Tuesday, May 04, 2010

BlueFire Ethanol

Shares of BlueFire Ethanol Fuels, Inc. (BFRE: OTC/BB) are little changed since we first profiled the company after it was awarded a renewable fuels grant by the Department of Energy in December 2009. Based in California, BlueFire has licensed cellulosic ethanol technology from The ARK Group of Companies and plans to biorefineries to produce transport ethanol.

BlueFire has a construction permit to build a four million gallon biorefinery facility near Lancaster, California. Total cost is expected to range from $100 million to $125 million.

However, it is not the Lancaster facility that has the support of the Department of Energy. BlueFire is planning another project in Fulton, Mississippi to process as much as 700 metric tons of saw mill residue and other woody biomass into ethanol.

The DOE has offered a total of $88million, of which $40 million was awarded in 2007 and another $48 milllion in the recent round. BlueFire has also sought $250 million in loan guarantees from the DOE that will cover the matching requirements.

Bluefire management remains confident that the two projects will create construction and manufacturing jobs - as many as 1,000 altogether. Then another 100 people could be put to work in operations and maintenance. In its current development stage BlueFire has nine full-time and two part-time employees.

The Company reported a profit for the year 2009, on revenue from Department of Energy development contracts. With approval of the loan guarantee by the DOE, BlueFire could be well on the way to accomplishing its goals for both California and Mississippi. Its only long-term obligation at the end of the last fiscal year was a book entry for the Company’s warrant liabilities of $2.3 million.

This penny stock looks highly speculative today. However, we suggest investors with a tolerance for risk look carefully at BlueFire should the Company get the DOE loan guarantees.

Neither the author of the Small Cap Strategist web log, Crystal Equity Research nor its affiliates have a beneficial interest in the companies mentioned herein.

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