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Kerrisdale Report on Gulf Resources Comes With Some Discrepancies



          Almost all followers or investors in Gulf Resources (NASDAQ:GURE) should now be aware that multiple articles have been written pertaining to the legitimacy of the company. The most recent article, named "Gulf Resources: Third Party Report Casts Doubt on Production Claims" and written by Kerrisdale Capital Management, claims that information obtained form a third party report shows evidence of Gulf Resources falsifying their production amounts. If we look closely and analyze all of the information provided by Kerrisdale, along with information provided by other sources, we notice that there are multiple discrepancies which could discredit the latest article written by Kerrisdale Capital Management. 

          First off, one of the most obvious discrepancies is where Kerrisdale claims to be listing the top 30 bromine producers in China. They claim to have obtained this "Top 30" list through a report created by CCM International Ltd., but CCM responded to inquiries about the article by saying

"There is no a table regarding Top 30 bromine producers but the Table II-1-2.5 Situation of 30 active bromine producers in China, 2009~2010E in our bromine and bromides report."  

This shows that Kerrisdale incorrectly branded these random 30 bromine producers as the top 30. And considering that most of Kerrisdale's argument is based on Gulf Resource's absence from the Top 30 list (which we now know does not exist), we can assume that most of their claims relating to the list are unfounded.


          Also, Kerrisdale seems to contradict themselves when they state " It's relatively clear to us that Gulf was unlikely to produce anywhere close to 34k tons of bromine in 2009. If it did, the company would have likely made its way into the list / report rather than one brief mention on page 49." and then later state "There's no mention of "Gulf Resources" in the report." in the comments section of their article.
(Source: It seems that Kerrisdale is unsure of if Gulf Resources was mentioned in the report created by CCM or not. And if Gulf was mentioned at least once on page 49 of the report, then Kerrisdale should have at least mentioned it in their write-up and include what context they were mentioned in.


          Lastly, Gulf Resources was apparently not mentioned in CCM's report, but its subsidiary Shouguang City Hao Yuan Chemical Industry Co., Ltd HAS been mentioned elsewhere. The Shouguang Bromide Profession Association's website includes production totals from bromide producers in the Shandong area and clearly displays Gulf Resource's subsidiary. (Source: The totals coming from this website account for all the bromine production in the Shandong area accurately and indicate that Gulf Resources IS telling the truth about their production.

          In conclusion, we can see that Kerrisdale Capital Management is not entirely truthful in their assertions about Gulf Resources. Whether they have made mistakes in their research or if they intentionally exaggerated information in their article is up to the reader and the investor. Through this article I am not endorsing Gulf Resources, but instead showing the faults of Kerrisdale's latest article. I believe that Gulf's management needs to provide more transparency on their operations to fully discredit any further misinformation about the company.


Disclosure: I am long GURE.

Additional disclosure: This long position is only a small test position and is subject to change at anytime.