According to the Agreement, Qinyang Paper Machine will be responsible for complete installation of the new production line within the next six months. Orient Paper had signed a Letter of Intent with Qinyang Paper Machine on March 15, 2010 and made a refundable deposit of RMB 38.0 million (approximately $5.6 million), which is about 20% of the total purchase price. With the signing of the Agreement, the deposit has been applied toward the first installment of the total purchase price. The remainder of the payment will be made in additional installments in commensuration with the progress made on equipment installation. Orient Paper expects to begin trial production in the beginning of the fourth quarter of 2010. Upon successful completion of the trial production at the end of 2010, Orient Paper plans to begin large scale production of corrugating medium paper on its newly added production line and achieve a utilization rate of approximately 70% in fiscal year 2011.
"With the additional 360,000 tons of corrugating medium paper production capacity, we are set to expand our market share in northern China's rapidly growing paper industry," said Mr. Zhenyong Liu, Chairman and Chief Executive Officer. "The newly acquired production line will increase our total production capacity from the existing 280,000 tons to reach 640,000 tons by 2011. Corrugating medium paper production capacity is expected to increase over 200%. The continued progress and development of our regional economy and the domestic consumer and packaging industries have resulted in robust demand for corrugating medium paper products. We believe the additional capacity will enable us to better serve the growing demand for corrugating medium paper contributing to our future revenue growth and profitability."