Mar. 29, 2011 - China GengSheng Minerals, Inc., a leading China-based high-tech industrial materials manufacturer producing heat resistant, energy efficient materials for a variety of industrial applications, today announced that it has signed a definitive agreement with a local affiliate in Gongyi, Henan Province to manufacture 30,000 metric tons of its fracture proppants through the end of 2011. With this addition, China GengSheng has increased its total annual fracture proppant capacity by 20% to 90,000 metric tons.
In conjunction with this new agreement, the Company has decided to terminate its operating lease, entered in October 2010, and ceased production of fracture proppant products at its leased manufacturing facility in Gongyi, Henan Province.
As a result of the rapid economic development in Gongyi City, the local government has implemented measures aimed at improving quality of life for Gongyi residents, including construction and development of both rural and urban areas. The leased facility, which was expected to increase GengSheng's annual fracture proppant manufacturing capacity by 15,000 metric tons, to 75,000 metric tons, is located in an area of the city impacted by the government's development plans. The facility has been subject to regular power outages and other restrictions that have impacted manufacturing operations, rendering the facility unsuitable and impractical for the large-scale production of proppant materials. Given the cause of the lease termination, the facility's owner has released GengSheng from the lease agreement without penalty and liability.
"The worldwide increase in drilling activity continues to drive demand for our fracture proppants from both domestic and international customers," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "In 2010 our fracture proppant orders totaled $14.3 million, and we have received 2011 orders totaling approximately $15.9 million thus far in the first quarter. To better capitalize on the maturing fracture proppant market, we are actively looking to further increase our manufacturing capacity in 2011. We are currently evaluating strategic acquisition or new construction to effectively deploy our assets and best capitalize on the near- and long-term opportunity within this growth market where we believe we can achieve substantial revenue gains and expand our margins."
In conjunction with this new agreement, the Company has decided to terminate its operating lease, entered in October 2010, and ceased production of fracture proppant products at its leased manufacturing facility in Gongyi, Henan Province.
As a result of the rapid economic development in Gongyi City, the local government has implemented measures aimed at improving quality of life for Gongyi residents, including construction and development of both rural and urban areas. The leased facility, which was expected to increase GengSheng's annual fracture proppant manufacturing capacity by 15,000 metric tons, to 75,000 metric tons, is located in an area of the city impacted by the government's development plans. The facility has been subject to regular power outages and other restrictions that have impacted manufacturing operations, rendering the facility unsuitable and impractical for the large-scale production of proppant materials. Given the cause of the lease termination, the facility's owner has released GengSheng from the lease agreement without penalty and liability.
"The worldwide increase in drilling activity continues to drive demand for our fracture proppants from both domestic and international customers," said Mr. Shunqing Zhang, Chairman and CEO of China GengSheng Minerals. "In 2010 our fracture proppant orders totaled $14.3 million, and we have received 2011 orders totaling approximately $15.9 million thus far in the first quarter. To better capitalize on the maturing fracture proppant market, we are actively looking to further increase our manufacturing capacity in 2011. We are currently evaluating strategic acquisition or new construction to effectively deploy our assets and best capitalize on the near- and long-term opportunity within this growth market where we believe we can achieve substantial revenue gains and expand our margins."
