LOS ANGELES and SHENZHEN, China, Oct. 29 /Xinhua-PRNewswire-FirstCall/ -- Gulf Resources, Inc. (the "Company") (OTC Bulletin Board: GUFR - News) a leading producer of Bromine and crude salt in China through its wholly-owned subsidiary Shuoguang City Haoyuan Chemical Company Limited (SCHC), announced today it signed a definitive agreement to acquire substantially all of the assets of Shouguang City Renjia Area, a bromine producer located in close proximity to SCHC for approximately $6.4 million in total consideration.

 

The assets include a 50-year mineral rights and land lease covering 2,165 acres through December, 2054, which has been paid in the full. The property has 200,000 to 250,000 metric tons of proven bromine reserves. Additional assets to be conveyed with the purchase include the related production facility, wells, pipelines and other production equipment, in addition to the current buildings and other assets on the property. The Company executed an asset purchase agreement with Mr. Jiancai Wang, the sole owner on October 25, 2007.

 

The facility is currently operating at 65 percent capacity and produces approximately 3,700 metric tons of bromine annually through 398 wells, which equates to $6.8 million in revenues and $1.8 million in net income at current market prices. Gulf Resources anticipates making $4.2 million in facility upgrades and capital expenditures over a four month period, which are expected to increase capacity utilization to 85 percent and increase overall bromine production output to 4,800 metric tons annually. In addition, the Company estimates the property will yield approximately 25,000 metric tons of annual crude salt production, equating to $0.33 million in incremental revenue.

 

"The acquisition of Shouguang City Renjia Area is part of our strategic plan to utilize our valuable exploitation license to complete targeted bromine asset purchases which will further complement the Company's business by expanding its overall reserves and increasing annual production output," stated Ming Yang, CEO, Gulf Resources, Inc. "We will leverage our strong production capabilities and distribution platform to create additional economies of scale for future margin enhancements which will ultimately decrease the payback period."

 

The asset purchase is subject to various conditions, including applicable regulatory approvals. Further details on the terms of this transaction can be found in the Company's 8-K which will be filed with the Securities and Exchange Commission.