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Orient Paper Inc. Signs Letter of Intent
New York, New York, USA, and Heibei, China, 19 June 2008  -- (BUSINESS WIRE) -- Orient Paper Inc. (OTCBB: OPAI - News), a large paper milling manufacturer based in the Hebei Province of China, announced today that it has issued a merger offer to Inner Mongolia Shangdu Paper Milling Company, Ltd., with the intent to acquire the environmental protection and energy saving projects developed by Shandu Paper Milling Company: Salix psammophila pulp production and alkali recycling.

S. psammophila is a desert shrub native to China that grows up to 4 m in height, and is commonly used for weaving wicker articles and stabilizing sand. Using pulp made from S. psammophila to mill paper, the Shangdu project is producing cultural paper at a rate of 70,000 tons annually, in conjunction with the supporting project that employs recycled black liquid alkali that used to bleach the S. psammophila pulp. The Shangdu project processes 200 tons of pulp and 68.5 tons of recycled alkali daily. These two projects are approved with the [2003]245 document issued by Inner Mongolia Autonomous Region Development and Reform Commission.

The management of Orient Paper stated, "The most attractive point of these projects is the environmental protection advantage. Utilizing the desert shrub Salix psammophila for the purposes of paper production has several major environmental advantages. First, the Salix has the potential to constitute a substantial source of raw material for the rapidly expanding paper industry that is currently dependent upon the consumption of timber. In addition, reforestation with the Salix shrub can take advantage of the significant anti-desertification properties of the plant that not only can provide high quality raw material for paper milling industry, but also effectively restore desert vegetation, forming a new pattern of industrialization using paper to raise forests and using forests to control desertification. This project aims to achieve the reunification of economic efficiency, ecological benefits, and social benefits."

As of October 2007, the total capital of the projects was USD 51 million, in which the fixed assets invested were USD 39 million and the current assets invested were USD 12 million. The plant occupies an area of 446,500 square meters and the facility and the public construction area cover 62,000 square meters. Shangdu possess a pulp production line with an actual annual production capacity of 90,000 tons, four 8-cylinder long network paper production machines, two multicylinder long network paper production machines, three steam pots with a capacity of 35 tons, one recycled alkali burning stove with supporting evaporation and exorbitant equipment, and sewage treatment facilities that can process 30,000 tons daily. Thecompany has 1036 employees, among which 56 are management, 94 are technical staff, and 886 are production workers. The annual sales income was USD 55 million with an income tax of USD 3.5 million and net income was USD 11.7 million.

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