Contract envisages the supply of 220,000 green tons per year of green residues (sawdust) for an initial term of 10 years with pricing linked to energy prices in the region.

The contract was entered with Springhill Land and Timber, a leading producer of timber in the southeast which has a cooperative working relationship with over 25 hardwood sawmills in a four state area.

Lamar Smith, owner of Springhill Land and Timber, commented, "This opportunity will be helpful to the timber industry in our area mostly because some of the products that are used we have not had a market for in the past."

Dynamotive USA officials are working with El Dorado Chamber of Commerce, through its President and CEO, Mr. Don Wales in regard to development.

The Company has been very impressed by the local enthusiasm for a plant. Dynamotive was attracted to Arkansas due to the State's well-crafted alternative energy policies, which are among the strongest in the nation as a result of programs put forth by the Governor and State Legislature.

Several sites have been shortlisted by Dynamotive and the Company will work with Mr. Don Wales to make a final selection which is expected by the end of the year. It is foreseen that construction would commence in 2010, TECNA S.A. would act as owner engineer and Hunt, Guillot and Associates have been shortlisted as the local engineering partner.

The Plant would incorporate the company's new technology on Upgrading of BioOil, which is scheduled to be deployed in 2011. Capital cost is expected to be approximately US$40 million, including US$7 million for a BioOil upgrading module. The Company and its partners' plan to submit applications for loan guarantees and other grant funding through Federal Programs.

At the state level, multiple production and feed credits have been identified by Dynamotive USA which would make the Arkansas project financially attractive. Funding for the State's already established Alternative Fuels Development Program was recently appropriated by the Arkansas State Legislature for the next two fiscal years.

Arkansas expanded its comprehensive Alternative Fuels Program by increasing funding for Feedstock Processors to $3 million from $2 million annually;

Alternative Fuel Distributors will receive $300,000 in grant funding; and

Production incentives under this program remain financially attractive, $2 million in grant funding that may be used for capital investment and/or operations costs.

Incentives under this program are awarded on a competitive basis. Dynamotive and its partners will make submissions under the terms of the program.

Don Wales, President and CEO, El Dorado Chamber of Commerce, noted: "We are excited to have Dynamotive as a corporate citizen in El Dorado and to be selected as the location for their US Flagship biorefinery." Dynamotive will bring highly skilled and sustainable jobs to a region that is all ready recognized for its oil/gas and chemical processing industries. Mike Dumas, Mayor of El Dorado, commented: "Dynamotive has invested much time in El Dorado and they understand the region. We look forward to working with them in this new industry." Additionally, County Judge Bobby Edmonds stated: "Union County is fortunate to have Dynamotive locate in our area. This industry will take advantage of our renewable resources and convert these resources to forms of alternative energy. We certainly support their efforts and expect to be a part of the growth of this new industry."

Concluding, pleased with the progress the Company has made, Andrew Kingston, President and CEO, Dynamotive Energy Systems Corporation commented, "Dynamotive has reached a further milestone in its U.S. business plan with the execution the feedstock supply agreement with Springhill Land and Timber. We appreciate the support and commitment by Mr. Lamar Smith. We look forward to working jointly in the development of value added products from timber residues and in doing so establish new business opportunities in the region. We are also very pleased with the progress achieved and the support received by the Chamber of Commerce of El Dorado. Mr. Don Wales has been and is a strong supporter of this development, it has been a pleasure to work with him and his team through the past year and we look forward to continue our work towards the implementation of a biorefinery in El Dorado."

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