SHOUGUANG, China, May 20, 2020 (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 results for the first quarter ended March 31, 2020 and provided a business update on events occurring after the end of the first quarter 2020.
Because of pollution issues, Chinese New Year, and circumstances related to the COVID-19 pandemic outbreak, the Company’s bromine facilities were closed for most time of the first quarter 2020.On Nov. 25, 2019, the government of Shouguang City issued a notice ordering all bromine facilities in Shouguang City to temporarily stop production from December 16, 2019 to February 10, 2020 for environmental reasons.
Due to the COVID-19 outbreak, the Company received an approval dated on February 27, 2020 allowing the Company to resume its bromine production issued by Shouguang Comprehensive Coordination Group for Epidemic Prevention and Control.
In January 2020, the Company obtained an environmental protection assessment approval issued by the government of Shouguang City, Shandong Province for the proposed new Yuxin chemical factory.
On January 27, 2020, the Company completed a 1-for-5 reverse stock split of its issued and outstanding shares of common stock, which was effective for trading purposes as of the commencement of trading on January 28, 2020.
On February 12, 2020, the Company announced that it received a notice from The Nasdaq Stock Market LLC (“Nasdaq”) on February 11, 2020 indicating that the Company has regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5450(a)(1) for continued listing on The Nasdaq Global Select Market.On March 5, 2020, the Company received a governmental approval allowing the Company to resume production at bromine factories #1, #4, #7, and #9.
In the mid-March 2020, the Company began trial production at bromine factories #1 and #7.Since the Company’s factories were closed for most time of the first quarter 2020, the Company generated relatively little revenue and sustained operating losses. For the first quarter 2020, ending March 31, 2020, Gulf Resources reported net revenue of $557,670 up from $38,570 in the same quarter of the previous year. The loss from operations was $4,835,429 compared to $6,396,030 in the same quarter of the previous year. The net loss after tax was $3,539,758 compared to $4,904,138 in the same quarter of the previous year. The net loss per share was $0.37 compared to $0.52 in the same quarter of the previous year.Despite the closure of its facilities for 30 months in the past, the Company’s balance sheet for the first quarter 2020 remains strong. As of March 31, 2020,The Company had cash of $93,632,690;Cash per share was $9.84*;Current assets were $96,207,226; and current liabilities were $2,476,301;Working capital per share was $9.85;Shareholder’s equity was $255,051,983; andBook value per share was $26.80*.Since the end of the first quarter 2020, the Company has made substantial progress in reopening its businesses.Bromine factories #1 and #7 commenced commercial production on April 3, 2020.Bromine factories #4 and #9 commenced commercial production on May 6, 2020. Because these two factories were not operational in 2019, their ramping up will be slower than that of factories #1 and #7.
The Company has been in discussions with the local government for the opening of bromine factories #2, #8, and #10. The Company is optimistic that it will receive approvals and will be able to open these factories by 2020.
The Company believes its bromine business will grow strong. To the Company’s knowledge, some of the bromine factories in China are still closed, and some of them may be closed permanently due to the strict measures being taken by the Chinese government in an effort to battle against environmental pollutions. The Company expects the demand and pricing for bromine to increase. While sales of some downstream products are down, bromine is increasingly being used as a disinfectant for humans and animals as well as in pharmaceutical intermediate products. The Company expects this trend will lead to increasing demand and strong pricing for bromine.
The Company is planning to begin construction of its new Yuxin Chemical factory in the second quarter 2020. Construction is expected to take approximately one year. It is expected that it will take additional 6 months to complete equipment installation and testing. The Company expects to begin trial production at the beginning of 2022. This factory will be expected to focus more on the higher margin pharmaceutical intermediate products. While this factory will be smaller than the combined two old factories, the Company expects it to make higher net profit margin.
On May 7, 2020, Petro China, the largest oil and gas producer and distributor in China, announced that it has discovered a huge natural gas belt found in China with an estimated reserve of over 1 trillion cubic meters. According to Petro China and news reported in major media, such as Xinhua Net and China.org.cn, this natural gas belt is located in Tianbao Township of Daying County (http://www.xinhuanet.com/english/2020-05/07/c_139038228.htm). This newly discovered natural gas belt is close to the Company’s current natural gas well site as well as its two additional registered sites. Gulf Resources believes this discovery could have a material positive impact on the Company. The Company believes that the government will more focus on finalizing the exploration planning for the township and the county.
On May 1, 2020, the Opinions of the Ministry of Natural Resources on Several Issues in Promoting the Reform of Mineral Resources Management (Trial), promulgated by the Ministry of Natural Resources of PRC on January 9, 2020 (the “Opinions”), came into effect. Pursuant to the Opinions, privately owned enterprises are allowed to participate in the oil and gas exploration and production. The Company believes its natural gas business will benefit from the Opinions.Mr. Liu Xiaobin, the CEO of Gulf Resources, stated, “The past 30 months have been long and very difficult for our company as we had to close all of our facilities for the reasons outlined above. During this difficult time, we were hit by one of the most destructive typhoons in the history of China. When we were getting production back, we were adversely impacted by the coronavirus pandemic. Now, however, we can see real signs of progress.”“We have four of our bromine facilities in commercial production,” Mr. Liu continued. “We are optimistic about the remaining three bromine factories. We have drilled more new wells and bought all new equipment. Now, we are about to start construction of our new chemical factory, which is being planned to focus more on higher margin pharmaceutical intermediate products, and Petro China has discovered one of the biggest natural gas belts in Chinese history in the same town that our existing natural gas well and two additional registered sites are located.”“Despite the fact that all of our facilities closed for most time of the past 30 months and the cost of buying all new equipment and drilling more new wells, we are still in a strong financial position with $93.6 million in cash,” Mr. Liu continued. “We have enough capital to build our new chemical factory, reopen our remaining bromine and crude salt facilities, and drill our wells in Sichuan.”“We look forward to returning to profitability in the near future,” Mr. Liu concluded. “We appreciate the support of our shareholders. Once we start construction on our chemical factory and get a better sense of timing for the approval of our remaining bromine factories, we will provide investors with further updates on our three-year plan for growth and profits. We are very optimistic about our future.”(*These calculations are not audited and based on the number of shares outstanding of 9,517,427 shares as of March 31, 2020)Conference CallGulf Resources management will host a conference call on Thursday, May 21, 2020 at 08:30 AM Eastern Time to discuss its financial results for the First quarter 2020 ended March 31, 2020.Mr. Xiaobin Liu, CEO of Gulf Resources, will be hosting the call. The Company management team will be available for investor questions following the prepared remarks. To participate in this live conference call, please dial +1 (877) 407-8031 five to ten minutes prior to the scheduled conference call time. International callers should dial +1 (201)689-8031, and please reference to “Gulf Resources” while dial in.The webcasting is also available then, just simply click on the link below: http://www.gulfresourcesinc.com/events.html A replay of the conference call will be available two hours after the call’s completion during 05/21/2020 11:30 ET – 05/28/2020 11:30 ET. To access the replay, call +1 (877) 481-4010. International callers should call +1 (919) 882-2331. The Replay Passcode is 34940.
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