LETTER FROM MR. LIU

September 4, 2023

Dear Shareholders and Associates,

In 2016, I thought one day Gulf could be a $30-$50 stock. We had ten bromine-crude salt factories, two chemical factories, had discovered natural gas and bromine in Sichuan, and had the capital to grow. At the time, I did not know the government would close our factories to improve the environment, COVID would occur, a typhoon would flood our facilities, or the government would increase financial controls on currency.

Despite these issues, in 2021, the management team and I made the decision to pay back partial or all of approximately 11 ½ years of compensation a in Gulf and get. Currently, I am working with no cash but only shares as compensation.  At the time, the stock was much higher than it is now, making our decision look wrong. However, we were- and are- making a long-term bet that Gulf can still be a $30-$50 stock.

Despite the long closure of our factories and our expensive rebuilding, we currently have approximately $115 million or $11.05 per share in cash, and almost no debt. We have not wavered in our belief that our company will generate substantial earnings. The following should not be taken as our projections. They are the views that convinced me to repay almost 11 ½ years of salary and work for no compensation.

In 2022, our bromine and crude salt business had earnings of approximately $14.2 million, with factory #8 only opening late in the year.  Despite the recent price decline, world-wide supplies of bromine are limited. Some former factories, including three of our own, were permanently closed. Demand should strengthen and prices should increase, especially as new uses, like zinc/bromine batteries, materialize. If we can get open our rest two closed factories, bromine and crude salt may earn $30-$40 million a year over time.

Our Yuxin chemical factory expect to be modern. We would not spend more than $60 million if we did not believe that we could earn a strong return. We have temporarily postponed the delivery of the final equipment so we can customize this equipment to the best market opportunities. Chemicals earned $33 million in 2015. While our new factory will be smaller, with our modern equipment and high margin products, we believe former profit levels may be attainable.

We also exptect try to developing an export business in chemicals to enable us to gain the financial flexibility to consider to buy back stock or pay dividends. We are also exploring the possible opportunities for zinc-bromine batteries.

In Sichuan, we continue to wait for the government’s environmental plan. Our current focus is to create a Joint Venture with the Daying county government. While we still do not know if our proposed Joint Venture in Sichuan will be approved, the potential could be greater than our original plan. If we can partner with the local government, we would expect to be able to drill more wells for both bromine and brine.. Since Petro-China has made the largest natural gas discovery in Chinese history in Daying, we think this could be a profitable endeavor. In addition, Daying has much higher concentrations of bromine than does Shandong Province.

If we may earn $30-$40 million from bromine and crude salt, $20-$30 million from chemicals, and $10-$20 million from natural gas, our operating earnings may be $60-$90 million, or $4.00-$6.00 a share after tax and corporate overhead.

Events could change these numbers. The Chinese economy could remain stay weak. We might not be able to open factories #2 and #10. Our attempts to build an export business in chemicals could fail, and the JV in Sichuan could fail to be established. However, the bet that our management and I are making is not that Gulf Resources can be a $4-$6 stock. Our bet is that we can generate high returns and may consider to use our free cash flow to enhance shareholder value. If we can accomplish these goals, our massive bets on the future of the company will have proven right.