Correcting...Kafus Subsidiary Signs Letter of Intent for Turnkey Construction of Planned Kenaf Paper Plant in Texas.

VANCOUVER, British Columbia--(BUSINESS WIRE)--Jan. 6, 1997--(CANADIAN DEALING NETWORK KFSS., OTC Bulletin Board KFSSF.) Kafus Capital Corporation (Kafus) (OTC Bul. Bd.: KFSSF and the Canadian Dealing Network: KFSS) is pleased to announce that its 82.5 percent owned subsidiary, Kenaf Paper Manufacturing ("KPM") has reached an agreement with Over Meccanica S.p.A., of Verona, Italy ("OVER") whereby OVER intends to act as the turnkey construction contractor for KPM's proposed Kenaf newsprint mill in South Texas. In this capacity, OVER will head a consortium of leading equipment suppliers to provide engineering and construction services including design engineering, procurement of equipment and construction of the entire facility (commonly referred to as an EPC contract). The proposed contract will provide a guaranteed construction price, guaranteed completion date and further guarantees for product quality, volume of output and operating costs for the facility.

OVER is one of the world's leading paper plant equipment manufacturers and regularly provides complete turnkey facilities. OVER has constructed installations worldwide, including North and South America, South Africa, Australia and throughout Asia. OVER, together with its consortium of equipment suppliers, has proven to be the best candidate to provide KPM with its required turnkey construction services.

KPM is rapidly completing all of the tasks necessary to finance its proposed Kenaf newsprint project, including: finalizing long term supply contracts for supply of Kenaf fibre; sale of finished product; land acquisition, and permitting.

Kenaf is a fast growing member of the hibiscus family, a close relative to the cotton plant, that starting from seed, can mature at heights of 10'-14' in less than seven months. Kenaf stalks provide 2-3 times more fibre per acre per year than Southern pine, a paper industry staple. Kenaf newsprint yellows less with age than conventional newsprint, and has been proven as a practical and economically feasible alternative to forest based fibre.

The Kafus project development team now charged with the responsibility of funding KPM's proposed Kenaf papermill, which is designed to produce 70,000 tonnes of newsprint per annum, is the same team currently managing the project financing of two proposed urban MDF plants costing US$95 million each and being developed by Kafus' lead investment, The CanFibre Group Ltd.

Kafus views Kenaf as a global opportunity. Regions of the world with depleted forest reserves or regions incapable of forest growth should be able to produce Kenaf as a profitable cash crop for localized paper production. KPM's proposed Texas-based Kenaf paper manufacturing plant should serve as a migratable model that could be sized for development on a global basis where conventional paper making facilities are currently not practical.

The acquisition of control of KPM, together with the global development opportunities arising from KPM's exclusive rights to over 18 years of Kenaf pulp and paper research and development, is another step in Kafus' long range plan of becoming a global leader in the use of alternative raw materials in the production of commodity type products.

Kafus is in the development stage of becoming a global low cost producer of commodity style products based entirely on the use of post consumer and industrial wastes and other non-conventional production raw materials.

Kafus is an SEC registrant as well as a reporting issuer in British Columbia and Ontario.

The Canadian Dealing Network neither approves nor disapproves the contents of this release.

CONTACT: Kafus Capital Corporation

Investor Relations Department, 604/ 602-1981

604/ 685-2426 (FAX)

1-888-333-KFSS (5377)

E-mail: [e-mail]