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Sino-Forest Releases Independent 2008 Forest Asset Valuation Report

Posted on: Thursday, 2 April 2009, 06:39 CDT

TORONTO, April 2 /PRNewswire-FirstCall/ - Sino-Forest Corporation ("Sino-Forest") (TSX:TRE), a leading commercial forest plantation operator in China, released today its yearly forest valuation report conducted by Poyry Forest Industry Consulting Ltd ("Poyry"), an international forestry consulting firm. Poyry has estimated the valuation of 335,000 hectares ("ha") of Sino-Forest's forest assets, based on a single rotation(1) using a pre-tax discount rate of 11.5%, to be US$1.64 billion as at December 31, 2008.

Sino-Forest had approximately 347,000 ha of trees under management at the end of 2008. However, Poyry excluded 12,000 ha in its valuation as some areas were allocated for bio-fuel, carbon credit development and other purposes.

The 32% increase in appraisal value from US$1.24 billion in 2007 to US$1.64 billion in 2008 was attributable to the following factors: - an increase in the forest area and tree maturity, resulting from 2008 tree acquisitions; - an increase in biological growth within plantations under management - in certain of our planted eucalypt plantations, Poyry recorded a standing volume of almost 150 cubic metres ("m3") per ha aged only three and half years. Poyry estimated an average standing timber volume of 160 m3 per ha in eucalypts at age six can be obtained; - revision of log prices, and management and production cost estimates; and - the change in the USD/RMB exchange rate from 7.3046 to 6.8542 as at December 31, 2007 and December 31, 2008, respectively.

Assuming perpetual rotation(2) with continuous replanting of plantation trees after harvesting, Poyry's estimate of the prospective valuation of Sino-Forest's forest assets, based on year-end hectares under management, using the pre-tax discount rate of 11.5%, was estimated to be US$1.69 billion. This valuation takes into account revenues and costs of re-establishing and maintaining the forest plantations for a 60-year period.

The following table presents estimated valuations depending on various discount rates applied to pre-tax cash flows.

------------------------------------------------------------------------- Discount Rate Applied to Pre-tax Cash Flows ----------------------------------------------- Forest Component 10.5% 11.5% 12.5% ----------------------------------------------- Valuation in USD billions as at Dec. 31, 2008 ------------------------------------------------------------------------- Single rotation: based on plantation area under management of 335,087 ha. Poyry's $1.70 $1.64 $1.59 estimate of the market value of Sino-Forests tree crop assets. ------------------------------------------------------------------------- Perpetual rotation: Poyry's estimate of the prospective value is based on continuous leasing and replanting of harvested land, ex- $1.79 $1.69 $1.61 cluding trees yet to be acquired under Sino- Forest's four long-term master agreements -------------------------------------------------------------------------

Poyry reported that Sino-Forest's total merchantable standing timber volume as at year end 2008 was 37.6 million m3, compared to 32.2 million m3 in 2007, representing a 17% increase in wood fibre. The volume increase was attributable primarily to higher yields obtained from trees acquired and to the biological growth of trees under management. Overall, the average yield of trees improved 9% from 103 m3 per ha in 2007 to 112 m3 per ha in 2008.

Sino-Forest Chairman & CEO Allen Chan said, "We are pleased to see that our long-term acquisition agreements are substantially increasing our total merchantable volume of fibre, estimated market value and our average yield per hectare. As we continue to acquire trees with higher-yields, we are confident that our total merchantable volume of fibre will continue to increase and generate attractive margins."

"We are also very encouraged by Poyry's endorsement of our R&D and silviculture efforts which recorded that the growing yield at our eucalypt plantations in a certain region can reach 160 m3 per ha by age 6, as compared to the Chinese fir trees that we purchased which have a yield of 120 m3 per ha after a 12-year growing cycle. This shows our re-planting growth progressing over the years," added Mr. Chan.

The full valuation report is available on Sino-Forest website under "Investor Relations", "Filings" (http://www.sinoforest.com/filings.asp), and will also be filed on SEDAR at www.sedar.com.

Notes: 1. Single rotation, also called "current rotation analysis", is based on one-off harvesting of standing timber and includes only the revenue and costs associated with the existing tree inventory. 2. Perpetual rotation, also called "perpetual cash flows", refers to perpetual re-establishment and maintenance of plantation land after harvesting through many rotations over a 60-year period, including all revenue and costs associated with sustainable forestry modelled in perpetuity.

Notice of Conference Call

Sino-Forest will host a conference call with consultants from Poyry Forest Industry on Wednesday April 8, 2009 at 8:30 am EST or 8:30 pm HKT to discuss modelling and valuation in its forest asset valuation report. Sino-Forest stakeholders are invited to dial in, however, we will take questions only from investment research analysts.

To participate, please dial +(1) 416-644-3415 for local and international callers or 800-731-6941 for North America toll-free access. Alternatively, you may onto click to the link below for webcast (listen only mode) and replay, please click http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2605240.

A replay will be available for 15 days and there will be no post-conference call transcript.

About Poyry Forest Industry Consulting Ltd

Poyry Forest Industry Consulting Ltd is an independent management consulting company within the Poyry Group and is recognised as one of the world's leading advisors to the global forestry industry cluster. The cornerstones of its operations are its strong business understanding and industry expertise. The Forest Industry business group's global network of around 2,100 employees covers 17 countries in all major forest products regions in the world.

About Sino-Forest Corporation

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.

Please note: This press release contains projections and forward-looking statements regarding future events. Such forward-looking statements are not guarantees of future performance of the Company and are subject to risks and uncertainties that could cause actual results and company plans and objectives to differ materially from those expressed in the forward-looking statements. Such risks and uncertainties include, but not limited to, changes in China and international economies; changes in currency exchange rates; changes in worldwide demand for the Company's products; changes in worldwide production and production capacity in the forest products industry; competitive pricing pressures for the Company's products and changes in wood and timber costs.

SOURCE Sino-Forest Corporation

Source: PR Newswire

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