Gulf Resources announced updates to the rectification of its bromine business. In the beginning of January, 2018, Liu Xiaobin, the President and CEO, Li Min, the CFO, Miao Naihui, the COO, went on an inspection tour of the bromine plants accompanied by a U.S. based consultant. The consultant took photographs of the facilities and wrote a report accompanying the photographs. The U.S. based consultant stated in the report, "As can be seen from the photos in this report, Gulf Resources has spent a considerable amount of money in the past two months in performing the rectification of its bromine mines and factories. While there are no guarantees, management feels confident that the government will approve the rectification of the factories and mines. The company still believes it will be able to begin bromine operations step by step shortly after the Chinese New Year."
Gulf Resources announced the closing of its bromine, crude salt and chemical factories for rectification and improvement in order to meet the new environmental rules in China. "At this time, Gulf Resources does not know the timing of further inspections or the cost of remediation and improvement that will be required, nor does the company know how long the factories will be closed. Until the Company understands the full implications and timing of these issues, it will not be able to provide any estimates as to the impact on either earnings or capital expenses. However, the company is currently in discussions with the county and city governments to resolve these issues as rapidly as possible. While the company does not yet know all of the issues that might be involved, Gulf believes that with respect to its Bromine production that it may have to purchase new equipment and utilize more modern technology in order to increase utilization; Converting the material used for energy from coal to natural gas, electricity, or solar power; develop better waste water treatment, and invest in equipment that minimizes emissions. While there is no way of knowing at this juncture how much all of these steps will cost, the company believes it could be between $15M-$30M," the company said.
Gulf Resources announces the temporary suspension of production at its first natural gas well in Sichuan Province. In the initial stages of production, the content of the natural gas did not meet the expected quality standards. The basic issue is that the water content in the natural gas is too high, which is a common problem in natural gas wells. From the outset, the company was aware that this type of problem could occur, which is why it was only producing test quantities of natural gas. Gulf Resources currently is consulting with the professional petroleum experts from Southwest Petroleum University to assess the issue and make recommendations. At the present time, the company believes the solution will likely involve the addition of relatively inexpensive pieces of equipment, which should take a few months to procure and install. However, until the full plan from the Southwest Petroleum University team is received, the company cannot be completely certain of the cost or the timing. While this is a short-term set back, the company believes this will not change the intermediate to long-term opportunities for natural gas production in Sichuan Province. Gulf Resources continues to be optimistic about both its core business and the opportunities in Sichuan Province. At the present time, Gulf expects to report strong results in bromine and improved results in chemicals for the second quarter of 2017. Overall, excluding potential extraordinary items and currency exchange problem, the company expects to report that sales in Q2 increased over those in the previous year. It also expects to report that earnings and earnings per share increased by double digits.