VANCOUVER, B.C., Sept. 10 (Canadian Corporate News) - Kafus Capital Corp. Ken Swaisland, President of Kafus, today notified Governor Pete Wilson of the State of California, of Kafus' intent to build a US$125,000,000 newsprint mill in southern California based entirely on the use of kenaf, a fast growing member of the hibiscus family and a close relative to cotton.

Kenaf is an annual crop that grows in subtropical regions from seed to over twelve feet high in seven months. Of great significance, at a time of diminishing world supplies of natural fibre, Kenaf produces two to three times the amount of fibre per acre per year as Southern Pine, a benchmark source of newsprint.

Kenaf Paper Manufacturing (KPM), which is currently 80 percent owned by Kafus, is in the final stages of financing North America's first commercial size kenaf newsprint mill in south Texas. The kenaf facility planned for southern California will be an identical design model allowing Kafus to fast track its development activity.

Mr. Swaisland broke the news on this new Kafus initiative during the Ground Breaking ceremony for Kafus' CanFibre medium density fibreboard (MDF) plant at Riverside, CA. (See today's related article, Enron to supply electricity to CanFibre Fiberboard projec").

The CanFibre Group of Toronto, Canada, owners and developers of the Riverside plant, is currently 87 percent controlled by Kafus. The CanFibre Riverside plant will be North America's first MDF plant that uses 100 percent recycled wastewood in the production of a high-quality panelboard product.

CanFibre MDF is also distinctive in that it doesn't use harmful urea formaldehyde resins and will divert 150,000 tonnes of waste away from California landfills each year.

The proposed Southern California kenaf newsprint mill, which is subject to a final feasibility study relative to site location, fibre supply, and permitting, will require the local cultivation of 15,000 acres of kenaf and create a new indigenous cash crop for local farmers. It is anticipated the planned kenaf mill will produce approximately 80,000 tons of high quality newsprint and create approximately 200 new regional jobs directly and indirectly.

Upon successful completion of its final feasibility study, Kafus would anticipate funding and construction of the proposed newsprint mill by mid-1998. Kenaf has been grown on a test basis in the Imperial Valley region since the late 1970's, in a series of projects by Kenaf Industries and the USDA.

Kenaf Industries has had a longstanding relationship with the USDA in the development of kenaf as an alternative to forest-based fibre. As part of this development program, the Bakersfield Californian newspaper printed its entire July 13, 1987 edition on kenaf-based newsprint. Copies of that edition still show very limited yellowing with age, a distinct feature of kenaf newsprint.

Kafus is currently conducting international feasibility studies to further apply the Texas kenaf newsprint model it has developed, on a global basis. Semi-tropical regions of the world with depleted forest reserves or regions incapable of forest growth should be able to produce kenaf as an indigenous cash crop for localized paper production.

Kafus envisions the eventual control of a series of large kenaf plantation operations strategically placed around the world, to assist in answering the problem of critical deforestation and the decline in value of conventional commodity crops, such as sugar cane and cotton.

Kafus is in the development stage of becoming a global low cost producer of commodity style products based entirely on the use of post consumer and industrial wastes and other non-conventional production raw materials.

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