Gulf Resources, Inc.
Q3 2017 Earnings Call Transcript

Published: 14 Nov 2017

[Operator:]

Good day, ladies and gentlemen. And welcome to the Gulf Resources 2017 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today’s conference, Helen Xu. Ma’am you may begin.

[Helen Xu:]

Thank you, operator. Good morning, ladies and gentlemen, and good evening to those of you how are joining us from China, and I would like to welcome all of you to Gulf Resources’ third quarter 2017 earnings conference call. I'm really sorry, we have some problem trying to coordinate this earnings conference with system. So me and Mr. Liu we are late for almost 15 minutes and we’re really sorry about that. So we will skip some part of the financial results today and it can save us some time for the discussion and our Director, our CEO Xiaobin Liu will also join us for this call today. I will be offering translation for the comments - the company’s management comments for the company’s operating results. I would like to remind you -- our listeners that in this comments - management’s remarks will contain forward-looking statements which are subject to risks and uncertainties. The management may make additional forward-looking statements. Therefore, the company claims the protection of Safe Harbor for the forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from those discussed today depending upon a number of risk factors, including, but not limited to, the general economic business condition in China, future product development and production capabilities, shipments to end customers, market acceptance of new and existing products, additional competition from the existing and new competitors for the bromine and other oilfields, agriculture and chemical product s and change of technology, the ability to make sure bromine asset purchase and various other factors beyond the company’s control. All forward-looking statements are expressly qualified in their entirety by this precautionary statement and the risk factors detailed with the company’s reports filed with the SEC. Accordingly, our company believe that expectation reflected in these forward-looking statements are reasonable and there can be no assurance of such will prove to be correct. In addition, any reference to the company’s future performance represents the company’s management’s estimates as of today, the 14th of November, 2017. Gulf Resources assumes no obligation to update these projections in the future as market conditions may change. For those of you who unable to listen to the entire call at this time, a replay will be available for 14 days at the company’s website. This call is also accessible through the webcast and the link is accessible through our website. So please look at our press release issued early for details. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

So, good morning, good night. Welcome you all for attending the earnings call for Gulf Resources 2017 third quarter results. Recently we received a letter from large shareholders groups with questions that it wanted us to answer on this conference call. Several other shareholders also submitted questions instead of depending older call reviewing the numbers recorded at quarter end of press release. We are going to focus on the questions that our shareholders have asked. We begin with a small summary of this quarter results. So please refer to the 10-Q and the press release. For more detailed discussions of the financial results of this quarter. There is going to be questions exactly as our shareholders asked to us and we’ll give you how this comes in this call. So firstly, I would like to give a small summary of this quarter first three months ended September 30, 2017 financial results. The revenue declined 39 percentage. Gross profit declined 41 percentage. The general and administrative expense increased 176 percentage to approximately $4.5 million. Income from operations declined 65 percentages to approximately $4.8 million. Net Income declined 67 percentage to approximately $3.4 million. Earnings per share declined 70% to $0.07 from $0.23. For the nine months, cash flow from operations was approximately $23.5 million. Free cash flow was $21.7 million, an increase of 88 percentage. Free cash flow per diluted share totaled $0.46. Cash on hand totaled around $193.4 million, which is approximately $4.14 per share. Net-net cash, which is cash minus liabilities, totaled around $183.7 million, which is approximately $3.92 per share. Shareholders’ equity equaled approximately $392.8 million and approximately $8.39 per diluted share. Tangible common equity, equity minus – which is equity minus goodwill and other intangible assets was approximately $363.9 million, which is cost to approximately $7.78 per diluted share. So now then we are going to show your questions, is being asked by our shareholders one by one.

[Unidentified Analyst:]

The first question is being asked from shareholders mostly is that you said on November 1, in your press release that the company believes that the rectification for all of the bromine business will be completed and that operation will commence by the end of March 2018. Are older factories going to be opened at the same time or do you expect some factories to open before March 2018? Will all of them will open by then. If management can share some more light on approach, a scenario for reassuming production that will be helpful?

[Helen Xu:]

And then here is a response from company management. We will work on factories and mine to get them opened as quickly as possible. We are already in a process of moving factories gasification because the gasification of some factories may be different. At least I feel that some will be finished sooner than others. Well, if that factory has completed its gasification we will approach the government for permission to open them and begin production. We believe it may be possible to open some of the factories in the early – in the first quarter, we would hope to have all the factories opened by the end of first quarter, while working closely with a lot of them to move this process along as quickly as possible.

[Unidentified Analyst:]

Question two. Being asked by shareholder, regarding the chemical business, we have no estimate of much will the cost come in to bring them into compliance of the new regulation? If not when do we expect to have done such as estimate and are technicians starting the timing of the opening of the factories, again shareholders are interested in understanding the cost and schedule of this two new operations of the chemical business?

[Helen Xu:]

And here is response from company management. The company still has not received a definitive plan from the local government regarding its chemical factories. It is expect to receive this plan by the end of November. So however since the chemical factories are located closer to where people live, the plan may be more completed and expensive than there were for bromine. Until the company received the governments plan is we will not able to make any explanation as to current or cost based on our conversation with the government. At this time, the company believes it will be able to meet government’s requirement with cash on hand and open out chemical business segment.

[Unidentified Analyst:]

Question three. We would welcome comments you have about what do you see happening in the industry in China right now, especially some associated with import of product forming and chemical to make up for the lack of products in China. What do you see as opportunities and threat for Chinese bromine and chemical industry, now [indiscernible] but for the industry in China?

[Helen Xu:]

And here is the response from company’s management. The government is dedicated to cleaning up the environment, reducing pollution and protecting the well health of its citizens. We can see the risk to be extremely important. So we do not like having our factories and mines go. We believe the government is doing the right thing. Our people want and deserve a clean and healthy environment. Now we will have one. They do not believe there will be long-term impact on industries. It’s also difficult and expensive to shift bromine from overseas. That's why most of our customers are focused on protecting lawsuit [ph] produced bromine. The additional cost of rectification may have relating in detail impact on our costs. The reason is that our factories have been run into only about 40 percentage utilization, with some factories and mines are closed, we should be able to increase our utilizing sickness in this, this will allow us to spread the cost of increased production. We should be able to earn more money and increase our market share. Market and conditions apply to bromine production and cost. Our customers are low cost operators. It can [indiscernible] problem increase we must share once the factories are re-opened. The economy in China is relatively held – healthy. It continues to grow faster than most other economies. The fact the government is taking should actually provide a boost of further economy, that we will be through the creation of stronger, more efficient company. The government is going to solve such problem, it's about safety, in outsourcing the rectification for better environment, which means that our factories are finally open. Others in other locations will still be closed and we have to change, hence we again stand loss sales in a short period of time. As you believe this rectification program will greatly benefit the bromine and the chemicals industry, smaller and un-licensed producers will close, larger producers will increase their market share and provide a better environment for the communities. Well, we are not making projections. We believe that one year from now we'll be operating at levels almost of much higher sales and profitability than we did previously. Obviously these programs will be very attractive for the natural gas industry in China as well. In conclusion, it will be rectification [ph] and time consumed will offer great opportunities for our company

[Unidentified Analyst:]

Question four. How much money we will lose, while factories are closed?

[Helen Xu:]

And here is the response from company management. We feel these are complicated questions to answer for a number of reasons. Our overhead is relatively low. Our segment on this is complicated because depreciation and amortization and non-cash charges to earnings and some of the rectification costs may have to be expensed. However, the company believes that its cash burn, excluding rectification costs, should not exceed $4 million in fourth quarter. During this time we will be spending money on rectification, some of the $35 million we will spend on rectification will be build the remainder will be hedged [ph] It is difficult at this time to know how the other cost will treat this expenditures. In addition, it will have substantial depreciation and amortization cost, it represents financial charges to our profit and loss statement. Although we have no impact on our cost in future. Finally, it is possible that there may be other charges. For example, we might have to write-off of account receivables, some of our customers who have spent for that. At the present time we do not see this happening. But we cannot completely rule out the possibility. So if you are asking how the closure of factories will impact, our tax sufficient, we would say that, its not a system $4 million, plus the cost of rectification, if you are asking how would it impact our profit and loss statement, the answer to that is more difficult to project.

[Unidentified Analyst:]

Question five. Once the factories are back in operation what’s the cost on sales and earnings for the company?

[Helen Xu:]

And here is the response from company management. It is difficult to know exactly when in fact our factories will be opened. So the comments we will make on this subject will not be related for particular - partially for fiscal year, nor we will include whatever period of time it will start full production. Once our factories are opened, we expect higher sales and earnings than we have had in the past. The reason it’s below, the first demand for our products is not going away, as such we remain post from during the period of rectification. Second, some of our customers have been closed, we are likely to have [indiscernible] which may help to increase demand. Third, so we finished factories and mines with other past of some and other province, and closing for rectification, we may be able to capture some of their business. Fourth, we should see somewhat still competitors if we lower our interest of massive share and our utilization it should lead to higher sales and profits.

[Unidentified Analyst:]

Question six. How are you handling your customers, they are still in operation that you are not in a position to deliver some product, are you exquisite of those – such customers. And similar we are interested to know what impact of shutdown you’ll have in the future and still on customers?

[Helen Xu:]

Here is the answer from company management. Some of our customers are in the same position that we are in. Their factories are also closed, still in other regions or even in other parts of Shouguang province they still be opened. But most if not all will ultimately have to rectify their production facility. We have calculated all of our customers. We are also actively communicating with them about our plans and our schedule and it’s basically in the same position. The government is committed to improving the environment and certainly the health of its people. Old customers and the stand by, they will have to go through the same process, everyone is been very supportive of the process and our company. We could now believe the shut down we’ll have any impact on our future or our customers. However, as we have noted before some of our competitors may not be able to complete the rectification. This could enable us to add additional customers and still want to re-start to factories fast operation. We are seeing our customers were more interested [ph] to pay us the money they own us. Virtually all of the company’s understand that the new direction of the government is very keen. We do not believe we will end up revolting any significant customers.

[Unidentified Analyst:]

Question seven. On the natural gas product, you say that your waste water problem was stopped, but you still have your challenges with [indiscernible]?

[Helen Xu:]

We think we are close to a solution and if so when we will see commercial production starting I can see there a partnership is and establish natural gas producers, shareholders would like to understand better the past going forward for the natural gas project. The report from management, as noted in the press release, the company has just found the solution to start with water problem. Now we are trying to solve the technical drilling problem, when the gas come out of the well ahead we have to be able to separate from water, mud and add a technical, to assure that it has the highest quality. We also meet to keep well head clean. We are working with Xinan Shiyou Daxue, a regulation in the Southwest Petroleum University to solve these issues. At the present time, we believe they can be solved by the end of 2017 or at the latest in first quarter of 2018. Despite these issues, we are more optimistic about the opportunities in natural gas. If you look at the rectification plans of the government you will see that well of the qualification is to switch from coal at a surge of emergence such as natural gas, this all driven throughout the company. For example in our press release on November 9, our inspectors stated, our production was suspended in September 2017 during a replacement of all of our coal branded boilers, with gas boilers in compliance is the latest settlement regulation. Almost all of the company’s investor petition, the government will produce natural gas and other forms of energy, rather than polluting coal. As more companies are forced to seek from coal to natural gas, the amount for natural gas releases when signalled conclude. We believe we are expanding the position to tactfully allow on this opportunity. We have always been open to a partnership with exclusive natural gas company. China is very short of natural gas. We believe we have a found a significant deposit of – trust of energy. That was long product, a partnership is a major phase on gas company is very sensible to us. However, to maximize the advantage to our shareholders, it would be better to wait until we had enough growth in operations, to be able to attract a strong partner and offer the best returns for our shareholders.

[Unidentified Analyst:]

Question eight. Where is the concern about the amount of accounts receivables that was in the book as a plan of the shut down of the industry? How you are being able to collect money from these customers. do you see a rate that some of these customers will be forced to close their business and not be able to pay their invoices, what have been the action, you can see to get this money from such customers. In general we would like to understand what is the impact, and down on actions you have on timing and selective inventory of accounts receivable?

[Helen Xu:]

And here is a response from company. Our receivables in place, you end up costlier [ph] because we granted our customers additional time to pay, since we have a strong cost position so this was not moved to mature royalties. As you can see from the 10-Q we have collected approximately 30% of accounts receivables that were more than 90 days old. More significantly we have like 34 percentage of the receivables and 81 days to 210 days and 100 percentage of receivables that were 211 days to 240 days old. The fact that all of the receivable as soon as seen in this as a high degree of confidence that we will ultimately will be left with virtually all the receivables. However, it’s not to good all of that, I feel that more customers may go bankrupt.

[Unidentified Analyst:]

Question nine. You are also talking about the possibility to attract more and more competitors not in a position to deliver on day rectification or have come up with a short list of potential acquisitions or find them on cheap and fixing them will they make financial sense?

[Helen Xu:]

The response from company. At the present time many of the bromine producers are attempting to get their rectification accomplished. However, still have [Technical Difficulty] We are currently in discussion with the fields more firms. If we believe we can acquire them at a comparable cheaper price we will essentially consider it.

[Unidentified Analyst:]

Question ten. How can you be thinking that the company stat, the effect had a cash level state. Could investors see the cash balances?

[Helen Xu:]

The company’s response. Our auditors review our bank account at the end of every fiscal year. The cash balance accounts verify that we have the cash, we still have, and all this [indiscernible] for the financial year of 2017 and through December 31.

[Xiaobin Liu:]

Question eleven. We understand that given the current asset motives created by this rectification permit, the company was sensing a while to repay its cash to seek the bromine and chemical business and a full potential acquisition. But have you considered either a small debt, a small stock buy back give the stock price witnessed, created by this asset motive [ph] we try to limit your stock price down, as open profit comes [indiscernible] or considering an action, still investor confidence and increase the stock value?

[Helen Xu:]

And here is response from company. As to the end of last quarter, our company had around $193.4 million cash and only $9.7 million in liabilities with more than $4 of share impact and about $3.90 of share in net net cash, this is a lot of money. We have found we have generated over the years a strong base. Shareholders who have been loyal and supportive for years will have to use this money to help the increase the price of our stock, more around with the benefit from this slow down our chairman who will be spending only 13.4 million shares, [indiscernible] I can show you it’s not an advantage. Although he had stated before, our company is committed to enhancing shareholder value. Here is why this is not very positive to expenditures. We have spend approximately $75 million to rectify our bromine business, if not so much, we will have to spend for chemical business that would believe me, it will be exact of $35 million, for purpose of this as an example, management [ph] did not have any idea for the exact or even approximately a rough number like us with $45 million, which means that we will have to commit an estimated approximately $80 million to our rectification. In addition, because some smaller companies expect the financial resources to complete their rectifications, we may have opportunities to make some decisions, valuations we have never seen before and may never see again. If we assume that we will put a small amount such as $20 million as sufficient, this would bring our commitment in bromine and chemicals to $100 million. We have also committed to spend also $172 million for the development of natural gas in Sichuan province. While, we have thus far committed very little this month, it’s critical that we can continue to demonstrate to the government of Sichuan Province of Daying County that we still have the money to follow through on our commitments. This is very important for all of you to understand. There may be substantial of natural gas in Daying County and in Sichuan Province. According to a recent study in a natural gas industry journal, the two major Chinese state-owned oil companies and many large independent producers are already spending billions of dollars to explore for natural gas in Sichuan. We were fortunate that we discovered natural gas while drilling for bromine. We were also fortunate that we had a large cash balance so we could convince the government of Daying County that it should partner with us. The natural gas opportunity is now far larger and more exciting than we could have ever imagined because of the new actions of the government to force companies to convert to natural gas from coal. In this opportunity it would be foolish for us to jeopardise our potential opportunity with the government of Daying County and Sichuan Province, creating our partners, as we not want to see this governments excuse to seek other partners, it should be clear that if everything works as expected we would have to dedicate all of our expecting cash to rectifications more acquisition and natural gas. As we had told you before, we believe all the events that are occurring in China will greatly benefit our company. We believe the bromine industry will have fewer competitors, our utilization will increase, and our profits could return to record levels. We believe the chemical industry will also consolidate and that our revenues and profits in chemicals will go up substantially. In addition, we believe that the new policies the government is implementing will greatly increase demand for natural gas. We are currently attempting to resolve technical problems related to drilling our first well. However, we have a strong partnership with the government of Daying County, and we believe the new government regulations may give us even more opportunities than we ever imagined. We are not making a projection, but projection, but with the consolidation in bromine and chemicals and the projected surge in demand for natural gas, our five year plan shows numbers that we really owe our investors. However, all that may believe to make our investors happy. We know, you want the highest or best. Accompanying, we may consider to make the full action, but as of the rectification is completed, and natural gas expect substantially in production we will try our investments and personally through our methods of enhancing shareholder value. In closing, the possibility of forming a partnership with a major natural gas company, listing China, Hong Kong as their - as our potential actions. Second, we may attempt a prior company with export [ph] so we can bring money, also tying up when our cash balance is in excess of our need. Third, as noted about, we will have our auditors inspect and audit our expense accounts for the year in 2017 for the year end audits. Fourth, once we have spend the money needed for rectification and natural gas saving we will use some of our free cash flow to enhance our shareholders value. In the past, we have savings that we believe our company spending could have been worst, essentially our expected dollar share based on the new environmental rules implement in China, we now believe the number could be higher. We recognized that this may not mean much to our long loyal investors, but we do want you to understand that one shift and ours are aligned.

[Xiaobin Liu:]

Question twelve. Why does management not buyback stock as this low prices?

[Helen Xu:]

The response from company. As we address months ago the broker who was handling of a number of our associates – executive officers in the US was closed. Our executives were unable to open the company in the US in the short term, before the window closed. At the present time, our executives have now been able to open a company in the US or out of China and basically we have most part of the shares in trend until now. However, our Chairman Mr. Yang, who is our largest shareholder, who has great [indiscernible] of stock.

[Xiaobin Liu:]

Question thirteen. How do perceive the US type of market and what are the alternatives for listing different exchange?

[Helen Xu:]

For Chinese company listed in the US, we believe the gas market are largely frozen. All you have to do is look at how our company do sales at such a low penny ratio, with such a discount with cash and book value. We know that we are not being recognized for the skills we have accomplished, but it’s not just all company, many of other US listed contended companies are selling at extremely low amounts of earnings and discount to book value. In some cases the companies are to blamed. We have not communicated and dealt with investors, prejudice about their accomplishment. We have not – we have been very steady in communications with investors. We have mutual press releases with ever more freight. They have held the conference call and we have tried our best to answer all of their questions, as this call also reflects. In addition, because we are a domestic company, we have been able to get money out of China, so we could stay in that division of bad debts. We clearly wish things were different, but we do want to know that we are trying our best and if cost cutting expensive, we have considered with concordant of China, to misleading Hong Kong, a company needs a massive capitalization of at least $300 million, is a price of unwanted projects in the future. One, the rectification is completed and natural gas is ultimately operating, we should have little difficulty achieving this valuation. In China we believe there could be substantial opportunities one for natural gas business is operating at a good level. We welcome more of your question. We are happy to discuss the current quarters, as well as any of our plans for the future. We know you would like to see a hike [ph] of price. We can assure we are fortunate sound to achieve our and your goal. Okay, operator, can we open for the call.

[Operator:]

Thank you. [Operator Instructions] Your first question comes from Jim Hall. Your line is open.

[Unidentified Analyst:]

Hello, Helen. I sent you some questions last night and I wanted to follow up on those after reading the 10-Q and the press release. So you say with respect to chemical business that you don't know how much it will cost and how much time it will take for the rectification because you don't yet know what is required. You also state that you expect to receive the plan from the government by the end of November. How long after you received the plan will you be able to tell stockholders how much it will cost and how long it will take for the rectification. You would expect to be able to give stockholders an estimate of the time – the money before the end of the year?

[Helen Xu:]

Okay. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

[Foreign Language] Okay. Hi. So the response from Mr. Liu we’ll say that once we receive the reports from government for our chemical business segment we will be able estimate the cost and the timing for chemical business in two, three days since we get the report from government.

[Unidentified Analyst:]

Okay. Thank you. My second question is, operating cost for the most recent quarter, including depreciation were $19 million. Depreciation should have been roughly $5 million for the quarter. As cash cost for the operation was about $14 million, I would expect for next quarter that operating costs would be somewhat lower. Accounts receivable are $71 million and I would expect to be that more than $20 million in cash collected next quarter. Thus I would expect cash from operations excluding rectification to be about $6 million. You say the company believes that its cash burn excluding rectification should not exceed $4 million. Is there a problem with collecting next quarter on the accounts receivable or is there some other requirements that will burn a very large amount of cash?

[Helen Xu:]

I'm sorry, how much your expectation was for cash burn in the fourth quarter?

[Unidentified Analyst:]

Not - yes for the fourth quarter, I would expect that excluding rectification you would generate about $6 million in cash. And what you say is that you shouldn't spend more than $4 million in cash. So it looks to me like there's about $10 million of additional costs that could be either bad accounts receivable or could be - or you expect would be associated with the operations for the rectification that would be expense. Is that about right?

[Helen Xu:]

No, but in the fourth quarter there will be less – very few revenue because there will be no production.

[Unidentified Analyst:]

Right…

[Helen Xu:]

We generate is production.

[Unidentified Analyst:]

Okay, to say again, I expect zero revenue and I expect that operating cost would be $14 million or less. That's what they were last quarter, excluding depreciation. So therefore you'll burn $14 million of cash that you should receive from your accounts receivable something like $20 million. So the cash next quarter from operations should be about positive $6 million. You say that it's going to - so why isn’t cash for next quarter expected to be about positive $6 million?

[Helen Xu:]

Okay. I got you. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

Hello?

[Unidentified Analyst:]

Yes. My projection was that you would have about $20 million collected or more in accounts receivable. So that would give you cash and that your operating costs would be about $14 million with no - with no production at most. In other words that's what it was last quarter. So it should be far less than that. So you should generate at least $6 million in cash?

[Helen Xu:]

I can’t…

[Unidentified Analyst:]

Okay.

[Helen Xu:]

Okay. I got you. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

Okay. All right, here is a response from Mr. Liu. In all this projections for the $4 million cash burn we did not improve the accounts receivable estimate. But if we consider the accounts receivable in this cash burn which should be positive number.

[Unidentified Analyst:]

Okay.

[Helen Xu:]

You are right.

[Unidentified Analyst:]

Okay. Thank you. My next question is with respect to the natural gas project, you state that you have solved the waste problem and now are solving the technical drilling problem and that you believe you can solve the technical drilling problem by the end of 2017 or at the latest Q1, 2018. After you have solved this problem, how long will it take before the first production will come online and can you give some guidance on the cost and schedule associated with the natural gas project particularly for next year?

[Helen Xu:]

Okay. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

[Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

So we expect the commercial production of this will, the later it would be first quarter of 2018 and the cost from now and to a steady commercial production will be cost about $600 to $800.

[Unidentified Analyst:]

You speak about spending $172 million for the bromine wells and the gas project. How much money do you expect to spend in 2018 on the gas - on the gas project?

[Helen Xu:]

Okay. I got it. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

Okay…

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

Okay. So here is a response on it, and it’s clear that, we have to wait three months since the commercial production of the first well started to see the production of this well first, then we can decide on 2018 investment on this area.

[Unidentified Analyst:]

So it sounds like you would spend only at most a couple of million dollars next year on the gas project is that correct?

[Helen Xu:]

No, we cannot confirm. No, no, no. We cannot confirm that. Because if our - first we will start the production on first quarter of 2018, after that we will have to observe it for three more months, then we will decide our production on this Sichuan project.

[Unidentified Analyst:]

So am I correct then if it's going to - if you're going to spend a couple hundred thousand in the first quarter and then you’re going to decide in the second quarter for the six months of the year you're only going to spend under $500,000 on the gas projects – in natural gas projects is that correct?

[Helen Xu:]

From until it started commercial production.

[Unidentified Analyst:]

What you said after you start the commercial production before you do mark commercial production you're going to evaluate that. So are we talking nine month - we talking till after the first - until the second - for the first half of next year? You basically only spend the money to do the first well which is a few hundred thousand dollars, is that correct?

[Helen Xu:]

I am still not confident, its four month. [Foreign Language]

[Xiaobin Liu:]

[Foreign Language]

[Helen Xu:]

Okay. Yes, you’re right. For the first half year of 2018 the costs would be - the investment would be around 600k to 800k US dollar.

[Unidentified Analyst:]

Okay. This project moves at a snail's pace. I think that's all the questions I have. Thank you.

[Helen Xu:]

Okay. Thank you.

[Operator:]

Thank you. And I am showing no further questions at this time.

[Helen Xu:]

Okay. Then can we close for the call.

[Operator:]

You can. Thank you so much. Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you all may disconnect. Everyone have a wonderful day.