NaturNorth Technologies Building Birch Bark Processing Facility near Duluth.

DULUTH, Minn. -- NaturNorth Technologies LLC (NaturNorth) has started construction of the world's first commercial facility to convert birch bark into an intermediate product for further processing into valuable compounds for a variety of market sectors.

The facility, located about 20 miles north of Duluth at Two Harbors, is expected to start operating in late March or early April of 2006. This facility will use patented technology to separate and process into pellets the bark of the white paper birch tree. The pellets will be further processed into commercial quantities of bioactive, non-toxic compounds such as betulin and betulinic acid. These compounds have demonstrated effectiveness as antifungals, antibacterials, antivirals and biocides for use in pharmaceuticals, cosmetics, crop protection products and preservatives.

The Two Harbors bark processing facility represents an important step toward fulfilling NaturNorth's mission of converting birch bark into commercial quantities of valuable bioactive compounds, according to David Peterson, President and CEO of NaturNorth. "The Two Harbors operation is an integral part of our overall strategy to construct a production facility and a demonstration site for our technology and lay the groundwork for further expansion as commercial opportunities develop. The new facility will initially employ five people on a single shift," he said.

Peterson emphasized that NaturNorth will obtain its bark supplies from forest products operations that currently generate the bark as a waste by-product of wood products manufacturing.

This facility will initially support the production of large quantities of betulin to supply a variety of industries. "Extracting betulin from birch bark to produce valuable products represents an exciting potential use for an otherwise underutilized renewable forest resource. We expect to expand our list of strategic partners to introduce birch-based compounds into a wide range of bioactive applications and will be announcing applications as they reach commercial stages," Peterson said.

NaturNorth began six years ago as a public-private venture between the University of Minnesota Duluth (UMD), Potlatch Corporation (NYSE:PCH) and Synertec Incorporated, a subsidiary of ALLETE, Inc. (NYSE:ALE). NaturNorth's technologies to extract betulin were initially developed at UMD's Natural Resources Research Institute. "Together, these entities have guided and supported NaturNorth. Because of the potential for substantial commercial success of betulin derivatives in a variety of markets, Potlatch has been the major funding source for NaturNorth, and is pleased to have the opportunity to support this business in Minnesota," said Penn Siegel, Chairman and CEO, Potlatch Corporation, and NaturNorth director.

This news release contains, in addition to historical information, certain forward-looking statements, including statements regarding the construction of and start date of operations at the birch bark processing facility, quantities of betulin to be produced, expanding our list of strategic partners and the potential for substantial commercial success of betulin. These forward-looking statements are based on management's best estimates and assumptions regarding future events, and are therefore subject to known and unknown risks and uncertainties and are not guarantees of future performance. The company's actual results could differ materially from those expressed or implied by forward-looking statements. The company disclaims any intent or obligation to update these forward-looking statements.