Sino-Forest to raise $200 million in strategic placement; to acquire 200 000 hectares of standing timber in Yunnan province

Mar 23, 2007. /Lesprom Network/. Sino-Forest Corporation, a leading commercial forestry plantation operator in China, announced on March 23 that it has entered into an agreement to sell approximately 26 million common shares, which will represent approximately 16% of the diluted total shares outstanding, to several institutional investors including Temasek Holdings and United Capital Investments Group (UCI). Temasek Holdings, an Asia investment firm headquartered in Singapore will be subscribing for approximately 85% of the offering. The offering is for gross proceeds of $200 million at a price of CAD $9.15 per share, which represents a discount of approximately 9% to the volume-weighted market price over the past 30 days. The proceeds will be used for the acquisition of standing timber, for the acquisition or construction of related processing facilities in the regions, and for working capital. In addition, Sino-Panel (Asia) Inc., a wholly-owned subsidiary of Sino-Forest, has entered today into an agreement with Gengma Dai and Wa Tribes Autonomous Region Forestry Company Ltd., established in Lincang City, Yunnan province in the People's Republic of China, under which Sino-Panel will acquire approximately 200 000 hectares of non-state owned commercial standing timber in Lincang city and surrounding cities in Yunnan province for approximately CNY 5.5 to 11 billion or approximately $0.7 to 1.4 billion over a 10-year period. The purchase price is not to exceed CNY 260 or approximately $33.6 per cubic meter. The number of hectares to be acquired each year will be determined by Sino-Panel's PRC subsidiaries by entering into specific purchase agreements with Gengma Forestry. The agreement also provides Sino-Forest with the rights of first refusal to lease the land for 50 years after harvesting. The final terms of the lease are to be further negotiated with Gengma Forestry. The area of acquisition in Lincang City and surrounding cities in Yunnan province contains mature species of pine, oak, birch and other broadleaved shaw with an estimated fibre yield of 105 to 210 cubic meter per hectare or approximately 21 to 42 million cubic meter of wood fibre in total. The funding of the acquisition will be provided by the proceeds raised and future cash flow generated from operating in Yunnan province. The economics of the Yunnan agreement are similar to those of the Hunan agreement announced in 2006. "This placement brings in a new, strategic investor with significant investments in the PRC. The $200 million raised together with the Yunnan agreement will allow us to commit and execute our long-term sustainable forestry programme," said Allen Chan, chairman and CEO of Sino-Forest. Mr. Chan continued, "The operating model in Yunnan would be similar to the one in Hunan where we will harvest, re-plant, or, re-generate secondary forest to conserve bio-diversity, and to develop value-added processing facilities by maximizing the value of the wood fibre. It will also bring sustained economic benefits to local communities." Sino-Forest Corporation, a Canadian company, is a leading commercial forestry plantations operator in China. The company started its operations in 1994 and is the first foreign and privately managed operator involved in forest products in China. Its principal businesses include the ownership and management of forestry plantation trees and sales of standing timber, wood chips and logs, and complementary manufacturing of downstream engineered-wood products.