Cathay Forest Products Corp.
TSX VENTURE : CFZ

Cathay Forest Products Corp.

September 06, 2007 08:00 ET

Cathay Forest Updates Russian Timber Concession

TORONTO, ONTARIO--(Marketwire - Sept. 6, 2007) - Cathay Forest Products Corp. (TSX VENTURE:CFZ), today provided further information and clarification, following the announcement of August 14, 2007 regarding a joint venture agreement to obtain a 51% interest in a 270,000-hectare concession of standing timber in Russia.

In consideration for a 51% interest in DalEuroLes (the "joint venture"), Cathay Forest is paying US $2.7 million cash, 800,000 common shares of Cathay Forest, and arranging a shareholder's loan to the joint venture. The amount of the loan will be based on a capital expenditure analysis conducted by Indufor, a forest-industry consulting firm. The Indufor report will prepare a budget for forestry activities such as roads and harvesting equipment.

The remaining 49% of the joint venture is owned by Finmashineri, a member of the Business Marketing group of companies. Business Marketing is a Russian-based forestry group that has been harvesting in the Khabarovsk region since 1998.

As previously stated in a press release dated August 14, Business Marketing has been approved by the Khabarovsk Ministry of Natural Resources to be among a list of Russian-based forestry companies that qualifies for an exemption from future increases in export tariffs. This policy is referred to as the Priority Investment Program ("PIP"),which governs tariff exemptions on roundwood exports and is subject to approval by the Russian Federal government. Business Marketing is currently constructing a sawmill that is an approved project of the Priority Investment Program. Under terms of the PIP, the tariff exemption period covers the design and construction phase of the sawmill. Cathay Forest and its subsidiaries have commercial arrangements with Business Marketing to export the harvest from DalEuroLes and processed wood products to Raohe Cathay, the China importing unit of Cathay Forest. The joint venture's export of roundwood through Business Marketing is expected to qualify for favourable export tariff treatment if and when Federal approval of the PIP is received.

The 270,000 hectare concession has an Annual Allowable Cut of 300,000 m3 of wood from the Khabarovsk Ministry of Natural Resources. The current lease period for the concession is 25 years. Pursuant to the recent implementation of a new Russian Forestry Code, the application period to request lease extensions to as much as 49 years begins in January 2008.

The joint venture is expected to begin harvesting in mid 2008, following the completion of logging roads and acquisition of harvesting equipment. The acquisition of 51% of DalEuroLes by Cathay Forest Products is subject to TSX Venture Exchange approval.

About Cathay Forest Products

Cathay Forest is a forest products company currently managing approximately 18,000 hectares of standing timber properties and fast-growth, high-yield poplar plantations in China. Cathay Forest is building a world-class forest products company through a customer base that includes the domestic Chinese pulp and paper industry as well as a variety of other wood products industries.

Forward-Looking Statements

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. Actual results and future events could differ materially from those anticipated in such 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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