Cathay Forest Products Corp.

Cathay Forest Products Corp.

May 02, 2008 11:22 ET

Cathay Forest Announces Financial Results for 2007

TORONTO, ONTARIO--(Marketwire - May 2, 2008) - Cathay Forest Products Corp. (TSX VENTURE:CFZ) today reported financial results for the year ended December 31, 2007.

For fiscal 2007, Cathay reported significant growth in revenues to $17,545,865, a four-fold increase over 2006. The increase in revenue was mainly attributed to expanded volumes of log importing, representing $15,407,311 of total revenue. It is anticipated that the log importing business will continue to increase in volume as well as being positively impacted by rising log prices.

The Company recorded $2,018,141 from the sale of standing timber in 2007 a significant increase over 2006. The revenue is generated from the sale of a limited harvesting rights at certain locations, which includes the sale of free standing bamboo. During 2007, the Company realized revenues of approximately $825,000 from the sale of bamboo trees.

In the fall of 2008, it is anticipated that the Company will begin to harvest standing timber from its 270,000-hectare joint venture property in Russia. The Company is currently completing the construction of the road to the Russian property in order to begin harvesting and generating revenue from the property starting in August 2008.

Net loss for the year ended December 31, 2007 was $5.1 million or $0.06 per common share as compared to a loss of $1.5 million or $0.03 per common share in 2006. As a result of the $45 million financing that took place in 2007 the Company maintains a strong cash position and ended the year with $37 million in cash equivalents.


- During 2007, the Company successfully completed two private equity transactions. In January 2007, Cathay raised $2,064,000 at $0.52 per unit. In November 2007, the Company successfully raised additional funds of $45,000,000 through the issuance of 30,000,000 shares at $1.50 per share.

- The net proceeds from the financing are funding the development of the Russian operations, the development of the Guizhou standing timber project, the continued development and expansion of existing plantations and to support on-going operations.

- In September 2007, the Company received an independent valuation of its plantation assets located in Central and Eastern China. The report was commissioned by the Company to provide a third party valuation of the Company's forest plantation assets. The valuation calculation was based on asset values at March 31, 2007 and accordingly would not include any values that could be assigned to the Russian joint venture property and the Guizhou standing timber agreement, both of which were entered into subsequent to the report's completion.

- Based on the discounted cash flow method using a 10% discount rate, the value of the Company's forest asset at the time of the valuation was calculated at RMB 994.9 million (approximately $140 Million).

- In the fourth quarter of 2007, the Company finalized the transaction leading to the acquisition of a 51% ownership position of a wood harvesting company in the Khabarovsk region of Russia. The purchase price for the Company's ownership position was US$ 2.7 million plus 800,000 common shares. This joint-venture involves the development of 271,000 hectares of leased plantation for 25 years with an annual allowable cut of 300,000 cubic metres.

- In February 2007, the Company finalized a joint venture agreement with Guizhou Hanfang Company Limited ("Hanfang") in Guizhou Province, China for a standing timber initiative which was developed by Hanfang several years ago. The agreement is to allow participation in the development of up to 39,600 hectares of standing timber in south-western China with 6,600 hectares to be developed initially. The additional 33,000 hectares will be developed upon acceptance, by local forestry officials, of the Company's sustainable harvesting plan.

- In July 2007, the Company announced the signing of an agreement which expands Cathay's interest to more than 65,000 hectares of standing timber properties in the Guizhou Province. This third phase of the Guizhou will take place once the first two previously announced phases have been completed.

- In December 2007, the Company announced that it had entered into an agreement to develop a 3,300-hectare poplar plantation in the PoYang Lake region of Jiangxi Province.

Cathay Forest is a forest products company managing standing timber properties and developing fast-growth, high-yield poplar plantations in China and Russia. Cathay Forest is building a world class forest products company through a customer base that includes the domestic Chinese pulp and paper industry and harvesting customers serving a variety of wood product industries.

All statements, other than statements of historical fact, in this news release are forward-looking statements that involve various risks and uncertainties, including, without limitation, statements regarding the future plans and objectives of the Company. We caution readers not to place undue reliance on these statements as a number of important factors could cause actual results and future events to differ materially from the plans, objectives, expectations and intentions expressed in such forward looking statements. The Company assumes no obligation to update forward-looking statements should circumstances or management's estimates or opinions change.

The TSX Venture Exchange has not reviewed and does not accept responsibility for the adequacy of this release.

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