Kafus Concludes US$11 Million of Permanent Financingfor its Indiana Flexform Mat and Panel Plan.

BOSTON--(BUSINESS WIRE)--June 8, 1999--

Kafus Env'l (AMEX:KS) North America's Largest and Most Advanced Natural Fibre Composites Production Facility Due for Start-Up September 1999.

Kafus Bio-Composites Inc., a subsidiary of Kafus Environmental Industries (Kafus), recently closed

Kafus natural fiber composites are designed as an alternative to traditional composite materials such as fiberglass. Marketed as Flexform(TM) mats and panels, Kafus' bio-composites can be recovered, reused and recycled. Additionally, they offer higher strength with lower weight and they are less likely to shatter upon impact or warp under extreme temperature changes. Most importantly, the use of natural fiber composite panels will dramatically reduce the molding time of 3-D parts; lower the emissions of toxic V.O.C.'s and reduce weight while improving the performance of end products.

The 55,000 sq.ft. Elkhart building is now fully erected and will be weather tight by June 15th. The facility will begin equipment installation in late June and is scheduled to begin testing and start-up activity in September. Commercial operation is planned to begin by September 30th, 1999. All construction and development activities are currently on or ahead of schedule.

Kafus' Indiana Bio-Composite plant is designed to produce over 100 million sq.ft. of natural fibre based Flexform(TM) mats and panels for the automotive, building and furniture industries. The plant is designed to meet multiple product specifications and designs using highly automated equipment. Initially the Elkhart facility will operate on a single line producing 50 million sq.ft. of Flexform(TM) fibre composite mats designed specifically for automotive use. Kafus' planned introduction of a second line will increase production to its full design capability of 100 million sq.ft.

Currently Kafus Bio-Composites Inc. has purchase commitments for the majority of its initial production run from three Tier 1 auto suppliers who in turn will use Flexform(TM) mats to manufacture finished interior automotive trim components for the big three US automotive OEM manufacturers. The purchase commitments to date call for Kafus Bio-Composites Inc. to supply Flexform(TM) mats for ultimate use in over two million automobiles and trucks over the next three model years. Under the commitments, the supply program for these vehicles will continue for at least five years.

Current applications for Kafus' natural fibre components include rear deck trays, full door panels, bolsters, trunk liners, door trim, head liners and related components. Kafus Bio-Composites Inc. is continuing to develop new bio-composite based component applications for Visteon Automotive Systems, an enterprise of Ford Motor Company, under an existing joint development agreement and for other customers in the trucking and recreational vehicle industries.

"With the successful conclusion of development of our first natural composites plant at Elkhart, we have now established an ideal migrateable model for Kafus' planned development of multiple facilities in North America, Europe and other strategic global locations," stated Mr. David Agneta President of Kafus Bio-Composites Inc. "With our proven ability to replace glass reinforced composites with less costly, lighter and safer natural fibre components, that are easily recyclable and more eco-friendly, coupled with our position as the leading US grower and processor of Kenaf, we are in an ideal position to take a global lead in the development and application of this remarkable new material technology," concluded Mr. Agneta.

Kafus is changing the global landscape through the use of alternative sustainable resources in the production of commodities.

The foregoing contains forward-looking statements, which are subject to contingencies and uncertainties. Such forward looking statements are not guarantees of future performance, and are based on numerous assumptions about future conditions that could prove to be inaccurate including without limitation, the assumption that Kafus will be able to raise the necessary financing to develop its projects and that there is market acceptance for its products. Actual events, transactions, and results may differ materially from anticipated events, transactions or results described in such statements. Material uncertainties about the future of the company exist. Kafus is subject to a number of risks and uncertainties, which are set forth in its filings, with the Securities Exchange Commission.