Gulf Resources (GURE) Announces Delay in Completion of Sichuan Province-Located Brine Water, Nat Gas Well Construction

October 26, 2016 8:32 AM EDT

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Gulf Resources, Inc. (Nasdaq: GURE) announces a delay in the completion of its first brine water and natural gas well field construction in Sichuan Province due to excessive rainfall and severe flooding.

Portions of Sichuan Province and much of central and southern China were hit by the largest amount of rainfall in over 20 years. As can be seen from some of the quotes below, which come from the news media and can all be easily found online, this flooding cost China $33 billion and left millions of people homeless. The first series of storms began in June. Further storms hit in July and August. Finally, as can be seen from the final quote, even more storms hit Sichuan from September 18th onwards, which is quite unusual.

“Several days of heavy rain and flooding in southern and eastern China has left at least 128 people dead and over 40 missing, according to Chinese authorities. Some areas have recorded over 200 mm of rain in 24 hours.”

(Floodlist- July 5, 2016 5 JULY, 2016 BY RICHARD DAVIES IN ASIA, NEWS)

“China’s Ministry of Civil Affairs (MCA) says that since 30 June, floods, hail, landslides, mudslides and other disasters have affected the 11 provinces of Jiangsu, Anhui, Jiangxi, Henan, Hubei, Hunan, Guangxi, Chongqing, Sichuan, Guizhou and Yunnan.”

(Floodlist- July 5, 2016 5 JULY, 2016 BY RICHARD DAVIES IN ASIA, NEWS)

“The death toll of 128, as reported on 04 July, has risen over the last few days. Since 30 June, the severe weather has now left 140 people dead, with 41 still missing, according to MCA figures.”

“The flooding that struck parts of China during July this year were some of the worst since 1998, and are likely to cost $33 billion, according to Aon catastrophe report.”

(5 AUGUST, 2016 BY FLOODLIST NEWS IN ASIA, INSURANCE)

“Since 18 September, torrential rainfall has caused flooding, mud flows and landslides in Sichuan and Yunnan provinces. As of 22 September, 14 deaths were confirmed and nine people were reported missing while an additional 5,400 people were temporarily relocated. 81,000 people across 28 counties and 13 cities in the two provinces have been affected, including over 8,000 people who need immediate assistance. (OCHA, 26 Sep 2016)”

Relief Web-China: Floods and Landslides - Jun 2016

Our first well field is being constructed in a very rural and mountainous region. Due to the unexpected rains which had impact on the construction for equipment housing, underground pipe network, reservoir, plant fence, and etc.

We believed that the weather would follow its normal patterns, with some rain in June and July. We had not expected the severe flooding during these months. However, even with the rains in July and August, we had thought we could achieve our original schedule. We had not expected the massive rains at the end of September and beginning of October, which are normally a drier period.

As a result of the rain and the floods, we now believe our first well will be delayed and will be in operation by January.

In addition, once the brine water and natural gas well field construction been completed, we do not believe that the normal floods will have any intermediate or long-term impact on our natural gas project. The local governments are assisting us to moving this project forward as quickly as possible. The first roads that we have built will also make it easier for us to construct subsequent wells and drilling operations. Despite this delay, we continue to be extremely optimistic about the opportunities in Sichuan.

China still has a severe shortage of natural gas, and with the government focusing on improving the environment, we believe natural gas prices will continue to rise.

Gulf Resources will be reporting its third quarter 2016 results by the second week of November. This delay in the first well operation will have virtually no impact on the financial results.



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