|Sakha's Buryatian Projects
Following extensive negotiations over the past several years, and the recent conclusion of two agreements, Toronto based Sakha Enterprises Corporation intends to launch in 2008 a gold mining operation at the Ukuchikta deposit and a harvesting operation, in the Republic of Buryatia in eastern Russia. The Republic of Buryatia is rich in natural resources, with gold and other minerals and large areas of untapped mature forest. Russia has more than half of the world’s arboreal forests. Much of the Company’s initial product, in the form of logs (round timber) and sawn wood is destined for the markets of neighbouring China and other Asian countries that are experiencing extremely rapid economic growth but which are not self sufficient in forest products. Demand for timber throughout most of Asia – and many other parts of the globe – is forecast to remain robust for many years into the future. Sakha’s management believes that the Buryatia Project will provide the Company and its shareholders with quality participation in the current renaissance of the very vibrant Russian Federation’s economy.
The Geographical AreaThe Republic of Buryatia is located in the eastern part of the Russian Federation with an area of approximately 350,000 km2. Buryatia is on the eastern shore of lake Baikal. Lake Baikal contains 20% of the world’s freshwater supply and over 2,500 species of fauna, of which over 80% are unique to Lake Baikal.
PeopleThe population of Buryatia is relatively small, at approximately one million. It is a multinational republic comprising dozens of nationalities with the two main nationalities being Buryats and Russians. Two thirds of the population live and work in the cities. The other one-third lives in the countryside and continues to farm, fish and to live the traditional way of life.
The Buryatian Economy and Investment ClimateThe economy of Buryatia is resource-based, with diamonds and gold being the leading exports. Timber, non-ferrous metals and furs follow these. With its location on the eastern shores of lake Baikal with its unique eco-system, tourism is also a growing part of the economy. The markets for these products are in approximately 34 countries located primarily in Asia and Europe. The Government has established an investment climate that encourages unrestricted direct foreign investment, especially in the natural resources sector. As a result, the Republic has seen major investments from the US, Germany, the UK and France, to name a few. Buryatia is a true treasure trove of natural resources. Sakha Enterprises intends to seek out additional opportunities in these industries, in conjunction with its strong business, financial and political networks in the province.
Buryatia’s Forest Products Industry Buryatia’s forest products industry is not as well developed as the mining sector. There are over nine (9) billion cubic meters of mature timber (in the “taiga”, the Russian forest, the species include pine, spruce, larch, cedar, aspen and birch) with a current market value of approximately one trillion dollars. Annual timber growth is estimated to be 75 million cubic meters with a projected market value of $8 billion. As a result of the lack of development, combined with the lack of competition in the industry within the Republic, substantial opportunities are available. Any company that develops this industry in the Republic will be able to take advantage of the Asian market, in particular the Peoples Republic of China (“PRC”). The PRC, in addition to having a fast growing economy, lies in close proximity to Baryutia. When the lower transportation costs are combined with a hard-working and well-educated workforce, as well as state-of-the-art forest harvesting technology & equipment, those companies involved can expect to enjoy a competitive advantage in Asia’s timber marketplace. The intent of Sakha Enterprises Corporation is to capitalize on these features through harvesting of the timber and the manufacture of related wood products. Furthermore, the Corporation views this as a start in the development of other resources in this resource-rich Republic.
MAP OF THE RUSSIAN FEDERATION
Sakha Enterprises Corporation will operate and manage the harvesting project, together with its Russian partner, Severnyi LPK.
Caterpillar Harvesting Equipment Chosen to Boost Production
The timber harvesting equipment will be provided by the Caterpillar World Trade Corporation, a subsidiary of world leading equipment maker, Caterpillar Inc., which is “the leading worldwide manufacturer of construction, mining, agriculture and forest products equipment, with a specialized machinery line for the harvesting of timber in forests around the world.” Caterpillar has numerous offices and facilities in Russia. By contracting for scheduled delivery of several million dollars in new leading-edge forest harvesting equipment from Caterpillar, Sakha Enterprises intends to dramatically boost production in as short a time as possible. Caterpillar World Trade Corporation has committed to supply the equipment and take payment-in-kind, i.e. to receive a portion of Sakha Enterprises lumber production. After the completion of the acquisition, Sakha Enterprises will own the assets and extensive timber harvesting contracts for a 49-year period with an annual allowable cut of 5 million m3 and estimated revenue of $US400 million annually.