Kafus to Produce Molded Fiber Board Honeycomb Panels

COLUMBIA, S.C. - Kafus Industries Ltd. (AMEX:KS) announced today the creation of Kafus Molded Fibers LLC, a company with world-wide rights to technology, originally called "SpaceBoard" and developed by the US Department of Agriculture. The "SpaceBoard" technology enables the manufacture of Molded Fiber Board (MFB), a strong, light-weight honeycomb panel produced from 100% recycled fiber as well as other sustainable raw materials. MFB panels have the bending strength of particleboard at one-third the weight.

The MFB panel technology was developed by the Forest Products Laboratory, a national laboratory operated by the USDA Forest Service located in Madison, Wisconsin. The original license to the MFB panel technology was granted to a Fortune 1000 global packaging company which in turn, subject to regulatory approval, has exclusively sublicensed the MFB panel technology to a Kafus subsidiary, Kafus Molded Fibers LLC.

Kafus Molded Fibers LLC is headquartered in Columbia, South Carolina and plans to build its first MFB panel plant in South Carolina in year 2000. Mr. Don Jenkins has been retained as President.

"South Carolina's ability to attract and retain progressive companies grows each time innovative solutions are used," said Governor Jim Hodges. "We welcome the new company, Kafus Molded Fibers, to South Carolina."

Kafus sees significant synergistic opportunities for MFB panels through the use of kenaf and waste fibers in the manufacturing of a large variety of packaging. Additionally, MFB panel designs, when combined with existing Kafus Bio-Composite technology, have an ability to produce a new revolutionary range of high strength, lightweight structural components for the use in the automotive, aeronautical, furniture and building products industries.

"By growing South Carolina's field of composites and recycling opportunities from MFB panel production, other companies will be able to utilize new technology, reduce wastes, increase productivity," said Secretary of Commerce Charles S. Way, Jr.

MFB panels can be produced in a wide range of thicknesses and mold configurations, depending upon the desired specifications of the application. The technology facilitates production of structural honeycomb products similar to aluminum and composite alternatives, from much lower cost raw materials, including 100% recycled paper, and various agricultural fibers.

Once produced, MFB products can be painted or laminated, and even curved to custom radii. The actual manufacturing process requires no additional resins or adhesives. As a result, panels have no harmful VOC emissions. With additional additives, they can be made water and fire resistant.

"This is a perfect complement to our existing product lines," stated David Saltman, Vice President of Marketing & Product Development for Kafus. "MFB opens up a wide range of new business opportunities for the company, both as a stand alone product and in combination with our natural fiber composites and AllGreen(R) MDF. The structural performance of MFB together with its environmental superiority is going to generate significant appeal among manufacturers, designers and specifiers."

Kafus is an emerging global manufacturer of superior materials produced from sustainable resources.

The foregoing contains forward-looking statements, which are subject to contingencies and uncertainties. Such forward-looking statements are not guarantees of future performance, and are based on numerous assumptions about future conditions that could prove to be inaccurate. Actual events, transactions, and results may differ materially from anticipated events, transactions or results described in such statements. Material uncertainties about the future of the company exist. There can be no assurance that funding will be obtained for the proposed facilities, or that they will be constructed or operated as contemplated, or that the market for the products of any facilities will be as assumed. Kafus is subject to a number of risks and uncertainties, which are set forth in its filing, with the Securities Exchange Commission.

Contact: Kafus Industries Ltd. Tony Francel, Toll Free: 1-888-333-5377 941/698-8920 781/326-5105 (FAX) Website: www.kafus.com or Kafus Industries Ltd. Mike McCabe, 781/326-5001 781/326-5105 (FAX) or Kafus Molded Fibers, LLC Don Jenkins, 803/822-8490