Kafus reports on major funding developments.

VANCOUVER, B.C--(BUSINESS WIRE)--April 9, 1997--Kafus Capital Corporation (Kafus) (0TC Bul. Bd.:KFSSF and the Canadian Dealing Network:KFSS) Kafus is pleased to announce the following conditional funding agreements which, once closed, will help Kafus expedite its development activity and assist Kafus in its goal of becoming a global low cost producer of commodity type products from waste and alternative materials:

-- Kafus has executed a letter of intent with a major multinational energy group (The Multinational), which is intended to lead to a global strategic relationship and the establishment of a global credit facility.

The Multinational, subject to final due diligence and its Board of Director's approval, intends to invest US$10 million by way of subordinated debt directly into Kafus' lead investment, The CanFibre Group's Riverside MDF project, as well as an additional US$5 million directly into Kafus by way of a convertible preference share issue. Kafus and CanFibre have executed letters of intent with the Multinational relative to the proposed investments. The closing of both placements is additionally subject to the successful placement of the tax exempt bonds required by The CanFibre Group to finance the debt on its proposed Riverside MDF plant.

The proposed relationship, currently under negotiation between Kafus and The Multinational would, once finally contracted, enable Kafus to stabilize certain energy costs for many of its planned CanFibre and Kenaf global developments, as well as create a "cookie cutter" project finance capability that would simplify and expedite the migration of the industrial development models currently being created for both Kenaf and CanFibre projects.

-- Kafus has successfully negotiated the terms of a private placement of between US$15 to US$20 million of Series 1 Kafus convertible preference shares. The placement, which is subject in part to a finder's fee, will be purchased by a small number of institutions and the multinational energy group. Existing documentation calls for monies to be placed in escrow by the end of April, for release simultaneously with the closing of the tax exempt bond sale related to The CanFibre Group's planned Riverside MDF project. Other conditions precedent normal for this size and type of offering are also in effect, including final due diligence and documentation. The general terms of the private placement are as follows:

The preference shares are convertible at the election of the preference shareholder into common stock of Kafus. A third may be converted 180 days from closing; a third at 270 days, and the remaining third at 365 days. Conversion will be at a 25% discount to a 5 day weighted average prior to the date of conversion. Additionally, the preference shares bear a 10% accumulative dividend which may be paid by Kafus by an additional issuance of Series 1 convertible preference shares. The preference shares will bear a warrant permitting the preference shareholder to purchase 1 additional Kafus common share for every 5 shares of Kafus received through conversion. The warrant is good for 5 years and is convertible at a cost equal to the price allotted the common shares at the time of each conversion. The closing of the private placement is scheduled to take place on or before June 1, 1997 subject to board of directors and regulatory approval as required.

-- Kafus has reached an agreement with The CanFibre Group to invest into CanFibre between US$5 and US$10 million by way of a purchase of CanFibre convertible preference shares. The monies will be used by CanFibre to supplement the equity requirement of its planned Riverside MDF facility as well as provide general working capital as required for its planned New York State MDF project. The terms of the issue, which is subject to Kafus' successful completion of its planned convertible preference share issue, are as follows:

Kafus will receive Series V Convertible redeemable preference shares of CanFibre at US$100,000.00 per share. The holder(s) of Series V Convertible Redeemable Preference shares of CanFibre are entitled to a fixed, accumulative, preferential cash dividend at a rate of 10% per annum and are entitled to convert such shares into Common shares of CanFibre at CDN$1.05 per share. The closing of the private placement is scheduled to take place on or before June 1, 1997, subject to Board of Directors and regulatory approval as required.

Kafus currently owns 34% of the issued and outstanding common shares of CanFibre together with CDN $8.45 million worth of convertible preference shares, that currently on conversion to common shares, would give Kafus in excess of 53% ownership of CanFibre.

Upon conclusion of the private placement announced, December 31, 1996, whereby Kafus has agreed to acquire 1,384,000 of Series IV CanFibre preference shares and given effect to the closing of CDN $6.9 million of Series V CanFibre preference shares, Kafus would upon conversion of all of its then outstanding convertible CanFibre preference shares, own 73% of the then issued and outstanding common shares of CanFibre.

CanFibre engages in the North American development of manufacturing plants to produce high quality wood panel products such as medium density fibreboard (MDF) from 100% recycled dry waste. CanFibre MDF is North America's first "Green" panel board. It is produced from materials normally dumped in landfills without the use of conventional Urea Formaldehyde resins, a growing environmental concern for current MDF producers worldwide.

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.

Shares Outstanding: 16.9 million

Direct all enquiries to: KAFUS CAPITAL CORPORATION, INVESTOR RELATIONS DEPARTMENT Toll Free (888) 333-KFSS(5377) Tel [phone] Fax [phone] E-mail: [e-mail] -0-

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CONTACT: Kafus Capital Corporation

Investor Relations Department

Toll free: 888/333-KFSS(5377)

604/602-1981

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