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Sino-Forest Acquires 100,000 Hectares of Plantation Trees in Hunan
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Toronto, Ontario, Canada, 28 September 2006 -- /PRNewswire/ -- Sino-Forest Corporation (TSX:TRE and TRE.S), a leading commercial forestry plantation operator in China, announced that one of its wholly-owned subsidiary, Sino-Panel (Asia) Inc., has today entered into a Master Agreement for Acquisition of Pine and Fir Forest with Hongjiang City Forestry Technology Integrated Development Services Company, a state-owned enterprise in the People's Republic of China (PRC) appointed to act as the authorized agent for the original plantation rights holders.

Under the agreement, Sino-Panel will purchase approximately 100,000 hectares of plantation trees in Hongjiang City, Hunan Province for RMB 2,600,000,000 to RMB 3,120,000,000 or approximately USD 328.3 million to USD 393.9 million over a 14-year period. The average purchase price per cubic meter is RMB 260 or approximately USD 32.83. The number of hectares of plantations to be acquired each year will be determined by Sino-Panel's PRC subsidiaries by entering into specific plantation purchase agreements with Hongjiang City Forestry.

The agreement also provides Sino-Forest the right of first refusal to lease the land for 50 years after harvesting. The final terms of the lease are to be negotiated with Hongjiang City Forestry upon the authorization of the original plantation rights holders.

The Hunan plantations contain mature species of pine and Chinese fir with an estimated fiber yield of 100 to 120 cubic meters per hectare, or 10 million to 12 million cubic meters of wood fiber in total, which will generate immediate cash flow to fund a portion of the acquisition. The balance of the funding for this acquisition will be provided by the company's operating cash flow and cash in hand.

The Agreement is a first step in securing a further 300,000 hectares of plantation trees in Hunan. With the signing of the additional 300,000 hectares, Sino-Forest is expected to have secure over 40 million cubic meters of long-term wood fiber, over a 14-year period. Agreement for the purchase of the additional 300,000 hectares of plantations is expected to be signed before the end of 2006.

Sino-Forest chairman and CEO Allen Chan said, "Under the terms of the Agreement, Sino-Forest has the flexibility to accelerate or decelerate the pace of our acquisitions based on our cash position and the overall strength of our balance sheet."

Chan continued, "Our strategic plan in Hunan goes beyond the typical acquire, harvest, and replant model. We are, in fact, working with the forestry bureaus in Hunan to improve sivilculture and yield of current forestry resources, while at the same time teaming up with local wood manufacturers to eliminate wastage and optimize the usage and value of wood fiber with existing downstream facilities.

"Speeding up rural area development and the industrialization of local forestry sector are amongst China's top priorities as it aims to improve rural area economy and infrastructure. Our strategic plan is consistent with the PRC government's policy. We are excited to be able to contribute to the growth of this sector in Hunan, while practicing sustainable forestry management," Chan concluded.

Signing of this agreement brings Sino-Forest one step closer to reaching its medium-term goal of attaining annual wood fiber output of 15-20 million cubic meters.

Hunan province is located in the center of China and is considered the gateway to southwestern China. The province has a forest area of 12.7 million hectares with standing timber covering 8.7 million hectares of forested land.

About Sino-Forest Corporation

Sino-Forest is the leading, foreign-owned, commercial forestry plantation operator in China in terms of plantation area. The corporation cultivates trees for sale as standing timber and wood chips, and is involved in the trading and manufacturing of wood chips, logs, and engineered wood products for the pulp and paper, furniture, construction, and decoration industries. Sino-Forest is a Canadian corporation with executive offices in Hong Kong and operations in southern China. It operates mainly through three wholly-owned subsidiaries: Sino-Wood Partners Limited, Sino-Panel Holdings Limited, and Sino-Global Holdings Inc. The corporation's common shares trade on the Toronto Stock Exchange under the symbol TRE since 1995.

Source: Sino-Forest Corporation
 

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