscal 2011.

Our net income applicable to common share holders resulted in basic and diluted income per share of $0.08 on 40.6 million basic weighted average shares and 41.1 million diluted weighted average shares, compared to basic and diluted income per share of $0.11 on 31.8 million basic and diluted weighted average shares recorded in the comparable period in fiscal 2011.

Revenues from our magnesium segment in the first quarter of fiscal 2012 were $18 million compared to $21.3 million recorded in fiscal 2011. We shipped 6,345 metric tons in the first quarter of fiscal 2012 with an average sale price of $2,833 per metric ton compared to 9,337 metric tons shipped at an average sale price of $2,280 in the first quarter of fiscal 2011.

The decline in volumes was largely due to management decision to reduce marketing activities for the reasons Richard previously mentioned. For the first quarter of fiscal 2012, gross profit for this segment prior to depreciation expenses associated with cost of goods sold was approximately $600,000 compared to gross profit of $900,000, also inclusive of $500,000 in depreciation expense we quoted in the same period of fiscal 2011.

Our magnesium operations resulted in an operating loss of $0.9 million, inclusive of $1 million in depreciation expenses compared to an average, to an operating loss of $0.6 million inclusive of $1 million in depreciation expenses recorded in the same period in fiscal 2011.

On an EBITDA basis our operations were slightly profitable in the first quarter of fiscal 2012. Our basic material segment revenue totaled approximately $13.8 million in the first quarter of fiscal 2012, compared to the $19 million recorded in the same period in fiscal 2011. Our basic materials segment generated a gross profit of $0.4 million in the first quarter of fiscal 2012 compared to $1.1 million recorded in the same period in fiscal 2011.

Operating loss for the first quarter in fiscal 2012 was $0.3 million compared to an operating income of $0.2 million recorded in the same period of fiscal 2011. Performance at our Lang Chemical Operations remain stable, while our CDI Beijing Operation contracted due to lower sales and construction seal related products as a result of tightening credit environments, affecting our customers ability to obtain financing to purchase products, coupled with a slowdown in China’s urban real estate development in the major metropolitan regions.

We recorded some modest expenses in association with the preparation of industrial commodity shipments out of the Americas commencing in the first quarter of fiscal 2012. Revenues from our consulting segment reached $5.2 million in the first quarter of fiscal 2012 compared to $5.3 million recorded in the same period in fiscal 2011.

Gross profit for this segment totaled $5.1 million compared to $5 million recorded in the same period in fiscal 2011. We’ve recognized all of our management and corporate overhead in this segment and recorded an operating income of $3.4 million in the first quarter of fiscal 2012, as compared to an operating income of $3.7 million in the same period for the prior year or prior quarter. But strong performance for this segment was mostly attributable to fees earned for consulting services provided to a new client during the fiscal quarter. Revenue in our consulting segment varies depending upon the level of service, transactional events and the addition of new clients.

From an overall balance sheet perspective, we remain well positioned for the future as we deploy significant capital to fuel our growth. We ended the first quarter of fiscal 2012 with $6.1 million in cash and cash equivalents, with prepaid expenses of $16.6 million, compared to cash and cash equivalents of $12.6 million with $14.4 million in prepaid expenses at September 30, 2011. Working capital improved to $52 million compared to $44.8 million at September 30, 2011.

In summary we are pleased with the performance from various business segments and believe our capital deployment will enable us to build on this momentum in the current fiscal year. We continue to devote substantial efforts to improving our internal controls. We expect to bring more of our operations on our UFIDA NC Enterprise Resource Planning or ERP Financial Accounting Software System over the course of 2012 and continue to rationalize and streamline our magnesium operation to reduce cost and increase operating efficiencies.

We also intend to rationalize and streamline our basic material segment in order to maximize our return on capital internationally. We have taken a conservative approach to our balance sheet and position our operations to be more streamlined and focused going forward.

We believe our current staffing levels are appropriate and any additions or reductions to staff will reflect the prevailing environment. We will continue to look to reduce cost where necessary and maintain inventory levels we believe are appropriate to our business needs. Our balance sheet remains strong and we believe we are well positioned for the future.

At this time I will turn the call back over to Richard for some closing comments.

Richard Galterio

Thanks Hernan. The overall environment for our business remains strong. We did experience some softness in demand at our China based subsidiaries in the first quarter. We’ve seen stabilization in Magnesium prices and believe this will lead to improved demand fixture as we move throughout 2012 and we are positioning our company to capitalize on the growth trends we see in this business in the coming years.

We believe our magnesium customers in various industries, including automobile manufacturing, aluminum alloy and steel production will look to be further strengthening in calendar 2012 as economic data in the U.S. is showing improvement and that Europe is addressing it’s financial issues.

The current environment for our consulting operations remains strong and we anticipate continued growth in this business in fiscal 2012. We believe our commodity business will have a significant impact on our overall performance this year as our investments in this area are beginning to bear fruit in the coming months through our established operations in Mexico, Chili and Bolivia.

We also believe our corporate repositioning, including our American expansion and name change will enhance our visibility in the investment company as we work to improve shareholder value.

As we look out into the second quarter and throughout fiscal 2012, we are confident we can continue to produce annual growth in our top and bottom line performance and we are going to get there in several ways.

First, we continue to see magnesium as our largest contributor to revenue in fiscal 2012. We anticipate progressive revenue growth throughout the remainder of fiscal 2012 from our existing operations, as well as contribution from our pending acquisitions should they be approved at our upcoming shareholder meeting in February.

We currently have a production capacity of 50,000 metric tons and these two acquisitions would increase that capacity by about 60%. Additionally, we continue to believe overall supply out of China will contract in 2012 as government regulations, tightening credit and energy cost for producers using coal as a fuel will continue to make the operations less viable.

Second, we believe we have cleared the regulatory hurdles in Mexico and South America and we see this at the end of our year and that was the thing that delayed our ability to deliver commodities on a continuous basis to China.

We have subsequently deployed significant capital in this area in the quarter to begin shipment in the near term. We believe that this business will be the leading driver of growth and basic materials, in addition to providing revenue diversification geographically. We intend to devote more resources to this business as it grows and may look to rationalize other parts of this segment as this business gains traction. And third, we are valuating certain opportunity in the U.S. and South America to further geographically diversify our business for the future.

We continue to see our overall top and bottom line performance improving in fiscal 2012 as compared to fiscal 2011. After our shareholder vote regarding our planned acquisitions is determined, we will be in a better position to evaluate the extent of our improvement for this fiscal year and will look to provide more detailed guidance after that evaluation is completed.

In closing, I would like to emphasize that we are confided that our strong balance sheet plays out in a solid foundation for our future growth. Additionally, the investments we have made in magnesium and international commodities, coupled with the strength of our consulting operations, places us in a strong position to deliver improved results in the remainder of fiscal 2012.

Allow me to thank you again for joining us and now operator, you can please begin the formal Q&A.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions) Our first question is from the line of Karl Burke (ph) with Burke Asset Management (ph). Please go ahead.

Karl Burke (ph) - Burke Asset Management (ph)

Yes. First I just like to make a comment that I haven’t received any proxy statements. I just heard of the vote on the acquisitions. Have they been mailed out?

Richard Galterio

Yes, they have and Karl, you can call our office and if you haven’t received that, we can make sure it’s provided to you immediately.

Karl Burke (ph) - Burke Asset Management (ph)

Okay, when were they mailed out?

Unidentified Company Representative

You should have received it during the last week or two.

Richard Galterio

Yes, I think they were mailed out about two weeks ago.

Karl Burke (ph) - Burke Asset Management (ph)

Okay. The questions I have is one – it’s on the magnesium price, assuming the volume remains flat where it is today, we need in order to make money or at least price even in magnesium and I mean after deprecation on the bottom line, net operating earnings.

Richard Galterio

I’ll put it to you this way. Last quarter we were profitable on a bottom line basis, even including the depreciation and that was prices around, net to us around the 33,100 level. But there are a couple of other factors that you have to determine along with that.

First of all, it depends on some of the input costs, because those vary as well. There are silicon and some other cost. So we could be depending upon those of course profitable at 2,800, 2,700 and we could also be profitable at 3,000, depending upon those input costs.

I think what we saw in this past quarter Karl was beginning in October. You had a progressive 9% slide in prices over the course of the quarter from October to December. In that type of an environment, it’s a rough go from a standpoint of doing trading and some other things, so we elected to build inventory, because the prices for the raw materials we felt were pretty good. So we were going to build inventory and we defiantly believe that the factors that caused that price drop were year-end factors.

A lot of the facilities in order to maintain their credit facilities and their loans have to have certain cash balances in order to do that. So we had small competitors that were liquidating whatever inventory that they had in the market, coupled with as you know there was – the end of the year was a pretty uneasy for the world markets and all of those factors together made us decide to build some inventories, because we see the economic factors and the long term trends I think looked pretty good and sort of pulled the throttle up on just you know selling and churning if you will our trading and selling at extremely low margin and not making any money, so that’s were we are.

So to answer your question, it does vary, but generally speaking at 2,900 or better with the right balance, we should make money.

Karl Burke (ph) - Burke Asset Management (ph)

Okay. Can I get some clarification on the marketable securities that you listed? There’s a significant rise on these securities, mostly the securities of the fee through your consulting services. Can you break out the increase in the balance sheet for me, indicating how much was an increase in the marketable high-end securities versus new securities that you received and how much of those securities can you actually sell today, sell it through, even though you are calling them off, because I know some …

Richard Galterio

Well, I don’t believe necessarily that we break down each one of our focus individually, but what I can say to you is the following. The vast majority are equities that we either received for services or investments that we’ve made.

In our Q is you go to the note section, they are broken down by the companies that we own and you can see all of that. So when our Q comes out, which should be momentarily, it might already be out, you could just go to the note section and those are broken down for you.

Karl Burke (ph) - Burke Asset Management (ph)

How about the increase in the value from quarter-to-quarter; is that additional securities of increases in the prices of the security?

Richard Galterio

There is probably some price fluctuation and I say probably the majority of it is some price fluctuations from the year-end. There’s also some liquidation that took place. We do liquidate some of those holdings from time-to-time. So you will see some liquidation, you will see some appreciation. Overall I don’t know whether there were any additions of the top of my head to the stock that we had. So we have one new client that increases some of the marketable securities, but that’s it. But in those notes you can take a look Karl and if you have any additional questions, feel free to call off line.

Karl Burke (ph) - Burke Asset Management (ph)

Okay. Well, I don’t have the notes yet or the Q, that’s why I’m asking these questions and I was really getting at how much of that increase would have been given to the new client as opposed to marketable price, and I don’t know if the notes will tell me how much of those securities are available for sales currently, what you could sell if you chose to.

Richard Galterio

Karl, the new client will probably be in accounts receivable, which will be the prior note I believe; I’m looking at this thing backwards, the accounts receivable. And they would be the new client that we have. Normally as we get the securities, then there will be fair value in subsequent quarters as Richard explained.

So between those two notes you will be able to get enough information and if you want to dig into more, let us know and we’ll be able to explain them. But that’s basically you have both, do you have the disclosure there.

Karl Burke (ph) - Burke Asset Management (ph)

Okay, what about the availability, what you really could sell out at $11.4 million without having to have these securities registered.

Richard Galterio

Well, first of all, in any of particular stock situations that will depend on the number of shares we hold the percentage of our ownership, based upon how much that we can sell. And once again, there will be a lot of detail in there, al right. I think that it’s a fair estimate to say, if you look back in the past, in 2010 we found it to be about $3 million or $4 million worth of stock and probably last year somewhere close, but lower than that.

But typically speaking, we liquidate some of those securities over time and its certainly market dependent, its certainly driven by revenues with -- early on, generally speaking when we picked out the client, we are certainly not looking to immediately liquidate that position, so it depends on overtime. But we’ve have had liquidations and there have been a number of times that those liquidations have resulted in gains from where we’ve originally carried them.

Karl Burke (ph) - Burke Asset Management (ph)

I understand and there have been also some substantial markdowns over time and what I read in the past in the Q and that’s why I’m asking this, that a lot of our securities could not be marketed if you chose to, because you would need the company to file a registration statement for you and that’s why I had to breakout as opposed to what you have been selling.

Richard Galterio

Well, in a number of the situations that we have, if we go into those situations for over six months or in some cases over a year, it wouldn’t require us to have a registration statement to sell them.

Karl Burke (ph) - Burke Asset Management (ph)

Okay, and you can’t give me a figure at this point of much of those would be free on the $11.4 million you have now.

Richard Galterio

I can give you a rough estimate, okay, if that would be helpful to you. If I gave you a rough estimate, I would say that – and it depends on over a point in time, but the majority of the shares that are held here have been held over a period of six months. Some of them would have to be held over a year. So we probably would be in a position that we could liquidate, I would say probably about 15% to 20% of our total holdings on any one given year.

Operator

Thank you. (Operator Instructions) Our next question is from the line of Deepak Talwari (ph) a private investor. Please go ahead.

Deepak Talwari (ph) - Private Investor

Hi. How are you?

Richard Galterio

Good, thank you. And you?

Deepak Talwari (ph) - Private Investor

Yes, (inaudible) but I think the market is not realizing what you guys are doing. But one more question I’d like to know, how many more dilution we expecting?

Richard Galterio

How many more what?

Deepak Talwari (ph) - Private Investor

How many more dilution coming? Because it seems like every year you guys diluting the sales.

Richard Galterio

Well, you have to think about one of the things that we are doing. You for argument sake, number one, we have made some acquisition. Those acquisitions bring us in assets, they bring us in also potential to grow our business. So if you look at our company from an asset standpoint, the assets we have and the shareholder equity that we have, a lot of the acquisitions that we’ve made have not been diluted from an asset standpoint and we are building those assets especially in magnesium, in anticipation of making ourselves the largest player in magnesium and capitalizing on those growth trends in the future.

From a standpoint of the capital raises that we did back in – the last capital raise I think was in December, a little over a year ago. That was at about a 15% or 20% discount to our then book value and we have not raised any additional capital and the acquisitions that we have pending right now, will add our capacity in bringing assets, so I don’t know if they even are diluted from a standpoint of what our book value will be after we carry the investments on our books.

Deepak Talwari (ph) - Private Investor

All right. Another question I would like to know, do you have any positive feedback from institutional investor?

Richard Galterio

Well, we do have a number of institutional investors that do own our stock. I really can’t comment from them as to what – if they own it, obviously they own it, because they think it’s going to be doing better than it is now. So we do have institutional ownership.

Deepak Talwari (ph) - Private Investor

All right, thank you.

Operator

Thank you. Our next question is from the line of Michael Barrentine (ph) with Barrentine Investment Advisors (ph). Please go ahead.

Michael Barrentine (ph) - Barrentine Investment Advisors (ph)

Good afternoon gentlemen. Just one question and its kind of the question I asked six, seven weeks ago. Has there been any additional talk about switching to one of the big four auditing firms, because I can tell you for a fact in talking to analysts on the street, from a transparency standpoint it would do wonders for the visibility of the company.

Richard Galterio

Hernan?

Hernan Welch

We are always discussing with possibilities of looking at alternatives that we have, but at the present time we have a relationship that we would like to maintain with our current auditors. They do a pretty good job and so that is open to us in the future. I think at the present time we are trying to minimize also our expenses. I came from a big four firm and I have seen over it well. An order of this size would probably be substantial and we want to get that balance sheet up and not down.

Richard Galterio

I think what we can also say is we are in the process of ramping up our organization in other parts of the world and we think that when we hit a critical mass and a critical operating level, where the cash flow that we are bringing in is substantial, we would definitely look to make that change and we have had discussions with some large firms towards that end.

While we’re deploying our capital and while we’re positioning ourselves to grow our businesses, I think that we are trying to best utilize the capital that we have in order to expand our business, that’s not to say that you know come a quarter or two down the road if our material business in South America and North America starts to really ramp up and we’re spending awful lot of cash that we certainly would look to upgrade ourselves in any way that we can.

So I guess the best way to say it is it’s on the table in the future, but I don’t think it’s pointing to be in the near term something that happens.

Michael Barrentine (ph) - Barrentine Investment Advisors (ph)

Okay. Thank you very much and good luck in the coming quarters.

Richard Galterio

Thank you.

Hernan Welch

Thanks.

Operator

Thank you. Our next question is from the line of Alan Stone with WallStreet Research. Please go ahead.

Alan Stone - WallStreet Research

Yes, thank you Rich, Hernan for a nice overview. Maybe, do you give any formal guidance for the company? Is there any guidance out there or what is the street kind of looking for in terms of this forward year in terms of just overall revenue, overall level of profitability.

Richard Galterio

Well Alan, we haven’t given formal guidance, because we have a shareholder vote coming up in a couple of weeks that will determine whether or not we are going to make the acquisition of the two magnesium companies that we have pending. And as I stated in the call earlier, after those acquisitions are even determined that they are going to happen or they are not going to happen and we certainly hope that they will happen, we are going to be in a position to provide a little bit more detailed information about what we see going on for the rest of the year.

What we have said at this point in time, we see our business improving over what we did last year. So I guess you can take last year and take some sort of growth trend off of that to start building on thesis and we will provide more information once these acquisitions are determined.

Alan Stone - WallStreet Research

Right. And I think you mentioned that magnesium prices are higher today than it were a year ago too, so...

Richard Galterio

Yes, significantly.

Alan Stone - WallStreet Research

So that should help. Good, well good. It sounds like you are defiantly on a nicer trend. Thank you.

Richard Galterio

Okay.

Operator

Thank you. Your next question is from (Inaudible) a private investor. Please go ahead.

Unidentified Participant

Hello. Thank you for the report. I just have one question. You are in the magnesium business, what do you see for the long-term demand for this material? Lets say five years our, 10 years out, 15 years out, so on and so forth and why?

Richard Galterio

Okay, that’s a terrific question and what I can tell you is we are building our ability to ramp up our capacity, because we see some very good things happening for the magnesium industry in the future. The growth that’s going to come out of the magnesium industry over the course of the next several years and probably for the next five to 10 years, we believe is going to come primarily out of the automobile and aerospace industry.

As I’m sure you are aware, in the United States the fleet sales in the U.S. are to be raised to the average mile per gallon per car or per automobile to reach 35 miles per gallon. There is really only two ways that they are going to be able to get there, better engines and lighter cars. Because magnesium is a lighter and stronger structural metal than aluminum, there are a number of different publications out there that will say exactly what I’m saying, is that the amount of magnesium used in the automobile industry could go up about 10, 15, 20 fold and some even say a lot more than that. If that’s the cast, the amount of magnesium produced in the world right now is nowhere near enough to satisfy that demand. So as that moves forward, we believe that’s going to be positive for the industry.

The other thing that will be very positive for the industry is as the amount of magnesium grows to a larger number and we are talking about maybe a $1 billion in total sales over the course of the year, there will be some futures markets that developed and in futures markets developed that will further increase the ability for people planning their automobiles and aerospace materials in to the future, to hedge those clocks out over the future, which will enable them to use more and more of those products as we move forward.

Additionally, alloys are getting better every year, better alloys are being developed. So we see those all as positive trends and right now we believe we are taking advantage of a weakness in the industry to make acquisitions, so when we come out the other side we’ll be in a lot stronger position and we’ll have a lot of ability to growth without making…

Unidentified Participant

That’s very interesting. I’m an engineer in the automotive industry now for 25 years and what do you think about magnesium replacing lithium in batteries?

Richard Galterio

I know there is a lot of work that’s being done in the magnesium battery industry. There’s hurdles that they have to overcome, but there’s a lot of people that believe that magnesium will be a much better metal for that. When that happens and we are not in that business, so it’s pretty difficult for me to comment when something like that might happen.

Unidentified Participant

Okay, thank you.

Operator

We have no further questions in queue at this time. I would like to turn the floor back over to management for any closing remarks.

Richard Galterio

Well, once again we’d like to thank all of our shareholders and interested parties for attending this conference call. We look forward to speaking to you all again as we report our second quarter number in a few months and as always, we are working very hard and diligently to move our company forward and increase the value of our company for our shareholders and once again, thank you much and have a great day.

Hernan Welch

Thank you.

Operator

Ladies and gentlemen, this does conclude today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.

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