Thailand's Kantana Group has started production on a sequel to 3D animated feature Khan Kluay, about the adventures of a blue elephant, which was the top local hit at the Thai box office last year.

The new animation, Khan Kluay 2, has an estimated budget of $5m. 'The bulk is financed by the Kantana Group, but we also welcome foreign investors to take a stake,' says Auchara Kijkanjanas, producer of the two Khan Kluay animations.

Auchara heads up Kantana Animation Studios, a new subsidiary set up last year after the success of the first Khan Kluay, specifically for animation production and computer graphics.

The director of the sequel is Taweelap Srivuttiwong who initiated the project. He previously worked as arts director on the first Khan Kluay and directed the TV series, The Adventures Of Khan Kluay, a spin-off of the animated feature.

As Thailand 's largest post-production house, equipped with fully integrated services, Kantana will undertake the entire production in-house, from story development, character design and 3D layout to post-production and the processing of theatrical prints.

Around 85 full-time staff are currently working on the project. Post-production is scheduled to finish by 2008 while a release is expected in summer 2009.

The Kantana Group will show promo reel of Khan Kluay 2 at the Bangkok Film Market which kicks off today (July 23). Also on its slate is Khon Thai, a historical epic produced by Kantana Motion Pictures and currently in post-production.

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