China GengSheng Minerals Signs Operating Lease Agreement for Fracture Proppant Manufacturing Facility

GONGYI, China, Oct. 27, 2010 - a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced that the company has signed a 3-year operating lease agreement for an approximately 215,000 square foot fracture proppant manufacturing facility located in Gongyi, Henan province, China. This new facility is expected to add 15,000 metric tons of annual production capacity, increasing the Company's fracture proppant capacity to 75,000 metric tons per year.
Resources at this new facility will be used primarily for the manufacture of mid- to high-end fracture proppant products, targeting international customers.
"Increased drilling activity has driven significant growth in demand for our fracture proppant products from both domestic and international customers, and we expect that this demand will continue to grow going forward. This new facility provides us with a meaningful increase in capacity, which will enable GengSheng to more effectively address the sizeable growth opportunity that exists in the global proppant market," said Mr. Shunqing Zhang, China GengSheng's Chairman and Chief Executive Officer. "Since launching our fracture proppant product line in 2007, we have built a great deal of brand equity and developed a reputation as a provider of high-quality, value-added proppant products. We have achieved a great deal of success within the Chinese market, having developed strong relationships with China's leading oil and gas exploration companies. Given our strong domestic foothold, we are working aggressively to expand our presence internationally in an effort to capitalize on the significant, untapped potential in the overseas market. We are in the process of developing a North American sales team that will allow GengSheng to more effectively engage customers internationally and capture additional market share as demand for proppant materials continues to grow."
GengSheng commercially launched its fracture proppant products in the second quarter of 2007, and reported full-year 2009 revenue from this product segment of $8 million, representing a 3-year CAGR of 323%. For the second quarter of 2010, fracture proppants accounted for $3.1 million, or 20.6% of total revenue. Domestic customers accounted for approximately 50% of second quarter 2010 sales, with the remaining 50% coming from international customers, primarily located in North America.