Sino-Forest Corporation Signs Fiber Supply Agreement
Toronto, Ontario, Canada, 28 January 2010 – Sino-Forest Corporation (TSX: TRE), a leading commercial forest plantation operator in China, announced today that its wholly-owned subsidiary, Sino-Panel (China) Investments Limited has entered into a master agreement for the purchase of pine and Chinese fir plantation forests (the Guizhou Master Agreement) with Guizhou Sen Li Industry Company Limited, which will act as the authorized agent for the original forest rights holders.
Under the Guizhou Master Agreement, Sino-Forest will, through its Peoples Republic of China (PRC) subsidiaries, acquire between 10.5 million and 16.5 million cubic meters (m3) of plantation wood fiber, within an area of 150,000 hectares of plantation trees that has an average yield of 70-110 m3 per hectare. The fiber acquisition will take place over a three-year period with a price not to exceed RMB 300 per cubic meter, to the extent permitted under the relevant PRC laws and regulations. The tree species include pine, Chinese fir, and others. Guizhou Sen Li will ensure that the commercial plantation forests sold to Sino-Forest are nonstate-owned and not from natural forests.
In addition to securing the maximum tree acquisition price, Sino-Forest has pre-emptive rights to lease the underlying plantation land at a price, as permitted under the relevant PRC laws and regulations, not to exceed RMB 450 per hectare per annum for 30 years from the time of harvest. The land lease can also be extended to 50 years as permitted under PRC laws and regulations. The specific terms and conditions of purchasing or leasing are to be determined upon the execution of definitive agreements between the PRC subsidiaries of Sino-Forest and Guizhou Sen Li upon the authorisation of original plantation rights holders, and subject to the requisite governmental approval and in compliance with the relevant PRC laws and regulations.
“We are very pleased to have signed our sixth master agreement, which provides us now with access to a total of 902,000 hectares of wood fibre and timber land, excluding the 348,000 hectares of trees acquired year-to-date through previous agreements," said Allen Chan, Sino-Forest chairman and CEO. "The acquisition will be funded by proceeds from the approximately USD 815 million raised from the recent convertible note and equity offerings. Our business and operational plan this year calls for further acquisition of plantation fibre, as we continue to expand our plantation base. We also plan to ramp up replanting with our genetically advanced seedlings, with the aim of achieving an average yield of 150-200 m3 per hectare at harvest in six years,” he said.
“Since Guizhou is one of the poorest provinces in China, we hope that significantly improving plantation yields and operating complementary wood processing mills that add value to wood fiber will help improve the livelihoods of local farmers and enrich regional economies,” Chan said.
Guizhou Province adjoins Sichuan Province and Chongqing Municipality to the north, Yunnan Province to the west, Guangxi Province to the south, and Hunan Province to the east. The Guizhou Master Agreement strategically expands Sino-Forest’s base of wood fiber and plantation operations in southern China. Chongqing is a vibrant and economically developing area, and infrastructure in Sichuan is under redevelopment after a massive earthquake. Accordingly, Sino-Forest believes that wood fiber will be a commodity in great demand in these provinces.
Sino-Forest Corporation is a leading commercial forest plantation operator in China. Its principal businesses include the ownership and management of forest plantation trees, the sale of standing timber and wood logs, and the complementary manufacturing of downstream engineered-wood products. The company’s common shares have traded on the Toronto Stock Exchange under the symbol TRE since 1995.