<B>CanFibre California Plant Struggling</B>

The CanFibre Group Ltd., reports that performance at its Riverside, Calif., medium density fiberboard facility has not met expectations during the past three months with losses being incurred from operations before interest, taxes and depreciation.

Highlights from the three months ended July 31, 2000, include:

Production has averaged approximately 55% of capacity

• Sales have not kept pace with production, resulting in finished goods inventories valued at approximately $2 million having accumulated;
• Until very recently, quality of the product has been inconsistent with both excellent quality and poor quality being produced on a somewhat random basis.
• Production costs to date have been considerably higher than originally forecast primarily due to a combination of fixed costs being spread over smaller production volumes and resin and power usage per unit being higher than projected.
• Cost reduction programs have been, and continue to be, implemented but realization of a cost-per-unit savings is expected to take several months.

CanFibre of Riverside expects to clear its excess inventory by the end of next month and to maintain a balance between production and sales thereafter. Sales forecasts for August and September indicate shipments should exceed 60% of capacity with a continual but gradual ramp-up to capacity during the 6 months thereafter.

The foregoing, in combination with financial setbacks earlier in the year that arose from the termination of CanFibre of Riverside's engineering, procurement and construction contract with Stone & Webster Engineering Corporation due to poor performance by Stone & Webster Engineering Corporation, has resulted in CanFibre of Riverside requiring additional working capital to finance accumulated start-up, operating, capital improvements and other expenses.

CanFibre and CanFibre of Riverside are exploring alternatives for obtaining this required additional capital.