Gulf Resources Agrees to Acquire Bromine and Crude Salt Manufacturing Assets
Gulf Resources, Inc., a leading manufacturer of bromine, crude salt and specialty chemical products in the People’s Republic of China, today announced that one of its wholly-owned subsidiaries Shouguang City Haoyuan Chemical Company Limited has signed an agreement with three individual residents of the People’s Republic of China, Fenqiu Yuan, Han Wang and Yufen Zhang (the “Sellers”), to acquire manufacturing assets involved in bromine and crude salt production.
Upon the closing of the transaction by January 30, 2009, SCHC will acquire the buildings, wells, machinery, equipment, pipelines, power circuits and inventory owned by the Sellers, and any warranties associated therewith, located on 6.52 km2, or approximately 1,611 acres, in Shouguang City Renjiazhuangzi Village North Area (the “Property”). The filing process for the Company to obtain 50-year land use rights for the Property is currently underway. SCHC has no relationship with the Sellers or the original operations of the assets being purchased. The assets have been non-operative since January 2008. Following the successful closing of the acquisition, the Company expects to start production utilizing the newly purchased assets in April 2009.
Consideration for the asset purchase includes $10.0 million in cash, of which $2.0 million has been delivered as a security deposit to the Sellers, and the issuance of shares of common stock equal to $1.5 million, which shares will be delivered to the Sellers within 30 days after the closing date of the transaction. The purchase price per common share is $1.00. The transaction will bring diluted share count to 101.2 million shares.
“Although the assets are not currently operational, we anticipate that the acquisition of these assets, together with the implementation of our marketing and distribution systems and utilization of our operating rights, will result in additional annual production capacity of 3,000 tons of bromine and 200,000 tons of crude salt, expanding the consolidated annual production capacity of SCHC to 34,000 tons of bromine and 300,000 tons of crude salt. We expect the additional production of bromine and crude salt from these new assets to add $3.69 million to $4.10 million and $3.50 million to $4.00 million, respectively, in incremental revenue in fiscal 2009 based on current market prices,” stated Ming Yang, CEO of Gulf Resources. “We consider this acquisition an important strategic milestone, as it enables us to utilize our valuable exploration license to expand market share compared to other bromine producers. Given the limited number of bromine properties left on the market, we believe to continue to be competitive in the industry we need to act quickly to emerge as a frontrunner as our industry consolidates.”
The closing of the transaction is subject to certain closing conditions, including a final assessment of the condition of the assets. Further details on the terms of this transaction can be found in the Company’s 8-K which is expected to be filed with the U.S. Securities and Exchange Commission on January 7, 2009.
