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Management Side
Technical Side
Sino-Forest Secures Long-Term Wood Fiber Supply
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Toronto Ontario, Canada, 31 July 2006 -- Sino-Forest Corporation (TSX:TRE andTRE.S), a leading commercial forestry plantation operator in China, announced today that one of its wholly-owned PRC subsidiaries has entered into a long-term agreement with Inner Mongolia Forest and Timber Resources Company Ltd, (the "EJV"), an equity joint-venture company in the People's Republic of China (the "PRC"), and Erlianhot Lianhe Forestry Bureau in the Inner Mongolia Autonomous Region, to secure a long-term supply of wood fiber while managing a regeneration program of secondary forests.

Under the agreement, the EJV will supply to Sino-Forest's subsidiary an aggregate annual volume of at least 1.5 million cubic metres (m3) of wood fiber that it will acquire from the forestry bureau. Under certain circumstances, where the EJV fails to comply with its obligations to deliver wood fiber in accordance with the terms set out in the agreement, the forestry bureau will supply the indicated volume of wood fiber.

Sino-Forest has committed a USD 10 million deposit which is refundable over the first five years of the contract. The annual volume of wood fiber will be in the form of logs and sawn timber for 12 years, until 2018. The tree species to be supplied will be birch, larch, or other species of similar grades.

In view of the long-term nature of cooperation between the parties, the wood fiber will be sold to Sino-Forest at a fixed discount of CNY 80 per cubic metre (currently equivalent to USD 9.70) to the lowest price at the timber trading market under the administration of the forestry bureau. The parties intend that the EJV will manage the harvesting, which generally will take place between 01 October and 31 May, and delivery of the fiber, which is anticipated to begin in the fourth quarter of 2006.

Sino-Forest and the EJV intend to jointly manage the secondary regeneration programme with a goal of improving yield and ecological functions of the natural forest, while conserving species grown in the Inner Mongolia Autonomous Region.

Commenting on the deal, Sino-Forest chairman and CEO, Allen Chan said, "This large-scale, long-term wood fiber agreement brings Sino-Forest an important step closer to reaching our strategic goal of 15 to 20 million m3 of annual fiber output in the PRC, compared to our current supply of 8 million m3 per
annum. In this case, we will also look to assist the forestry bureau with professional harvesting and regeneration of secondary forests, to ensure that the regenerated areas will function better in terms of fiber production and ecological conservation. It will demonstrate our expertise and reinforce our leading position in sustainable forestry and plantation management in the PRC."

Secondary Regeneration Forests

Secondary regeneration forests are an alternative source of wood fiber supply. In countries such as Canada, Finland, Sweden, and others, a significant amount of the productive forests are secondary regenerated and managed professionally. A forest regeneration programme that combines selective harvesting with professional post-harvest management can improve the recovery rate and performance of a forest (as measured by quality and growth rate) in the long term.

The northeastern part of Inner Mongolia Autonomous Region has large areas of secondary forests, and is anticipated to be a significant source of wood fiber in the PRC. Over the years, due to inadequate funding and limited resources for managing selective harvesting and post-harvesting programs, and
due to the logging ban imposed in 1998, large tracts of the secondary forests have become mature or over-mature, resulting in a lower growth rate and sick trees falling. The State Administration of Forestry of the PRC has therefore lifted the ban on the felling of mature and over-mature trees to improve the
performance of these forests and biodiversity. The regeneration program will also boost development of local wood processing, transportation, and sapling cultivation sectors.

About Inner Mongolia Forest and Timber Resources Company Ltd

Inner Mongolia Forest and Timber Resources Company Ltd, the EJV, is headquartered in Hohhot, Inner Mongolia Autonomous Region. One of its shareholders has a team of forestry experts that specializes in research and development and forestry environment. It includes the internationally renowned
forestry expert, Han Yifan, who specializes in genetic improvement of poplars with superior insect resistance. This shareholder also manages approximately 800 hectares of nursery plantation in the Jiangsu and Heibei Provinces.

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. It 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 have traded on the Toronto Stock Exchange under the symbol TRE since 1995.


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