OREANDA-NEWS. July 05, 2010. To fund the future development and expansion RusForest is currently evaluating the prerequisites for carrying out a rights issue during the coming 3 to 4 months, the company said in a statement received by Lesprom Network.

The capital raise is partly related to RusForest's intended merger with Nord Timber Group and the joint development plans.

The size of the intended issue - along with the use of proceeds for the same - and the final merger terms - with operational targets for the merged entity - will be released at a later stage.

However, RusForest's new management has identified several key investments which need to be made without delay in the existing RusForest structure. The timing of these investments is very important, as they will need to be made before autumn and the planned capital raising in order to ensure a satisfactory speed of operational improvements during 2010 and stronger cash flows in the coming season.

The investments include:
- Forcefully driving on the installation works at the Rusforest Magistralny sawmill where assembly works at the site will be sped up between July and October 2010, before winter and the end of the outside construction season. Infrastructure, foundations, steel constructions for buildings, sawmilling equipment along with sorting and drying equipment has already been paid for, with only assembly and installation work remaining.

- Investment into electricity grid connection at the Boguchansky LPK sawmill, as already agreed with the relevant authorities.

- Investment into a newly established forest road construction program (road construction equipment to be acquired) in Ust Ilimsk, as a step to ensure the long term development of the company's harvesting areas and raw material sourcing plan - with focus on stable log supplies in the summer period of 2011.

In order for RusForest to immediately start work on these key development projects and to cover working capital needs over the summer period, while taking into account the cash level as per the company's latest quarterly report,

Vostok Nafta Investment Ltd has agreed to advance, in part, its share of the proposed rights issue. The financing is provided by way of a short term unsecured loan in the principal amount of USD6 million with a bullet maturity on September 30, 2010, and a fixed annual interest rate of 15%.

RusForest is the only listed Russian forestry and sawmilling company, with operations based in Eastern Siberia and long term leases covering over 850 thousand hectares of forest land.