OREANDA-NEWS. January 25, 2013. On March 7, 2012, prior to the reconstitution of the Company's board, Cathay Forest Products Corp. announced that it had entered into an agreement with Russia Forest Products Group ("RFP"), a Russia- based forestry company, pursuant to which, subject to a number of significant conditions, RFP would acquire a controlling interest in DalEuroLes LLC, as Cathay Forest said in a press release received by Lesprom Network.

The Company has previously disclosed that it holds a 51% interest in DalEuroLes. The consideration payable to the Company under the proposed transaction, subject to the satisfaction of conditions, included a cash payment of USD13 million with the Company to own an approximate 30% indirect interest in DalEuroLes once the transaction was complete.

Prior to the reconstitution of the Company's board, the proposed arrangements involving RFP and the Company had broken down and these arrangements were no longer actively being pursued by RFP or the Company. The break-down appears to have resulted from, among other things, disagreements between the Company and the local entity in Russia that holds a 46% interest in and operates DalEuroLes, Finmashineri Co., Ltd. ("Finmashineri"), including in respect of the ownership and control of DalEuroLes. For at least several months prior to the reconstitution of the Company's board, Finmashineri was directing the business and affairs of DalEuroLes, with little or no direction or input from or financial reporting to the Company.

Following the reconstitution of the Company's board, the new board endeavoured to re-enter into discussions with RFP regarding DalEuroLes, to date without success.

Since the reconstitution of the Company's board, the Company has received no financial or other reporting regarding DalEuroLes or the current state of its two standing timber concessions in Kharbarovsk, Russia.

Working within the Company's liquidity constraints, the new board continues to assess strategies to realize the maximum possible value from the Company's prior investment in DalEuroLes, although the amount that will ultimately be realized, if any, and the timing of that realization remains unknown at this time.

Cathay Forest is a forestry products company managing standing timber properties and developing fast-growth, high yield poplar plantations in the People's Republic of China and Russia.