Orient Paper HB has secured the lease of a 300 mu parcel of land (or approximately 200,000 square meters) in the Wei County Economic Development Zone in Hebei Province. Under the land lease agreement, Orient Paper HB has the usage rights for 15 years starting from November 27, 2012 for lease payment of RMB3.6 million (US$580,000) per annum.
Orient Paper HB has also signed a construction and installation contract with a leading paper manufacturing equipment provider in China, for the first of its two household/tissue paper production lines, each having a designed capacity of 15,000 tonnes per year. The consideration for the first production line under the contract is RMB31 million (US$5.0 million), funded by the Company out of cash on hand, with installation scheduled to be completed by the end of the second quarter of 2014. The Company estimates that the total cost of the two tissue paper production lines and related facilities will be approximately US$43.5 million. When full anticipated production is achieved, the Company expects the two production lines to generate up to US$30 to US$34 million of revenue annually.
"Orient Paper is making steady progress with our business expansion into the tissue paper sector, as previously announced," said Mr. Zhenyong Liu, Chairman and Chief Executive Officer of Orient Paper. "Our strategy is to tap on under-served markets and benefit from the growing urbanization of China's rural regions, and we see great potential in the household/tissue market in North China. The tissue paper business is one of our key future growth drivers and we are confident that the expansion into this sector can provide long-term value for our shareholders."