China Direct Inc. (Amex: CDS), a management and consulting company based in the United States, has historically focused more attention on the consulting side of its business. Given favorable traction in the Chinese market and a better financial position, though, company management said it will soon begin focusing its efforts on the management side of its business.

“The consulting business will be the biggest driver of business [currently], but that pendulum is continuing to swing the other way and there’s going to be a point in time, whether it’s late in 2008 or 2009, when that will shift the other way,” said Richard Galterio, executive vice president of China Direct, in an interview at the 20th annual Roth OC Growth Stock Conference this week in Dana Point, Calif.

On the management side of the company’s business, within its portfolio of Chinese companies that operate within the natural resources sector, China Direct’s magnesium companies could be a major driver behind earnings and revenue growth for the company.

“You can’t talk magnesium without talking China Direct,” Galterio said. “The whole magnesium industry could be a catalyst for us. The price of magnesium has increased dramatically in 2007; should that environment continue and magnesium prices continue to increase, it could help us dramatically in 2008.”

From a gross margin perspective, management says Chang Magnesium was a break-even business when China Direct first took over. Now it’s $4 million business.

“If that trend continues into 2009, magnesium will probably be the largest single driver of China Direct’s earnings,” said Galterio. He sees this happening sometime in the next 12 months.

For the third quarter ended Sept. 30, 2007, the Boca Raton, Fla.-based company recorded net income of $2.98 million, or $0.16 per diluted share, compared with a net loss of $0.2 million, or $0.02 per share, for the third quarter of 2006. No analyst estimates were available for this time period.

Revenues were $44.58 million, compared with revenues of $96 thousand in the third quarter ended Sept. 30, 2006. The increase in revenues was mainly attributable to the three companies acquired in China since October 2006: Chang Magnesium, Lang Chemical and CDI Wanda Alternative Energy.

As of its third-quarter earnings release in November, China Direct raised its 2007 net income guidance to a range of $10.5 million to $11.5 million, from $9.5 million.

The firm is also projecting revenue will range between $170 and $180 million for 2007 due to anticipation of continued strong performance from subsidiaries and new joint venture operations expected to come on line in the fourth quarter. Last year, the company booked $13.98 million in revenues. An analyst surveyed by Thomson Financial is forecasting revenues of $174.61 million.

For 2008, the company is forecasting revenues exceeding $270 million with net income exceeding $20 million.

“If you look at the surfer out [in the ocean], we’re that surfer,” said David Stein, chief operating officer of China Direct. “We’ve been practicing how to stay and hold onto that board and were about to see a wave coming and all we have to do is hang onto that wave. China is coming.”

China Direct will report fourth-quarter results by the end of March.

In December 2007, China Direct bought a 51% stake in two magnesium companies.

The first joint venture, Baotou Xinjin Magnesium Co., Ltd. currently has annual production capacity of approximately 7,000 to 8,000 metric tons and plans to distribute an additional 8,000 metric tons in 2008, according to the company. China Direct expects to invest approximately $8.5 million in the form of working capital to increase annual capacity to 20,000 metric tons by the third quarter of 2008.

The second joint venture, Baotou Sanhe Magnesium Co., Ltd. is expected to contribute approximately $7.5 million in the form of working capital to construct a magnesium facility with an annual production capacity of 20,000 metric tons. China Direct forecasts the facility will have 12,000 metric tons of annual capacity by June 2008 and an additional 8,000 metric tons of annual capacity by June 2009.

In November of 2007, China Direct bought CDI Jixiang Metal Industry Co., Ltd., a zinc and lead mining company that owns the sole mining rights to land located in the Yongshun Kaxi Lake Mining area with the capability to produce 10,000 metric tons of zinc and lead on an annual basis.

Shares of China Direct (CDS) were down 1.18%, or $0.08, to $6.72 during morning trading. Shares of China Direct have been trading in the range of $2.49 to $12.95 for the past 52 weeks.