Gulf Resources Provides Updates on the Rectification of its Bromine Business

Published Mar 15th, 2018

SHOUGUANG, China, Nov. 01, 2017 (GLOBE NEWSWIRE) -- Gulf Resources, Inc. (Nasdaq:GURE) ("Gulf Resources" or the "Company"), a leading manufacturer of bromine, crude salt, specialty chemical products, and natural gas in China, today announced updates on the rectification of its bromine business.

On September 1, the Company announced it received notification from the government of Yangkou County, Shouguang City that production at its factories and mines had to be halted in order for the Company to perform “rectification and improvement in accordance with the country's new safety, environmental protection requirements.”

Since that time, the local government organized the Safety Supervision and Administration Department and the Environmental Protection Departments conducted inspections of every bromine production enterprise within its jurisdiction, in order to improve security, environmental protections, pollution, and safety.

The Company has been working closely with the County authorities to develop rectification plans for both its bromine and its chemical businesses. The Company and the government have now agreed on a plan for Haoyuan Chemicals, the Company’s bromine business, which includes the following:

      I.        The coal boilers should be dismantled. The “conversion of coal to electricity” and “conversion of coal to gas” or the connection to the centralized pipe network should be carried out.

     II.        Positions related to chlorine should all adopt automatic control (or remote control). Emergency cut-off devices should be provided for liquid chlorine vaporization. Video monitoring and toxic gas alarms should be set as required and should be in normal operation.

    III.        Emergency facilities for leakages regarding above-ground storage tanks should be provided (collecting pool, cofferdam, receiving tank, dumping pump, etc). It is encouraged to use underground storage tanks. For each storage tank, high level alarms and high level interlocking shut-off valves should be provided as required. Meanwhile, liquid level detectors should be installed.

    IV.        Hardening should be carried out for site road, unloading area, device area, storage tank area and gasification area of liquid chlorine storage. It is encouraged to carry out hardening for the entire site.

     V.        All pipes inside the plant area should be buried or above-ground pipe supports should be adopted. Cables should be placed inside pipes and pipe supports should be used. Related labels and flow direction should be marked clearly. It is forbidden to place cables in a disordered way.

    VI.        Anticorrosion should be carried out for all devices, pipes, valves and flanges inside the plant without any terrible rust. Related caution labels should be suspended and posted as required. Misuse, hanging in a disordered way and damage are forbidden.

   VII.        Attention should be paid to the cleanness and greening inside the plant. Leakage is strictly forbidden.

  VIII.        Aqueducts and crude salt pans of some mining areas should be modified again to strengthen the leakage prevention and prevent underground brine and waste water from polluting surrounding farmland. Leakage prevention should be checked each year and updated on a regular basis.

    IX.        In case the related crude salt pan of the bromine factory cannot consume the waste water generated by the factory, negotiation should be made with surrounding enterprises.

After the rectification is completed, the County will entrust relevant governmental supervisory departments and safety and environmental experts to conduct a joint inspection. We may start production again if we pass the inspection, otherwise production shall be halted until the rectification has been approved. If the Company fails inspection twice, we will be forced to close the factories according to law.

The Company believes the new environmental policies are very important for the quality of life in China. While the measures the Company must take to implement the policies are costly and time consuming, the Company believes they are essential. It also believes that in the end, the Company’s position in the bromine business will be significantly strengthened, as many smaller and unlicensed competitors may be unable to pass inspections or to finance needed improvements.

Gulf Resources is committed to undertaking and completing all of the rectification steps which the Company believes will cost approximately US$35 million. The Company believes that the rectification for all of the bromine business will be completed and that operations will recommence by the end of March 2018.  However, the Company will try its best to implement the measures quickly to commence production for part of its bromine factories before this date.

At this time, the government has not issued plans for the Company’s chemical business. Because the factories of chemical business are located in residential areas, the government may need longer time to formulate its plans and make a decision. The Company is in discussions with the government to arrive at a rectification plan for its chemical business. As soon as it receives the government’s detailed plan, it will begin developing its strategy and communicate with investors.

In Sichuan, the Company has found a solution for the waste water, and it will continue to resolve the technical drilling issues for its natural gas project.

Financial Implications

Since September 2017, all of the bromine and chemical operations have been closed. We expect that these operations will be closed during the entire fourth quarter of 2017. As a result, the Company will report reduced earnings for the third quarter of 2017 and a loss for the fourth quarter of 2017. The Company is currently reviewing the financial implications and will report to investors in the near future.

Gulf Resources would like to reiterate to investors that as of June 30, 2017, the Company had more than US$176 million in cash. This cash will enable Gulf to make the improvements in its bromine business as well as any improvements that may be required for its chemical and natural gas businesses.

Mr. Liu Xiaobin, the CEO of Gulf Resources, stated, “Sometimes events that appear to be bad news are actually great opportunities. We are obviously disappointed that our factories and mines had to be closed and that our earnings for 2017 will be disappointing. However, we believe the government is doing the right thing by taking strong steps to improve the environment. Our management is working extremely closely with the local authorities to resolve all of these issues are quickly as possible.”

“We further believe,” Mr. Liu continued, “this could turn out to be a very exciting business opportunity for Gulf. We believe our mines and factories have had generally higher quality standards than those of most of our competitors. We believe that unlicensed competitors may be permanently closed and that smaller competitors may not have the capital to upgrade. We may have opportunities to purchase these competitors at a comparable cheaper price. In addition, with fewer competitors, we expect that utilization and profitability in our industries could increase. Over the long-term, we believe our earnings power may increase as well. With our very large cash position, we should be able to rectify our factories, make acquisitions, develop our natural gas project, and also enhance shareholder value.

“We will continue to communicate with our shareholders,” Mr. Liu continued, “as we gain more visibility as to the cost and the timing of the rectification program in bromine and the plans for the similar program in chemicals.”

About Gulf Resources, Inc.
Gulf Resources, Inc. operates through three wholly-owned subsidiaries, Shouguang City Haoyuan Chemical Company Limited ("SCHC"), Shouguang Yuxin Chemical Industry Co., Limited ("SYCI"), and Daying County Haoyuan Chemical Company Limited (“DCHC”). The company believes that it is one of the largest producers of bromine in China. Elemental Bromine is used to manufacture a wide variety of compounds utilized in industry and agriculture. Through SYCI, the company manufactures chemical products utilized in a variety of applications, including oil and gas field explorations and papermaking chemical agents, and materials for human and animal antibiotics. DCHC was established to further explore and develop natural gas and brine resources (including bromine and crude salt) in China. For more information, visit www.gulfresourcesinc.com.

Forward-Looking Statements

Certain statements in this news release 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 general economic and business conditions in the PRC, future 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 other oilfield and power production chemicals, changes in technology, the ability to make future bromine asset purchases, and various other factors beyond its control. All forward-looking statements are expressly qualified in their entirety by this Cautionary Statement and the risk 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.

CONTACT: Gulf Resources, Inc.
Web: http://www.gulfresourcesinc.com

Director of Investor Relations
Helen Xu (Haiyan Xu)
beishengrong@vip.163.com