Gulf Resources Completes Acquisition of Bromine and Crude Salt Manufacturing Assets

Gulf Resources Completes Acquisition of Bromine and Crude Salt Manufacturing Assets

Gulf Resources, Inc., announced that one of its wholly-owned subsidiaries Shouguang City Haoyuan Chemical Company Limited has completed the acquisition of manufacturing assets involved in bromine and crude salt production owned by three individual residents of the People’s Republic of China, Fenqiu Yuan, Han Wang and Yufen Zhang.

On January 7, 2009, SCHC signed an agreement to 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 acquisition is expected to increase the Company’s annual production capacity by 3,000 tons of bromine and 200,000 tons of crude salt when the assets are fully operational, expanding the consolidated annual production capacity of SCHC to 34,000 tons of bromine and 300,000 tons of crude salt.

“We are very glad to see the rapid completion of this acquisition of manufacturing assets, and have already started the maintenance and upgrade of existing facilities, which are currently not operational, to achieve optimal operating conditions. We expect to start formal production using the assets in April 2009,” said Ming Yang, CEO of Gulf Resources. “The completion of this acquisition enables us to utilize our valuable exploration license to rapidly expand our bromine production capacity and market share, given the limited number of bromine exploration licenses issued. In addition, the newly acquired assets allow us to better utilize the economic benefits of crude salt, a byproduct of bromine production, which we believe offers attractive gross margin.”

Consideration for the bromine and crude salt manufacturing assets was $11.5 million, of which $10.0 million was paid in cash and $1.5 million was paid by the issuance of 1.5 million shares of the Company’s common stock at price of $1.00 per share. The Company expects 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 long-term contract prices for year-end 2008.

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