Gulf Resources (GURE) Offers Update on Sichuan Natural Gas Project; Sees $3M of CapEx in 2016

Gulf Resources, Inc. (Nasdaq: GURE) announced the updates on its Sichuan natural gas project.

We would like to bring our shareholders up to date on the progress of our Sichuan Natural Gas project.

We are very pleased with the progress we have made in the past quarter. We have:

• Signed the agreement to purchase the equipment needed for drilling and converting the natural gas.
• Constructed the roads and related infrastructure needed to begin operations in the remote and mountainous region of Daying county.

The total capital expenditures in 2016 should be approximate $3 million. This total includes equipment, roads, and all other related expenses.

We expect to begin production on the first well in October or November.

Once production begins, we expect to have a phased development process. For the beginning three to six months, we will produce at trial production levels. After this period of time, we expect to produce at maximum levels step by step. At the present time, based on the studies we have completed, we estimate the well should be able to produce at maximum levels for a minimum of 10 years.

Once we achieve maximum output, we will be in a position to evaluate our plans for additional wells. Assuming the first well produces to the levels we expect, we plan to drill 3-4 new wells in 2017. Based on the results of these wells, we could accelerate our development in 2018.

The next group of wells should cost approximately $8 million a well. If we significantly increase the number of wells drilled, the cost per well may be reduced.

At this point in time, there is no way to know how long the approval process will take. The company has the strong support of the government of Daying County. The county government will work with the company try to obtain whatever provincial approvals are needed.

The first well in Sichuan is permitted for both natural gas and bromine. The bromine concentrations in Sichuan are about 7x higher than those in Shandong. There is every reason to believe that we will be able to produce bromine in addition to the natural gas. However, we will not begin to consider developing the bromine reserves until after the natural gas is being produced at full capacity.

Based on our current development plans, we should continue to be free cash flow positive.

We will be reporting our second quarter in early August. We are very pleased that our project in Sichuan is progressing as planned.

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