Toxin-free integrated aquaculture and aquatic product processing company HQ Sustainable Maritime Industries has broken ground on an organic feed mill and processing plant in Hainan.

The feed mill, which is the first organic-extruded feed mill in Hainan, is expected to be completed at the end of 2007 and is expected to produce approximately 100,000 tons of organic floating feed per year. The feed mill will serve HQSM's large cooperative farm operations, which were recently doubled in size through HQSM's agreement, announced August 8, 2006 and extended by an additional agreement signed on December 18, 2006 with the Government of Tayang Town, Qionghai City, Hainan Province.

This brought HQSM's total cooperative farming capacity to 3,294 acres. Each farm will be required to acquire feed from HQSM's mill to meet the Company's strict organic standards The arrangement is expected to reduce risks for the farmer and to increase HQSM's percentage of profits from feed to processing.

Floating feed is one of the most efficient feed for large certified organic cooperative farm operations, such as those run by HQSM, and there is no floating or organic feed production in Hainan currently. Production is expected to satisfy not only HQSM's expanded demand for its combined aquaculture farms in Wenchang and Qionghai. It will also provide feed for such other aquaculture operations in Hainan as shrimp and other farmed species. The plant is expected to manufacture approximately 100,000 tons annually of feed and will source organic non-GMP corn and soy from China and abroad.

HQSM is a leader in developing Hainan's aquaculture industry to global standards, recognized as a "Dragon Head" company by the Government of China.

Aquaculture has been the world's fastest growing segment in the food production system for the past two decades. In 2005, tilapia production was second in volume only to carps, and it is projected that tilapia will become the most important aquaculture crop in this century, potentially reaching US$5 billion in global sales. HQSM also produces marine bio and healthcare products addressing large markets in China. The processing plant for these products also produces tilapia feed additives. The company anticipates that the new large-scale organic feed mill and processing plant will increase profit margin, guarantee product quality and further vertically integrate the company's operations.

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