A.BN 13 115 027 033

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ANNUAL GENERAL MEETING

Tuesday October 30, 2007 at 11:00am

Dear Shareholder,

On behalf of the Board of Gulf Resources Limited, it gives me great pleasure to invite you to the Annual General Meeting of shareholders.

The Annual General Meeting is to be held in The Tanner Room, Four Seasons Hotel, 199 George Street, Sydney at 11:00am on Tuesday October 30, 2007.

Please find enclosed the following documents in relation to the Annual General Meeting:

a) Notice of Annual General Meeting;
b) Proxy Form for Annual General Meeting together with instructions.

If you are not able to attend the Annual General Meeting in person, you are urged to complete and lodge the enclosed Appointment of Proxy.

Your Directors hope that you will be able to attend the Meeting and commend the resolutions for your support.

Yours sincerely

Scott Reid Chairman

Level 10 Gold Fields House 1 Alfred Street Sydney NSW 2000 PO Box R745 Royal Exchange NSW 1225 Telephone 02 8247 5333 Fax 02 9247 7722

www.gulfresources.com.au

Notice of Annual General Meeting

Notice is hereby given that the Annual General Meeting of the Company will be held on Tuesday, 30 October 2007 commencing at 11:00am in The Tanner Room, Four Seasons Hotel, 199 George Street, Sydney.

Notes:

A member entitled to attend and vote is entitled to appoint not more than two proxies.

Ordinary Business

1. Financial Statements and Reports

To receive and consider the Balance Sheet of the Company at 30 June 2007, the Income Statement of the Company for the year ended on that date, together with the consolidated accounts of the Company and its controlled entities and the reports of Directors and Auditors thereon.

2. Adoption of Remuneration Report

To consider and, if thought fit, pass the following resolution:

To adopt the remuneration report forming part of the Directors’ Report for the financial year ended 30 June 2007.

Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the member's voting rights.
Appointment of a proxy by a member who is a corporation must be given in accordance with the Corporations Act 2001 (Cwlth) or signed on its behalf by an authorised attorney.
If this proxy is executed under a Power of Attorney, the instrument appointing the attorney must accompany the form of proxy.
Any instrument of proxy in which the name of the appointee is not filled in shall be deemed to be given in favour of the Chairman of the Meeting.
A proxy need not be a member of the Company.

(Note: the vote on this resolution is advisory only and does not bind the Directors or the Company.)

3. Re-election of a Director

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

In accordance with the Constitution of the company, Mr Wayne Kernaghan who being a director of the Company retires by rotation and being eligible, is re-elected as a Director of Gulf Resources Limited.

4. Election of a Director

To be effective, the proxy form must be received by the Company at its registered office, PO Box R745 Royal Exchange NSW 1225, or received by facsimile on (02) 9247 7722 not less than fortyeight (48) hours before the time for holding the meeting.
For the purposes of section 1109N of the Corporations Act 2001 (Cwlth), the directors have set a snapshot date to determine the identity of those entitled to attend and vote at the meeting. The snapshot date and time has been set at 7pm EST on 28 October 2007.

To consider and, if thought fit, pass the following resolution as an ordinary resolution:

In accordance with the Constitution of the company, Mr Philip Treisman who having been appointed as a director to fill a casual vacancy and who retires under the Constitution and being eligible, is elected as a Director of Gulf Resources Limited.

5. Further Business

To transact any further business that may legally be brought forward.

By Order of the Board

W J Kernaghan Company Secretary 25 September 2007

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Appointment of Proxy

I/We .................................................................................................................................................................................................................

of ......................................................................................................................................................................................................................

being a member/members of Gulf Resources Limited hereby appoint

The Chairman of Write the name of the person you are The meeting OR appointing if this person is someone (mark with an ‘X’) other than the Chairman of the Meeting.

Or failing the person named attending the meeting, or if no person is named, the Chairman of the meeting as my/our proxy to act generally at the meeting on my/our behalf and to vote in accordance with the following directions (or if no directions have been given, as the proxy sees fit) at the Annual General meeting of the Company to be held on 30 October 2007 at 11:00am and at any adjournment of that meeting.

IMPORTANT:

If the Chair of the Meeting is appointed as your proxy or may be appointed by default and you do not wish to direct your proxy how to vote as your proxy on each item, please place a mark in this box. By marking this box, you acknowledge that the Chair of the Meeting may exercise your proxy even if he has an interest in the outcome of these resolutions and that votes cast by the Chair of the meeting for these resolutions, other than as a proxy holder, would be disregarded because of that interest. If you do not mark this box, and you have not directed your proxy how to vote, the Chair will not cast your votes on these resolutions and your votes will not be counted in computing the required majority if a poll is called on these resolutions. The Chairman intends to vote undirected proxies in favour of each resolution.

Voting directions to your proxy – please mark an ‘X’ to indicate your directions.

Resolution 2. Adoption of Remuneration Report 3. Re-election of Wayne Kernaghan 4. Election of Philip Treisman Signed this ……………………………………………… Individual Securityholder 1 Individual/Sole Director	For Against Abstain ……. day of ……………………….………………… 2007. Securityholder 2 Securityholder 3 Director Director/Company Secretary	For Against Abstain ……. day of ……………………….………………… 2007. Securityholder 2 Securityholder 3 Director Director/Company Secretary

		Director/Company Secretary

This form must be signed by the securityholder. If a joint holding, either securityholder may sign. If signed by the securityholder’s attorney, the power of attorney must have been previously noted by the registry or a certified copy attached to this form. If executed by a company, the form must be executed in accordance with the securityholder’s constitution and the Corporations Act 2001 (Cwlth).

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Instructions for Completion of Proxy Form

A member entitled to attend and vote is entitled to appoint not more than two proxies.
Where more than one proxy is appointed, each proxy must be appointed to represent a specified proportion of the member's voting rights.
Appointment of a proxy by a member who is a corporation must be given in accordance with the Corporations Act 2001 (Cwlth) or signed on its behalf by an authorised attorney.
If this proxy is executed under a Power of Attorney, the instrument appointing the attorney must accompany the form of proxy.
Any instrument of proxy in which the name of the appointee is not filled in shall be deemed to be given in favour of the Chairman of the Meeting.
A proxy need not be a member of the Company.
To be effective, the proxy form must be received by the Company at its registered office, PO Box R745 Royal Exchange NSW 1225, or received by facsimile on (02) 9247 7722 not less than fortyeight (48) hours before the time for holding the meeting.
For the purposes of section 1109N of the Corporations Act 2001 (Cwlth), the directors have set a snapshot date to determine the identity of those entitled to attend and vote at the meeting. The snapshot date and time has been set at 7pm EST on 28 October 2007.

2007

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Annual Report

resources gulf LIMITED

directors

Scott Reid (Chairman) Wayne Kernaghan (Director) Greg Duncan (Director) Philip Treisman (Director)

company secretary

Wayne Kernaghan

registered office

Level 10 Gold Fields House 1 Alfred Street Sydney NSW 2000 PO Box R745 Royal Exchange NSW 1225

auditors

Alcock Davis Danieli Level 5 285 George Street Sydney NSW 2000

legal

Price Sierakowski PO Box Z5433 St George's Terrace Perth WA 6831

Chairman’s Letter	1
Activities & Project Review	2
Directors’ Report	17
Auditors’ Independent Declaration	21
Independent Audit Report	22
Directors’ Declaration	24
Income Statement	25
Balance Sheet	26
Statement of Changes in Equity	27
Cash Flow Statement	28
Notes to the Financial Statements	29
Shareholder Information	40

bank

Westpac Banking Corporation 275 George Street Sydney NSW 2000

share registry

Security Transfer Registrars PO Box 535 Applecross WA 6953

CHAIRMAN’S LETTER

Dear Fellow Shareholder,

It gives me great pleasure to present the company’s second annual report to shareholders since listing on the ASX in August, 2006.

Your board and management have remained focused on positioning the company to fulfill the short and longer term goals outlined to investors at the time of our initial public offering (IPO).

I am pleased to report the during the last year the company management team has made a number of significant achievements and is delivering on our strategy of offering shareholders a balanced exposure to brownfield resource expansion, advanced greenfield exploration and development potential through a project acquisition strategy.

These achievements include:

Successful listing on the ASX at premium to IPO price.
Completion of Loyalty option issue that delivered a ten-fold return for investors.
Significant exploration success at Crystalbrook Gold base metals through:
Completion of Geophysical IP survey - outlining a previous unknown target.
Drill testing and discovering a previously unknown mineralized intrusive body.
Received formal grant of highly prospective NT gold tenements - the Swan Creek Project.
Initiated and maintained a strong working relation with the Malera Bandjalan people’s representatives at our Ewingar Gold Project in Northern NSW.
Reviewed and conducted advanced negotiations on a number of substantial resource projects in East and Southern Africa.
Acquired a substantial shareholding in ASX listed investment company as part of our broader strategy of building a global resources investment group.

I congratulate the Gulf Resources staff and management team on the excellent work achieved this year and look forward to working with the team as we continue to expand and grow the business.

In particular, the senior executive team, Mr Wayne Kernaghan (Director and Chief Financial Officer) and Mr Greg Duncan (Technical Director), deserve mention for their dedication and professionalism in making your company a success.

Additionally, I have the pleasure to welcome Mr Philip Treisman (Director, Strategy and Counsel) to the board and management team and acknowledge the valuable input he is making to the group.

Where to from here?

The short-term global economic outlook remains generally positive. The economic growth of China and India is expected to remain strong and it seems that there may be a re-emergence of Russia both globally and in the East Asian region. The US economy seems likely to remain solid if somewhat volatile.

Investors have responded to these developments by seeking comfort in the traditional safe haven of gold. The price of gold rose by an average of 28 per cent during the last financial year and forward prices on LME metals remains above their long-term historical averages.

This is usually understood to indicate that supply surpluses are not expected in the near future of these markets. Gulf is thus well positioned both geographically and in terms of its intended operations to take advantage of the opportunities presented by these trends.

However, while the short-term outlook is encouraging, it is not without risk. The year has seen continued far-reaching and continued escalation developments in the international socio-economic and political environment. The serious political tensions in the Middle and Far East and the

vacillating stability of the US dollar have contributed to a tight oil market, and are adding to increased uncertainty in all markets.

Our principle focus remains on the exploration, development and mining of resource commodities by building a pipeline of assets spread across the resource development curve, to provide investors with exposure to both blue sky potential as well as strong cash flow generating mining operations and royalties.

Complimentary to this approach is the creation of a dedicated listed investment holding company with the capacity to raise and manage funds, enabling it to capitalise on the broader corporate opportunities as they arise in the global mining and financial markets. This two pronged approach offers investors a coherent and logical group investment strategy capturing value at both a corporate and project level.

We are well down the path of with this approach and will update Shareholders as significant milestones are made.

On behalf of the company, I acknowledge the strong mandate and support Shareholders have given the company since inception, but also the accompanying responsibility of representing all shareholders interests.

Your company has an experienced board, management and technical advisory team that bring together a multi-skilled team of professionals with successful track records across the financial, corporate, mining and mineral exploration sectors. Together with the continued support of Shareholders, I look forward to an active and successful year ahead.

Yours sincerely,

Scott A Reid Chairman and CEO

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Summary

Since listing on 10 August 2006 the company has initiated exploration activities on all of its exploration projects in North Queensland, Northern Territory and New South Wales.
Results recorded significant intercepts of Gold, Silver Lead and Zinc mineralisation from targeted alteration systems, including;
4m of 3.8 g/t gold and 3m of 53 g/t silver, 0.1% lead, and 1.6% zinc in Hole 2

	exploration activities on all of its exploration projects in North Queensland, Northern Territory and New South Wales.		and Zinc mineralisation from targeted alteration systems, including; ►4m of 3.8 g/t gold and 3m
•	Company management has		of 53 g/t silver, 0.1% lead,
	also instigated review of		and 1.6% zinc in Hole 2
	potential projects under the
	company’s project acquisition strategy.		►2m of 0.1 g/t gold, 62 g/t silver, 2 % lead and 1.1%
			zinc in Hole 3
•	1 for 3 non-renounceable
	Option Issue was strongly supported by shareholders with a participation rate of over		►2m of 1.5 g/t gold in Hole 4
	88%
			►2m of 14.4 g/t silver, 0.1%
•	Successful $2million placement at $0.26 per share plus a 1 for 4		lead and 1.0% zinc in Hole 1
	attaching listed option.
		•	Diamond drilling program
•	The company carried out a 3D		being prepared to test the
	Induced Polarisation (IP) survey		buried Induced Polarisation
	to further define the drill targets		(“IP”) response.
	at the Crystalbrook project in
	North Queensland and the	•	IP anomaly is consistent with
	planned timetable for the initial		disseminated to massive
	drilling campaign.		sulphide mineralisation
			associated with a porphyry
•	Significant preliminary results		style intrusive.
	achieved from the 3-
	dimensional Induced	•	Results from two diamond drill
	Polarisation (“IP”) survey at the		holes following up the first
	Crystalbrook Project.		pass RC drilling program
			intersected wide zones of
•	Reverse Circulation (“RC”)		hydrothermal alteration with
	drilling at Crystalbrook was		associated pyrite and
	completed in December 2006.		pyrrhotite -chalcopyrite,
			arsenopyrite, galena and
•	First pass drilling at		sphalerite observed as
	Crystalbrook returns		disseminations and in veining.
	encouraging polymetallic
	intersections along major	•	Encouraging assay results
	shear zone while Induced		were received from the initial
	Polarisation (“IP”) survey		diamond drilling programme at
	delineates a potential untested		the Crystalbrook Project with
	buried intrusive in close		drilling intersected zones of
	proximity.		anomalous copper (to 0.4 %)
			and zinc ( to 0.3 %)
			mineralisation within an
			extensive intrusive related
			silica – pyrite – pyrhhotite
			alteration zone.

Interpretation of the results suggest that the chargeable anomalies represent the top of a much larger system at depth and that the main source of the IP targets have not been intersected.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Crystalbrook Project, Far North Queensland (EPM 13841 - GLF 100%)

The Crystalbrook gold-base metal project consists of a single exploration tenement, EPM 13841 (area 26 km[2] ), located some 25 km southwest of Chillagoe and 150 km west of Cairns in far north Queensland.

The project covers what was essentially an untested intrusive related gold and base metal system focused on a major west north-west trending basement structure and Mt Leyshon type breccia–pipe deposits.

Previous exploration focused on breccia-type, skarn-epithermal and high grade vein styles of gold-base metal mineralisation. Several prospective targets were defined but only one, Silver Dollar, was followed up with limited, shallow exploratory drilling.

The tenement lies on a major WNW trending fault that has controlled the emplacement of the mineralised Carrs Granite and provided a focus for regional mineralisation. Other Permo – Carboniferous granites of the North Queensland Igneous Province host world class gold mineralisation at Mt Leyshon, Kidston and Red Dome where 6,000,000 oz gold was recovered during operations up until 1996.

A structure of this orientation controls the North Parkes (1.4 million ounce gold deposit) and Cadia (1.6 million ounce gold deposit) – Ridgway (4.5 million ounce gold deposit) mineralised systems in the Lachlan Fold Belt of NSW. The Crystalbrook Structure plays a similar role in the North Queensland mineral province which contains Red Dome gold

deposit. The Company tenement covers the dominantly mineralised 5 km of this fault zone in the region with gold in rock chips to 4.7 grams per tonne gold and 39 grams per tonne silver

Major magnetic anomalies are associated with gold-base metal soil geochemical anomalies and, locally, a circular fracture pattern related to a possible sub-volcanic intrusive complex, are considered to be major targets for future exploration and offer immediate drill targets.

Initially, the Company’s priority was to focus on the Silver Dollar structure, which was be evaluated with high resolution 3D ground geophysics with the purpose of targeting deeper, high grade intrusion associated gold mineralisation of the Mungana type. Prospective targets will be diamond drilled.

Initial interpretation of results from the 3-dimensional (“3-D”) Induced Polarisation (“IP”) survey indicated a discrete anomaly within the target area for porphyry style gold– base metal mineralisation.

A 3 dimensional dipole-dipole IP geophysics survey was carried out in December 2006 and was completed in late January 2007. The survey is targeted an area of 5km[2] . Preliminary results indicated a large 600m x 800m IP anomaly at 150m depth to plus 500m depth coincident with a large circular ring fracture system on a mineralised regional northwest trending fault.

Mineralisation and historic workings along the fault zone extend for over 5 km with gold in rock chips to 4.7 grams per tonne gold and 39 grams per tonne silver. The target style is a mineralised intrusive of the KidstonRed Dome-Mungana type.

The anomaly is consistent with disseminated to massive sulphide mineralisation associated with a porphyry style intrusive. Previous drilling results along the fault zone demonstrate that the mineralisation is strongly anomalous in gold and bismuth, an association noted in the other substantial mineralised systems in the region, with grades to 9.40 gpt gold.

The gold-base metals-bismuth geochemical association is characteristic of breccia-pipe and intrusion associated gold deposits in this province which includes the Kidston, Mt Leyshon and Red Dome systems. First pass drill testing of the alteration systems within the tenement was carried out during the September quarter 2006 with a program of 1,000m of RC drilling completed in December 2006.

Results from the Reverse Circulation (“RC”) drill testing of the alteration systems within the tenement were reported to the ASX on 18 April 2007. The drill results confirm findings of previous explorers along the mineralized Crystalbrook Shear Zone. The shear zone can now be interpreted as a peripheral fracture tapping fluids from a modelled mineralised intrusive some 500m to the North West.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Summary of RC Drill Results - Crystalbrook Project

Hole	Easting (m)	Northing (m)	Dip/ Azimuth (°)	Total Depth(m)	From (m)	To (m)	Width (m)	Ag (g/t)	Pb%	Zn%	Au (g/t)
1	224158	8083180	-60/134	102	84	86	2	14.4	0.1	1.0	-

2	225085	8080920	-60/334	96	13	16	3	53.0	0.1	1.6	0.6
					88	92	4	-	-	-	3.8

3	225120	8081015	-60/174	198	43	44					0.33
					154	156	2	62.0	2.0	1.1	0.1
4	225074	8081033	-60/174	156	78	80	2	-	-	-	1.5

5	224618	8081213	-60/200	24	-	-	-	-	-	-	-

6	224618	8081213	-60/334	180	-	-	-	-	-	-	-

7	225789	8080898	-60/200	102	0	8	8	-	-	-	0.3

8	227620	8082439	-60/285	198	-	-	-	-	-	-	-

Notes: Drilling co-ordinates AMG – AGD 66 Zone 55

Results shown are either > -.099 ppm Au or > 0.099% Pb / Zn.

The reverse circulation samples were collected on one metre intervals and composited for assay. Assays conducted by ALS – Chemex , Townsville by the following methods

Au-AA25, gold 25g charge fire assay.
Mullti element ME-ICP61 – suite.
Pb – Zn - Ag above 10,000 ppm re-assay by OG-46.

In conjunction with the RC drilling results Interpretation of the 3 - dimensional (“3-D”) Induced Polarisation (“IP”) survey was carried out and the results confirmed preliminary findings.

Interpretation and modeling of the IP results indicate;

a moderately strong IP response at depth.
the response becomes clear at a depth of 250m (see attached plan figure and cross sections).
the chargeable zone is adjacent to a resistive body, interpreted to be a an intrusive body, and may represent alteration associated mineralization of further exploration interest.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Regional Geology & Location Map - Crystalbrook Project

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South-North Cross Section thorough IP /Resistivity Models on Line 224600E

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Crystalbrook Project – Drilling Locations & I.P.

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Crystalbrook Project – Drill Rig

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Crystalbrook IP Anomaly Plan View (Horizontal Slice through Model at 300m Depth)

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Follow-up diamond drilling intersected wide zones of hydrothermal alteration with associated pyrite and pyrrhotitechalcopyrite, arsenopyrite, galena and sphalerite were observed as disseminations and in veining.

The holes targeted potential mineralisation identified from the Induced Polarisation survey. The IP anomaly response was consistent with

disseminated sulphide mineralisation associated with an intrusive. Hole CBD-1 extended to 380.6 metres depth and Hole CBD-2 to 452 metres.

The extensive zones of alteration and mineralisation are consistent with the gold–copper intrusive related target model. The drilling has successfully intersected the upper zone of a large mineralised intrusive related system.

Note:

The core was half sawn and sampled on half metre intervals with over 630 samples dispatched to ALS in Townsville for gold and multi element assay.

Drilling was conducted by Tom Browne Drilling using an LF70 drill rig. Holes were collared as HQ and continued as NQ core.

Collar locations are:

	Easting	Northing	Azimuth	Dip Depth (m)	Depth(m)
CBD01	224910	8081861	310	-90	380.6
CBD02	224603	8082089	360	-60	452.0

Diamond Drill Hole & IP Anomaly Location

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Encouraging assay results were received from the initial diamond drilling program at the Crystalbrook Project.

Drilling intersected zones of anomalous copper (to 0.4%) and zinc (to 0.3%) mineralisation within an extensive intrusive related silica – pyrite – pyrhhotite alteration zone.

Interpretation of the results suggest that the chargeable anomalies represent the top of a much larger system at depth and that the main source of the IP targets have not been intersected.

The initial two holes into a previously untested blind target confirm the presence of a large intrusive system with associated copper, zinc, lead and silver mineralisation. The result of 21m @ 248 ppm copper and 436 ppm zinc from 272m in CBDD-2 demonstrates the potential of the

system to host economic mineralisation.

The drill holes, drilled 380m apart, targeted a large (2 km diameter) geophysical anomaly 1400m to the north of the mineralised Silver Dollar Fault Zone. This zone was detected utilising an Induced Polarisation Survey which indicated a chargeable anomaly at depth to the north of the regional fault and resistive anomaly to the south. The anomaly is co-incident with the regional north west Silver Dollar Fault intersection with a radial fracture system.

The results are of a lower tenor than previous drilling along the Silver Dollar Fault Zone and are interpreted as having intersected the peripheral zone of mineralisation within the system. Surface rock chip and soil sampling results indicate a broad area of elevated gold and base metal over a 12 km[2] area centered

on the Silver Dollar Fault Zone intersection with the radial fracture zone.

The extensive widths of alteration present in both holes, CBDD-1 was drilled to 380.6m and CBDD-2 to 452m and progression to a higher temperature alteration assemblage in CBDD-2 from 170m depth are considered indicative of an extensive system with zoned metal distribution. Mineralisation increased in CBDD-2 with the broadest zone of anomalous + 300 ppm zinc from 272m.

The results are considered very encouraging with confirmation of a large intrusive related mineralised system warranting continued exploration. Petrology and further assays will be undertaken on the drill core with results to be combined with previous drill results and the I.P. model to target further drilling which is scheduled to commence in late August.

Results include:

0.5m @ 10 ppm Ag, 4420 ppm (0.4%) Cu and 2100ppm Zn from 32.5m in CBDD-2

21m @ 248 ppm (Cu) and 436 ppm (Zn) from 272m in CBDD-2

2m @ 1114 ppm Zn from 141.5m in CBDD-2

4.5m @ 453ppm Cu and 273 ppm Zn from 107m in CBDD-1
1.0m @ 3090ppm Pb and 2023 ppm Zn from 127.5m in CBDD-1
1.5m @ 288 ppm Cu and 891 ppm Zn from 83.5m in CBDD-1

1m @ 1146ppm Cu, 3.8 ppm Ag and 208 ppm Zn in CBDD-1.

CBDD - 1

From	To	Interval m.	Cuppm.	From	To	Interval m.	Znppm.

84	85	1	496	83.5	85	1.5	890.5
107	108	1	1146	110.5	111.5	1	547
111	111.5	0.5	1140	127.5	128.5	1	2023
				216	216.5	0.5	540

Copper intersections > 400 ppm Zinc intersections > 300 ppm

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

CBDD-2

From	To	Interval m.	Cuppm.	From	To	Interval m.	Cuppm.
32.5	33	0.5	4420	32.5	33	0.5	4420
34	34.5	0.5	409	34	34.5	0.5	409
49	49.5	0.5	470	49	49.5	0.5	470
77.4	77.9	0.5	427	77.4	77.9	0.5	427
277.5	278.5	1	598	277.5	278.5	1	598
277.5	278.5	1	598	277.5	278.5	1	598
286	289.5	3.5	459	286	289.5	3.5	459
298.5	299	0.5	871	298.5	299	0.5	871
342	342.5	0.5	547	342	342.5	0.5	547
381	381.5	0.5	953	381	381.5	0.5	953
397	397.5	0.5	418	397	397.5	0.5	418
409	409.5	0.5	559	409	409.5	0.5	559
Copper intersections > 400 ppm				397	397.5	0.5	418
				409	409.5	0.5	345
				423	425.5	2.5	327

Zinc intersections > 300 ppm

Note: Assay Details

Drill core was half sawn in 0.5m intervals and assayed by ALS-Chemex. Gold assay was by fire assay AA-Au 25 and base metals by ME-ICP61.

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

Swan Creek Project Northern Territory (EL25083 and EL24764 - GLF 100%)

The Swan Creek tenements are located at the northwestern extremity of the Tanami region in the Northern Territory, close to the Western Australian border, some 160 km southeast of the Argyle diamond mine. The principal exploration target is for Tanami and Granites goldfields styles of gold mineralisation in Palaeoproterozoic basement metasediments. The gold rich volcano-sediment hosted gold fields of the Pine Creek, Tanami and Tennant Creek are hosted in a time specific package of pre-Barramundi Orogeny sedimentary rocks which form the basement in the Gulf tenement area.

The Tanami and Granites goldfields lie some 230 km and 300 km respectively south of the Company’s Swan Creek tenements. Gold production to date from the Tanami region is estimated at 4.8 million oz, and the remaining resource is estimated at 7.7 million oz. Callie, the largest deposit in the region, had an original resource in excess of 4.5 million oz gold. In all, over 100 gold mines/occurrences are known in the Tanami region.

Mineralisation is regionally confined to two litho-stratigraphic zones, the lowermost strongly metamorphosed Dead Bullock Formation (DBF) and an upper, much younger more weakly metamorphosed basaltic volcanic sequence of the Mount Charles Formation (MCF).

The DBF is comprised of an alternating sequence of iron-rich, cherty, carbonaceous and pelitic metasediments, with a strong magnetic signature.

Subconcordant gold mineralisation is closely associated with folded iron formations and broadly classed into the BIF (banded iron formation) category, examples of which include the Proterozoic Cosmo Howley (Pine Creek, Northern Territory) and Homestake (South Dakota, USA).

Geophysical evidence indicates that folded DBF type lithologies are present with in the Company’s tenements, and the spatial coincidence with stream gold geochemical anomalies warrants further investigation.

The giant Callie deposit was entirely concealed beneath alluvial/regolith cover, and only discovered by step-out bedrock geochemical drilling from an adjacent known deposit.

During the September 2006 quarter Gulf accepted grant of these two highly prospective exploration tenements in the Northern Tanami region.

The two tenements cover a land position of some 1500km[2] which is considered highly prospective for gold mineralisation. The Tanami Province is highly endowed with significant gold mineralisation hosted in iron rich metasediments. In the project area the iron rich formation is evident in airborne magnetic images and is associated with anomalous gold shedding into drainages.

Reconnaissance exploration was carried out with a soil sampling survey completed.

Gulf proposes to utilise ultra-high resolution ground magneticelectromagnetic surveys to initially define prospective lithological units and structures, with follow-up soil geochemistry and shallow percussion (RAB-aircore) drilling to define possible concealed mineralisation.

Ewingar Northern NSW (EL-6490 – GLF 100%)

The Ewingar gold exploration project is located on the northeastern border of the New England Plateau in northern New South Wales. The project tenement, EL 6490 of 300 km[2] , covers part of two extensive goldfields.

The tenement includes a small inferred resource of 31,000 ounces of gold at the Hortons Prospect. The deposit remains open at the northern end with possible extensions to the south, and merits further exploration, based on the northern most down hole drill intersection of 38m at 4.36 g/t gold.

A new geological exploration model indicates significant prospectivity for similar deposits at a grade of 2 to 5 g/t gold. In addition, the eastern part of the tenement covers part of the Lionsville goldfield where high grade epithermal-type gold veins have been exploited in the past.

Exploration by major companies, from 1969 up to 1999, identified numerous granite-hosted disseminated gold prospects, of which five deposits: Big Hill, Poverty Point, RMT, Hortons and Leeds/Poulsons provided a combined mineral resource of 16.8 million tonnes at 0.73 g/t (390,000 oz) gold.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

ACTIVITES & PROJECT REVIEW

During the year consultations have been held with representatives of the Malera Bandjalan native peoples to create a framework for co-operation in identifying cultural heritages sites and places within the tenement. Company management and the representatives of the tribe will meet on site to undertake further discussions.

The company values and appreciates the positive input of the representatives and is progressing the formal framework for co-operation going forward.

Corporate Activities Review

Loyalty Option Issue

During the September quarter 2006 the company announced and completed a non-renounceable offer to all shareholders.

The offer to shareholders was for one option for every three shares held at an offer price of $0.015 per option, each option having an exercise price of $0.20 and an expiry date of 30 June 2011. The issue was strongly supported by shareholders with a participation rate of over 88%.

The prospectus for the offer was lodged with ASIC on 10 November 2006, with an ex-entitlement date of 15 November 2006 and a record date of 21 November 2006. The closing date was 8 December 2006 and the options were quoted on a deferred settlement basis from 11 December 2006.

Project Acquisition Strategy

The board, together with external consultants, reviewed a number of potential exploration and development projects as part of the company’s ongoing project acquisition strategy. The company is currently engaged in confidential discussions on a number of advanced projects.

As well the board is reviewed a number of opportunities for our shareholders to participate in an uranium exploration strategy.

$2 million Capital Raising

In March quarter 2007 the company successfully raised over $2 million by placing 8 million shares at $0.26 each with a free attaching 1 for 4 listed option to clients of Paradigm Capital Pty Ltd and Bligh Capital Pty Ltd.

The placement was completed in two tranches:

Tranche 1: placement of 4,624,800 shares at $0.26 and 1,156,200 options to raise $1,202,448 (within the Board's capacity for the issue of 15% of Gulf’s issued securities)
Tranche 2: placement of 3,375,200 shares at $0.26 and 843,800 options to raise $877,552 – approved by shareholders on 29 June 2007.

Attribution

The information in this report which relates to exploration results at the Crystalbrook Project has been approved for release by Mr Greg Dunan (B.Sc, MAusIMM), who is an exploration geologist and has sufficient experience in relation to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined by the “Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves” (JORC Code 2004 Edition). Mr Duncan has consented to inclusion of this information in the form and context in which it appears.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

CORPORATE GOVERNANCE STATEMENT

In recognising the need for the highest standards of corporate behaviour and accountability, the directors of Gulf Resources Limited (“the company”) have adhered to the principles of corporate governance. A description of the main corporate governance practices, as well as any disclosures required by the Australian Stock Exchange’s “Principles of Good Corporate Governance and Best Practice Recommendations”, is set out below. Unless otherwise stated, the practices were in place for the entire year.

1. Board of Directors

The Board of Directors of the company is responsible for the corporate governance of the company. The Board guides and monitors the business and affairs of the company on behalf of the shareholders by whom they are elected and to whom they are accountable.

As the Board acts on behalf of shareholders, it seeks to identify the expectations of shareholders, as well as other ethical expectations and obligations. In addition, the Board is responsible for identifying areas of significant business risk and ensuing arrangements are in place to adequately manage those risks.

The primary responsibilities of the Board include:

formulation and approval of the strategic direction, objectives and goals of the company;
monitoring the financial performance of the company, including approval of the company’s financial statements;
ensuring that adequate internal control systems and procedures exists and that compliance with these systems and procedures is maintained;
the identification of significant business risks and ensuring that such risks are adequately managed;
the review of performance and remuneration of executive directors; and
the establishment and maintenance of appropriate ethical standards.

The responsibility for the operation and administration of the company is carried out by two of the directors, who operate in an executive capacity, supported by senior professional staff. The Board ensures that this team is suitably qualified and experienced to discharge their responsibilities, and assesses on an ongoing basis the performance of the management team, to ensure that management’s objectives and activities are aligned with the expectations and risks identified by the board.

The directors of the company are as follows:

Mr Scott Reid - Chairman Mr Wayne Kernaghan - Financial Director Mr Greg Duncan - Technical Director Mr Philip Treisman - Director of Strategy & Counsel

For information in respect to each director refer to the directors’ report.

2. Independent Directors

Under ASX guidelines all of the current board members are considered to be independent directors. The Board is satisfied that the structure of the Board is appropriate for the size of the company and the nature of its operations and is a cost effective structure for managing the company.

3. Board Composition

When the need for a new director is identified, selection is based on the skills and experience of prospective directors, having regard to the present and future needs of the company. Any director so appointed must then stand for election at the next Annual General Meeting of the company.

4. Terms of Appointment as a Director

The constitution of the company provides that a director other than the Managing Director may not retain office for more than three calendar years or beyond the third annual general meeting following his or her election, whichever is longer, without submitting for re-election. One third of the directors must retire each year and are eligible for re-election. The directors who retire by rotation at each annual general meeting are those with the longest length of time in office since their appointment or last election.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

5. Board Committees

In view of the size of the company and the nature of its activities, the Board has considered that establishing formally constituted committees for audit, board nominations and remuneration would contribute little to its effective management. Accordingly audit matters, the nomination of new directors and the setting, or review, of remuneration levels of directors and senior executives are reviewed by the Board as a whole and approved by resolution of the Board (with abstentions from relevant directors where there is a conflict of interest). Where the Board considers that particular expertise or information is required, which is not available from within their number, appropriate external advice may be taken and reviewed prior to a final decision being made by the Board.

6. Remuneration

Remuneration and other terms of employment of executives, including executive directors, are reviewed periodically by the Board having regard to performance, relevant comparative information and, where necessary, independent expert advice. Remuneration packages are set at levels that are intended to attract and retain executives capable of managing the company’s operations.

The terms of engagement and remuneration of executive directors is reviewed periodically by the Board, with recommendations being made by the non-executive directors. Where the remuneration of a particular executive director is to be considered, the director concerned does not participate in the discussion or decision-making.

7. Conflict of Interest

The directors must keep the company informed, on an ongoing basis, of any interest that could potentially conflict with those of the company. Where the Board believes a significant conflict exists, the director concerned does not receive the relevant board papers and is not present at the meeting whilst the item is considered.

8. Independent Professional Advice

Directors have the right, in connection with their duties and responsibilities as directors, to seek independent professional advice at the company’s expense. Prior approval of the Chairman is required, which will not be unreasonably withheld.

9. Code of Conduct

In view of the size of the company and the nature of its activities, the Board has considered that an informal code of conduct is appropriate to guide executives, management and employees in carrying out their duties and responsibilities.

10. Communication to Market & Shareholders

The Board of Directors aims to ensure that the shareholders, on behalf of whom they act, are informed of all information necessary to assess the performance of the directors and the company. Information is communicated to shareholders and the market through:

the Annual Report which is distributed to all shareholders;
other periodic reports which are lodged with ASX and available for shareholder scrutiny;
other announcements made in accordance with ASX Listing Rules;
special purpose information memoranda issued to shareholders as appropriate;
the Annual General Meeting and other meetings called to obtain approval for board action as appropriate; and
the company’s website.

11. Share Trading

Dealings are not permitted at any time whilst in the possession of price sensitive information not already available to the market. In addition, the Corporations Act 2001 prohibits the purchase or sale of securities whilst a person is in possession of inside information.

12. External Auditors

The external auditor is Alcock Davis Danieli.

Full details of the company’s corporate governance practices can be viewed at its website – www.gulfresources.com.au.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

DIRECTORS’ REPORT

Your Directors submit their report on the company and its controlled entities for the financial the year ended 30 June 2007.

Directors

The names of directors in office at any time during or since the end of the year are:

	Appointed	Resigned
S Reid	30 June 2005	-
W Kernaghan	30 June 2005	-
G Duncan	30 June 2005	-
P Treisman	14 August 2007	-

Directors have been in office since the start of the financial year to the date of this report unless otherwise stated.

Information on Current Directors

Scott Andrew Reid B.Sc. (Syd), Grad. Dip. Sci. (Geophys), MAIG, FFin, MAICD

Chairman

Scott Reid has over 15 years experience in the exploration and mining finance sectors. His technical experience in the mineral and oil & gas industry was gained in a wide variety of geological and geographical settings including Australia, Asia, West and Eastern Africa and North and South America during his time with large multinational French geophysical contracting corporation (CGG) including managing World Bank and United Nations sponsored geophysical projects. Scott Reid holds graduate and postgraduate qualifications in geophysics, applied finance and mineral economics. During the past three years Mr Reid has held the following listed company directorships:

AIM Resources Limited from 16 May 2002 to 31 March 2007
Discovery Nickel Limited from 30 May 2003 to 31 July 2006
Andean Resources Limited from 12 December 2003 to 26 April 2005
MXL Limited from 5 June 2007

Wayne John Kernaghan B.Bus, ACA, FAICD, ACIS

Finance Director and Company Secretary

Wayne Kernaghan is a member of the Institute of Chartered Accountants in Australia with over 20 years experience in various areas of the mining industry. He is a Fellow of the Australian Institute of Company Directors and a Chartered Secretary. During the past three years Mr Kernaghan has held the following listed company directorships:

Cullen Resources Limited from 11 November 1997
Goldlink Incomeplus Limited from 18 December 2003
Bushveld Platinum Limited from 7 September 2006

Gregory Neil Duncan B.Sc., MAusIMM

Technical Director

Greg Duncan is an exploration geologist with extensive experience in gold, base metal and diamond exploration in Australia. He combines field experience with technical expertise in the planning and management of exploration programs in remote locations and has successfully advanced conceptual models to exploration success during his career. Currently a consulting geologist based in Brisbane he brings solid exploration credentials to the Board.

Philip Treisman B.A., LLB (Wits)

Director of Strategy and Counsel

Philip Treisman has over 10 years experience in the international finance and mining and resource industries and has been the principal advisor for strategic business development in international finance, mining and resource projects and various government sponsored infrastructure development projects throughout Africa, the Caribbean, Asia, Oceania and Australia. His close relationship with London’s finance community and his role in advising companies listing on the Johannesburg Stock Exchange, Botswana Stock Exchange and London’s Alternative Investment Market has provided him with extensive experience in corporate activities relating to junior mining companies expanding their activities and increasing their shareholder value as they move into the multinational arena.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

Directors’ Interests

At the date of this report, directors’ interests in the shares and options of the company were:

Director	Direct Shares Options Performance Rights 3,288,464 972,116 1,000,000 3,900,005 2,300,000 1,000,000 - - 1,000,000 - - -	Indirect
		Shares Options Performance Rights
S Reid W Kernaghan G Duncan P Treisman		- - - 1,278,627 353,825 - 4,815,000 3,095,416 - - - -

Principal Activities

The principal activities of the consolidated group during the financial year were mining and mineral exploration. There was no significant change in the nature of the consolidated group’s principal activities during the financial year.

Review & Results of Operations

Gulf Resources Limited is involved in mineral exploration and mining. The net loss after providing for income tax amounted to $2,122,121 (2006: $192,577). The consolidated entity has been active exploring on its properties and has undertaken an IP survey and a follow up drilling program on the Crystalbrook property.

Dividends Paid or Recommended

The directors do not recommend the payment of a dividend for this financial year. No dividend has been declared or paid by the company since the end of the previous financial year.

Financial Position

The net assets of the consolidated group have increased by $1,937,442 from 30 June 2006 to $3,092,716 in 2007. This increase has largely resulted from equity raisings during the year to fund the consolidated group’s activities.

Future Developments, Prospects & Business Strategies

Exploration activities will continue on the current tenement package which offers the opportunity to explore in areas of known mineral occurrences that have not been fully exploited through modern advanced exploration activities. The consolidated group will also focus on low cost – high return exploration and corporate strategies to capture significant value for shareholders.

Environmental Issues

The exploration activities of the consolidated entity in Australia are subject to environmental regulation under the laws of the Commonwealth and the States in which those exploration activities are conducted. The environmental laws and regulations generally address the potential impact of the consolidated entity’s activities in the areas of water and air quality, noise, surface disturbance and the impact upon flora and fauna. The directors are not aware of any environmental matter which would have a materially adverse impact on the overall business of the consolidated entity.

Significant Changes in State of Affairs

The significant changes in the state of affairs of the consolidated entity that occurred during the financial year under review were:

The Listing of the Company on the Australian Stock Exchange on 10 August 2006.
The issue of shares and options during the year to raise a net $4,059,563.
The incorporation of a new subsidiary named Bonanza Uranium Limited.

After Balance Date Events

There has not arisen in the interval between the end of the financial year and the date of this report any item, transaction or event of a material and unusual nature likely, in the opinion of the directors of the parent entity, to affect the operations of the consolidated entity, the results of those operations or the state of affairs of the consolidated entity in the subsequent financial years.

Directors Meetings

The number of Directors Meetings of Gulf Resources Limited held during the financial period ended 30 June, 2007 and the number of meetings attended by each director is as follows:

Name	Directors	Meetings
	Eligible to	Attended
	Attend
S Reid	5	5
W Kernaghan	5	5
G Duncan	5	5
P Treisman	-	-

As well as formal directors’ meetings, executive and non-executive directors are in frequent communication.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

Options

At 30 June 2007 the company had 23,327,402 (2006: 5,500,000) listed and unlisted options on issue and the details are as follows:

Type	Number	Exercise	Expiry Date
		Price
Listed	16,577,402	$0.20	30 June 2011
Unlisted	6,750,000	$0.20	30 June 2011

During the year, 19,266 (2006: Nil) fully paid ordinary shares were issued by virtue of the exercise of options. Since the end of the financial year no shares have been issued by virtue of the exercise of options.

Remuneration Report

This report details the nature and amount of remuneration for each director of Gulf Resources Limited.

Remuneration Policy

The remuneration policy of Gulf Resources Limited has been designed to align director objectives with shareholder and business objectives by providing a fixed remuneration component and offering specific long-term incentives based on key performance areas affecting the consolidated group’s financial results. The board of Gulf Resources Limited believes the remuneration policy to be appropriate and effective in its ability to attract and retain the best executives and directors to run and manage the consolidated group as well as create goal congruence between directors and shareholders.

The board’s policy for determining the nature and amount of remuneration for board members is as follows:

The remuneration policy, setting the terms and conditions for the executive directors was developed by the board. All executives receive a base salary (which is based on factors such as length of service and experience), options and incentives. The board reviews executive packages annually by reference to the company’s performance, executive performance and comparable information from industry sectors and other listed companies in similar industries.

The board policy is to remunerate non-executive directors at market rates for comparable companies for time, commitment and responsibilities. The board determines payments to the non-executive directors and reviews their remuneration annually, based on market practice, duties and accountability. Independent external advice is sought when required. The maximum aggregate amount of fees that can be paid to non-executive directors is subject to approval by shareholders at the Annual General Meeting. Fees for non-executive directors are not linked to the performance of the company. However, to align directors’ interests with shareholder interests, the directors are encouraged to hold shares in the company.

Details of remuneration practices of key management personnel remuneration of the consolidated entity have been disclosed in Note 14 - Key management personnel compensation.

Key Management Personnel Remuneration

The remuneration for each director received during the year was as follows:

Director	Primary	Motor	Post Employment	Total
2007	Salary/Fee	Vehicle	Superannuation	$
	$	$	$
S Reid	164,799	18,201	2,393	185,393
W Kernaghan	173,000	-	2,970	175,970
G Duncan	143,000	-	2,970	145,970
P Treisman	-	-	-	-

(e) Compensation practices

The board’s policy for determining the nature and amount of compensation of key management for the company is:

The remuneration for executive officers, including executive directors is based on a number of factors, including length of service, particular experience of the individual concerned, and overall performance of the company. The contracts for service between the company and specified directors and executives are on a continuing basis, the terms of which are not expected to change in the immediate future. Upon retirement, specified directors and executives are paid employee benefit entitlements accrued to the date of retirement. Any options not exercised before or on the date of termination lapse.

Director	Primary	Motor	Post Employment	Total
2006	Salary/Fee	Vehicle	Superannuation	$
	$	$	$
S Reid	-	-	-	-
W Kernaghan	-	-	-	-
G Duncan	10,000	-	-	10,000

These have been payments made to director related entities for services provided to the economic entity which have been included in the above amounts.

The consolidated entity does not have specific executives as the executive role is performed by the specified directors.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

Options Granted as Part of Remuneration for the year ended 30 June 2007

There were no options granted as part of director and executive emoluments during the year.

Corporate Governance

In recognising the need for the highest standard of corporate behaviour and accountability, the directors of Gulf Resources Limited support and adhered to the principles of good corporate governance. The company’s corporate governance statement is on pages 15 to 16.

Indemnifying Officer or Auditor

The company has not, during or since the end of the financial year, in respect of any person who is or has been an officer or auditor of the company or related body corporate indemnified against liability incurred as an officer or an auditor including costs and expenses in successfully defending legal proceedings or paid or agreed to pay a premium in respect of a contract insuring against a liability incurred as an officer or auditor for the costs or expenses to defend legal proceedings.

Auditor’s Independence Declaration

The lead auditor’s independence declaration for the period ended 30 June 2007 has been received and can be found on page 21.

Signed in accordance with a resolution of the Board of Directors:

S Reid Chairman Sydney, 25 September 2007

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

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Alcock Davis Danieli

Chartered Accountants

ABN 27 056 471 099

AUDITOR’S INDEPENDENCE DECLARATION

Level 5, 285 George St Sydney NSW 2000 PO Box H88 Australia Square NSW 1215

Ph. (02) 9290 3099 Fax (02) 9262 2502

Email: [email protected] Website: www.addca.com.au

UNDER SECTION 307C OF THE CORPORATIONS ACT 2001

TO THE DIRECTORS OF GULF RESOURCES LIMITED AND CONTROLLED ENTITIES

I declare that, to the best of my knowledge and belief, during the year ended 30 June 2007 there have been:
i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and
ii. no contraventions of any applicable code of professional conduct in relation to the audit.

ALCOCK DAVIS DANIELI Chartered Accountants

Sam Danieli Partner

Sydney, 25 September 2007

Liability limited by a scheme approved under Professional Standard Legislation

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

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Alcock Davis Danieli

Chartered Accountants ABN 27 056 471 099

INDEPENDENT AUDITOR’S REPORT

TO THE MEMBERS OF

Level 5, 285 George St Sydney NSW 2000 PO x H88 Australia Square NSW 1215

Ph. (02) 9290 3099 Fax (02) 9262 2502

Email: [email protected] Website: www.addca.com.au

GULF RESOURCES LIMITED AND CONTROLLED ENTITIES

A.B.N. 13 115 027 033

Report on the Financial Report

We have audited the accompanying financial report of Gulf Resources Limited (the company) and Gulf Resources Limited and Controlled Entities (the consolidated entity), which comprises the balance sheet as at 30 June 2007 and the income statement, statement of changes in equity and cash flow statement for the year ended on that date, a summary of significant accounting policies and other explanatory notes and the directors’ declaration of the consolidated entity comprising the company and the entities it controlled at the year’s end or from time to time during the financial year.

As permitted by the Corporations Regulations 2001, the company has disclosed information about the remuneration of directors and executives (remuneration disclosures), required by Accounting Standard AASB 124: Related Party Disclosures, under the heading ‘Remuneration Report’ in pages 19 to 20 of the directors’ report and not in the financial report.

Directors’ Responsibility for the Financial Report

The directors of the company are responsible for the preparation and fair presentation of the financial report in accordance with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Act 2001 . This responsibility includes establishing and maintaining internal control relevant to the preparation and fair presentation of the financial report that is free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. In Note 1, the directors also state, in accordance with Accounting Standard AASB 101: Presentation of Financial Statements, that compliance with the Australian equivalents to International Financial Reporting Standards (IFRS) ensures that the financial report, comprising the financial statements and notes, complies with IFRS.

The directors also are responsible for preparation and presentation of the remuneration disclosures contained in the directors’ report in accordance with the Corporations Regulations 2001.

Auditor’s Responsibility

Our responsibility is to express an opinion on the financial report based on our audit. We conducted our audit in accordance with Australian Auditing Standards. These Auditing Standards require that we comply with relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain reasonable assurance whether the financial report is free from material misstatement and that the remuneration disclosures in the directors’ report comply with Accounting Standard AASB 124.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial report. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial report, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial report in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial report and the remuneration disclosures in the directors’ report.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Independence

In conducting our audit, we have complied with the independence requirements of the Corporations Act 2001 . We confirm that the independence declaration required by the Corporations Act 2001 , provided to the directors of Gulf Resources Limited on 25 September 2007, would be in the same terms if provided to the directors as at the date of this auditor’s report.

…continued over

Liability limited by a scheme approved under Professional Standard Legislation

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

Auditor’s Opinion

In our opinion:

a. the financial report of Gulf Resources Limited and Gulf Resources Limited and Controlled Entities is in accordance with the Corporations Act 2001, including:
i. giving a true and fair view of the company’s and consolidated entity’s financial position as at 30 June 2007 and of their performance for the year ended on that date; and
ii. complying with Australian Accounting Standards (including the Australian Accounting Interpretations) and the Corporations Regulations 2001;
b. the financial report also complies with International financial Reporting Standards as disclosed in Note 1; and
c. the remuneration disclosures that are contained in pages 19 to 20 of the directors’ report comply with Accounting Standard AASB 124.

ALCOCK DAVIS DANIELI Chartered Accountants

Sam Danieli Partner

Sydney, 25 September 2007

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

DIRECTORS’ DECLARATION

The directors of the company declare that:

(a) The financial statements and notes, as set out on pages 25 to 39, are in accordance with the Corporations Act 2001 and:
(i) comply with Accounting Standards and the Corporations Regulations 2001; and
(ii) give a true and fair view of the financial position as at 30 June 2007 and of the performance for the year ended on that date of the company and consolidated group;
(b) The Chief Executive Officer and Chief Finance Officer have each declared that:
1. the financial records for the company for the financial period have been properly maintained in accordance with section 286 of the Corporations Act 2001;
2. the financial statements and notes for the financial period comply with the Accounting Standards; and
3. the financial statements and notes for the financial year give a true and fair view.

(c) In the director’s opinion there are reasonable grounds to believe that the company will be able to pay its debts as and when they become due and payable.

This declaration is made in accordance with a resolution of the Board of Directors.

S Reid Chairman Sydney, 25 September 2007

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

INCOME STATEMENT FOR THE YEAR ENDED 30 JUNE 2007

Consolidated Group 2007 $ 2006 $ 80,926 - (440,483) (7,287) (1,531,366) (223,911) - - - - (2,122,121) (192,577) - - (2,122,121) (192,577) (5.6) (2.6) (4.0) (1.5)	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
80,926 (440,483) (7,287) (1,531,366) (223,911) (2,122,121) - (2,122,121) (5.6) (4.0)	80,926 (440,483) (7,287) (808,053) (215,972) (1,390,869) - (1,390,869)	- - - - -
		(189,848) -
		(189,848)

(The accompanying notes form part of these financial statements.)

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

BALANCE SHEET AT 30 JUNE 2007

Consolidated Group 2007 $ 2006 $ 2,340,621 407,643 116,682 34,333 2,457,303 441,976 - - 612,225 - 263,141 - 723,313 875,366 723,313 3,332,669 1,165,289 239,953 10,015 239,953 10,015 239,953 10,015 3,092,716 1,155,274 4,740,963 1,252,151 666,451 95,700 (2,314,698) (192,577) 3,092,716 1,155,274	Parent 2007 $	Entity 2006 $
2,340,621 116,682 2,457,303 - 612,225 263,141 - 875,366 3,332,669 239,953 239,953 239,953 3,092,716 4,740,963 666,451 (2,314,698) 3,092,716	2,339,900 96,682 2,436,582 34,000 1,332,927 263,141 - 1,630,068 4,066,650 239,953 239,953 239,953 3,826,697 4,740,963 666,451 (1,580,717) 3,826,697	404,985 14,333
		419,318
		28,000 720,700 -
		748,700
		1,168,018
		10,015
		10,015
		10,015
		1,158,003
		1,252,151 95,700 (189,848)
		1,158,003

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 JUNE 2007

Consolidated Group Balance at 30 June 2005 Issue of share capital Share based payments Loss for the period Balance at 30 June 2006 Balance at 1 July 2006 Issue of share capital Share based payment Issue of options Loss for the year Balance at 30 June 2007 Parent Entity Balance at 30 June 2005 Issue of share capital Share based payments Loss for the period Balance at 30 June 2006 Balance at 1 July 2006 Issue of share capital Share based payment Issue of options Loss for the year Balance at 30 June 2007	Issued Capital $ - 1,252,151 - - 1,252,151 1,252,151 3,488,812 - - - 4,740,963 Issued Capital $ - 1,252,151 - - 1,252,151 1,252,151 3,488,812 - - - 4,740,963	Share Option Reserve $ - - 95,700 - 95,700 95,700 - 378,000 192,751 - 666,451 Share Option Reserve $ - - 95,700 - 95,700 95,700 - 378,000 192,751 - 666,451	Accumulated Losses $ - - - (192,577) (192,577) (192,577) - - - (2,122,121) (2,314,698) Accumulated Losses $ - - - (189,848) (189,848) (189,848) - - - (1,390,869) (1,580,717)	Total Equity $ -
				1,252,151 95,700 (192,577)
				1,155,274
				1,155,274
				3,488,812 378,000 192,751 (2,122,121)
				3,092,716
				Total Equity $ -
				1,252,151 95,700 (189,848)
				1,158,003
				1,158,003
				3,488,812 378,000 192,751 (1,390,869)
				3,826,697

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

CASH FLOW STATEMENT FOR THE YEAR ENDED 30 JUNE 2007

Consolidated Group 2007 $ 2006 $ 80,926 - (1,324,858) (216,895) (1,243,932) (216,895) - (2,613) (612,225) - - - (270,428) - (882,653) (2,613) - - 4,059,563 627,151 4,059,563 627,151 1,932,978 407,643 407,643 - 2,340,621 407,643	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
80,926 (1,324,858) (1,243,932) - (612,225) - (270,428) (882,653) - 4,059,563 4,059,563 1,932,978 407,643 2,340,621	80,926 (1,316,919) (1,235,993) - (612,225) (2) (270,428) (882,655) (6,000) 4,059,563 4,053,563 1,934,915 404,985 2,339,900	- (194,166)
		(194,166)
		- - - -
		-
		(28,000) 627,151
		599,151
		404,985 -
		404,985

(The accompanying notes form part of these financial statements.)

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

1. Statement of significant Accounting Policies

The financial report is a general purpose financial report that has been prepared in accordance with Australian Accounting Standards including Australian Accounting Interpretations, Urgent Issues Group Interpretations, other authoritative pronouncements of the Australian Accounting Standards Board and the Corporations Act 2001.

The financial report covers the economic entity and controlled entities and as an individual parent entity Gulf Resources Limited is a public listed company incorporated and domiciled in Australia.

The financial report of Gulf Resources Limited and its controlled entities and Gulf Resources Limited as an individual parent entity comply with all International Financial Reporting Standards (IFRS) in their entirety.

The following is a summary of the material accounting policies adopted by the consolidated group in the preparation of the financial report. The accounting policies have been consistently applied, unless otherwise stated.

Basis of preparation

The accounting policies set out below have been consistently applied to all years presented.

Reporting Basis and Conventions

The financial report has been prepared using the accrual basis of accounting and is based on historical cost and does not take account of changing money values or, except where stated, current valuations of non-current assets. Cost is based on the fair values of the consideration given in exchange for assets.

a. Principles of consolidation

A controlled entity is any entity controlled by the Company. Control exists where the Company has the capacity to dominate the decision-making in relation to the financial and operating policies of another entity so that the other entity operates with the Company to achieve the objectives of the Company.

A list of controlled entities is contained in Note 16 to the Financial Statements. All controlled entities have a June financial year end. All intercompany balances and transactions between entities in the consolidated group, including any unrealised profits or losses, have been eliminated on consolidation.

Where controlled entities have entered or left the economic entity during the year, their operating results have been included from the date control was obtained or until the date control ceased.

b. Mining tenements & deferred exploration, evaluation & development expenditure

Mining Tenements are carried at cost, less accumulated impairment losses.

Mineral exploration, evaluation and development expenditure incurred is accumulated in respect of each identifiable area of interest. These costs are only carried forward to the extent that they are expected to be recouped through the successful development of the area of interest or sale of that area of interest, or exploration and evaluation activities have not reached a stage which permits a reasonable assessment of the existence or otherwise of economically recoverable reserves and active or significant operations in or in relation to, the area of interest are continuing.

Accumulated costs in relation to an abandoned area are written off in full against profit in the year in which the decision to abandon the area is made.

A regular review is undertaken of each area of interest to determine the appropriateness of continuing to carry forward costs in relation to that area of interest.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

c. Goods & services tax

Revenues, expenses and assets are recognised net of the amount of goods and services (GST), except where the amount of GST incurred is not recoverable from the Australian Tax Office (ATO). In these circumstances the GST is recognised as part of the cost of acquisition of the asset or as part of an item of the expense. Receivables and payables are stated with the amount of GST included.

The net amount of GST recoverable from, or payable to, the ATO is included as a current asset or liability in the balance sheet.

Cash flows are presented in the Cash Flow Statement on a gross basis, except for the GST component of investing and financing activities, which are disclosed as operating cash flows.

d. Impairment of assets

At each reporting date, the consolidated group reviews the carrying values of its tangible and intangible assets to determine whether there is any indication that those assets have been impaired. If such an indication exists, the recoverable amount of the asset, being the higher of the asset’s fair value less costs to sell and value in use, is compared to the asset’s carrying value. Any excess of the asset’s carrying value over its recoverable amount is expensed to the income statement.

Where it is not possible to estimate the recoverable amount of an individual asset, the Company estimates the recoverable amount of the cash-generating unit to which the asset belongs.

e. Income tax

The charge for current income tax expense is based on the profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the tax rates and tax laws that have been enacted or are subsequently enacted by the reporting date.

Current tax losses for current and prior periods are not recognised as an asset as the future income tax benefit can be carried forward only as an asset where realisation of the benefit can be regarded as being probable.

f. Share-based payments

The fair value determined at the grant date of equity-settled share-based payments is treated as the cost of assets acquired or expensed on a straight-line basis over the vesting period, based on the Group’s estimate of shares that will eventually vest. Vesting is not conditional upon a market condition. No asset or expense is recognised for share-based payments that do not vest.

For cash-settled share-based payments, a liability equal to the portion of the goods or services received is recognised at the current fair value determined at each reporting date.

g. Cash

For the purpose of the statement of cash flows, cash includes:

cash on hand and at call deposits with banks or financial institutions, net of bank overdrafts; and
investments in money market instruments with less than 14 days to maturity.

h. Revenue recognition

Interest revenue is recognised on a proportional basis taking into account the interest rates applicable to the financial assets.

Revenue from the rendering of a service is recognised upon the delivery of the service to the customers.

All revenue is stated net of the amount of goods and services tax (GST).

i. Reporting period

The period ended 30 June 2006 refers to the period 30 June 2005 (date of incorporation) to 30 June 2006.

j. Impact of pending accounting standards

There are no material impacts to the financial statements known from pending accounting standards that have not been adopted in the preparation of these financial statements.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

2 Loss for the Year Revenue from ordinary activities: Interest Expenses from ordinary activities: Consulting Compliance Depreciation Employee benefits expense Exploration expenditure Legal Travel	Consolidated Group 2007 $ 2006 $ 80,926 - 80,926 - 21,770 72,308 30,986 36,512 7,287 - 440,483 - 1,531,366 - 23,276 39,963 39,471 9,053	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
	80,926 80,926 21,770 30,986 7,287 440,483 1,531,366 23,276 39,471	80,926 80,926 21,770 30,350 7,287 440,483 808,053 23,276 39,471	- - 72,053 35,500 - - - 39,963 9,053

Income tax

Potential future income tax benefits estimated at $694,409 (2006: $57,773) attributable to Australian tax losses carried forward by the company and future benefits to exploration expenditure and other timing differences allowable for deduction have not been brought to account in the consolidated accounts at 30 June 2007 because the Directors do not believe it is appropriate to regard full realisation of the future income tax benefits as probable. These benefits will only be obtained if:

(a) the company derives future assessable income of a nature and of sufficient amount to enable the benefit from the deductions to be realised; and
(b) the company continues to comply with the conditions for deductibility imposed by tax legislation; and
(c) no changes in tax legislation adversely affect the company in realising the benefit from the deduction in losses.

4. Cash & cash equivalents

Cash and cash equivalents at the end of the year as shown in the statement of cash flows is reconciled to the related items in the balance sheet as follows:

Cash on hand and at bank 5. Trade & other receivables Current Other debtors Security deposits Non-Current Loans to controlled entities 6. Financial assets Available for sale financial assets comprise: Unlisted investments at cost - shares in controlled entities Listed investments at fair value - shares in listed corporations	2,340,621 2,340,621 96,682 20,000 116,682 - - - 612,225 612,225	407,643 407,643 14,333 20,000 34,333 - - - - -	2,339,900 2,339,900 96,682 - 96,682 34,000 34,000 720,702 612,225 1,332,927	404,985
				404,985
				14,333 -
				14,333
				28,000
				28,000
				720,700 -
				720,700

The fair value of unlisted available for sale financial assets cannot be reliably measured, and are therefore measured at cost. Available for sale financial assets comprise investments in the ordinary capital of various entities. There are no fixed returns or fixed maturity dates attached to these investments.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Consolidated Group 2007 $ 2006 $ 7. Property, Plant & Equipment Plant and equipment 2,900 - Less accumulated depreciation (159) - 2,741 - Leasehold improvements 135,967 - Less accumulated amortisation - - 135,967 - Motor Vehicles 131,561 - Less accumulated depreciation (7,128) - 124,433 - Total Property, Plant & Equipment 263,141 - Movements in the carrying amounts for each class of property, Plant and equipment between the beginning and the end of the current financial year. Plant and Equipment Balance at the beginning of year - - Additions 2,900 - Disposals - - Depreciation (159) - Carrying amount at the end of year 2,741 - Leasehold improvements Balance at the beginning of year - - Additions 135,967 - Disposals - - Amortisation - - Carrying amount at the end of year 135,967 - Motor Vehicles Balance at the beginning of year - - Additions 131,561 - Disposals - - Depreciation (7,128) - Carrying amount at the end of year 124,433 - 8. Deferred exploration costs Costs carried forward in respect of areas of interest in the exploration and evaluation phase Opening balance 723,313 - Expenditure incurred during the year 808,053 723,313 Less expenditure written off during the year (1,531,366) - Closing balance - 723,313 9. Trade & other payables Trade creditors 239,953 10,015 239,953 10,015	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
	2,900 (159) 2,741 135,967 - 135,967 131,561 (7,128) 124,433 263,141 - 2,900 - (159) 2,741 - 135,967 - - 135,967 - 131,561 - (7,128) 124,433 - 808,053 (808,053) - 239,953 239,953	- -
		-
		- -
		-
		- -
		-

		-
		- - - -
		-
		- - - -
		-
		- - - -
		-
		- -
		-
		-
		10,015
		10,015

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

10. Issued Capital Issued capital 46,559,271 (2006: 28,040,005) fully paid shares The company has authorised share capital amounting to 46,559,271 ordinary shares of no par value. Movements during the year Beginning of the financial year 30/6/05 issued at 20 cents 27/2/06 issued at 0.1 cents 27/2/06 issued at 2 cents 28/2/06 issued at 5 cents – acquisition of Chillagoe Resources Pty Ltd 28/2/06 issued at 5 cents – acquisition of Dingo Resources Pty Ltd 3/5/06 issued at 5 cents 10/8/06 issued at 20 cents 23/5/07 issued at 26 cents 23/5/07 exercise of options at 20 cents 20/6/07 exercise of options at 20 cents 29/6/07 exercise of options at 20 cents 29/6/07 issued at 26 cents Share issue expenses End of the financial year	4,740,963 2007 Number of Shares 28,040,005 - - - - - - 10,500,000 5,755,152 933 13,333 5,000 2,244,848 - 46,559,271	1,252,151 2006 Number of Shares - 5 1,500,000 2,500,000 8,000,000 4,500,000 11,540,000 - - - - - - - 28,040,005	4,740,963 2007 $ 1,252,151 - - - - - - 2,100,000 1,496,340 187 2,667 1,000 583,660 (695,042) 4,740,963	1,252,151
				2006 $ - 1 150 50,000 400,000 225,000 577,000 - - - - - - -
				1,252,151

Ordinary shares have the right to receive dividends as declared and, in the event of winding up the company, to participate in the proceeds from the sale of all surplus assets in proportion to the number of and amounts paid upon shares held.

Ordinary shares entitle their holder to one vote, either in person or by proxy, at a meeting of the company.

Options

At 30 June 2007 there are 23,327,372 (2006: 5,500,000) unissued shares in respect of which options were outstanding and the details of them are as follows:

Type	Number	Exercise Price	Expiry Date
Unlisted	6,750,000	$0.20	30 June 2011
Listed	16,577,372	$0.20	30 June 2011
11. Share Option Reserve

The share option reserve records value of options used to assist with the Listing of the Company on the Australian Stock Exchange refer to note 12. Also the option reserve includes the issue of loyalty options to shareholders under a prospectus to shareholders in December 2006.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

12. Share Based Payments

(i) On 28 February 2006 Shares and Options were issued to acquire all ordinary shares in Dingo Resources Pty Ltd and Chillagoe Resources Pty Ltd as follows:

Dingo Resources Pty Ltd - 4,500,000 ordinary shares @ 5 cents 225,000 - 1,500,000 options (valued using Black Scholes option valuation methodology) 26,100

$ 251,100

Chillagoe Resources Pty Ltd - 8,000,000 ordinary shares @ 5 cents 400,000 - 4,000,000 options (valued using Black Scholes option valuation methodology) 69,600 $469,600

(ii) On 10 August 2007 3,000,000 options were issued to Paradigm Capital Pty Ltd and were valued at $378,000 using a Black Scholes option valuation methodology for assisting the parent entity in becoming listed on the Australian Stock Exchange.

13. Auditors remuneration Remuneration of the auditor of the parent entity for: – auditing or reviewing the financial report – other services	Consolidated Group 2007 $ 2006 $ 12,500 7,500 - - 12,500 7,500	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
	12,500 - 12,500	12,500 - 12,500	7,500 -
			7,500

14. Key management personnel compensation

(a) Names and positions held of economic and parent entity key management personnel in office at any time during the financial year are:

Name Appointed Position S Reid 30 June 2005 Director W Kernaghan 30 June 2005 Director G Duncan 30 June 2005 Director

Key management personnel remuneration has been included in the Remuneration Report section of the Directors Report.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

(b) Number of options held by key management personnel and their related parties

Company Director	Balance	Options	Options	Balance
	1/7/2006	Issued	Exercised	30/6/2007
S Reid	750,000	226,116	-	976,116
W Kernaghan	1,000,000	1,653,825	-	2,653,825
G Duncan	1,500,000	1,595,416	-	3,095,416
	Balance	Options	Options	Balance
	30/6/2005	Issued	Exercised	30/6/2006
S Reid	-	750,000	-	750,000
W Kernaghan	-	1,000,000	-	1,000,000
G Duncan	-	1,500,000	-	1,500,000

Company Director	Balance	Options	Net Change	Balance
	1/7/2006	Exercised	Other	30/6/2007
S Reid	2,500,000	-	788,464	3,288,464
W Kernaghan	4,750,005	-	428,627	5,178,632
G Duncan	4,700,000	-	115,000	4,815,000
	Balance	Options	Net Change	Balance
	30/6/2005	Exercised	Other	30/6/2006
S Reid	-	-	2,500,000	2,500,000
W Kernaghan	-	-	4,750,005	4,750,005
G Duncan	-	-	4,700,000	4,700,000

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

Related party transactions
(a) Payments to director related companies

Transactions between related parties are on normal commercial terms and conditions no more favourable than those available to other parties unless otherwise stated.

Consultancy payments were made to Mosman Corporate Services Pty Ltd totaling $140,000 (2006: Nil) which is a company controlled by Mr W Kernaghan.

Geological payments were made to Pacific Consulting Services Pty Ltd totaling $110,000 (2006: $10,000) which is a company controlled by Mr G Duncan and was reimbursed geological services of $ 133,759 ( 2006: Nil)

(b) Transactions with wholly owned controlled entities

During the financial year there have been transactions between Gulf Resources Limited, and its wholly owned controlled entities which have been eliminated for consolidation purposes.

Interest free loans have been provided by the company to its wholly owned controlled entities $34,000 (2006: $28,000).

Economic entity accounts include a consolidation of the following companies:

Contribution to consolidated
operating loss
2007
$ 2006
$ Gulf Resources Ltd
(2,114,182)
(189,848)
Dingo Resources Pty Ltd
(7,085)
(1,648)
Chillagoe Resources Pty Ltd
(852)
(1,081)
Bonanza Uranium Ltd
(2)
-
(2,122,121)
(192,577)
Company
Place of
incorporation
Date of
acquisition
Dingo Resources Pty Ltd
Australia
28.02.06
Chillagoe Resources Pty Ltd
Australia
28.02.06
Bonanza Uranium Ltd
Australia
23.05.07
17. Earnings per share
(a) Net loss
Net loss used in the calculation of basic earnings per share
(b) Weighted average number of ordinary shares on issue used in the
calculation of basic earnings per share
Weighted average number of options outstanding
Weighted average number of ordinary shares outstanding during the
year used in calculation of dilutive EPS

Details of investment in shares
Cost of parent entity’s investment
in subsidiaries
2007
$ 2006
$ -
-
251,100
251,100
469,600
469,600
2
-
720,702
720,700
Class of
Shares
2007
2006
Ordinary
100%
100%
Ordinary
100%
100%
Ordinary
100%
-
2007
2006
(2,122,121)
(192,577)
37,972,510
7,339,677
15,107,164
5,500,000
53,079,674
12,839,677

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

18. Capital and Leasing Commitments

(i) The consolidated entity has certain obligations to perform mining exploration work and expend minimum amounts of money on mineral exploration tenements. The consolidated entity has committed to expend a minimum of $458,200 (2006: $115,000) over the next year to keep its current tenement in good standing.

(ii) Lease expenditure commitments

Lease expenditure commitment Operating lease for premises Minimum lease payments: – not later than one year – later than one year and not later than five years Aggregate lease expenditure contracted for at reporting Date but not provided for	Consolidated 2007 $	Group 2006 $ - - -	Parent Entity 2007 $ 2006 $	Parent Entity 2007 $ 2006 $
	160,650 629,212 789,862		160,650 629,212 789,862	- -
				-

19. Financial Instruments

The group’s financial instruments consist mainly of deposits with banks, accounts receivable and payable and loans to and from subsidiaries. The main risks the group is exposed to through its financial instruments are interest rate risk and liquidity risk.

i) Interest Rate Risk

The economic exposure to interest rate risk and the effective weighted interest for classes of financial assets and financial liabilities are set out below:

below:
2007 Note	Floating interest rate $	One year or less $	Over one to 5 years $	Non interest bearing $	Total $
Financial assets Cash and cash equivalents 4 Trade and other Receivables 5 Financial Assets 6 Financial Liabilities Trade and other payable 8 2006 Note	2,340,621 - - 2,340,621 - - Floating interest rate $	- - - - - - One year or less $	- - - - - - Over one to 5 years $	- 116,682 612,225 728,907 239,953 239,953 Non interest bearing $	2,340,621 116,682 612,225
					3,069,528
					239,953
					239,953
					Total $
Financial assets Cash and cash equivalents 4 Trade and other Receivables 5 Financial Liabilities Trade and other payable 8	- - - - - -	- - - - -	- - - - -	407,643 34,333 441,976 10,015 10,015	407,643 34,333
					441,976
					10,015
					10,015

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

The parent entity exposure to interest rate risk and the effective weighted interest for classes of financial assets and financial liabilities are set out below:

below:
2007 Note	Floating interest rate $	One year or less $	Over one to 5 years $	Non interest bearing $	Total $
Financial assets Cash and cash equivalents 4 Trade and other Receivables 5 Financial Assets 6 Financial Liabilities Trade and other payable 8 2006 Note	2,339,900 - - 2,339,900 - - Floating interest rate $	- - - - - - One year or less $	- - - - - - Over one to 5 years $	- 96,682 612,225 708,907 239,953 239,953 Non interest bearing $	2,339,900 96,682 612,225
					3,048,807
					239,953
					239,953
					Total $
Financial assets Cash and cash equivalents 4 Trade and other Receivables 5 Financial Liabilities Trade and other payable 8	- - - - - -	- - - - -	- - - - -	404,985 14,333 419,318 10,015 10,015	407,643 14,333
					421,976
					10,015
					10,015

ii) Net fair values

Monetary financial assets and financial liabilities not readily traded in an organised financial market have been valued at cost, which approximate fair value. The carrying amounts of bank deposits, accounts receivable and, accounts payable approximate net fair value.

iii) Liquidity Risk

The group manages liquidity risk by monitoring forecast cash flows.

The carrying amounts and net fair values of financial assets and liabilities as at the reporting date are as follows:

	2007	2006	2007	2006
	Consolidated	Consolidated	Parent	Parent
	Group	Group	Entity	Entity
	Carrying Amount	Carrying Amount	Carrying Amount	Carrying Amount
	$	$	$	$
Financial Assets
Cash and cash equivalent	2,340,621	407,643	2,339,900	404,985
Trade and other receivables	116,682	34,333	96,682	14,333
Financial assets	612,225	-	612,225	-
Financial Liabilities
Trade and other payables	239,953	10,015	239,953	10,015

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 30 JUNE 2007

20. Cash flow information

Cash flow information
Loss from ordinary activities after income tax Non cash flows in loss: Depreciation Exploration expenditure Changes in assets and liabilities: (Increase)/Decrease in Trade receivables Increase/(Decrease) Trade and other payables Operating cash flow	Consolidated Group 2007 2006 $ $ (2,122,121) (192,577) 7,287 - 723,313 - (82,349) (34,333) 229,938 10,015 (1,243,932) (216,895)	Parent Entity 2007 2006 $ $
	(2,122,121) 7,287 723,313 (82,349) 229,938 (1,243,932)	(1,390,869) 7,287 - (82,349) 229,938 (1,235,993)	(189,848) - - (14,333) 10,015
			(194,166)

21. After balance date events

22. Segment information

The economic entity operates in one business segment being the mining industry and in one geographical location, namely Australia.

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

AUSTRALIAN STOCK EXCHANGE INFORMATION

Shareholdings (a) Analysis of holdings as at 25 September 2007. 1-1,000 1,001-5,000 5,001-10,000 10,001-100,000 100,001 and over Less than marketable parcels	Ordinary Shares 1 38 169 152 70 430 6	Options
		1 115 32 63 30
		241

(b) Substantial shareholders: The company has the following substantial shareholders as at 25 September 2007: No. of Shares Pacific Consulting Services Pty Ltd 4,700,000 Scott Reid 4,030,000 Wayne Kernaghan 3,900,005	% of Total 10.09 8.66 8.38

No restrictions. On a show of hands every member present or by proxy shall have one vote and upon a poll each share shall have one vote.

(d) The names of the twenty largest shareholders of ordinary shares as at 25 September 2007.

Pacific Consulting Services Pty Ltd Scott Reid Wayne Kernaghan Katherine Louise Reid West African Exploration Pty Ltd Morrice Cordiner M & S Super Investments Pty Ltd Marc Flory WJ K Investments Pty Ltd National Nominees Ltd ANZ Nominees Limited Ann Michelle Howrie Kate Reid Frank Cannavo John Larking Paradigm Capital Pty Ltd Picturebook Pty Ltd T Naysmith & K Mitchell Phillip Clive Hardcastle Zona Holdings Pty Ltd	No. of Shares 4,700,000 4,030,000 3,900,005 2,075,000 1,950,000 1,510,000 1,500,000 1,417,142 1,268,632 1,000,000 950,000 803,560 750,000 749,000 600,000 500,000 500,000 500,000 500,000 400,834 29,604,173	% of Total 10.09 8.66 8.38 4.46 4.19 3.24 3.22 3.04 2.73 2.15 2.04 1.73 1.61 1.61 1.29 1.07 1.07 1.07 1.07 0.86 63.58

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

AUSTRALIAN STOCK EXCHANGE INFORMATION

(e) The interests of each director and/or associate are listed in the Directors Report.

(f) i) The name of the Company Secretary is Wayne Kernaghan

ii) The business and registered office address is Level 10 Gold Fields House 1 Alfred Street Sydney NSW 2000 Telephone (02) 8247 5333 Facsimile (02) 9247 7722

iii) Gulf Resources Limited is listed on the Australian Stock Exchange. ASX Code: GLF

iv) Share registry is located at Security Transfer Registrars Pty Limited 770 Canning Highway Applecross WA 6153 Telephone (08) 9315 2333 Facsimile (08) 9315 2233

GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

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GULF RESOURCES LIMITED & CONTROLLED ENTITIES ● ABN 13 115 027 033

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resources gulf

LIMITED

Level 10 Gold Fields House 1 Alfred Street Sydney NSW 2000 PO Box R745 Royal Exchange NSW 1225

t (02) 8247 5333 f (02) 9247 7722

ACN 115 027 033

AI assistant

CASSIUS MINING LIMITED — AGM Information 2007

64667_rns_2007-09-26_3c206bd4-0be7-4a73-aa42-4dd1aa94fbbd.pdf

ANNUAL GENERAL MEETING

Tuesday October 30, 2007 at 11:00am

Notice of Annual General Meeting

Ordinary Business

1. Financial Statements and Reports

2. Adoption of Remuneration Report

3. Re-election of a Director

4. Election of a Director

5. Further Business

Appointment of Proxy

IMPORTANT:

Instructions for Completion of Proxy Form

2007

Annual Report

directors

company secretary

registered office

auditors

legal

contents

bank

share registry

CHAIRMAN’S LETTER

Dear Fellow Shareholder,

ACTIVITES & PROJECT REVIEW

Summary

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

Note:

ACTIVITES & PROJECT REVIEW

Results include:

CBDD - 1

ACTIVITES & PROJECT REVIEW

CBDD-2

Note: Assay Details

ACTIVITES & PROJECT REVIEW

ACTIVITES & PROJECT REVIEW

Corporate Activities Review

Loyalty Option Issue

Project Acquisition Strategy

$2 million Capital Raising

Attribution

CORPORATE GOVERNANCE STATEMENT

1. Board of Directors

2. Independent Directors

3. Board Composition

4. Terms of Appointment as a Director

5. Board Committees

6. Remuneration

7. Conflict of Interest

8. Independent Professional Advice

9. Code of Conduct

10. Communication to Market & Shareholders

11. Share Trading

12. External Auditors

Directors

Information on Current Directors

Chairman

Wayne John Kernaghan B.Bus, ACA, FAICD, ACIS

Finance Director and Company Secretary

Gregory Neil Duncan B.Sc., MAusIMM

Technical Director

Philip Treisman B.A., LLB (Wits)

Director of Strategy and Counsel

Directors’ Interests

Principal Activities

Review & Results of Operations

Dividends Paid or Recommended

Financial Position

Future Developments, Prospects & Business Strategies

Environmental Issues

Significant Changes in State of Affairs

CASSIUS MINING LIMITED AGM Information 2007