Sino Forest – Signs Long-term Tree Acquisition Agreement in Jiangxi Province

World economies may falter but China story hasn’t lost its steam. At an expected GDP growth of 6.5% for 2009, China appears to have performed better than many other large economies. The government’s $586 billion stimulus package appears to be doing wonders in China.

If China story indeed continues, prospects are bright for companies such as Toronto listed Sino-Forest Corporation (TSX: TRE). Sino-Forest is leading commercial forest plantation operator in China with some 347,000 hectares of plantation trees under its management (as of December 31, 2008). The company is one of the top suppliers of commercial wood fibre in China. In case one wonders over environmental issues and objections from tree huggers, Sino Forrest is not cutting down rain forests but growing commercial plantation such as eucalyptus used in wood fibre operations and manufacturing.

For Sino-Forrest’s business to thrive, it requires a steady economic growth in China which indeed appears to be the case. It also requires a steady supply of wood fibre. In an attempt to ensure the latter, the company’s wholly-owned subsidiary, Sino-Panel (China) Investments Limited has entered into a Master Agreement for the Purchase of Pine and Chinese Fir Plantation Forests with Jiangxi Zhonggan Industrial Development Company Limited ("Jiangxi Zhonggan"), which will act as the authorized agent for the original plantation rights holders.

Under the Agreement, Sino-Panel will, through PRC subsidiaries of Sino-Forest, acquire between 15 million and 18 million cubic metres (m(3)) of wood fibre located in plantations in Jiangxi Province over a three-year period with a price not to exceed RMB300 per m(3), to the extent permitted under the relevant PRC laws and regulations. The plantations in which such amount of wood fibre to acquire is between 150,000 and 300,000 hectares to achieve an estimated average wood fibre yield of approximately 100 m(3) per hectare, and include tree species such as pine, Chinese fir and others. Jiangxi Zhonggan will ensure plantation forests sold to Sino-Panel and its PRC subsidiaries are non-state-owned, non-natural, commercial plantation forest trees.

In addition to securing the maximum tree acquisition price, Sino-Panel has pre-emptive rights to lease the underlying plantation land at a price, permitted under the relevant PRC laws and regulations, not to exceed RMB450 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-Panel and Jiangxi Zhonggan 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.

According to Sino-Forest Chairman and CEO Allen Chan the agreement would enable them to capture and support investment opportunities in China's developing forestry sector by locking up a large amount of fibre at competitive prices. This is Sino-Forest's fifth, long-term, fibre purchase agreement during the past two years, thus increasing the total plantation area to over one million hectares in five of China's most densely forested provinces. Sino-Forrest intends to use proceeds from the recently closed Cdn$380 million bought deal for the acquisition of standing timber in Jiangxi Province and for general corporate purposes.

About Sino-Forest Corporation
Sino-Forest Corporation (the "Company") 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.