Acquisition of 2,318 acres is expected to yield approximately 3,700 tons of
annual bromine production equating to $6.85 million in revenue and $1.8
million in net income
LOS ANGELES and SHENZHEN, China, June 11 /Xinhua-PRNewswire/ -- Gulf
Resources, Inc. (the "Company") (OTC Bulletin Board: GUFR) a leading producer
of Bromine and crude salt in China through its wholly-owned subsidiary
Shuoguang City Haoyuan Chemical Company Limited (SCHC), announced today that
on June 8, 2007 it completed an asset purchase agreement with Dong Hua Yang,
an individual who controls bromine production property in the Dong Ying City
Liu Hu area, for approximately $6.7 million in total consideration.
The key asset includes a 50-year property lease covering approximately
2,318 acres, or 9.38 square kilometers, which is located in close proximity to
SCHC. The lease is paid in full through maturation on April 30, 2052. The
property maintains proven reserves of approximately 235,000 tons of bromine.
Additional assets to be conveyed in this purchase include the existing bromine
production infrastructure, wells, pipelines, power circuits, and other
equipment, as well as the existing buildings on the property. The property
and assets carry a book value of approximately $7.5 million, which management
believes is approximately seventy percent of the current market value.
The facility is currently producing approximately 3,700 tons of bromine
annually, which equates to $6.85 million in revenues and $1.8 million in net
income at current market prices and is operating at 69 percent capacity
utilization. Gulf Resources plans to invest approximately $3.3 million in new
equipment and property improvements during 2007. These improvements are
expected to increase overall production output by 21.6 percent to more than
4,500 tons of bromine annually with a target plant utilization rate of between
84 to 89 percent.
"The acquisition of the Dong Ying City Liu Hu area is expected to increase
SCHC's overall bromine production output by approximately 24 percent to over
19,100 tons annually, and salt production by approximately 23.4 percent to
97,500 tons annually and be accretive to 2007 earnings," stated Ming Yang, CEO
of Gulf Resources, Inc. "This acquisition is consistent with our stated plan
to acquire and consolidate local bromine producers while expanding our
collective production capacity and overall output. As the government continues
to closely monitor unlicensed operators, the bromine production and
distribution licenses we maintain have enabled the Company to purchase new
reserves at attractive valuations while providing owners with a way to
monetize under utilized assets, a true win-win for both parties. In addition,
this acquisition is expected to increase our proven bromine reserves to
approximately 1.05 million tons. Given the long duration of these associated
land leases, we are building a recurring business model with attractive
margins and strong cash flow, which management expects will drive significant
shareholder value in the coming years."
Consideration for the asset purchase includes approximately $4.6 million
in cash at closing, a promissory note for approximately $900,000 and 409,795
shares of restricted Gulf Resources (GUFR) common stock valued at $941,300
based on a stock price of $2.30 per share.
This acquisition was completed on June 8, 2007 and further details on the
terms of this transaction can be found in the Company's 8-K to be filed with
the Securities and Exchange Commission on June 11, 2007.
Gulf Resources, Inc.
Gulf Resources, Inc. operates through two wholly-owned subsidiaries: SCHC
which is engaged in manufacturing and trading Bromine and Crude Salt in China.
Bromine is used to manufacture a wide variety of bromine compounds used in
industry and agriculture, and SYCI which manufactures and sells chemical
products utilized in oil & gas field explorations and as papermaking chemical
agents. For more information, please visit http://www.gulfresourcesco.com.
Safe Harbor Statement:
Certain statements in this news release may contain forward-looking
information about Gulf Resources and its subsidiaries business and products
within the meaning of Rule 175 under the Securities Act of 1933 and Rule 3b-6
under the Securities Exchange Act of 1934, and are subject to the safe harbor
created by those rules. The actual results may differ materially depending on
a number of risk factors including, but not limited to, the following: the
ability of Gulf to complete the asset purchase of Dong Ying City Liu Hu area,
the general economic and business conditions in the PRC, product development
and production capabilities, shipments to end customers, market acceptance of
new and existing products, additional competition from existing and new
competitors for bromine and crude salt, changes in technology, and various
other factors beyond its control. All forward-looking statements are expressly
qualified in their entirety by this Cautionary Statement and the risks factors
detailed in the Company's reports filed with the Securities and Exchange
Commission. Gulf Resources undertakes no duty to revise or update any forward-
looking statements to reflect events or circumstances after the date of this
release.
Investor Relations Contact:
Ethan Chuang (310) 470-2886
Ethan@gulfresourcesco.com
Matthew Hayden
HC International, Inc.
(858) 704-5065
matt@haydenir.com