Birch Mountain Resources Ltd. - Technical Report

EX-99.3 4 bmrtechreport.htm TECHNICAL REPORT Birch Mountain Resources Ltd. - Technical Report - Prepared By TNT Filings Inc.

Hammerstone Project, Alberta
Qualified Person's Review and Technical
Report

Prepared for: Birch Mountain Resources Ltd.
By: AMEC Americas Ltd.
Effective Date: August 1, 2006
Project No.: 152547

IMPORTANT NOTICE

Recognizing that Birch Mountain Resources has legal and regulatory obligations in a number of global jurisdictions, AMEC Americas Limited (AMEC) consents to the filing of this report with any stock exchange and other regulatory authority and any publication by Birch Mountain Resources, including electronic publication on Birch Mountain Resources' website accessible by the public, of this report.

This report was prepared as a National Instrument 43-101 Technical Report, in accordance with Form 43-101F1, for Birch Mountain Resources by AMEC. The quality of information, conclusions, and estimates contained herein is consistent with the level of effort involved in AMEC's services, based on: i) information available at the time of preparation, ii) data supplied by outside sources, and iii) the assumptions, conditions, and qualifications set forth in this report. This report is intended to be used by Birch Mountain Resources, subject to the terms and conditions of its contract with AMEC. That contract permits Birch Mountain Resources to file this report as a Technical Report with Canadian Securities Regulatory Authorities pursuant to provincial securities legislation. Except for the purposes legislated under provincial securities laws, any other use of this report by any third party is at that party's sole risk.

Ross T. Griffiths, P.Eng.
AMEC Americas Ltd.
900, 801 - 6^th Avenue SW
Calgary Alberta T2P 3W3
+1.403.298-4980
+1.403.298-4125
ross.griffiths@amec.com:

CERTIFICATE OF AUTHOR

I, Ross T. Griffiths, do hereby certify that:

1. I am Principal Geologist of AMEC Americas Ltd., Energy and Mining Division, 900, 801 - 6th Avenue SW., Calgary Alberta T2P 3W3

2. I graduated with a degree in Geological Engineering from the University of Toronto, Toronto, Ontario in 1977. In addition, I have obtained a Masters in Business Administration from the University of Calgary, Calgary, Alberta in 1989.

3. I am a member of the Association of Professional Engineers, Geologist and Geophysicists of Alberta, member #M34590 and, of the Canadian Institute of Mining, Metallurgy and Petroleum, member #98621.

4. I have worked as a geologist for a total of 26 years since my graduation from university.

5. I have read the definition of "qualified person" set out in National Instrument 43-101 ("NI-43-101") and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101) and past relevant work experience, I fulfill the requirements to be a "qualified person" for the Purposes of NI 43-101.

6. I am responsible for the preparation of sections 1 through 18, 20, 21 of the technical report titled Birch Mountain Resources, Hammerstone Project, Alberta, NI 43-101 Technical Report and Qualified Person's Review, and dated August 1, 2006 relating to the Hammerstone aggregate and reagent limestone processing project. I visited the Hammerstone Project on July 14, 2006.

7. I have not had prior involvement with the property that is the subject of the Technical Report.

8. I am not aware of any material fact or material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.

9. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43-101.

10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form.

11. I consent to the filing of the Technical Report with any stock exchange and other regulatory authority and any publication by them for regulatory purposes, including electronic publication in the public company files on their websites accessible by the public, of the Technical Report.

Dated at Calgary this 1st Day of August, 2006.

Ross T. Griffiths
__________________________________

Ross T. Griffiths, P.Eng.
AMEC Americas Ltd.
Energy & Mining Division
900, 801 - 6^th Avenue SW
Calgary Alberta T2P 3W3
+1.403.298-4980
+1.403.298-4125
ross.griffiths@amec.corn:

CONSENT OF AUTHOR

British Columbia Securities Commission	U.S. Securities and Exchange Commission
Alberta Securities Commission	450 5th Street, NW
Saskatchewan Securities Commission	Washington, D.C. 20549
Manitoba Securities Commission	U.S.A.
Ontario Securities Commission
Commission des valeurs mobilieres du
Quebec

August 2, 2006

Dear Sir/Madam:

Re: Birch Mountain Resources Limited

In regard to the filing of the Birch Mountain Resources Limited technical report entitled, "Birch Mountain Resources Ltd., Hammerstone Project, Alberta, Independent Qualified Person's Review and Technical Report" dated August 1, 2006 (the "Hammerstone Project Technical Report"), and the News Release and Material Change Report, each dated August 2, 2006, the undersigned hereby consents to:

(a) The filing of the Hammerstone Project Technical report;

(b) The written disclosure of the Hammerstone Project Technical Report and such extracts from this report that have been included in the News Release and the Material Change Report.

I confirm that I have read the written disclosures being filed and they fairly and accurately represent the information in the Hammerstone Project Technical Report.

__________________
Ross T. Griffiths

CERTIFICATE OF AUTHOR
Donald C. Doe, P.Eng.
900, 801-6^th Avenue SW
Calgary, Alberta T2P 3W3
Tel: (403) 298-4196; Fax: (403) 298-4125
donald.doe@amec.com

I Donald C. Doe, P. Eng., am a Professional Engineer, employed as a Technical Director, Mining with AMEC Americas Limited, Mining and Metals, and reside at 44 Patterson Hill, SW, in the city of Calgary, province of Alberta Canada.

I have practiced my profession continuously since 1987 and have been involved in mine operations and mine development studies for oil sands and gold properties in Canada, the United States and Peru.

As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43-101.

I am currently a Consulting Mine Engineer and have been so since July 2002.

I visited the Muskeg Valley Quarry and proposed Hammerstone site, near Fort McMurray, Alberta on July 14, 2006. I was responsible for the preparation of sections 19.1, 19.2, 19.4-19.6 and for the capital and operating costs for the quarry in sections 19.9 and 19.10.

I am not aware of any material fact of material change with respect to the subject matter of this technical report that is not reflected in this report and that the omission to disclose would make this report misleading.

I am independent of Birch Mountain Resources in accordance with the application of Section 1.5 of National Instrument 43-101.

I have read National Instrument 43-101 and Form 43-101F1 and this technical report has been prepared in compliance with same.

Dated at Calgary, Alberta, this 31st day of July 2006.

Donald C. Doe
Printed name of Qualified Person

AMEC Americas Limitet
Mining and Metals
900, 801 - 6 Ave. SW
Calgary, Alberta, Canada T2P 3W3
Tel: 1.403.298.4185
Fax: 1.403.298.4125

Donald C. Doe, P.Eng.
AMEC Americas Ltd.
Energy & Mining Division
900, 801-6^th Avenue SW
Calgary, Alberta T2P 3W3
+1.403.298.4197
+ 1.403.298.4125
donald.doe@amec.com

British Columbia Securities Commission	U.S. Securities and Exchange Commission
Alberta Securities Commission	450 5th Street, NW Washington, D.C. 20549
Saskatchewan Securities Commission	U.S.A.
Manitoba Securities Commission
Ontario Securities Commission
Commission des valeurs mobilières du Québec

August 2, 2006

Dear Sir/Madam:

Re: Birch Mountain Resources Limited

(a) The filing of the Hammerstone Project Technical report;

(b) The written disclosure of the Hammerstone Project Technical Report and such extracts from this report that have been included in the News Release and the Material Change Report.

I confirm that I have read the written disclosures being filed and they fairly and accurately represent the information in the Hammerstone Project Technical Report.

<signed>
Donald C. Doe

Michael Robert Samis, Ph.D., P. Eng.
AMEC Americas Limited
2020 Winston Park Dive Suite 700
Oakville, Ontario, Canada. L6H 6X7
Telephone: +1.905.403.5037
FAX: +1.905.829.3633
michael.samis@amec.com

CERTIFICATE OF AUTHOR

I Michael Robert Samis, Ph.D., P.Eng.,, am a Professional Engineer and Director of Financial Services (Mining and Metals) of AMEC Americas Limited, at 2020 Winston Park Drive - Suite 700, Oakville, Ontario, Canada, L6H 6X7. I have been employed by AMEC since August, 2004,

I am registered as a Professional Engineer in the province of Ontario (#100060140). I graduated from the University of British Columbia in Vancouver. B.C., Canada with a Bachelor of Applied Science in Mining Engineering in 1989. I subsequently obtained a Master of Science degree in Mining Engineering (Mineral Economics) from the University of the Witwatersrand in Johannesburg, Republic of South Africa in 1995 and a Doctorate of Applied Science in Mining Engineering (Mineral Economics) from the University of British Columbia in 2000.

I have practiced and conducted research in my profession continuously since 1990 and have been involved in production, min planning, and valuation at precious metal, base metal, industrial mineral., gemstone, and oil sands projects. These deposits have been located in North America, South America, Africa, and Asia. My valuation experience includes exploration stage projects through to late stage open pit end underground operating mines. I have also taught graduate level mine valuation courses at the Western Australian School of Mines m Kalgoorlie Australia and at the University of the Witwaterstand. I have taught and continue to teach a professional development course discussing advanced mine valuation methods using simulation and advanced finance theory on a regular basis through the Colorado School of Mines and in other global industry forums.

As a result of my experience and qualifications, I am a Qualified Person as defined in National Instrument 43-101.

I am responsible for the preparation of sections 19,3, 19.9, 19.10, and 19.11 of the technical report titled Birch Mountain Resources, Hammerstone Project Alberta. NI 43-101 Technical Report and Qualified Person's Review, and dated 1 August 2006 (the "Technical Report") relating to the Hammerstone Project in the Fort McMurray region of Alberta.

The subject of this update to the Technical Report are revisions in mine design, process designs, operating costs, capital costs, and industrial mineral product, sales and price forecasts that were the result of work by Birch Mountain Resources, Norwest Corporation, Canadian Energy Research Institute, Professor Graham Davis of the Colorado School of Mines, and Phoenix Engineering

AMEC Americas Limited
2020 Winston Park Drive - Suite 700
Oakville, Ontario L6H 6X7
Tel: (905) 403-5037
Fax: (905) 829-3633
www.amec.com

Services. In preparation of Section 19.9, I was assisted by Phoenix Engineering Services with estimating the capita! costs associated with the activation, calcining, and hydrating plants and by Mr. Don Doe, the Technical Director of Mining at AMEC, with estimating costs associated with quarrying equipment. The capital costs for the crushing plants have not been updated except for escalation from the estimate provided in the previous Harwnerstone NI43-101 report. In preparation of Section 19.10, I was assisted by Phoenix Engineering Services with estimating the operating costs associated with the activation, calcining, and hydrating plants and by Mr. Don Doe with estimating quarrying operating costs. The operating costs for the crushing plants are based on the operating cost model used in the previous Hannmerstone Nl43-101 report with a factor for escalation.

I have worked previously on building and advanced valuation model for the Hammerstone project from November 2005 to the current time.

I certify that, to the best of my knowledge, information and belief, that the technical report contains all scientific and technical information required to be disclosed to make the report not misleading.

I am independent of Birch Mountain Resources Limited in accordance with the application of Section 1.5 of National Instrument 43.101.

I have read National Instrument 43.101 and certify that the Technical Report has been prepared in compliance with that Instrument. I further certify that, as of the date of this certificate, the Technical Report contains all of the information required under Form 43.101F1 in respect of the property that is subject of the report.

Dated at Oakville, Ontario, Canada this 1 Day of August, 2006.

AMEC Americas Limited
2020 Winston Park Drive - Suite 700
Oakville, Ontario L6H 6X7
Tel: (905) 403-5037
Fax: (905) 829-3633
www.amec.com

Michael Robert Samis, Ph.D., P. Eng.
AMEC Americas Limited
2020 Winston Park Dive - Suite 700
Oakville, Ontario, Canada. L6H 6X7
Telephone: +1.905.403.5037
FAX: +1.905.829.3633
michael.samis@amec.com

CERTIFICATE OF AUTHOR

TO:	British Columbia Securities Commission
	Alberta Securities Commission
	Saskatchewan Securities Commission
	Manitoba Securities Commission
	Ontario Securities Commission
	Commission des valeurs mobilières du Québec
	Securities and Exchange Commission, United States of America

Re: Birch Mountain Resources Limited

In regard to the filing of the Birch Mountain Resources Limited technical report entitled, "Birch Mountain Resources Ltd., Hammerstone Project, Alberta, Independent Qualified Person's Review and Technical Report" dated August 1, 2006 (the "Hammerstone Project Technical Report"), and the News Release and Material Change Report, each dated August 2, 2006, the undersigned hereby consents to:

(a) The filing of the Hammerstone Project Technical report;

(b) The written disclosure of the Hammerstone Project Technical Report and such extracts from this report that have been included in the News Release and the Material Change Report.

I confirm that I have read the written disclosures being filed and they fairly and accurately represent the information in the Hammerstone Project Technical Report.

Dated at Oakville, Ontario, Canada on 2 August, 2006.

Michael Robert Samis, Ph.D., P. Eng.

AMEC Americas Limited
2020 Winston Park Drive - Suite 700
Oakville, Ontario L6H 6X7
Tel: (905) 403-5037
Fax: (905) 829-3633
www.amec.com

John D. Macfadyen, P.E
Phoenix Process Engineering, Inc.
1053 Cave Springs Rd., Suite 305
St. Peters, MO 63376

CERTIFICATE OF AUTHOR

I, John D. Macfadyen, do hereby certify that:

1. I am President of Phoenix Process Engineering, Inc.; 1053 Cave Springs Road, Suite 305, St. Peters, MO 63376,

2. I graduated with a degree in Geological Engineering from the Colorado School of Mines, Golden, Colorado, U.S.A. in 1962 and a degree in Metallurgical Engineering.

3. I am a member of Society for Mining, Metallurgy and Exploration, a constiuent society of the American Institute of Mining, Metallurgical and Petroleum Engineers, Inc., member #1984800 since 1962 and a member of Air and Waste Management Association, Member #27662 since 1987 and a member of the Technical Association for the Pulp and Paper Industry, Member # 1203518 since 2004.

4. I have worked as a professional engineer since 1962 for a total of 42 years since my graduation from university.

5. I hare read the definition of "qualified person" set out in National instrument 43-101 ("NI 43-10") and certify that by reason of my education, affiliation with a professional association (as defined in NI 43-101} and past relevant work experience, I fulfill the requirements to be a "qualified person" for the Purposes of NI 43-101.

6. I am responsible for the preparation of section 19 of the technical report titled "Requirements for Technical Reports on Production and Development Properties", NI 43-101 Technical Report and Qualified Person's Review, and dated July 2006 relating to the Hammerstone project, Alberta. I visited the Hammerstone Project site in October 2005 and in June 2006.

7. I have not had prior involvement with the property that is the subject of the Technical Report.

8. I am not aware of any material fact of material change with respect to the subject matter of the Technical Report that is not reflected in the Technical Report, the omission to disclose which makes the Technical Report misleading.

AMEC Americas Limited
2020 Winston Park Drive - Suite 700
Oakville, Ontario L6H 6X7
Tel: (905) 403-5037
Fax: (905) 829-3633
www.amec.com

9. I am independent of the issuer applying all of the tests in Section 1.5 of National Instrument 43-101.

10. I have read National Instrument 43-101 and Form 43-101F1, and the Technical Report has been prepared in compliance with that instrument and form.

Dated at Place of Signing this 1st Day of August, 2006.

John D. Macfadyen, P.Eng.

AMEC Americas Limited
2020 Winston Park Drive - Suite 700
Oakville, Ontario L6H 6X7
Tel: (905) 403-5037
Fax: (905) 829-3633
www.amec.com

1053 Cave Springs Rd., Suite 305
St. Peters, MO 63376
U.S.A.
Phone: 636-441-9708
Fax: 636-441-9737

	E-Mail: phoenix@phoenixprocess.com

British Columbia Securities Commission	U.S. Securities and Exchange Commission
Alberta Securities Commission	450 5th Street, NW Washington, D.C. 20549
Saskatchewan Securities Commission	U.S.A.
Manitoba Securities Commission
Ontario Securities Commission
Commission des valeurs mobilières du Québec

August 2, 2006

Dear Sir/Madam:

Re: Birch Mountain Resources Limited

(a) The filing of the Hammerstone Project Technical report;

(b) The written disclosure of the Hammerstone Project Technical Report and such extracts from this report that have been included in the News Release and the Material Change Report.

I confirm that I have read the written disclosures being filed and they fairly and accurately represent the information in the Hammerstone Project Technical Report.

Phoenix Process Engineering, Inc.

John Dugald Macfadyen, P. Eng.

BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

C O N T E N T S

1.0	SUMMARY		1-1
	1.1	Introduction	1-1
	1.2	Property Description and Tenure	1-1
	1.3	Geology	1-1
	1.4	Data Sources – Drilling and Sampling	1-2
	1.5	Mineral Resources and Reserves	1-4
	1.6	Quarrying	1-6
	1.7	Process	1-7
	1.8	Capital Cost	1-8
	1.9	Operating Costs	1-9
	1.10	Financial Analysis	1-10
	1.11	Conclusions and Recommendations	1-10

2.0	INTRODUCTION AND TERMS OF REFERENCE		2-1

3.0	DISCLAIMER		3-1

4.0	PROPERTY DESCRIPTION AND LOCATION		4-1
	4.1	Mineral Tenure	4-1
	4.2	Permits and Agreements	4-2

5.0	ACCESSIBILITY, CLIMATE, AND PHYSIOGRAPHY		5-1

6.0	HISTORY		6-1

7.0	GEOLOGICAL SETTING		7-1
	7.1	Regional Geology	7-1
	7.2	Property Geology	7-2
		7.2.1 Unit 1	7-24
		7.2.2 Unit 2	7-24
		7.2.3 Unit 3	7-24
		7.2.4 Unit 4	7-25
		7.2.5 Cretaceous Sediments	7-25
		7.2.6 Quaternary and Recent Sediments	7-25

8.0	DEPOSIT TYPES		8-1

9.0	MINERALIZATION		9-1

10.0	EXPLORATION		10-1
	10.1	Outcrop Mapping and Sampling	10-1
	10.2	Drilling	10-2
	10.3	Test pits and bulk samples	10-2
	10.4	In-pit activities	10-10

11.0	DRILLING		11-1

12.0	SAMPLING METHOD AND APPROACH		12-1
	12.1	Drill Core Sampling	12-1

13.0	SAMPLE PREPARATION, ANALYSES, AND SECURITY		13-1


Project No.: 152547	TOC i

BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

	13.1	Calcination of Reagent Limestones		13-1
	13.2	Direct Ship Reagent Limestones		13-2
	13.3	Aggregate		13-2
14.0	DATA VERIFICATION			14-1
15.0	ADJACENT PROPERTIES			15-1
16.0	MINERAL PROCESSING AND METALLURGICAL TESTING			16-1
	16.1	Calcine Testing of Reagent Limestone		16-1
		16.1.1	FFE Testing	16-1
		16.1.2	Cimprogetti Testing	16-1
		16.1.3	Metso Minerals Testing	16-2
	16.2	Aggregate Testing		16-2
		16.2.1	EBA Aggregate Testing	16-2
		16.2.2	Metso Minerals and EBA Results on upgraded aggregate	16-5
		16.2.3	EBA Concrete Testing	16-5
		16.2.4	Stony Valley Test Crush	16-7
		16.2.5	Testing for CaCO3 content	16-7
17.0	MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES			17-1
	17.1	Product quality and market acceptability		17-2
		17.1.1	Calcinable Limestone Quality Results	17-2
		17.1.2	Aggregate Quality Results	17-3
		17.1.3	Reagent Limestone - direct ship quality	17-7
	17.2	Resource Estimation		17-8
		17.2.1	Geological Modeling	17-8
		17.2.2	Volume calculations - general	17-8
		17.2.3	Volume calculations - sub-units of UNIT 3	17-9
		17.2.4	Resource classification	17-10
	17.3	Reserves		17-17
18.0	OTHER RELEVANT DATA AND INFORMATION			18-1
19.0	REQUIREMENTS FOR TECHNICAL REPORTS ON PRODUCTION AND DEVELOPMENT
	PROPERTIES			19-1
	19.1	Introduction		19-1
	19.2	Project Description		19-1
	19.3	Industrial Mineral Demand, Supply, and Pricing		19-2
		19.3.1	19.3.1 Market for aggregate and reagent limestone products	19-2
		19.3.2	19.3.2 Supply of aggregate and reagent limestone products	19-3
		19.3.3	19.3.3 Current demand for aggregate, reagent limestone and lime products..	19-5
		19.3.4	Projected long-term oil sands construction activity and bitumen production
			capacity	19-7
		19.3.5	Projected long-term demand for aggregate products	19-10
		19.3.6	Projected long-term energy demand in the oil sands industry	19-11
		19.3.7	Projected long-term demand for reagent limestone and lime products	19-22
		19.3.8	Forecast market share and Birch Mountain sales	19-25
		19.3.9	Pricing for aggregate and reagent limestone products	19-29
	19.4	Muskeg Valley Quarry (MVQ) Operations		19-31
	19.5	Hammerstone Production Forecast		19-31
	19.6	Quarry Production Equipment		19-40
	19.7	Process Description		19-41


Project No.: 152547	TOC ii

BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

		19.7.1	Aggregate Operations	19-41
		19.7.2	Quicklime Production	19-49
	19.8	Site Infrastructure		19-65
		19.8.1	Fuel	19-65
		19.8.2	Operating Power	19-65
	19.9	Capital Cost Estimate		19-66
	19.10	Operating Cost Estimate		19-69
		19.10.1	Summary	19-69
		19.10.2	Quarrying	19-69
		19.10.3	Aggregate Operation	19-70
		19.10.4	Activation and Calcining Operation	19-70
		19.10.5	Hydration Operation	19-71
		19.10.6	General and Administration	19-71
		19.10.7	Contingency	19-72
		19.10.8	Assumptions	19-72
	19.11	Financial Analysis		19-72
		19.11.1	Summary	19-72
		19.11.2	Sensitivity Analysis	19-74
		19.11.3	Valuation Methodology	19-75
20.0	CONCLUSIONS AND RECOMMENDATIONS			20-1
21.0	REFERENCES			21-1


T A B L E S

Table 1-1:	Summary of Annual Drilling at Hammerstone Project Area	1-3
Table 1-2:	Summary of Annual Sampling at Hammerstone Project Area	1-3
Table 1-3:	Mineral Resource Tonnage (in million of metric tonnes)	1-5
Table 1-4:	Mineral Reserve Tonnage (in millions of metric tonnes)	1-6
Table 4-1:	Birch Mountain's Metallic and Industrial Minerals Leases Covering the Hammerstone
	Quarry Project Area	4-7
Table 7-1:	Regional Stratigraphic Column for Hammerstone	7-1
Table 7-2:	Stratigraphic column for the Moberly Member in the Hammerstone Project	7-24
Table 7-3:	Subdivisions of Unit 3	7-25
Table 9-1:	^{Summary of CaCO}3 values from laboratory work	9-1
Table 9-2:	List of compounds and elements analyzed by Acme Labs	9-2
Table 9-3:	List of additional elements analyzed by Bondar Clegg	9-2
Table 11-1:	Hammerstone Project Drill Hole Stratigraphic Summary	11-2
Table 16-1:	Summary of Aggregate Test Results	16-4
Table 16-2:	Summary of Alkali Reactivity Testing by EBA	16-7
Table 16-3:	^CaCO3 concentrations in limestone samples	16-8
Table 17-1:	Specifications and Source Units for all Products	17-2
Table 17-2:	Potential CaO+MgO from Geochemistry vs. Potential CaO from FFE Testing	17-3
Table 17-3:	Unit 2 Potential CaO+MgO from Geochemistry	17-3
Table 17-4:	Unit 4 Potential CaO+MgO from Geochemistry	17-3
Table 17-5:	Aggregate Market Designations	17-4
Table 17-6:	L.A. Abrasion Comparison Summary (Unit 1 )	17-5


Project No.: 152547	TOC iii

BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Table 17-7:	Aggregate L.A. Abrasion Comparison Summary (Units 4 & 3)	17-6
Table 17-8:	L.A. Abrasion and MSS values for upgraded Unit 3A samples	17-7
Table 17-9:	Subdivisions of Unit 3	17-9
Table 17-10:	Statistical ratio of sub-units within Unit 3	17-10
Table 17-11:	Mineral Resource Tonnage (in millions of metric tonnes)	17-17
Table 17-12:	Mineral Reserve Tonnage (in millions of metric tonnes)	17-19
Table 19-1:	Road quality and concrete aggregate supply, Regional Municipality of Wood Buffalo	19-4
Table 19-2:	Competing Quicklime Plants, Canadian Prairies and Northern US Plains	19-5
Table 19-3:	Road quality and concrete aggregate demand, Regional Municipality of Wood Buffalo..19-6
Table 19-4:	Limestone produced from Birch Mountain's leases for use as aggregate by oil sands
	mining companies	19-6
Table 19-5:	Average daily bitumen production capacity by decade, oil sands region, and activity	19-9
Table 19-6:	Average oil sands and municipal demand for aggregate products in the North
	Athabasca and South Athabasca regions	19-11
Table 19-7:	Natural gas demand factors in the oil sands industry for fuel and generation of power
	and hydrogen	19-14
Table 19-8:	Energy intensity factors for fuel, power, and hydrogen production from natural gas	19-16
Table 19-9:	Revision of energy intensity factors for alternative fuel use in power generation	19-17
Table 19-10:	Alternative fuel energy content and annual alternative fuel consumption factor by oil
	sands industry activity	19-17
Table 19-11:	Alternative fuel sulphur content and annual sulphur production factor by oil sands
	industry activity	19-18
Table 19-12:	Alternative fuel mix assumptions	19-20
Table 19-13:	Division of alternative fuel combustion technologies by region	19-21
Table 19-14:	FBC / FGD reagent limestone consumption factors	19-23
Table 19-15:	Quicklime consumption factors	19-24
Table 19-16:	Selection of FGD limestone and quicklime product at direct combustion plants by
	region	19-24
Table 19-17:	Average annual demand for reagent limestone product demand in the North
	Athabasca, South Athabasca and Cold Lake regions.	19-25
Table 19-18:	Maximum BMR market share of aggregate and reagent limestone product demand in
	the North Athabasca, South Athabasca and Cold Lake regions used in the 2005 and
	2006 pre-feasibility reports	19-26
Table 19-19:	Average BMR sales of aggregate products in the North Athabasca and South
	Athabasca regions	19-26
Table 19-20:	Average BMR sales of reagent limestone product in the North Athabasca, South
	Athabasca and Cold Lake regions	19-26
Table 19-21:	Forecast BMR prices for aggregate and reagent limestone products used in the 2005
	and 2006 pre-feasibility reports	19-30
Table 19-22:	Hammerstone Production Forecast	19-32
Table 19-23:	Hammerstone Mining Losses	19-33
Table 19-24:	Hammerstone Substitution Rules	19-33
Table 19-25:	Hammerstone Mining Equipment	19-40
Table 19-26:	Process Losses	19-42
Table 19-27:	Aggregate-1 Production Rates	19-46


Project No.: 152547	TOC iv

BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Table 19-28:	Aggregate-2 Production Rates	19-47
Table 19-29:	Aggregate-3 Production Rates	19-49
Table 19-30:	Mass Balance – Activation Plant	19-55
Table 19-31:	Heat Balance – Activation Plant	19-58
Table 19-32:	Mass Balance – Quicklime 1	19-60
Table 19-33:	Heat Balance – Quicklime-1	19-64
Table 19-34:	Plant Installed Electrical Loads (kW)	19-66
Table 19-35:	Summary of Capital Costs	19-67
Table 19-36:	Estimated Average Operating Cost for the Hammerstone Project	19-69
Table 19-37:	Average Life-of-Quarry Operating Costs	19-70
Table 19-38:	Aggregate Plant Life-of-Quarry Operating Costs	19-70
Table 19-39:	Activation Operating Cost	19-71
Table 19-40:	Calcining Operating Cost	19-71
Table 19-41:	Hydration Operating Cost	19-71
Table 19-42:	Variation in NPV (C$ million) with Discount Rate and IRR	19-74

F I G U R E S

Figure 4-1:	Project Location Map	4-4
Figure 4-2:	Birch Mountain Mineral Leases for Hammerstone Project	4-5
Figure 4-3:	Archaeological Exclusion Zone Location Map	4-6
Figure 7-1:	Regional Bedrock Geology Map	7-3
Figure 7-2:	Estimated Depth to top of Devonian Map	7-4
Figure 7-3:	Unit 1 Isopach Map	7-5
Figure 7-4:	Unit 2 Isopach Map	7-6
Figure 7-5:	Unit 3 Isopach Map (unsegregated)	7-7
Figure 7-6:	Unit 4 Isopach Map	7-8
Figure 7-7:	Top of Unit 1 Structure Contour Map	7-9
Figure 7-8:	Top of Unit 2 Structure Contour Map	7-10
Figure 7-9:	Top of Unit 3 Structure Contour Map	7-11
Figure 7-10:	Top of Unit 4 Structure Contour Map	7-12
Figure 7-11:	Top of Christina Structure Contour Map	7-13
Figure 7-12:	Overburden Isopach Map	7-14
Figure 7-13:	Project Geology Map and Section References	7-15
Figure 7-14:	Section A - A' (Fence Diagram)	7-16
Figure 7-15:	Section B - B' (Fence Diagram)	7-17
Figure 7-16:	Section C - C' (Fence Diagram)	7-18
Figure 7-17:	Section D - D' (Fence Diagram)	7-19
Figure 7-18:	Section E - E' (Fence Diagram)	7-20
Figure 7-19:	Section F - F' (Fence Diagram)	7-21
Figure 7-20:	Section G - G' (Fence Diagram)	7-22
Figure 7-21:	Section H - H' (Fence Diagram)	7-23
Figure 10-1:	Surface Samples - KAR01 Series	10-3
Figure 10-2:	Surface Samples - GDP03 Series	10-4
Figure 10-3:	Surface Samples - KAR03 Series	10-5


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BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Figure 10-4:	Surface Samples GKR04 Series	10-6
Figure 10-5:	Surface Samples - UQUMP04 Series	10-7
Figure 10-6:	Surface Samples - GDP04 Series	10-8
Figure 10-7:	Surface Samples - BMBS05 Series	10-9
Figure 10-8:	Backhoe Test Pit Samples - TP06 Series	10-11
Figure 11-1:	BMR Core Logging Protocol	11-3
Figure 11-2:	Example of a core logging sheet for a Birch Mountain hole	11-4
Figure 11-3:	Drill hole location map	11-5
Figure 15-1:	Adjacent Oil Sand Properties	15-2
Figure 17-1:	Visual Estimate Shale Percentage vs. EBA L.A. Abrasion Test Result	17-5
Figure 17-2:	Unit 1 Resource Classification Map	17-12
Figure 17-3:	Resource Classification for Unit 2	17-13
Figure 17-4:	Resource Classification for Unit 3 (unsegregated)	17-14
Figure 17-5:	Resource Classification for Unit 3A	17-15
Figure 17-6:	Resource Classification for Unit 4	17-16
Figure 19-1:	Projected daily bitumen producing and upgrading capacity for the North Athabasca,
	South Athabasca, and Cold Lake regions from the CERI / Davis model	19-9
Figure 19-2:	Variation in expected total bitumen production compared to the base case CERI /
	Davis model when lower long-term equilibrium WTI prices are used	19-10
Figure 19-3:	Forecast unrestricted natural gas consumption for fuel, power and hydrogen and total
	projected annual energy consumption in the oil sand industry	19-14
Figure 19-4:	Projected unrestricted daily natural gas consumption for fuel, power and hydrogen
	production	19-15
Figure 19-5:	Division of energy consumed between alternative fuels and natural gas used in this
	study; revised natural gas consumption with alternative fuels	19-19
Figure 19-6:	Annual proportion of forecast energy requirements met by natural gas, alternate fuels
	combustion with IGCC, and alternate fuels consumed with either direct or fluidized-
	bed combustion.	19-22
Figure 19-7:	Birch Mountain market share of aggregate and reagent limestone product demand in
	the North Athabasca region	19-27
Figure 19-8:	Birch Mountain market share of aggregate and reagent limestone product demand in
	the South Athabasca region	19-28
Figure 19-9:	Birch Mountain market share reagent limestone product demand in the Cold Lake
	region	19-29
Figure 19-10:	Site Plan, Infrastructure and Access	19-35
Figure 19-11:	Quarry Plan Year 1	19-36
Figure 19-12:	Quarry Plan Year 10	19-37
Figure 19-13:	Quarry Plan Year 25	19-38
Figure 19-14:	Quarry Plan Year Life of Mine	19-39
Figure 19-15:	Aggregate 1	19-44
Figure 19-16:	Aggregate 2	19-45
Figure 19-17:	Aggregate 3	19-48
Figure 19-18:	Quicklime Production Schematic	19-51
Figure 19-19:	Coke Grinding	19-52
Figure 19-20:	Coke Firing	19-53


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BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Figure 19-21:	Raw Materials	19-56
Figure 19-22:	Activation 1 – Limestone Purification Process	19-57
Figure 19-23:	Quicklime 1 Lime Process and Ground Limestone Process	19-61
Figure 19-24:	Finished Lime & Limestone Product Storage and Shipping	19-62
Figure 19-25:	Finished Lime & Limestone Product Packaging	19-63
Figure 19-26:	Cumulative development capital profile	19-68
Figure 19-27:	Sensitivity of Pre-tax NPV using a 7.5% discount rate (C$ million)	19-74
Figure 19-28:	Sensitivity of After-tax NPV at 7.5% discount rate (C$ million)	19-75

A P P E N D I C E S

G L O S S A R Y

U N I T S O F M E A S U R E

Above mean sea level	amsl
Ampere	A
Annum (year)	a
Billion years ago	Ga
British thermal unit	Btu
Candela	cd
Carat	ct
Carats per hundred tonnes	cpht
Carats per tonne	cpt
Centimetre	cm
Cubic centimetre	cm³
Cubic feet per second	ft³/s or cfs
Cubic foot	ft³
Cubic inch	in³
Cubic metre	m³
Cubic yard	yd³
Day	d
Days per week	d/wk
Days per year (annum)	d/a
Dead weight tonnes	DWT
Decibel adjusted	dBa
Decibel	dB
Degree	°
Degrees Celsius	°C
Degrees Fahrenheit	°F
Diameter	ø
Dry metric ton	dmt
Foot	ft
Gallon	gal
Gallons per minute (US)	gpm


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BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Gigajoule	GJ
Gram	g
Grams per litre	g/L
Grams per tonne	g/t
Greater than	>
Hectare (10,000 m²)	ha
Hertz	Hz
Horsepower	hp
Hour	h (not hr)
Hours per day	h/d
Hours per week	h/wk
Hours per year	h/a
Inch	" (symbol,
Joule	J
Joules per kilowatt-hour	J/kWh
Kelvin	K
Kilo (thousand)	k
Kilocalorie	kcal
Kilogram	kg
Kilograms per cubic metre	kg/m³
Kilograms per hour	kg/h
Kilograms per square metre	kg/m²
Kilojoule	kJ
Kilometre	km
Kilometres per hour	km/h
Kilonewton	kN
Kilopascal	kPa
Kilovolt	kV
Kilovolt-ampere	kVA
Kilovolts	kV
Kilowatt	kW
Kilowatt hour	kWh
Kilowatt hours per short ton (US)	kWh/st
Kilowatt hours per tonne (metric ton)	kWh/t
Kilowatt hours per year	kWh/a
Kilowatts adjusted for motor efficiency	kWe
Less than	<
Litre	L
Litres per minute	L/m
Megabytes per second	Mb/s
Megapascal	MPa
Megavolt-ampere	MVA
Megawatt	MW
Metre	m
Metres above sea level	masl
Metres per minute	m/min
Metres per second	m/s
Metric ton (tonne)	t
Micrometre (micron)	µm
Microsiemens (electrical)	µs
Miles per hour	mph
Milliamperes	mA
Milligram	mg
Milligrams per litre	mg/L
Millilitre	mL
Millimetre	mm


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BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Million	M
Million tonnes	Mt
Minute (plane angle)	'
Minute (time)	min
Month	mo
Newton	N
Newtons per metre	N/m
Ohm (electrical)
Ounce	oz
Parts per billion	ppb
Parts per million	ppm
Pascal (newtons per square metre)	Pa
Pascals per second	Pa/s
Percent	%
Percent moisture (relative humidity)	% RH
Phase (electrical)	Ph
Pound(s)	lb
Pounds per square inch	psi
Power factor	pF
Quart	qt
Revolutions per minute	rpm
Second (plane angle)	"
Second (time)	s
Short ton (2,000 lb)	st
Short ton (US)	t
Short tons per day (US)	tpd
Short tons per hour (US)	tph
Short tons per year (US)	tpy
Specific gravity	SG
Square centimetre	cm²
Square foot	ft²
Square inch	in²
Square kilometre	km²
Square metre	m²
Thousand tonnes	kt
Tonne (1,000 kg)	t
Tonnes per day	t/d
Tonnes per hour	t/h
Tonnes per year	t/a
Total dissolved solids	TDS
Total suspended solids	TSS
Volt	V
Week	wk
Weight/weight	w/w
Wet metric ton	wmt
Yard	yd
Year (annum)	a
Year (US)	yr

All dollar figures ($) in this report refer to Canadian dollars unless otherwise stated as United States dollars (US$). Project exploration data use the SI system of measurement and this is retained throughout the report with the exception of discussion of United States markets for aggregate, where sales units are customarily quoted in U.S. dollars per short ton.

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BIRCH MOUNTAIN RESOURCES
HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

1.0 SUMMARY

1.1 Introduction

Birch Mountain Resources Limited (BMR) is developing the Hammerstone Project in northeast Alberta to supply calcinable limestone and aggregate to the oil sands industry and related users. This report is based on the "Hammerstone Project Pre-feasibility Study Report (February 2005)" and its subsequent update undertaken by AMEC Americas Ltd. (AMEC) and constitutes a Qualified Person's Review and Technical Report. Ross T Griffiths, P.Eng., Donald Doe, P.Eng., Michael Samis, P.Eng., employees of AMEC, and John Macfadyen P.Eng., President, Phoenix Process Engineering, Inc. served as the qualified persons responsible for the preparation of the technical report as defined in National Instrument 43-101 (NI 43-101), Standards of Disclosure for Mineral Projects and in compliance with Form 43-101F1 (the "Technical Report").

1.2 Property Description and Tenure

Hammerstone is located approximately 60 km north of the City of Fort McMurray, Alberta in Township 94, Range 10W4M. Existing highways and roads give good access to the northern portion of the project area whereas the southern portion of the project area is accessed via winter/ATV roads and cut lines. The proposed Hammerstone quarry covers approximately 1,608 hectares (ha) and is located on portions of Birch Mountain's metallic and industrial mineral leases 9494070001, 9494070002, 9403120367, 9499030555, and 9400080004. In some areas, BMR's metallic and industrial mineral leases overlap with oil sands leases of Shell Canada Ltd., Syncrude Canada Ltd., plus others (Figure 4-2). These companies own the mineral rights to the oil sands but not to the underlying Devonian limestone. BMR has co-development agreements with Syncrude Canada Ltd. and a cooperation and information sharing agreement with Albian Sands Energy Inc. (Shell Canada Ltd., Chevron Canada, and Western Oil Sands) plus other agreements that provide for cooperative exploration, environmental planning, development, extraction, and production activities in areas of the overlapping leases. On the North West corner of the property, the boundaries of the Hammerstone project area has been adjusted to skirt an Archaeological Exclusion Zone, which was previously excluded from the project but now follows a more defined boundary against Legal Subdivisions.

1.3 Geology

The Hammerstone project area contains surface exposures of Devonian limestones of the Moberly Member of the Waterways Formation, oil sands and shale of the Cretaceous McMurray Formation, and Quaternary sediments. Devonian limestones are exposed throughout the project area in resistant knolls and uplands that stand up above the surrounding muskeg. Quaternary deposits comprising tills and glaciofluvial deposits are present in the northeastern part of the project area.

The unit of interest in the project area is the Moberly Member of the Devonian Waterways Formation. At Hammerstone, the approximately 45 m thick Moberly Member has been informally divided into four units which are, from base to top: Unit 1, Unit 2, Unit 3, and Unit 4.

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In addition, a subdivision of Unit 3 has been proposed into Units 3A, 3B, and 3C. These subdivisions are based on its average shale content.

Unit 1 averages 13 m thick and consists of grey nodular limestones with 10 to 15% shale. A bed of light green calcareous shale near the base averages 0.95 m thick. Individual beds within Unit 1 are very consistent in lithology and thickness and can be correlated throughout the Project area.

Unit 2 is a high-purity limestone that averages 4.5 m thick. As observed in drill core, it contains three beds: an upper bed of cream to light tan coloured, stromatoporoid-bearing, bitumen-stained limestone (±4.0 m thick); a light grey nodular limestone (±25 cm thick); and a lower cream coloured pelloid-bearing limestone (±15 cm thick). Unit 2 is a distinctive regional marker bed and has been encountered in drill core in the Poplar Creek area, approximately 25 km to the south, where it is less than 50 cm thick.

Unit 3 averages approximately 20.5 m thick and is composed of light grey nodular limestone, interbedded light grey limestone, and light green calcareous shale. Outcrops of Unit 3 are found in cliffs along the Muskeg River and in two locations in the northern part of the Project area. The lithology and thickness of individual beds within Unit 3 vary across the Project area, but the thickness and lithological character of the unit as a whole is consistent.

Based on recent bulk sampling in the MVQ area, BMR has proposed a subdivision of Unit 3 based on average shale content. This subdivision relates to the ability of the unit to respond to upgrading of quality through secondary crushing and screening. Table 7-3 shows the proposed subdivisions. At the current time, these sub-units are not stratigraphically interpolated. They are represented solely by their occurrence in drill core on a statistical basis.

Unit 4 is a high-purity limestone that ranges in thickness from zero (eroded) to 6.0 m and is composed of light tan, massive to slightly nodular limestone with very little shale component (<5%). Unit 4 outcrops throughout the project area in knolls and ridges, which stand up to 6 m above the surrounding wetlands. A shaley fossiliferous bed has been observed near the base of Unit 4 which ranges from 40 cm to 80 cm thick (average 65 cm) and varies from a calcareous shale to shaley fossiliferous limestone.

1.4 Data Sources – Drilling and Sampling

The information gathered on the limestone resources of the Hammerstone project used most of the standard techniques employed by mining companies. Reconnaissance mapping, detailed mapping, test pits, outcrop sampling, drilling and bulk sampling have all been employed at Hammerstone. With the start up of the Muskeg Valley Quarry, in-pit face mapping, sampling and where required, blast hole drill logging and sampling can be added to the list of data gathering sources.

Exploration drilling commenced in the Hammerstone project area in 1996. The focus of this campaign was precious metals but provided core samples of the limestone beds During the winter of 2002/2003, a drill program was defined to provide information regarding the geology of the Muskeg Valley Quarry and explore the calcinable limestone and aggregate resource potential.. The drill holes were nominally sited on a 500 m grid, with locations adjusted slightly to take advantage of existing access.

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After this drilling, the overall geological character of the project area was established and the stratigraphy was divided into the four informal stratigraphic units. In the winter of 2004, five holes were drilled in the southern portion of the project area and an additional five were drilled in the northern part. These holes established continuity of stratigraphy, calcinable limestone quality and aggregate quality between the original northern project area and the expanded southern project area and significantly increased the calcinable limestone and aggregate resources. The drill hole data has been summarized into the following table.

Table 1-1:                    Summary of Annual Drilling at Hammerstone Project Area

Year Number of
Holes Drilled

1996 5

2002 6

2004 10

In addition to the drill holes, several seasons of surface sampling has been performed across the Hammerstone Project area providing useful geological and geochemical data. Sampling programs started in 2001 with the primary goal of investigating the extent of limestone silicification previously identified in the future Muskeg Valley Quarry area. In order to locate, describe, and sample outcrops of the Devonian limestone, surface sampling programs were also conducted in 2003 and 2004. At each location, a representative sample was collected and the lithology described. These descriptions were used to provide detailed spatial and vertical characterization of the limestone units, and to compare the outcrop material to that recovered in the drilling programs. The sampling data has been summarized into the following table.

Table 1-2:                   Summary of Annual Sampling at Hammerstone Project Area

Year Number of Series Samples

Sites Sampled

2001 25 KAR01

2003 18 GDP03

2003 31 KAR03

2004 6 GKR04

2004 20 UQUMP04

2004 74 GDP04

2005 5 BMBS05

2006 26 TP06

A 300 tonne bulk sample was extracted from Unit 4 in August 2004. It was taken adjacent to an exploration road in the northern part of the deposit very near where the MVQ has begun production. In March 2005, the same area was re-accessed to obtain a 40 tonne (more or less) bulk sample of Unit 3. This sample was sent for specialized crushing and screening tests.

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HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

1.5                     Mineral Resources and Reserves

The mineral resource estimates for Hammerstone were calculated by (AMEC). The mineral resource estimate for the Hammerstone quarry project comprised three components:

Demonstration of physical and chemical property homogeneity;

Volume/tonnage estimate of material;

Marketability of the mineral resource.

All of these components must be considered in order to classify an industrial mineral resource, such as calcinable lime or aggregate, and are consistent with the guidelines for the reporting of industrial minerals in the CIM definitions referred to in NI43-101. The Hammerstone quarry project supports classification of the deposit into measured, indicated, and inferred mineral resources categories as shown in Table 1-3.

Measured resource status is assigned for Unit 2 to an area within a 500 m radius of all drill hole intersections having either a favourable calcine test or favourable potential CaO+MgO calculated from whole rock geochemical analysis. Indicated resource status is assigned to all other areas.

Aggregate testing and lithological logging give sufficient confidence in aggregate properties to assign measured resource status for Unit 1 and Unit 3 to an area of 500 m radius around all drill holes. Indicated mineral resource status is assigned to areas greater than 500 m from the drill holes. Indicated mineral resource status is also assigned where Unit 3 is interpreted to have been eroded along the erosional edge of Unit 1 in the north and in locations where the upper portions of Unit 3 have been eroded.

The sub units of Unit 3 receive the same classification as Unit 3 as a whole except for Unit 3A which has the potential to produce higher value products. The classification for Unit 3A is independent of the rest of Unit 3 but, sub Unit 3A is capable of substituting for the other sub units in Unit 3. The classification is based on where Unit 3A is found in drill holes and sampled in a test pit. A zone around the bulk sample pit where the test on Unit 3A material was made is classed as Measured Unit 3a resource. The areas around Unit 3 drill holes classed as measured are stepped down one class to Indicated for Unit 3A resource. The rest of the area is classed as Inferred for Unit 3A. Using these boundaries, AMEC has determined that Unit 3A only occurs as measured and indicated over 24.5% of the area covered by Unit 3. Therefore, AMEC believes that Unit 3A only accounts for 3.7% of the total volume of Unit 3, not the 15% shown in Table 17-10. This is the value that AMEC has used for estimating the resources of Unit 3A.

Measured mineral resource is assigned to all mapped outcrops of Unit 4. AMEC has proposed that Unit 4 under the Cretaceous but outside the Shell exclusion boundary is classed as indicated resource. The remainder east of the Shell exclusion boundary is classed as inferred.

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HAMMERSTONE PROJECT
2006 NI43-101 TECHNICAL REPORT

Table 1-3:                   Mineral Resource Tonnage (in million of metric tonnes)

Units Sub-Units Designations Measured Indicated Total

ATT 1,2,4,6;

1 reagent 240.5 245.2 485.7

limestone

2 Quicklime, 79.5 78.8 158.3

Hydrated lime

Concrete rock,

3A ATT 1,2; 1.0 25.2 26.2

reagent

limestone

3B+3C ATT 2,4, 6; 322.7 459.3 782.0

Shale liner

3 Subtotal 323.7 484.5 808.2

Reagent

4 limestone, 7.1 5.5 12.6

Concrete rock

Total 650.8 814.0 1464.8

The limestone reserves were calculated for each of the four units. The mineral reserves are summarized in Table 1-4. The proven reserves listed in Table 1-4 are the part of the measured resource for each unit that falls within the economic pit design; the probable reserves are the part of the indicated resource for each unit that falls within the economic pit design. The designated uses for each unit are also shown in Table 1-4. As shown in this report, there is a reasonable expectation of profit from the limestone quarried within the Hammerstone quarry pit design given the processes described and the estimated prices for the final saleable products.

The Hammerstone quarry pit design includes the current MVQ and most of the remaining unrestricted areas of the BMR Hammerstone project bounds. The restricted areas include

a 200 m offset from the Muskeg River,

the archaeological exclusion zone in the northeast corner,

the area to the north and north east excluded for infrastructure and access and,

the areas included in Shell's oil sands mining plans along the eastern edge (Shell exclusion zone).

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Table 1-4:                   Mineral Reserve Tonnage (in millions of metric tonnes)

Units Sub-Units Designations
Proven

Probable

Total

1 ATT 1,2,4,6;
reagent limestone
181.1

172.0

353.1

2 Quicklime, Hydrated
lime 59.9 58.0 117.7

3A Concrete rock, ATT
1,2; reagent
limestone
0.8

22.4

23.2

3B+3C ATT 2,4, 6; Shale
liner
211.7

282.6

494.3

3 Subtotal 212.5 305.0 517.5

4 Reagent limestone,
Concrete rock
5.6

4.5

10.1

Total 459.2 539.5 998.7

Notes:

Specific Gravity of 2.70 used for all units

includes 5% mining loss on Unit 1 against footwall

includes 25% mining loss in Unit 3 against overburden and internal shale zones (excluding sub Unit 3A which has no mining loss)

includes 17% mining loss in Unit 4 against overburden and internal shale zone

AMEC calculations show Proven Unit 3A = 3.63% of volume, Probable = 96.37% of volume

1.6                    Quarrying

In general, the quarry will commence in the northern portion of the property and move progressively southwards. The aggregate plant equipment will move along with the quarry development and Hammerstone will rely on the customer's trucks to transport the finished products to the weigh scale and off the property, which will remove the need for long overland conveyers. The calcinable limestone will be crushed near the face and then transported by quarry haulage trucks to the calcining plant stockpiles at the north end of the property. In the future, when all three kilns are running (year 18 onwards) it may become economically feasible to install overland conveyors for the calcining plant feed to reduce transportation costs.

The quarry plan has been based on quarrying the four units as required to satisfy the projected sales figures supplied by BMR. The fact that the quarry plan is driven purely by sales has resulted in benches being opened up to supply the market demand as opposed to when they would suit the overall development of the quarry. This should be considered as a market-driven case, and trade-off studies should be used to investigate options of optimizing the quarry plan with the objective of reducing operating costs while minimizing impacts to the supply of products to the market.

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HAMMERSTONE PROJECT
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1.7                    Process

Aggregate Production

In the Muskeg Valley Quarry operation, aggregate production plants capable of producing 7,000,000 tonnes/yr of specific product or suite of products, are currently being acquired and assembled. These plants will continue to operate as the quarry extends from the currently approved MVQ into the Hammerstone quarry extension. To increase quarry production to produce 25,000,000 tonnes/yr (up to 30,000,000 tonnes/yr in a peak production year) for both aggregate sales and to supply the Hammerstone plants, a scaling up of aggregate production is required.

The aggregate production system is designed to produce four separate classes of products: construction grade aggregate, base grade aggregate, concrete rock, and crushed limestone for sale as reagent limestone, or used for calcining for quicklime and cement production. There will be four independent aggregate processing plants, each assigned a specific production duty. Aggregate processing plants are currently being acquired, and will be installed sequentially as the quarry expands to meet increasing demand for aggregates. Aggregate processing plants will be semi-mobile, and will be moved to keep pace with the advancing face of the quarry. This will minimize the amount of movement and manipulation of source rock and product, reducing operating costs, vehicle emissions, and dust generation.

Aggregate Plant

The aggregate plant will consist of a number of movable screening, crushing and conveying equipment packages supplied by a vendor.

The quarry is utilizing contractor owned and operated equipment in order to begin aggregate production prior to BMR's own crushing plant being designed, purchased, delivered and commissioned on site. The detailed engineering is expected to proceed once the aggregate plant permit is received and the owner is expected to commence production with its own equipment in 2007 or 2008.

Quicklime Production

Quicklime production will begin in 2009. Initially, the quicklime processing system will include an activation plant, which removes bitumen from the limestone, and a quicklime production plant. As demand for quicklime increases, additional activation and quicklime plants will be constructed and commissioned. The full quicklime production system, comprising three activation plants and three quicklime plants.

The quicklime processing design for this study is based on the preliminary bench-scale test work carried out to date, which has shown that Unit 2 produces quicklime of acceptable quality. Additional bench-scale and pilot-scale testing determined that the most suitable kiln was a horizontal type kiln due to decrepitation of the lime product. It was also determined that due to some impurities and volatiles the limestone was not a suitable product for a pre-heater and that a regenerative thermal oxidizer would be required to reduce emissions of volatiles.

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2006 NI43-101 TECHNICAL REPORT

Activation Plant

The presence of hydrocarbons in limestone feed is known to cause operational problems within pre-heater type quicklime kilns. Therefore, removal of hydrocarbons from the limestone is critical first step in the process to produce quicklime. Activation plant produces a high calcium carbonate limestone.

Quicklime Plant

Activated limestone produced by the activation plant(s) will be screened and the coarse fraction placed in a storage bin. A blend of this high quality limestone and limestone not containing organic substances from the quarry (Unit 4) will be prepared for calcining in a manner that ensures production of quicklime meeting customer specifications.

1.8                    Capital Cost

The estimated cost to construct, install and commission the facilities described in this report is C$577 million. This estimate is categorized as pre-feasibility level with an expected accuracy of ±25%. This amount covers the direct field costs of executing four crushing plants, three activation plants, three calcining plants, two hydration plants, and the indirect costs associated with design, construction and commissioning.

The estimate is summarized in Table 1-3. The base pricing is 1st quarter 2006 Canadian dollars with no allowance for escalation beyond that time. Interest or financing during construction are not included.

Table 1-3: Summary of Capital Costs

Construction horizon
Total

Area Start Finish
($ million)

Mining capital
42.9

Crushing plants
16.4

Activation plant #1 2007 2009
73.7

Activation plant #2 2013 2015
73.7

Activation plant #3 2020 2023
73.8

Lime plant #1 2007 2009
69.7

Lime plant #2 2008 2011
74.0

Lime plant #3 2012 2015
144.0

Hydration plant #1 2008 2008
4.3

Hydration plant #2 2013 2013
4.3

Total Capital Cost
576.5

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The capital cost estimate is based on the following project data:

design criteria

flowsheets general arrangement drawings

single-line electrical drawing

equipment list

supplemental sketches as required

budget quotations from vendors

in-house database and budget quotations from vendors

regional climatic data

project work breakdown structure (WBS) and code of accounts.

According to AMEC classifications, this estimate is categorized as pre-feasibility level, with a likely accuracy of ±25%. A major assumption is that all crushed material required for the project will be supplied by BMR at no cost to the project. Owner's costs are not included.

1.9                    Operating Costs

The operating cost estimate is based on an owner-operated quarry, aggregate plant, and calcining facility. Costs have been calculated for the four main areas of mining, aggregate processing, calcining, hydrating, and site general and administration. Costs have been developed from data considered applicable to the Fort McMurray area. Table 1-4 shows the overall average operating cost anticipated for Hammerstone over its planned 55 year life.

Table 1-4: Estimated Average Operating Cost for the Hammerstone Project

Area
Cost per Tonne Product ($)

Quarrying and rock haulage
1.88

Aggregate plant processing
1.66

Activation plant
9.48

Calcining plant processing
36.40

Hydration plant costs
15.22

General and administration
0.30

The following assumptions have been made in regard to the operating costs:

equipment is owned and operated by BMR

maintenance is carried out in-house

labour costs are in line with the surrounding operations

job classifications across the project will incorporate a fair amount of flexibility

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a labour burden of 35% has been included
a contingency of 15% has been added to the G&A costs.

1.10                  Financial Analysis

The Hammerstone project was analyzed using a discounted cash flow approach assuming 100% equity in 1st quarter 2006 Canadian dollars. Projections for annual revenues and costs are based on data developed for the limestone quarry, process plants, capital expenditures and operating costs. Estimated project cash flows were used to determine the pre-tax net present value (NPV), after-tax NPV, pre-tax internal rate of return (IRR) and after-tax IRR for the base-case.

Results from the base-case analysis (Table 1-6) estimate the project's pre-tax NPV at a discount rate of 7.5% as C$1,669 million and after-tax NPV as C$1,099 million. The estimated expected cumulative net cash flow (i.e. NPV with a 0% discount rate) over the life of the project is C$12,891 million on an pre-tax basis and C$8,613 million on an after tax basis. The estimated time-discounted cumulative net cash flow (i.e. NPV calculated with a risk-free interest rate of 2.5%) is pre-tax C$5,874 million and after-tax C$3,913 million. Note that the time-discounted net cash flow does not include an adjustment for risk. The project's pre-tax IRR is estimated to be 36.3% and after-tax IRR is estimated to be 31.2%. The payback period is estimated at 5.9 years from first production. The base-case quarry life is 55 years.

Table 1-5: Variation in NPV (C$ million) with Discount Rate and IRR

0% 2.5% 5% 7.5% 8.0% 10% 12.5% 15%

Pre-tax NPV 12,891 5874 2987 1669 1500 1005 640 424

Pre-tax IRR (%) 36.3%

After-tax NPV 8613 3913 1981 1099 986 655 411 266

After-tax IRR (%) 31.2%

Sensitivity analysis was performed by varying quarrying cost, process cost, product price and capital expenditure across a range of minus 20% to plus 20%. The cash flow model is most sensitive to changes in reagent limestone and aggregate product price, significantly less sensitive to mining costs, processing cost, and capital costs, and least sensitive to lime plant fuel cost (see Figure 19-27 and Figure 19-28).

1.11                 Conclusions and Recommendations

The following conclusions may be drawn based on the, "Hammerstone Project Pre-feasibility Study Report (February 2005)" and it's subsequent 2006 update:

The Hammerstone Quarry contains sufficient reserves for over 50 years of production based on the produc demand and sales forecast.
A viable market for the aggregate and reagent limestone products exists in the local Fort McMurray area.

The Hammerstone Project can produce quality aggregate, quicklime and other reagent limestone products suitable for the oil sands industry and local infrastructure markets.

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It is reasonable to expect that the limestone can be quarried, processed and sold at a profit given the processes described, the expected sales quantity, the close proximity to the market, and the estimated prices for the final saleable products.

Birch Mountain should expand its testing program for upgrading Unit 3 quality as it relates to segregated sub-units based on shale content. A test pit or bulk sample scale program must increase the number of samples for testing and, expand the geographic area of the test locations. Positive results similar to the single test currently available will allow for the upward adjustment of measured and indicated resources for Unit 3 sub-units. A subsequent increase in sub-unit 3A reserves would be expected (following a mine scheduling review) which will lead to additional options for higher value product sales. This will also provide a wider flexibility in the product mix so BMR can react much more quickly to changing customer demands. This recommendation should be implemented before the final feasibility study is completed.

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2.0                    INTRODUCTION AND TERMS OF REFERENCE

Birch Mountain Resources Ltd. (BMR) currently operates the Muskeg Valley Quarry, a limestone quarry, 60 kilometers north of the city of Fort McMurray, Alberta, Canada. It is located in Township 94, Range 10 West of the Fourth Meridian. Birch Mountain is proposing to establish a larger operation, the Hammerstone Project, that would continue to provide quarried limestone to feed an aggregate production plant, and a limestone processing complex producing reagent limestone, quicklime and hydrated lime. Limestone would be quarried, crushed, and screened to produce aggregate for local infrastructure and municipal construction. Specific uses include, asphalt concrete, portland cement concrete, base and road surfacing aggregates. High-grade limestone would be quarried, crushed, screened, and processed to provide direct ship reagent limestone for flue gas desulphurization (FGD) and fluidized bed combustion (FBC). The high-grade limestone will also be calcined to produce quicklime for FGD and further hydrated to produce hydrated lime for use in water treatment.. The market for these products is expected to be the oil sands operations in the surrounding area.

BMR engaged AMEC Americas Limited (AMEC) of Oakville, Ontario and Calgary, Alberta to provide updated geology, resource calculations, mine scheduling, and cash flow model in order to update the Pre-feasibility Study for the Hammerstone Project. BMR released the information related to new reserve numbers and new the new cash flow model and project valuation on June 26, 2006. From this, AMEC was assigned the responsibility for preparing a Technical Report and Qualified Persons Review that is compliant with National Instrument NI43-101(NI43-101) and following the guidelines in Form 43-101F1. Mr. Ross Griffiths, P.Eng, an employee of AMEC of Calgary has served as a Qualified Person and is responsible for the overall preparation and publication of this report.

Information and data for this review and report were obtained from the updated Hammerstone Project Pre-feasibility Study and cash flow analysis;⁽¹⁾ the recently submitted Environmental Impact Assessment Report, May 2006 by BMR with assistance from AMEC Earth and Environment of Calgary, Alberta; and additional information provided by BMR. Pertinent data were reviewed in sufficient detail for the preparation of this document. Ross Griffiths, P. Eng., Principal Geologist for AMEC in Calgary conducted and supervised the review of all matters pertaining to sections 1 through 18, 20 and 21 of this report. This encompasses all the geological and resource information. Mr. Donald Doe, P.Eng, Technical Director, Mining and Manager of AMEC's mining group in Calgary, reviewed and contributed to the report concerning the mine design, mining costs, mine capital costs and other matters relevant to requirements on production and development properties (Section 19). The process design and process costing in Section 19.7 was authored by John Macfadyen P.Eng., President, Phoenix Process Engineering, Inc. (Phoenix) of St. Peter's, Missouri. Mr. Carlos Perucca, P.Eng, an employee of AMEC, Saskatoon, Saskatchewan, reviewed the section concerning the process design, process operating and capital costs. Dr. Michael Samis, Director of Financial Services for AMEC, Oakville, Ontario, authored section 19.11, the financial analysis and, co-authored Section, 19.3 Industrial Mineral Demand, Supply, and Pricing along with Dr. Hugh J. Abercrombie, V.P. Exploration, BMR.

¹ Includes studies by AMEC, CERI, Dr. Graham Davis, Norwest Corporation and Phoenix Process Engineering Inc. See Section 21: References for details

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Mr. Griffiths and Mr. Doe visited the project site near Fort McMurray on July 14, 2006. The operating Muskeg Valley Quarry (MVQ), bulk sample pit, and a representative number of exploration drill hole sites and outcrop locations were examined. Quarry operations staff were interviewed concerning operating conditions and logistical parameters. Additionally, Mr. Griffiths visited BMR's core storage facility in Calgary on May 17, 2006. Rock core from a representative number of exploration holes was examined and cross checked with existing BMR drill logs.

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3.0                    DISCLAIMER

AMEC's review of the Hammerstone Project relied on the pre-feasibility study, "Hammerstone Project Prefeasibility Study Report," dated February 2005 and work associated with its subsequent update in 2006.

AMEC used information from these reports under the assumption that they were prepared by Qualified Persons.

AMEC also relied on information obtained in the "Hammerstone Project Environmental Impact Assessment" submitted to the Alberta Natural Resources Conservation Board, Alberta Environment and the Alberta Energy and Utilities Board, June 2006 as prepared by BMR and it's professional consultants.

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4.0                    PROPERTY DESCRIPTION AND LOCATION

The Hammerstone project is located approximately 60 km north of the City of Fort McMurray in Township 94, Range 10W4M, within the Regional Municipality of Wood Buffalo (Figure 4-1). Within T94, R10W4, Hammerstone occupies the following divisions of land:

Section 16; All LSDs
Section 21: All LSDs

Section 8: All or portions of LSDs 1, 8, 9, and 16;

Section 9: All or portions of LSDs 1 to 16;

Section 17: All or portions of LSDs 1, 2, 7 to 10, and 14 to 16;

Section 20: All or portions of LSDs 1 to 3, 6 to 11, and 14 to 16;

Section 28: All or portions of LSDs 1 to 16;

Section 29: All or portions of LSDs 1 to 3, 8 to 10, 15 and 16;

Section 32: All or portions of LSDs 1; and

Section 33: All or portions of LSDs 1 to 7, 10, 11, 14, and 15.

Global reference of the centroid of the project area is 57 10' North Latitude, 111 34' West Longitude. This area includes parts of BMR's metallic and industrial mineral leases 9494070001, 9494070002, 9403120367, 9499030555, and 9400080004 (Figure 4-2). Detailed information on the 5 Hammerstone leases is included in Table 4-1.

The boundaries of the Hammerstone project area have been determined from geological, environmental, and economic considerations. The western boundary constitutes a 200 m setback from the Muskeg River, consistent with setbacks for wildlife habitat in adjacent oil sands leases. The southern and southeastern boundaries incorporate the areas where limestone is interpreted to be at or near surface. The eastern boundary has been placed where the thickness of Cretaceous and Quaternary sediments increases to more than 20 m. The northern boundary was originally selected to coincide with a pipeline/power line right-of-way and is located where regional structure data indicate that the Devonian surface begins to deepen to the north. This boundary has been adjusted to skirt an Archaeological Exclusion Zone established in the northeast corner of the project area to protect significant historical resources (Figure 4-3). This area was previously excluded from the project but now follows a more defined boundary against Legal Subdivisions (LSDs). The project boundary could be expanded to the south because favourable limestone units are present near surface in this area. Expansion of the boundary to the north, east or west is not anticipated.

4.1                    Mineral Tenure

BMR holds both metallic and industrial minerals permits and leases on its large Athabasca exploration property in north-eastern Alberta. The Hammerstone property represents only a small portion of the holdings. As of March 31, 2006, BMR held 69 mineral leases, 37 mineral permits, and 22 mineral permits for which applications have been filed for conversion to leases in the Athabasca region. These land holdings cover 402,748 hectares.

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The resource estimate and Pre-Feasibility Study for the Hammerstone project have been based upon the 6,700 ha. of land located on the leases described in Table 4-1.

In some areas, BMR's property leases overlap with oil sands leases held by Shell Canada Ltd., Syncrude Canada Ltd., and other oil sands companies. These companies own the mineral rights to the oil sands but not the underlying Devonian limestone. BMR has co-development agreements with Syncrude Canada Ltd., Canadian Natural Resources Ltd. (CNRL) and Suncor Inc. BMR also has a cooperation and information sharing agreement with Albian Sands Energy Inc. (a joint-venture between Shell Canada Ltd., Chevron Canada, and Western Oil Sands Inc.). These agreements with oil sands operators provide for cooperative exploration, environmental planning, development, extraction, and production activities in areas of the overlapping leases.

A royalty of $0.0441 per tonne limestone sold is payable to the Alberta Government and an escalating royalty that is currently at $0.158 per tonne limestone sold is payable to a third party. Net Smelter Return (NSR) royalties of 2 to 5% are payable on some of the leases for all other metals and industrial minerals except limestone (Table 4-1).

4.2 Permits and Agreements

In Alberta, regulatory approvals for a quarry project are initiated by filing and publishing a Public Disclosure Document (PDD) containing a project description and draft Environmental Impact Assessment (EIA) Terms of Reference. Following public review and comment, Alberta Environment issues the final EIA Terms of Reference. The applicant undertakes all required field studies and prepares the EIA in compliance with the Terms of Reference. The completed EIA and application is submitted to Alberta Environment and Alberta Natural Resources Conservation Board (NRCB) and is published for public and stakeholder review. After all requests for supplemental information have been satisfied, the EIA is declared complete by Alberta Environment. The NRCB then determines if the project is in the public interest. Public input is again sought and the NRCB may order a public hearing. Upon issue of a positive decision report by the NRCB, the project is presented for approval by an Order In Council and final regulatory approvals are issued.

In October 2002, BMR released the PDD and draft EIA Terms of Reference for the Muskeg Valley Quarry (MVQ), which represents approximately the northern one-quarter of the Hammerstone project area. The MVQ application was subject to the Natural Resources Conservation Board Act, the Alberta Environmental Protection and Enhancement Act, the Alberta Water Act and the Alberta Public Lands Act and requirements of the federal government under the Canada-Alberta Agreement on Environmental Assessment Cooperation. In March 2004 the MVQ EIA/Application was filed with regulators. In December 2004, Alberta Environment declared the MVQ EIA complete. In February 2005, the NRCB notified BMR that because no public interventions opposing the MVQ had been received, a public hearing would not be held. Regulatory approvals for the MVQ were received July 2005. A Development Permit from the Regional Municipality of Wood Buffalo (RMWB) was received in July 2005. These approvals are summarized below

Order in Council [O.C.340/2005] on July 13, 2005
NRCB Approval [No. NR-205-1] on July 14, 2005

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Public Lands MSL050604 and LOC051042 on July 21, 2005
Environmental Protection and Enhancement Act Approval No. 189942-00-00 on July 27, 2005

Water Act Approval No. 00207059-00-00 and Water Act Licence No. 00222006-00-00 on July 27, 2005

The Development Permit from the RM of Wood Buffalo [Permit No. 2005-0607] was issued on July 15, 2005.

The Hammerstone PDD and draft EIA terms of reference were filed in December 2004. The Hammerstone project will incorporate all aspects of the limestone quarry and aggregate plant included in the MVQ EIA/Application, an expanded quarry with a limestone processing complex. The Hammerstone EIA/Application was submitted May 24, 2006. Final approvals for Hammerstone are expected within 12-18 months of this filing, depending on whether a public hearing is required. Final regulatory approval is expected by Q3 2007.

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Table 4-1: Birch Mountain's Metallic and Industrial Minerals Leases Covering the Hammerstone Quarry Project Area

Royalties,

Area Location BMD Special Obligation Expiration Environmental Past

Agreements &

Number (ha) Type Issue Date Status Description Interest Rights Provisions Obligation Date Date Encumbrances Liabilities Owners Agreement

Subject to 5% NSR

Metallic and

4-10-094: 19; 20; 21W; 28SW; 29; 30 100% Nil $4,628.37 04 Jul 04 Jul 09 excepting limestone; None Tintina lease/permit 689007A004; 08 Feb 00

Industrial Minerals

subject to limestone

9494070001 1322.39 Lease 01 Feb 00 Active 4-11-094: 24L9, L10P, L15P, L16;

25L1P, L2P, L8P, L9P, L10P, L15P, royalty of $0.158/t

Richardson permit 6890070004

L16P portions(s) lying to the east of the limestone sold

right bank of the Athabasca River

Subject to 4% NSR

4-10-094: 28NW; 31E, WP portions excepting limestone;

Metallic and

9494070002 668.60 Lease 01 Feb 00 Active lying to the east of the right bank of the 100% Nil $2,340.10 04 Jul 04 Jul 09 subject to limestone None Tintina lease/permit 689007D004; 08 Feb 00

Industrial Minerals

Athabasca River; 32; 33W royalty of $0.158/t

limestone sold

4-11-094: 36SEP portions lying to the

east of the right bank of the Athabasca Richardson Permit 6890070004

River

Subject to 2% NSR

10 Mar 99 for all metallic and

(acquired industrial minerals

Metallic and Transferred from Richardson Lease

9499030555 192.00 Lease by Birch Active 4-10-094: 28NE; 33E 100% Nil $672.00 10 Mar 10 Mar 14 excluding limestone; None 20 Dec 02

Industrial Minerals 9499030003; Richardson permit

Mountain subject to limestone

07 Aug 02) royalty of $0.158/t

limestone sold

Subject to 3% NSR

4-10-094: 3; 4NE, L1, L7, L8, L11, L13,

Metallic and excepting limestone,

L14; 7E, 7WP; 8; 9; 10L5-L8, L12, L13;

9400080004 1953.36 Lease 22 Aug 00 Active 100% Industrial Minerals, Nil $6,836.76 22 Aug 22 Aug15 subject to royalty of None BMD permit 939007A003 Richardson permit,

15L4, L5, L12, L13; 17S, NE, L14;

Limestone $0.158/t limestone

18NW, L1-L3 portions lying east of

sold

the right bank of Athabasca River, L4P,

L5-7, L10; 21E; 22L4, L5, L12, L13;

27L4, L5; 28SE portions lying to north 20 Nov 96

and east of right bank of Athabasca

River

Subject to limestone

Transfer of industrial mineral rights

9403120367 256.00 Lease 10 Dec 03 Active 4-10-094: 16. 100% Industrial Minerals Nil $896.00 10 Dec 10 Dec 18 royalty of $0.158/t None Richardson Agreement, 20 Dec 02

from Lease 9499030003

limestone sold

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5.0                    ACCESSIBILITY, CLIMATE, AND PHYSIOGRAPHY

The project area is accessible by paved road from Fort McMurray. The route is 60 km north on Highway 63, approximately 6 km east on the Firebag Road ( formerly Canterra Road, and approximately 1 km south on a gravel road to the northern edge of project site (Figure 4-1). Existing gravel roads established by BMR give good access to the northern portion of the project area (the operating MVQ) whereas the southern portion of the project area is accessed via winter/ATV roads and cut lines.

The climate in the Athabasca area is typified by long cold winters (January average temperature -25.1°C) and short cool summers (July average is 15.9°C). There are less than 100 frost-free days per year. The annual mean temperature is -2.7°C⁽²⁾. Average annual snowfall is 150 cm, and average annual precipitation is 41.1 cm⁽³⁾, more than half of which falls between June and September. The prevailing wind is westerly.

The project area is characterized by flat to slightly rolling terrain with an average elevation of 280 m. Lower areas are covered with organic-rich wetlands with black spruce and larch trees, while limestone and sand outcrops are observed in higher areas with white spruce, jack pine, and aspen. The Muskeg River, immediately to the west of the project area, has an erosion profile depth of approximately 3 m in the north increasing to about 25 m in the south.

Infrastructure in the vicinity of the project area is excellent due to the presence of extensive oil sands mining and in situ operations in the Athabasca region of Alberta. All major services, including goods and accommodation, air and helicopter service, heavy equipment, vehicle service and expediting, can be obtained in the Fort McMurray area. Fort McMurray is 460 km by road, northeast of Edmonton and can be reached by paved, provincial Highways 2 and 63 and by regularly scheduled airline flights. Fort McMurray's population is growing rapidly. The city is currently home to over 60,000 people.

The existing infrastructure in the region supports oil sands mining and in situ operations that produce approximately one million barrels of crude bitumen per day. As a result, the communities and government regulatory agencies are familiar with mining and mine development proposals, and the community consultation and regulatory processes for mine development applications are clearly established. Most leaseholders and other community and government stakeholders in the region belong to the Cumulative Effects Management Association, which coordinates environmental research and databases. Regional environmental data are available for application preparation, with only site-specific data required for a new quarry application. Oil sands operators have successfully permitted mining infrastructure including process plants, overburden and tailings storage areas, and waste disposal sites. Trained open pit mining personnel are available in the region. University-affiliated and college training facilities are situated in Fort McMurray.

² Source - Section 1.4 of the Hammerstone EIA.

³ Source - Table 8.12 of the Hammerstone EIA.

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6.0                    HISTORY

The Hammerstone project area was originally explored for precious metals. In the early 1990's, the leases that cover the current Hammerstone Project were held by K. Richardson. The leases generally granted rights to Metallic and Industrial Minerals on the leases. Some originally only started as Quartz and Metallic Minerals leases but were later amended by the Alberta Government to include industrial minerals.

In 1993, Tintina Mines Ltd. acquired the mineral rights for the lease covering the north west quarter of the current Hammerstone property from K. Richardson. Tintina Mines carried out three exploration programs for precious metals in 1993 and 1994. One of these programs included mapping covering the north west quarter of the current Hammerstone property.

BMR became interested in the area as an extension of their large holdings in the Athabasca area. In 1996, BMR acquired mineral rights from K. Richardson that covered the east central and south half of the current Hammerstone Property. As part of the 1996 regional drill program, BMR drilled 5 holes on or near this newly acquired lease. The target was precious metals in the near-surface sedimentary sequences.

In 2000, BMR acquired Tintina Mines' rights to the lease covering the north west part of the current Hammerstone property. At this time, BMR was still exploring the property for precious metals and drilled one hole just west of the current property. The next year, BMR conducted it's first mapping and sampling program in the future MVQ area. Although this sampling program was undertaken before the industrial mineral potential of the area was recognized, these surface samples provided valuable information about the geochemistry of the limestone exposed at surface.

BMR completed land acquisition over the Hammerstone property in 2002 when it obtained the lease covering the north east portion from K. Richardson. This gave BMR full metallic and industrial minerals rights to the Hammerstone property. Refer to Table 4-1 for a summary of lease numbers and obligations.

The year 2002 marked a change of focus for BMR at the Hammerstone property. The exploration target shifted from precious metals to limestone aggregate potential. Regional mapping in 2002 showed the area encompassing the current Hammerstone property was the preferred location for a limestone quarry. High purity calcium carbonate (CaCO3) was tested in fossiliferous limestone core from the 1996 hole BM96-04. This led to an exploration drilling program in the winter of 2002/2003 which identified the four different limestone units within the Hammerstone property.

Additional mapping and sampling took place in 2003 that established the continuity of the quality of Unit 4 across the property. This was immediately followed by a 10 hole coring program in the winter 2003/2004 that produced infill stratigraphic and quality data for the property. During the construction of some of the drill roads and drill pads in the southern part of the property, additional limestone outcrops were uncovered. These were subsequently sampled during the extensive surface sampling and mapping program of 2004. The first large bulk sample (300 tonnes) was quarried from a test pit in the MVQ area in August of 2004 and used for crushing and screening trials as well as analytical work on Unit 4.

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In March of 2005, an additional 40 tonne (approximate) bulk sample of Unit 3 was extracted from the north project area and submitted for specialized crushing and sizing analyses. This testing was to gauge the ability to liberate lime-mud shales from the limestone thereby enhancing the marketability of the product.

Regulatory approval for the MVQ was received in July 2005 and the quarry began operation in December 2005. Once the quarry had been opened up below the upper Unit 4, it was apparent that Unit 4 was not as continuous beneath overburden cover as previously interpreted. This led to a revisit of the outcrop sites on the property in March 2006 to investigate the Unit 4/Unit 3 contact using backhoe test pits and trenches. This helped finalize the current interpretation used in this Technical Report and the 2006 Pre-Feasibility Update.

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7.0                    GEOLOGICAL SETTING

7.1                    Regional Geology

Sedimentary rocks in the region around the Hammerstone Project belong to the Western Canada Sedimentary Basin (WCSB) and consist of two eastwardly thinning, unconformity-bounded, sedimentary sequences. The first is a lower Paleozoic carbonate-evaporite sequence and the second is an overlying Mesozoic siliciclastic sequence (Figure 7-1). The Paleozoic rocks are approximately 300 m thick in the project area and belong to the Devonian Elk Point and the Beaverhill Lake groups. The Mesozoic rocks comprise the Cretaceous McMurray Formation of the Mannville Group and range in thickness from 0 m to 150 m. A stratigraphic column for the area is shown in Table 7-1

Table 7-1: Regional Stratigraphic Column for Hammerstone

Age Group Formation Member Lithology Thickness⁽⁴⁾

Quaternary - - - Till Thin to absent

Lower Cretaceous Mannville McMurray - Oilsands, siltstone, shale Thin to absent

Unconformity

Upper Devonian Beaverhill Waterways Moberly⁽⁵⁾ Nodular and fossiliferous limestone 40 - 45 m

Lake (eroded at top)

Christina, Nodular limestone, calcareous shale 102 m

Calumet Firebag

Slave Point - Limestone 10 m

Ft. Vermilion - Anhydrite, shale, limestone, dolomite 17 m

Middle Devonian Elk Point Watt Mountain - Anhydrite, shale, limestone, dolomite

Prairie Evaporite - Anhydrite, salt, dolomite 48 m

Methy - Dolomite, dolomitic limestone, 70 m

anhydrite

La Loche/ - Basal coarse conglomerate, 32 m

McLean River sandstone, shale, minor

anhydrite/gypsum

Unconformity

Precambrian - - - Granitoid-mafic gneisses -

Strata in the region are generally flat-lying with a gentle (<1°) dip to the west-southwest. There is minor structural disturbance resulting from basement faulting, salt dissolution, karsting and erosion. The Hammerstone Project is situated in a structural/erosional window, which exposes Waterways Formation limestones at surface in the lower Muskeg River area. The McMurray Formation and Quaternary sediments thicken away from this window in all directions.

⁴    Thickness of the Moberly Member and younger are from geological information within the project area. Unit thickness below Moberly Member is from drill hole LAC94-02, located approximately 2.5 km to the northeast of the project area

⁵ Interval of interest in the Hammerstone project area. The Ft. Vermilion and Watt Mountain formations were logged as one unit in the Hammerstone Project region.

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7.2                    Property Geology

Devonian limestones of the Moberly Member of the Waterways Formation underlie the majority of the Hammerstone project area (Figure 7-1). The Moberly Member is approximately 40 to 45 m thick in the project area and has been divided by BMR geologists into four stratigraphic units based on descriptive and chemical analyses (Table 7-2). These divisions also translate into differing aggregate and/or reagent limestone qualities. Limestone rocks in the Hammerstone project area display uniform and tabular stratigraphy with no significant variation in thickness except in the northernmost portion of the project area where limestone strata are truncated at the Devonian-Cretaceous unconformity (see Figure 7-3 to Figure 7-6). The strata are relatively flat with a low amplitude (10 m) anticline plunging southwest through the centre of the northern portion of the project area (see Figure 7-7 through Figure 7-10).

The depth to Devonian limestone in the Hammerstone project area varies from zero over limestone outcrop areas to up to 30 m beneath Cretaceous and Quaternary sediments. In the northern portion of the project area, the depth to Devonian increases as the Devonian-Cretaceous unconformity deepens. Towards the eastern boundary of the project area, the depth to Devonian increases. This is primarily due to an eastwardly increasing thickness of McMurray Formation oil sands. In the southern portion of the project area, the areas between limestone outcrops are interpreted to contain up to 3.5 m of overburden comprising muskeg as well as McMurray Formation and Quaternary sediments (Figure 7-12). This overburden estimate is based on air-photo interpretation of vegetation patterns, soil depth data from drill holes and adjacent oil wells and, backhoe excavations at drill sites. Only the upper two units of the limestone outcrop in the Hammerstone area.

Underlying the Moberly Member is the Christina Member, which comprises predominantly calcareous shales that are unsuitable for quicklime and less suitable for aggregate production (Figure 7-11). The top of the Christina Member represents the footwall of the Hammerstone Deposit.

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Table 7-2: Stratigraphic column for the Moberly Member in the Hammerstone Project

Unit Lithology Average Thickness

Unit 4 Massive/nodular limestone 0 m to 6 m

Nodular limestone, interbedded

Unit 3 limestone/calcareous shale, 20.5 m

calcareous shale

Unit 2 Fossiliferous and Nodular Limestone 4.4 m

Unit 1 ^{Nodular limestone, minor
calcareous} 13.0 m

shale

The stratigraphy of the Hammerstone project quarry is detailed in the following sections. The stratigraphy along with visual shale estimate is demonstrated on the fence sections shown on Figure 7-14 to Figure 7-21. Unit domain is shown on each drill hole along with a histogram of estimated shale percentage. The sections are referenced on the map in Figure 7-13 preceding the sections.

7.2.1                 Unit 1

Unit 1 averages 13 m thick and consists of grey nodular limestones with 10 to 15% shale. A bed of light green calcareous shale near the base averages 0.95 m thick. Individual beds within Unit 1 are very consistent in lithology and thickness and can be correlated throughout the Project area.

7.2.2                 Unit 2

Unit 2 is a high-purity limestone that averages 4.4 m thick. As observed in drill core, it contains three beds: an upper bed of cream to light tan coloured, stromatoporoid-bearing, bitumen-stained limestone (±4.0 m thick); a light grey nodular limestone (±25 cm thick); and a lower cream coloured pelloid-bearing limestone (±15 cm thick). Unit 2 is a distinctive regional marker bed and has been encountered in drill core in the Poplar Creek area, approximately 25 km to the south, where it is less than 50 cm thick.

7.2.3                 Unit 3

Unit 3 averages approximately 20.5 m thick and is composed of light grey nodular limestone, interbedded light grey limestone, and light green calcareous shale. Outcrops of Unit 3 are found in cliffs along the Muskeg River and in two locations in the northern part of the Project area. The lithology and thickness of individual beds within Unit 3 vary across the Project area, but the thickness and lithological character of the unit as a whole is consistent.

Based on recent bulk sampling in the MVQ area, BMR has proposed a subdivision of Unit 3 based on average shale content. This subdivision relates to the ability of the unit to respond to upgrading of quality through multiple pass crushing and screening. Table 7-3 shows the proposed subdivisions. At the current time, these sub-units are not stratigraphically interpolated. They are represented solely by their occurrence in drill core on a statistical basis.

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Table 7-3: Subdivisions of Unit 3

Unit 3 sub-unit name Shale percentage Possible Products if successfully
upgraded(1)

Unit 3A 0% - 15%
Concrete aggregate, asphalt aggregate,
reagent limestone, base aggregate

Unit 3B 15% - 35%
Base and Construction aggregate

Unit 3C Above 35%
Pit-run gravel,sub-base aggregate, low
permeability liner material

Note    (1)     See Table 17-1 for description of aggregate and reagent products

7.2.4                 Unit 4

Unit 4 is a high-purity limestone that ranges in thickness from zero (eroded) to 6.0 m and is composed of light tan, massive to slightly nodular limestone with very little shale component (<5%). Unit 4 outcrops throughout the project area in knolls and ridges, which stand up to 6 m above the surrounding wetlands. A shaley fossiliferous bed has been observed near the base of Unit 4 which ranges from 40 cm to 80 cm thick (average 65 cm) and varies from a calcareous shale to shaley fossiliferous limestone.

7.2.5                 Cretaceous Sediments

Oil sand, shale, and silicified sandstone of the Cretaceous McMurray Formation are found in the northern and eastern parts of the project area and in localized occurrences along the Muskeg River to the west. In the northern part of the project area, McMurray Formation sediments thicken from zero to approximately 12 m as the Devonian-Cretaceous unconformity deepens northward. Along the eastern boundary of the project area the McMurray Formation thickness increases eastward from zero to approximately 30 m along a north-south-trending, eastward rising slope.

7.2.6                 Quaternary and Recent Sediments

Quaternary glacio-fluvial deposits of primarily sand and large (2 m) boulders are found in the northern and north eastern parts of the Hammerstone Project area. A thin layer of Quaternary sediments covers the northernmost part of the Project area, and a south-west-trending ridge up to 13 m high along the north eastern boundary likely represents an eroded lateral moraine. Small, isolated patches of glacial sand and boulders are found throughout the Hammerstone Project area.

A number of features interpreted to be sediment-filled karst holes were encountered during the opening of the Muskeg Valley Quarry. These features consisted of areas where Devonian sediments had been removed by chemical erosion and the voids infilled with green-brown clay, oil sand and boulders. The age of these karst features is unknown but they are likely to be in part Quaternary.

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8.0                    DEPOSIT TYPES

Hammerstone is a sedimentary, carbonate deposit that is part of the Western Sedimentary Basin of Canada. It is represented by the Moberly Member which is a fossiliferous unit of the Waterways basinal carbonate shales and siltstones of late Devonian age (see Figure 7-1). The Waterways in general, represents a series of quiet water (below fair weather base) deposition of allochthanous limestones that are time equivalent to the carbonate banks that rimmed the large 'inland sea' at that time. The Moberly Member would represent one 'time period' in this series where due to a minor 'regression' of the sea would have allowed a seaward movement of a carbonate bank towards the basin (likely southward). This encroachment would introduce more detritus from the bank into the basin with the resulting lithofacies being a nodular, fossiliferous, limestone. Deposition occurred approximately 378 million years before present.

Subsequent uplift and erosion has brought the limestone to surface. This flat lying deposit displays an average dip of less than 1 to the west south west. Because of this Hammerstone is classed as a surface mineable deposit.

The continuity of the stratigraphic layers is well documented in the thousands of local oil sands drill holes as well as in-situ recovery wells. Sedimentary unit contacts and marker horizons can be traced for dozens of kilometers or more in oil and gas wells of the region. Locally, outcrops along the Athabasca River, 4.5 kilometers west of the eastern most data point in Hammerstone project, show the same stratigraphy and markers as the eastern most drill points. This well documented continuity allows for wider spacing of data points when compared to many other types of mineral deposits. Spacing of data points will depend on the level of stratigraphic details required to define the different types of limestone and accompanying dilution materials such as lime muds and shales.

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9.0                    MINERALIZATION

In industrial mineral deposits, it is generally a single mineral or compound that is being sought and marketed. This is compared to a typical hard rock deposit where a single mineral or a number of minerals may be providing an element that is to marketed such as gold or copper. Associated minerals and compounds that may be deleterious to the end products may be just as critical to quantify as the major product. This is because the processing of industrial minerals generally involves fairly simple comminution and classification systems that cannot readily separate minerals. Therefore, an industrial mineral deposit must be close to pure with respect to the major mineral or, allow for a non-complex form of mechanical and/or chemical separation of the major mineral.

The primary mineral being mined and sold at Hammerstone is calcium carbonate (CaCO3) the primary chemical constituent of limestone. Analyses from outcrops and drill holes have demonstrated that the deposit is of a high purity in at least 2 of the 4 units mapped (see Table 9-1). The other units have varying levels of impurities mixed with the limestone. These include silica and alumina dominated minerals, mostly represented in lime muds and shales. These occur as bands and lenses within the limestone.

Table 9-1: Summary of CaCO₃ values from laboratory work

Unit Lab Sample CaCO3%

Unit 1

FFE Minerals

U104-08A
86.52

Unit 1

ACME Labs

BMQCS02-06
84.25

Unit 1

ACME Labs

BMQCS03-05
81.31

Unit 1

ACME Labs

BMQCS04-05
82.81

Unit 1

ACME Labs

BMQCS05-04
82.67

Unit 1

ACME Labs

BMQCS06-04
81.00

Average (ACME)
82.41

Unit 2

FFE Minerals

MQU96-04
94.12

Unit 2

FFE Minerals

BM02-04
94.81

Unit 2

FFE Minerals

BM02-05
94.21

Unit 2

FFE Minerals

MQU04-01
96.30

Unit 2

FFE Minerals

MQU04-02
95.80

Unit 2

FFE Minerals

MQU04-03
96.30

Unit 2

FFE Minerals

MQU04-04
96.40

Average
95.42

Unit 4

FFE Minerals

BMQCS-03-6ii
89.42

Unit 4

FFE Minerals

GDP03-07
93.40

Unit 4

FFE Minerals

GKR04-01
95.30

Unit 4

FFE Minerals

GKR04-03
95.50

Unit 4

FFE Minerals

GKR04-04
94.90

Unit 4

FFE Minerals

GKR04-05
95.30

Unit 4

FFE Minerals

UQU04-05
93.70

Average
93.93

BMR was originally exploring for precious metals on the property. Most of the older holes have been analyzed for whole rock analysis, and for many individual trace elements. Lab results show the primary compound present, as expected, is CaO or lime.

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Loss on Ignition or LOI is the second highest value on the laboratory assay sheets. This represents the volatiles driven off during the firing of the sample. The major volatile will be carbon dioxide (CO2) from the limestone. Lab sheets show that SiO2 and Al2O3 represent the primary sources of impurities. Occasionally, Fe2O3 can be elevated in some samples but is generally not considered a consistent impurity. There is some minor correlation between elevated aluminum and elevated iron. Section 13 gives details on sample analysis methods.

A list of the whole rock analysis compounds and trace elements analyzed in some of the samples are in Table 9-2 below. Not all samples received the complete level of chemical analysis. Many samples only received analysis for CaCO3 and for physical and chemical properties related to aggregate and reagent products.

Some of the units within the deposit contain small quantities of bitumen. In particular, Unit 2 has visibly higher concentrations of bitumen then the rest of the units.

Table 9-2: List of compounds and elements analyzed by Acme Labs

Compounds Elements

SiO2 Ba

Al2O3 Ni

Fe2O3 Sr

MgO Zr

Cao Y

Na2O Nb

K2O Sc

TiO2 Total C

P2O5 Total S

MnO

Cr2O3

LOI

Table 9-3: List of additional elements analyzed by Bondar Clegg

Au Pt

Pd Ag

Cu Pb

Zn Mo

Co Cd

Bi As

Sb Te

Cr V

Sn W

Ga Li

Ta Ti

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10.0                  EXPLORATION

The Hammerstone project area has been explored using most of the standard techniques employed by mining companies. Reconnaissance mapping, detailed mapping, test pits, outcrop sampling, drilling and bulk sampling have all been employed at Hammerstone. With the start up of the Muskeg Valley Quarry, in-pit face mapping, sampling and where required, blast hole drill logging and sampling can be added to the list.

10.1                  Outcrop Mapping and Sampling

A number of field mapping programs have taken place on the Hammerstone project since 1993. The mapping and sampling program conducted by BMR geologists in 2001 although not directed at developing a limestone quarry, provided useful geological and geochemical data. The primary goal of the program was to investigate the extent of limestone silicification previously identified in future MVQ area. The mapping and sample stations were designated KAR01 series. These are shown on Figure 10-1. All sites sampled by BMR were flagged and then surveyed with hand held global positioning system (GPS) units.

BMR's first mapping program related to the development of a limestone quarry took place in 2002. This was part of a larger regional mapping program that was aimed at defining the best area for a potential limestone quarry. During that season many of the knolls and uplands of resistant limestone were observed and recorded through much of the of future MVQ area. This appraisal confirmed a high purity (high CaCO3) fossiliferous limestone unit at the future MVQ location. A successful calcine test of this unit from drill core BM96-04 demonstrated the potential for quicklime production in addition to aggregate production.

Many of the outcrops were re-examined in the summer of 2003. The focus was on comparing Unit 4 outcrop material to that recovered in the 2002 drilling program. Lithologies and textures were compared and confirmed. To compare chemical analyses, 18 outcrop chip samples, some weighing 20 kg were recovered. These were designated the GDP03 series and appear on Figure 10-2. One sample was sent for calcine analysis. An additional 30 samples were collected later in the 2003 field season. These appear on Figure 10-3 as the KAR03 series. Locations were established using hand held GPS Brief descriptions of rock type, colour, textures, presence and type of fossils, other descriptive comments were recorded. Also, a location description was added to each geological description. These samples were sent to Acme Laboratories for geochemical analysis. The results of the 2003 exploration program determined that the lithology and texture of Unit 4 rocks were indistinguishable for the Unit 4 intervals intersected in drill core.

Extensive outcrop sampling occurred in 2004. In February, previously unknown outcrops of limestone in the southern portion of the project area were located during the 2003/2004 winter drilling program. Six samples, the GKR04-series, were collected. Their locations are shown on Figure 10-4. Locations were surveyed using hand held GPS units A location description along with similar geological descriptions as were used in the KAR03 were recorded. The level of bitumen staining was also noted. Another 19 samples were collected from the 31 UQUMP04 series mapping/sample stations shown on Figure 10-5. The 25 fifty kilogram samples were taken using jack-hammers at these outcrop and drill pad locations.

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All were targeting Unit 4 for quicklime and aggregate testing. As with the previous programs, locations were flagged and then survey with hand held GPS units.

Additionally, another outcrop mapping and grab sample program visited 74 sites, all but two were Unit 4 outcrop or exposed subcrop locations. These were recorded as the GDP04 series and are shown on Figure 10-6.

10.2                 Drilling

A total of 21 drill holes have been completed on or adjacent to the Hammerstone project. These are all core holes with drilled between 1996 and 2004. As drilling is an important source of quantitative and qualitative data, it is discussed in detail in Section 11.0 of this report.

10.3                 Test pits and bulk samples

A 300 tonne bulk sample was extracted from Unit 4 in August 2004. It was taken adjacent to an exploration road in the northern part of the deposit very near where the MVQ has begun production. The location is shown on Figure 10-5. In March 2005, the same area was re-accessed to obtain a 40 tonne (more or less) bulk sample of Unit 3. This sample was sent for specialized crushing and screening tests.

All sample locations were surveyed using hand held GPS units. After the Lidar survey in 2004, all the locations visible from the accompanying ortho-image were cross checked with all the hand held GPS readings. Some adjustments had to be made to allow for occurrences of signal scramble with the GPS system in the early years of its use which continued into this decade. Due to this, the accuracy of all the measurements for the hand held units ranged between 1 and 20 meters horizontal. With the Lidar survey and ortho-image, the accuracy was improved to +/- 3 meters horizontal.⁽⁶⁾ Vertical accuracy for the Lidar data is +/- 20 cm. AMEC believes this accuracy is sufficient for this type of mineral deposit.

⁶ Communication with BMR technical staff

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10.4             In-pit activities

After the opening of the Muskeg Valley Quarry in late 2005, it became evident from observations made in the pit that Unit 4 was not as continuous between outcrop and drill hole locations as previously interpreted. In-pit mapping of the contact between Unit 4 and Unit 3 revealed Unit 4 was absent between the previously mapped surface outcrops at the MVQ` location. This information was used to mount an immediate revisit of other known outcrops with an extensive backhoe sampling program to determine if this stratigraphic observation was valid at other locations in the deposit. In March 2006, a total of 26 sites were visited. The backhoe was used to expose the edge of the Unit 4 outcrop to determine its extent under the surface overburden. The pits were mapped and recorded as the TP06 series. These are shown on Figure 10-8. The usual geological information was recorded for each site. The results showed that Unit 4 was not always continuous between outcrops. This has led to a change in the interpretation of Unit 4 and Unit 3 along with an adjustment to the resources of each unit as reported in the 2005 Technical Report.

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11.0                 DRILLING

A summary of drill core data from the holes drilled in the vicinity of the Hammerstone Project is given in Table 11-1. Theses drill hole locations are shown on Figure 11-3. All core, including the 1996, 2002 and 2004 drill cores, was logged by Birch Mountain geology staff in 2004 using a protocol that was developed in-house. Lithological characteristics related to suitability of the rock for producing quicklime and aggregate, such as shale percent and structural disturbance were recorded.

Several holes drilled in 1996 by Birch Mountain as part of a precious metal exploration program provide information regarding the geology of the Hammerstone project area. These holes include BM96-04 and BM96-05 within the project area, as well as BM96-01, BM96-02 and BM96-03, which are located to the west of the southern portion of the project area (Figure 11-3).

During the winter of 2002/2003, a nine-hole drill program was conducted in the northern portion of the project area. The drill holes were nominally sited on a 500 m grid, with locations adjusted slightly to take advantage of existing access. At two of the locations, it was necessary to drill multiple holes in order to obtain enough material for sampling. The overall geological character of the project area was established and the stratigraphy was divided into the four informal stratigraphic units described in Section 7.2. The Unit 2 was intersected in all six holes at depths between 8.5 m and 25.8 m and a second unit with quicklime potential, Unit 4, was identified.

In the winter of 2004, five holes were drilled in the southern portion of the project area and an additional five were drilled in the northern part. These holes established continuity of stratigraphy, calcinable limestone quality and aggregate quality between the original northern project area and the expanded southern project area and significantly increased the calcinable limestone and aggregate resources.

BMR geologists established a core logging protocol that would assist in maintaining consistency between core loggers. This is shown on Figure 11-1. Following this is an example of a page from the core logging records of BMR.

All drill holes were surveyed using hand held GPS units. After the Lidar survey in 2004, all the drill holes visible from the accompanying ortho-image were cross checked with all the hand held GPS readings. Some adjustments had to be made to allow for occurrences of signal scramble with the GPS system in the early years of its use which continued into this decade. In most cases, the adjustment in the horizontal plane was usually under 10 meters.⁽⁷⁾

⁷ Verbal communication with BMR field geologist.

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Table 11-1: Hammerstone Project Drill Hole Stratigraphic Summary

Depth to Top of Unit Thickness

Drill Hole Limestone Unit 4 Unit 3 Unit 2 Unit 1 Christina Total Depth Unit 4 Unit 3 Unit 2 Unit 1

BM96-01¹ 5.40 5.40 6.20 30.00 33.00 45.80 55.80 - 23.80 3.00 12.80

BM96-02¹ 23.00 - - 42.50 45.90 58.10 68.10 - - 3.40 12.20

BM96-03¹ 4.60 4.60 7.35 30.50 34.30 47.25 48.25 - 23.15 3.80 12.95

BM96-04 13.70 - - 20.2 25.30 37.95 48.95 - - 5.10 12.65

BM96-05 32.00 - - 52.50 56.00 69.30 79.30 - - 3.50 13.30

BM02-02 surface surface 3.66 25.20 29.40 41.50 45.11 - 21.54 4.20 12.10

BM02-03 surface surface 5.13 24.60 29.20 - 30.50 5.13 19.47 4.60 -

BM02-04 5.50 - - 25.80 30.20 - 31.85 - - 4.40 -

BM02-05 6.65 - - 13.10 17.82 30.85 35.40 - - 4.72 13.03

BM02-06 2.15 - - 8.5 12.95 - 21.70 - - 4.45 -

BM02-08 11.20 - - - 15.25 - 15.85 - - - -

BM04-01² surface surface - 23.40 26.10 41.70 44.50 - - 2.70 15.60

BM04-02² surface surface - 24.60 30.00 41.20 42.00 - - 5.40 11.20

BM04-03 surface surface 6.00 26.00 30.60 43.40 45.00 6.00 20.00 4.60 12.80

BM04-04 3.80 - - 24.40 28.10 41.65 42.00 - - 3.70 13.55

BM04-05 surface surface 6.00 26.50 30.50 44.50 46.00 6.00 20.50 4.00 14.00

BM04-06 2.00 - 4.40 25.60 30.30 43.30 45.00 - 21.20 4.70 13.00

BM04-07 1.00 - - 6.95 11.25 24.00 27.00 - - 4.30 12.75

BM04-08 14.00 - - 18.40 22.80 36.00 39.00 - - 4.40 13.20

BM04-09 3.00 - - 6.60 11.70 24.60 27.00 - - 5.10 12.90

BM04-10 4.00 - 5.50 - - - 8.50 - - - -

Mean 20.54 4.37 13.08

Notes: (1) Hole outside project area
            (2) Unit 1 at surface at these locations, no core recovered across top of Unit 3

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Logging Protocol, Hammerstone Quarry Drill Core

Lithology

Share %

Lms Nodule

Shale Bed

Massive Limestone

0 to 5

Size (cm)

Thickness

Nodular Limestone with Wispy Shale

5 to 10

N/A

NA/

Nodular Limestone in Shale Mix

10 to 30

<1

<1

Shaley Nodular Limestone

30 to 50

1 - 3

1 - 3

Shale with Limestone Nodules

50 to 70

3 - 5

3 - 5

Calcareous Share

> 70

> 5

> 5

Structure

ND - Not Determined

0 - None Observed

1 - Minor Fracturing

2 - Minor Fracturing w/localized (<1m) moderate fracturing

3 - Moderate Fracturing 1-5 meter

4 - Moderate Fracturing >5 meters, localized intense fracturing

5 - brecciation and/or intense fracturing over >1 meter and/or inclined >20 degrees

Alterations

Shale Color

Color

De-Calcification

Tan

White

Sideritization

Brown

Tan

Silicification

Orange

Brown

Grey

Orange

Secondary Mineralizations

Lt. Grey

Grey

Sulphides

Dk. Grey

Lt. Grey

Barite

Green

Dk. Grey

Pyrrhotite

Lt. Green

Formation

Quaternary

McMurray

Moberly

Christina

Calumet

Firebag

Figure 11-1: BMR Core Logging Protocol

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Core Number Easting (NAD 83) Northing (NAD 83) Max Depth (m) Logged by Date Logged Elevation (m) Location Data Source

BM 02-03 465969.94 6338567.2 30.5 GK 277.18 Ground Survey

From (m) To (m) Thickness (m) Recovery (%) Lithology Unit Shale% Shale Bed Thickness Shale Color LmsNod LmsCol Structure Alteration Description

0 2.15 2.15 0 0 None Casing; mud and carbonates

2.15 5.13 2.98 65 Massive limestone U4 (UQU) 10 < 1 cm Grey 3-5 cm Tan 3 None Sections of massive to nodular texture due to structure; Major fractures above 5.10m; Crinoid fragments

5.13 6.05 0.92 25 Nodular limestone in shale matrix U3 15 < 1 cm Grey 1-3 cm Grey 3 Sideritization Crinoids; Orange sideritzation within parts of limestone @ 5.15; Major fracture @ 5.20m.

6.05 7 0.95 100 Nodular limestone in shale matrix U3 15 < 1 cm Dark grey 1-3 cm Grey 2 None Shale becomes lighter color down section (6.70m) and becomes more expanding when wet.

7 9.45 2.45 55 Nodular limestone in shale matrix U3 10 < 1 cm Grey 1-3 cm Light grey 3 None Unit would be very competent if there was no structure. Extensive structure from 8.20m - 9.45m

9.45 15.25 5 100 Shaley nodular limestone U3 35 1-3 cm Dark grey 1-3 cm Grey 2 None Shale internal from 10.10m - 10.50m; Fractured from 11.00m - 11.25m; 5cm thick calcite mineralization @ 12.95m; Occassional crinoids throughout shale.

15.25 18.7 3.45 100 Nodular limestone in shale matrix U3 25 1-3 cm Dark grey 1-3 cm Grey 2 None Shale increases towards bottom of section. Shallowing interval; Crinoid bed at top of interval; Rare crinoids throughout remainder of interval; Calcite filled vugs and vertical fractures throughout interval; Bitumen staining in fractures; Bedding offset at 18.35m from fracture/fault

18.7 23.75 5.05 100 Shaley nodular limestone U3 40 1-3 cm Grey 1-3 cm Light grey 3 None Major fracture with brecciation @ 19.80m; 0.30m thick 20% shale unit @ 20.15m; Hardground at base of interval. Blackened clasts and crinoids; Hardground @ 20.80m, blackened clasts and brachs; Occasional amphipora near top section; Brecciation and fracturing, 45 cm thick @ 23.45m. Bedding at 60deg. to horizontal from base of brecciation down to bottom of section; Occassional crinoids throughout section.

Figure 11-2: Example of a core logging sheet for a Birch Mountain hole

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12.0     SAMPLING METHOD AND APPROACH

Outcrop and Bulk Sampling

Mapping and surface outcrop sampling programs were conducted in the MVQ area in 2001, 2003 and 2004 in order to locate, describe and sample outcrops of the Devonian limestone. At each location, a representative sample was collected and the lithology described. These descriptions were used to provide detailed spatial and vertical characterization of the limestone units. The outcrop or subcrop sampled was marked on air photos and field topographic maps, and a GPS reading was collected and recorded. A one kilogram representative sample was obtained from each outcrop using a geology hammer. The sample usually included both weathered and fresh material. It was placed in clear plastic bag marked with the sample number, and flagging tape was used to mark the sampling location. Samples were stored in 5 gallon plastic pails and shipped to Birch Mountain's core storage facility in northeast Calgary at the end of the field season.

If the samples were to be analyzed, the entire sample was shipped to the analytical laboratory from the core storage facility in Calgary. Any portion of the sample not consumed in the analytical procedure was returned as pulp and is currently stored at Birch Mountain's core storage facility. Samples not sent for testing are currently stored at Birch Mountain's core storage facility.

Bulk sampling locations were selected in order to provide a larger representative sample of a particular unit for aggregate testing. At each mini-bulk sample location (UQUMP series), one five gallon rock pail was filled with Unit 4 limestone collected under the supervision of Birch Mountain staff. If needed, the outcrop was broken up using jack hammers. until competent rock was encountered. Only fresh material was sampled. Sample numbers were inscribed on both the pail and the lid. Samples deemed to be of better aggregate quality were shipped to Calgary and sent for aggregate analysis. Samples not sent for testing and the portions of samples not consumed during testing are stored at BMR's Calgary core storage facilities. At the larger bulk sampling locations (BMBS series), rock was first blasted and then collected with a backhoe. The samples were placed directly into tandem trucks and hauled to Stony Valley Quarry's crushing facilities south of the MVQ. These samples were crushed and placed in stockpiles. These stockpiles were sampled in accordance with CSA A23.2-1A⁽⁸⁾ and sent for further aggregate testing. Sample stockpiles of units 2 and 4 remain at Stony Valley's facility.

12.1     Drill Core Sampling

Birch Mountain conducted a number of drilling programs prior to 2002 for precious metals and diamond exploration. In 2002 and 2004, drill programs were conducted on the MVQ and Hammerstone properties in order to outline the geology and explore the calcinable limestone and aggregate resource potential. All drilling locations were selected by Birch Mountain staff and all drilling was conducted directly under the supervision of Birch Mountain. At the drill site, core from each drill hole was placed into wooden boxes with hole numbers, core runs and depths clearly marked on each box. In 2002, the core boxes were taken to the McMurray Resources Research and Testing (MRRT) facilities in Fort McMurray, Alberta. The 2002 core

^{___________________

8 Communication from Russ Gerrish, P.Eng - V.P. Engineering and
Operations, BMR.

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was cut into halves at MRRT and then shipped to Birch
Mountain's core logging facility in Calgary. In 2004, the drill core was
shipped directly to Calgary and halved by Birch Mountain staff. All logging
and sampling was conducted by Birch Mountain staff at its Calgary facilities.
All drill core is currently stored at Birch Mountain's core storage facility.

Prior to 2002, the limestone zone was sampled at nominal 1
meter intervals for the purposes of precious metals assaying and multi-element
geochemical analysis. From 2002 onward, composite core samples were assembled
from multiple drill cores in order to obtain enough material for aggregate
testing. The composite intervals were limited to lithological boundaries.
Material of similar lithological characteristics were combined to form the
composites. All samples were collected by Birch Mountain geology staff.
Information about each sample were recorded on to sample tags attached to the
core boxes and placed in the sample bags. The information was added to the
electronic sample data base. The sample bags were placed into 5 gallon plastic
pails. The sample numbers were marked on the pails and on the self sealing
lids. The pails were transported to the laboratory using a local
transportation company.
Any portions of samples not destroyed during the testing process are stored
at Birch Mountain's core storage facility.

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13.0     SAMPLE PREPARATION, ANALYSES, AND SECURITY

13.1     Calcination of Reagent Limestones

Sample preparation and analysis protocols for determining
suitability of limestone to yield a quality lime product were set up and
executed by FFE Minerals USA Inc. Procedures, test results, and comments are
provided in the metallurgical testwork section (Section 16.0). Generally, the
key quality components for calcinable limestone are the following:

Chemical analysis for CaO (potential CaO percentage) and
impurity levels (SiO₂, MgO, and Al₂O₃+Fe₂O₃).

Burnability – how much time is needed to fully calcine
the sample and an assessment of potential processing problems related to
thermal and mechanical breakage during calcining.

Slakability (ASTM C-100 for limestone lime) –
hydration reactivity of lime product, measured as how much time it takes for
a 40 C hydrate
temperature rise.

Availability – the reactivity or availability of
lime product after a 60 minute burn test (given as a percentage of the
potential CaO).

Breakage test – thermal and mechanical breakage
tests. The former tests resistance to thermal breakage throughout the
temperature range of the test (maximum of 1,800
F) and the latter tests resistance to mechanical
breakage during the same temperature range of the test.

Hardgrove – hardness of calcined product.

Off-gas emission test – recording of gas emissions
during a set preheat temperature range (100
F to 1,000
F, by 25
F increments).

To evaluate the quicklime potential of core intervals not
tested by FFE, selected intervals were submitted to Acme Analytical
Laboratories Ltd. (Acme), Vancouver, B.C., for sample preparation and whole
rock geochemical analysis by ICP-AES (inductively coupled plasma–atomic
emission spectrometry). Acme is an accredited laboratory certified under ISO
9002. Unit 2 drill hole intersections as well as select bracketing samples
above and below it were submitted for analyses. The suite of surface samples
collected by BMR in 2001 was also submitted to Acme for analysis.
Sample preparation involved crushing the entire sample to
-10 mesh, then pulverizing a representative 250 g split to -150 mesh. The
samples were analyzed for major oxides and trace metals following Acme's Group
4A analytical method, which involves ICP-AES analysis of a 0.200 g sample
split using acid digestion of a lithium metaborate fusion. Carbon and sulphur
were determined by Leco element analyzer, and loss-on-ignition (LOI) was
determined by thermogravimetric analysis.
The samples were analyzed in three batches. The first batch
included samples of Unit 2 from each drill hole. Replicate analyses of
original pulps were requested on two samples with somewhat unusual
compositions; these analyses are included in report. Values agree closely with
the original values. The third batch comprised non-Unit 2 samples.

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Acme's standard QA/QC protocol was applied all to the
sample analyses. This protocol involves including replicate sample analyses
within a batch and running a batch with a standard sample. The replicate
analyses in the first batch gave relative standard deviations for major oxides
from 0.14% to 4.09%. In the third batch, the replicate analyses gave relative
standard deviations slightly higher than the first batch. The three replicate
analyses of the standard gave relative standard deviations of less than 1% for
all major elements with the exception of CaO, which was 2.73%.
Quicklime potential is estimated by determining a proxy for
"potential CaO" (available CaO equals about 95% to 97% of the potential CaO).
The proxy consists of calculating the potential CaO+MgO for each of the
intervals tested. The basis for this calculation is that both CaO and MgO
contribute to SO2 consumption in FGD applications and to the generation of
hydroxide ions for stripping metal ions in water treatment, and both are
measured by the sugar test for available lime (dissolving of the lime product
in a sugar solution, then titrated with HCl) The calculation is:

Potential CaO+MgO = [(CaO + MgO)/(Sum all oxide – LOI)] x 100%

where "Sum" is the sum of all measured components and "LOI" is
loss-on-ignition. Comparison of calculated potential CaO+MgO and FFE potential
CaO shows reasonable agreement.

13.2     Direct Ship Reagent Limestones

Subsequent to the 2005 Technical Report, BMR has
investigated the marketing of other reagent limestone products in addition to
quicklime. Specifically, these would be crushed and screened reagent grade
limestone direct shipped for use in (FGD) and (FBC).
Generally, the key quality component for these products is
the CaCO3 concentration in the crushed limestone. The higher the CaCO3 content
in the reagent limestone, the more cost effective the product for the end
user. It is anticipated that an average minimum value of 85% CaCO3 would meet
the needs of the local customers.
CaCO3 concentrations were tested by Acme and FFE Minerals
as part of the standard whole rock analysis in most of the drill core samples
and many of the outcrop and other surface samples. Sample analysis procedure
is described in Section 13.1.

13.3     Aggregate

Aggregates for general use in road base and sub-base
account for approximately 92% to 95% of the forecast needs for the area (CERI
2006, Davis 2006 and Norwest 2006). Aggregate specifications will vary from
project to project, but would generally follow those laid out by Alberta
Transportation, whose specifications for the applicable types of aggregates
are as follows:

Designation 6, Pit Run Gravel Fill – gradation,
percent passing the 80 µm sieve (2% to 15%), plasticity index NP-8.

Designation 4, Gravel Surfacing Aggregate – gradation,
percent passing the 80 µm sieve (0% to 12%), percent fracture (40+%),
plasticity index NP-8.

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Designation 2, Base Course
Aggregate – gradation, percent passing the 80 µm sieve (2% to 10%), percent
fracture (60+ %), plasticity index NP-6, LA abrasion loss (50% max), dry
strength of non-plastic aggregates.

Designation 1, Asphalt Concrete Aggregate –
gradation, percent passing the 80 µm sieve (4% to 10%), percent fracture
(60% to 90+ %), plasticity index NP, LA abrasion loss (40% max).

Alberta Transportation also requires that the aggregate be
free from injurious quantities of flaky particles, soft shales, organic
matter, clay lumps, and other foreign matter. Some aggregate designations
limit this to 3%. Alberta Transportation has its own sample preparation
protocols for testing aggregates, as detailed in the following list. Tests
designated ATT or TLT refer to Alberta Transportation test procedures.
Comparable test methods from CSA or ASTM are also noted.

Sieve analysis (ATT-25 or 26; CSA A23.2-2A)

Dry strength of non-plastic aggregates (ATT-54)

Plasticity index (AASHTO T90). Note: AASHTO =
American Association of State Highway and Transportation Officials

Percent fracture (ATT-50)

Los Angeles abrasion resistance (AASHTO T96; CSA
A23.2-16A & 17A)

Detrimental matter in coarse aggregate
(abbreviated petrographic analysis TLT-107; abbreviated ASTM C294)

Aggregates for use in Portland cement concrete account for
approximately 5% to 8% of the forecast needs for the area (CERI, Davis,
Norwest, 2006). The CSA has a full slate of specified tests for aggregates to
be used in concrete. The major ones are as follows:

Sieve analysis (A23.2-2A)

Amount of material finer than 80 µm (A23.2-5A)

Relative density and absorption (A23.2-6A & 12A)

Magnesium sulphate soundness (A23.2-9A)

Density of aggregate (A23.2-10A)

Alkali-aggregate reaction (A23.2- 14A)

Petrographic examination (A23.2-15A)

Los Angeles abrasion resistance (A23.2-16A).

The CSA has other tests for more specific characteristics, but they are
only used as warranted by the potential for problems with the material.

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14.0     DATA VERIFICATION

In 2004, AMEC qualified person Dr. Stephen Juras directed
AMEC personnel through the process of checking the mapping of outcrops and
road cuts and, the core logging for the 21 core holes available at the time of
AMEC's previous field review. It was determined that BMR's logging and mapping
was done professionally and accurately. During that site visit, AMEC personnel
visited drill collar sites and found that their locations agree with the
locations shown on project maps. AMEC's current opinion is that this previous
verification work on the raw geological data gathering methodology is still
valid. AMEC visited the Calgary core storage facility (May 2006). A
representative number of drill cores were examined. The geological description
and unit interval boundaries were checked between the core and the written
logs. AMEC determined that the information recorded on the written drill logs
was both qualitatively and quantitatively accurate.
This report is based on the information assembled for the
Hammerstone Project, 2006 Pre-Feasibility Update Report. All geochemical,
quicklime, reagent limestone and aggregate test work as well as all market,
cost, engineering and financial data mentioned in this report are documented
and available for inclusion in the Hammerstone Pre-Feasibility Study Update
Report and have been reviewed by the author.
For this Technical Report, AMEC compared information from
all the written drill core logs with electronic data base entry information.
The minor number of discrepancies noted were brought to the attention of BMR
geological staff. Sufficient explanation was obtained for AMEC to validate the
electronic data base and declare it to be adequate for the resource
interpretation and estimation that has been performed.
Russ Gerrish, P. Eng., provided to AMEC copies of the
aggregate test results. Testing was carried out for: Los Angeles abrasion
resistance, magnesium sulphate soundness, absorption, and density. Mr. Gerrish
also supplied test results relating to specialized crushing tests performed by
Metso Minerals, Mineral Research and Test Center, Milwaukee, WI; (a division
of Metso Corporation, Helsinki, Finland). Results of these tests carried out
by EBA and Metso are consistent with those stated in this report and utilized
in the Pre-Feasibility Study and its subsequent update.
Spatial control for Hammerstone is provided by an airborne
LiDAR (Light Detection and Ranging) surface elevation survey and associated
orthophoto flown in May, 2004. The LiDAR data density is approximately one
data point per metre and the accuracy is approximately ±30 cm horizontally and
±20 cm vertically. The BM02-series drill holes were surveyed in 2004, the
location of all other drill holes and surface features (roads etc.) is from
the LiDAR survey and orthophoto. All surface mapping and sample locations were
determined by hand-held GPS and adjusted where needed using the more accurate
Lidar survey.

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15.0      ADJACENT PROPERTIES

BMR currently hold the metallic and industrial mineral
rights under 402,748 hectares of land in and around the Athabasca oil sands
region of Northeastern Alberta.⁽⁹⁾ In the Hammerstone area, all the
limestone rights are controlled by BMR. Rights to the oil sands are controlled
by others. This affects BMR where there are oil sands overlying their
limestone rights. At the Hammerstone project site, along the east side of the
property, Shell Canada owns oils sands rights to Leases 90 and 13 that cover
approximately 248 hectares within the Hammerstone project boundary. BMR has
negotiated a co-operation and information sharing agreement with Shell
Canada's partly owned subsidiary Albian Sands Energy Inc (Albian). Albian is
the joint venture that is mining Shell's oil sands leases in the area. It is
anticipated but not certain the Albian will mine off Shell's oils sands before
BMR exhausts it's limestone reserves at Hammerstone. All limestone located
under this Shell exclusion zone is not counted in any reserve estimates.

^{9 Source: BMR website - Industrial Minerals page

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16.0 MINERAL PROCESSING AND METALLURGICAL TESTING

16.1     Calcine Testing of Reagent
Limestone

A description of the test results is given below.

16.1.1   FFE Testing

Seven samples of the Unit 4 and eight samples of the Unit 2
were analyzed for quicklime properties by F.L. Smidth Inc. of Bethlehem, PA,
the analytical branch of FFE Minerals USA Inc. Unit 2 is designated as the
principal source for quicklime production. Based on the results, it is
feasible to feed some amounts of Unit 4 into the activated limestone and
quicklime process. However, as at publication date of this Technical Report,
all of Unit 4 is designated for direct ship reagent limestone product or,
concrete aggregate. The F.L. Smidth analysis includes an assessment of:

Physical description of the limestone

Chemical analysis of both the limestone feed and
lime product

Burnability

Slaking time

Available CaO of the lime product

Thermal and mechanical breakage

Hardgrove hardness

Off-gas emissions during calcining.

The average potential CaO of Unit 2 and the available CaO
of the quicklime product exceed relevant specifications. Impurity levels are
below specification except for Fe2O3+Al2O3 which is only slightly above.
Burnability was reported as good and off-gas emissions are high enough to be a
consideration in kiln design. Thermal breakage is reported as fair and
mechanical breakage is reported as fair to poor.

16.1.2 Cimprogetti Testing

FFE's preliminary assessment of the relatively low
mechanical strength of Unit 2 was that it might not be appropriate for a
vertical shaft kiln. To better assess the suitability of Unit 2 for a vertical
shaft kiln, samples were submitted for testing to Cimprogetti, a manufacturer
of vertical kilns in Italy. Cimprogetti's appraisal was that Unit 2 would be
suitable, but precautions were indicated for off-gasses, high quantities of
Fe2O3 potentially blocking the kiln, and high amounts of dust. A test was also
run on Unit 4. It was deemed suitable with a precaution regarding high
quantities of Fe2O3 potentially blocking the kiln.

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16.1.3 Metso Minerals Testing

Metso Minerals Industries of Danville, Pennsylvania,
evaluated the suitability of Unit 4 and Unit 2 for a preheater, rotary lime
kiln through four testing procedures: a Metso Limestone Evaluation (LSE), a
Proximate and Ultimate Analysis, a Direct-Fired Small Batch Rotary Kiln Test (RKI)
and a Thermo-Gravimetric Analysis (TGA). The results for Unit 4 will be
reported as this unit may still be upgraded as an activated lime product
compared to a crushed, screened and direct shipped FGD/FBC limestone.

Unit 4

Metso reports that the Unit 4 sample is a limestone of
quite reasonable quality with good mechanical and thermal strength, which
would not abrade very much in a preheater rotary kiln type. Metso notes the
high SiO2 content but indicates it is not enough to warrant concern. The RKI
of the Unit 4 sample is reported as "extraordinarily good", indicating very
little tendency to decrepitate or break down during processing in a Metso
preheater/rotary kiln. The slaking test of the Unit 4 lime sample product
shows it to have medium to high reactivity. Nothing of concern is reported
from the TGA evaluation.

Unit 2

Metso reports that the Unit 2 sample is a limestone of
reasonable quality with similar mechanical strength to the Unit 4 sample and
slightly lower thermal strength. The RKI of the Unit 2 is reported as
"typical", indicating slightly more dust and a higher feed-to-product ratio
than the Unit 4 sample. The slaking test of the Unit 2 lime product showed it
to have medium to high reactivity.
The bitumen content of the Unit 2 sample was a factor in a
number of the Metso analyses. The bitumen content was measured to be
approximately 2% by the proximate analysis and although it produced black
smoke and flame in the static bed muffle furnace test it did not manifest
itself in a similar way during the small batch rotary kiln test. Metso reports
the only apparent affect of the bitumen on the calcining process is to
increase the decrepitation slightly, with Unit 2's physical characteristics
still behaving "typical, average". Metso's assessment of the TGA analysis of
the Unit 2 sample indicates the off-gasses from the bitumen would be released
below 300°C, prior to it entering the preheater. This could be mediated by a
duct-burner in the preheater outlet or other adaptation.

16.2     Aggregate Testing
16.2.1 EBA Aggregate Testing

Twenty-four samples of Unit 4, fourteen samples of Unit 3,
and thirteen samples of Unit 1 have been analyzed for aggregate properties by
EBA Engineering Consultants Ltd. of Calgary, Alberta. The EBA analysis
includes aggregate testing for:

Los Angeles Abrasion (LA Abrasion) – CSA A23.2-16A

Magnesium Sulphate Soundness (MSS) – CSA A23.2-9A

Compression Strength – CSA A23.2-14C

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Apparent and Bulk Relative Density – CSA A23.2-12A

Absorption – CSA A23.2-12A.

Grading was not tested, as this will be controlled in processing.
All of the tests were carried out in accordance with the
specifications of the Canadian Standards Association (CSA), in particular
A23.1-00/A23.2-00, "Concrete Materials and Methods of Concrete
Construction/Methods of Test for Concrete." These are the guidelines for most
of the ready-mixed concrete produced in Canada. In addition, two tests were
carried out using procedures of ASTM (American Society of Testing and
Materials): C295, "Petrographic Examination of Aggregates" and D4318,
"Plasticity Index of Soils." The test results are summarized in Table 16–1 and
discussed further below.
Unit 4 Aggregate Test Results – Tests have indicated that,
from a mechanical perspective, coarse aggregates made from Unit 4 can be used
to make aggregate for Portland cement concrete. All of the LA abrasion results
are below the CSA A23.1-00, Section 5 (Table 6), maximum limit of 50% loss for
coarse concrete aggregates. For MSS, the same table lists the maximum of 12%
for extreme conditions (C-1 – reinforced concrete exposed to chlorides, C-2 –
plain concrete exposed to chlorides and freezing and thawing, and F-1 –
concrete exposed to freezing and thawing in a saturated condition but not to
chlorides). Only 3 of the samples had MSS results above this criteria. The MSS
limit for all other exposure classes is 18%, and all but one of the test
results met this condition.

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Table 16-1: Summary of Aggregate Test Results

Bulk Relative

Bulk Relative

Apparent Relative

Absorption

EBA Sample #

LA Abrasion

MSS

Density

Density-SSD

Density

(%)

Plasticity

UNIT 4 (UNIT 4)

BM03-C4-004
27.3
0.9
-
-
-
-
-

BM04-C4-006
30.6
18.0
-
-
-
-
NP

BM04-C4-007
32.1
7.0
2.491
2.574
2.715
3.3
-

UQUMP04-01A
28.1
9.5
-
-
-
-
-

UQUMP04-01C
27.3
-
-
-
-
-
-

UQUMP04-02
27.1
-
-
-
-
-
-

UQUMP04-03
27.8
21.1
-
-
-
-
-

UQUMP04-04
27.8
9.4
-
-
-
-
-

UQUMP04-05
37.3
-
-
-
-
-
-

UQUMP04-06
32.3
7.4
-
-
-
-
-

UQUMP04-07
28.9
16
-
-
-
-
-

UQUMP04-08
33.2
-
-
-
-
-
-

UQUMP04-09
26.3
-
-
-
-
-
-

UQUMP04-10
28.8
-
-
-
-
-
-

UQUMP04-12
30.0
-
-
-
-
-
-

UQUMP04-13
25.9
9.1
-
-
-
-
-

UQUMP04-14
24.0
-
-
-
-
-
-

UQUMP04-15
24.6
10.7
-
-
-
-
-

UQUMP04-16
25.6
-
-
-
-
-
-

UQUMP04-17
27.9
-
-
-
-
-
-

UQUMP04-18
26.9
11.3
-
-
-
-
-

UQUMP04-19
28.3
-
-
-
-
-
-

UQUMP04-20
32.3
-
-
-
-
-
-

UQUMP04-0
32.0
-
-
-
-
-
-

Average(arithmetic)

28.9

10.9

-

-

-

-

-

UNIT 3

BM03-A3-001
34.0
24.8
2.569
2.616
2.695
1.8
-

BM03-B3-002
51.0
-
-
-
-
-
-

BM03-A3-003
-
53.1
-
-
-
-
-

BM04-A3-011
38.3
-
-
-
-
-
NP

BM04-B3-012
56.2
-
-
-
-
-
-

BM04-B3-013
51.6
-
-
-
-
-
-

BM04-A3-017
35.5
-
-
-
-
-
NP

BM04-A3-018
33.3
-
-
-
-
-
NP

BM04-B3-020
62.5
-
-
-
-
-
-

BM04-B3-021
51.7
-
-
-
-
-
-

BM04-B3-022
39.1
-
-
-
-
-
-

BM04-A3-023
37.4
53.7
-
-
-
-
NP

BM04-B3-027
48.2
-
-
-
-
-
-

BM04-A3-028

38.6

-
-
-
-
-
NP

Average

44.4

43.9
-
-
-
-
-

UNIT 3A*

L-66
26.5
8.3

L-67

29.5

7.0

UNIT 1

BM03-A1-005
32.2
25.9
-
-
-
-
-

BM04-C1-008
32.7
22.3
-
-
-
-
NP

BM04-C1-009
27.7
59.7
-
-
-
-
NP

BM04-C1-010
37.0
53.5
-
-
-
-
NP

BM04-A1-014
35.1
31.7
-
-
-
-
NP

BM04-A1-015
37.0
62.3
-
-
-
-
NP

BM04-A1-016
34.6
36.5
-
-
-
-
NP

BM04-A1-019
34.0
51.4
-
-
-
-
NP

BM04-A1-024
30.0
33.0
-
-
-
-
NP

BM04-A1-025
33.8
15.6
2.575
2.630
2.726
2.1
-

BM04-A1-026
35.3
48.2
-
-
-
-
NP

BM04-A1-029

32.6

37.0
-
-
-
-
NP

Average

33.5

39.8
-
-
-
-
-

BM00-002

49.4

AMPa (Compressive Strength of
Rock)

-

-

-

* - Unit 3A tests are split of same 20 tonne bulk sample
upgraded through specialized crushing and screening

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Unit 3 (unsegregated) Aggregate Test Results – The test
results indicate that aggregate made from Unit 3, without amelioration through
processing, could be used to make certain aggregates that comply with Alberta
Transportation specifications. All of the samples tested were non-plastic, and
because the aggregates are quarried, all particles have 100% fracture. So
apart from gradation, which is controlled through crushing and screening, the
other major criterion is LA Abrasion Loss. For Designation 2 – Base Course
Aggregates, the LA Abrasion limit is 50% loss. Eight of the thirteen results
are below 50%, so through selective quarrying alone, Designation 2 aggregates
can be produced. For other materials, Designation 6 – Pit Run Gravel Fill, for
instance, there is no LA Abrasion specification. Losses from samples with
higher LA Abrasions come from the abrading of the softer shale matrix. A
single test has shown that through high-impact crushing, screening, and the
elimination of fines, it is possible to produce aggregates with an LA
Abrasions value less than 50% on a consistent basis. It will therefore be
possible to produce aggregates as high as asphalt quality through processing
and selective quarrying (see Section 16.2.2 for details).
Unit 1 Aggregate Test Results – The Alberta Transportation
specifications were again used to judge the potential use of aggregates from
Unit 1. Here again, all of the samples tested proved to be non-plastic. The LA
Abrasion results were less variable than for Unit 3, with a lower average of
33.5% abrasion loss. Percent fracture of the limestone aggregates is assured
at 100%, and gradation will be met through crushing and screening. Based on
these specifications, aggregates from Unit 1 will make the full range of
sub-base, base, surfacing, and asphalt aggregates to comply with Alberta
Transportation specifications. One sample of rock from Unit 1 was tested for
compressive strength. It was evaluated to be 49.4 MPa.

16.2.2 Metso Minerals and EBA Results on upgraded aggregate

Unit 3A Aggregate Test Results - The bulk sample taken in
March 2005 was submitted to Metso Minerals on May 2, 2005 for specialized
crushing and screening in an attempt to remove shale material, hence upgrading
the limestone percentage by weight. The goal was to see if Unit 3 intervals
that display lower shale percentages can produce higher value products such as
aggregate for Portland cement concrete. Two samples that began with 15% or
less shale and, shale between 15% and 30% respectively, were subjected to a
double pass, crushing and screening test by Metso. The as received material
from bulk sample was screened to +5/8". This coarse material was split into
four samples and run through a NP1007 impact crusher using a different feed
rate speed for each sample. The results of this first pass were analyzed and
the products from the two middle speed rate tests were re-combined, screened
at +1/4" and fed through the impact crusher again at a speed and feed rate
matching the rates of the first test. A test for un-screened raw feed was also
performed. Five gallon bucket samples from all intermediate and final tests
were saved for further testing by BMR.
The resultant sample representing the 15% shale was sent to
EBA for aggregate testing. The sample was split and tested twice (for
repeatability). The results in Table 16-1 for Unit 3A show an improvement in
the LAA values (average of 28) and, significant improvement in the MSS values
(average 7.7). This material could be used for Portland cement concrete
aggregate.

16.2.3 EBA Concrete Testing

EBA Engineering Consultants Ltd. conducted a number of tests to assess the
suitability of Unit 4 to produce Portland cement concrete. The first, and
standard test for concrete, is

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compressive strength. EBA followed all of the procedures
contained in CSA Standard A23.2 to prepare the cylinders, and test them in
accordance with chapter A23.2-9C. Concrete is normally assessed on its
compressive strength after 28 days, although normally there are cylinders
broken at 7 days for an early indication. A mix design was supplied by a Fort
McMurray ready-mix producer that targets a 30 MPa compressive strength at 28
days using local sand and gravel aggregates. Three batches were prepared using
essentially the same aggregate components: limestone coarse aggregate, and
local Fort McMurray concrete sand for the fine aggregate. Results are
summarized below for samples tested in the autumn of 2004 from the bulk sample
pit:
The 7-day results showed average compressive strength for
Mix 1 was 32.4 MPa (4 cylinders), Mix 2 was 29.6 MPa (2 cylinders), and Mix 3
averaged 30.3 MPa (2 cylinders). Seven of the eight test cylinders had
achieved 28-day compressive strength in 7 days. The complete 28 day test of 4
of the cylinders showed Mix 2 averaged 39.1 Mpa and Mix 3 averaged 38.7 Mpa.
Total entrained air content ranged from 5.8% to 7.5%.
In another series, EBA ran tests on the limestone aggregate
to assess Alkali-Aggregate Reactivity. Four concrete batches were prepared for
this test: two using limestone coarse aggregate with local Fort McMurray
concrete sand, and two using limestone for both the coarse and fine fractions.
This test was done in accordance with CSA test method A23.2-14A, "Potential
Expansivity of Aggregates (Procedure for Length Change due to Alkali-Aggregate
Reaction in Concrete Prisms)." CSA states in Appendix B of A23.1-00, "Concrete
prism tests of fine and coarse aggregates indicate that potentially reactive
aggregates occur throughout the province [of Alberta]. Virtually all of the
gravels in Alberta are, according to the concrete prism test, at least
moderately reactive." Appendix B of A23.1-00 further lists expansion limits
for various exposure conditions, the most stringent of which is for no more
than 0.02 percent expansion at three months. The results after 56 weeks show a
maximum expansion of 0.010% (Table 16-2), well within the limits suggest by
CSA A23.1-00.
EBA was also asked to perform a petrographic analysis of
the limestone coarse aggregate and to calculate the Petrographic Number (PN).
The petrographic analysis is a method of appraising the quality of an
aggregate, and the PN is a numerical method of expressing the quality of that
aggregate (the lower, the better – the optimum PN is 100). Generally, a PN of
130 or less is required for an aggregate to be considered suitable to produce
Portland cement concrete. The limestone coarse aggregates from the Unit 4 have
a PN of 110 and have been declared physically suitable for use in concrete.

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Table 16-2: Summary of Alkali Reactivity Testing by EBA

Time (weeks)
Expansion (%)

Sample TC04-
Sample TC04-
Sample TC04-
Sample TC04-

01 agg. +
02 agg. + L-53
01 agg. + L53
02 agg. +

TCO4-01 sand
sand
sand
TC04-01 sand

0
0.000
0.000
0.000
0.000

1
-0.002
-0.006
-0.005
-0.003

2
-0.002
-0.006
-0.001
-0.001

4
0.000
-0.003
0.000
-0.001

8
0.000
-0.002
-0.003
0.001

13
0.006
-0.002
0.007
0.006

18
0.004
0.001
0.006
0.005

28
0.009
0.004
0.008
0.009

39
0.004
0.001
0.008
0.005

56
0.006
0.001
0.010
0.005

Note - agg. = aggregate

16.2.4 Stony Valley Test Crush

In the summer of 2004 a pilot-scale test of Unit 4 was
conducted at a nearby aggregate plant. A contractor was hired to drill and
blast approximately 300 tonnes of sample (location shown on ) and haul the raw
material to a nearby gravel pit operated by Stony Valley Contracting Ltd.
where the limestone was crushed and screened using a 20 x 36 primary jaw
crusher and a 48" cone. The crusher was configured to produce a 25 mm (1"
minus) road crush.
A limited amount of fine overburden material was found in
the first part of the test crush run. It was decided to install a bypass
screen at the primary feeder and reject all material finer than 10 mm (3/8).
This configuration was observed to reject most of the fine overburden material
and produced material was much coarser in gradation and lighter in colour than
without the minus 10 mm (3/8) screen.
Although the crushing spread consisted of equipment that
was much smaller than has been envisioned for the Hammerstone quarry, there
were no major problems in the test crush. The only situations came from a
couple of oversize slabs that became wedged in the feeder. There were no
material-related problems.

16.2.5 Testing for CaCO3 content

Both Acme and FFE Minerals performed whole rock analysis on
drill core and surface samples including determination of CaCO3 content. For
reagent limestone direct ship, BMR is expecting to provide a crushed and
screened product at CaCO3 contents of 85%, 90% and 95% with a nominal average
of 90% CaCO3. It is expected that all the units would be able to supply
limestone of this quality level although not from all locations as CaCO3
content varies more widely in Units 1 and 3. Some upgrading through additional
crushing and screening is anticipated for Unit 3 to meet the product
specification. A summary of CaCO3 results is shown on Table 16-3 below.

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Table 16-3: CaCO₃ concentrations in limestone samples

Unit

Lab

Sample

CaCO₃%

Unit 1

FFE Minerals

U104-08A

86.52

Unit 1

ACME Labs

BMQCS02-06

84.25

Unit 1

ACME Labs

BMQCS03-05

81.31

Unit 1

ACME Labs

BMQCS04-05

82.81

Unit 1

ACME Labs

BMQCS05-04

82.67

Unit 1

ACME Labs

BMQCS06-04

81.00

Average (ACME)

82.41

Unit 2

FFE Minerals

MQU96-04

94.12

Unit 2

FFE Minerals

BM02-04

94.81

Unit 2

FFE Minerals

BM02-05

94.21

Unit 2

FFE Minerals

MQU04-01

96.30

Unit 2

FFE Minerals

MQU04-02

95.80

Unit 2

FFE Minerals

MQU04-03

96.30

Unit 2

FFE Minerals

MQU04-04

96.40

Average

95.42

Unit 4

FFE Minerals

BMQCS-03-6ii

89.42

Unit 4

FFE Minerals

GDP03-07

93.40

Unit 4

FFE Minerals

GKR04-01

95.30

Unit 4

FFE Minerals

GKR04-03

95.50

Unit 4

FFE Minerals

GKR04-04

94.90

Unit 4

FFE Minerals

GKR04-05

95.30

Unit 4

FFE Minerals

UQU04-05

93.70

Average

93.93

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17.0     MINERAL RESOURCE AND MINERAL RESERVE ESTIMATES

In Canada, a declared mineral resource is defined by NI43-101 accordingly:

A Mineral Resource is a concentration or occurrence of
diamonds, natural solid inorganic material, or natural solid fossilized
organic material including base and precious metals, coal, and industrial
minerals in or on the Earth's crust in such form and quantity and of such a
grade or quality that it has reasonable prospects for economic extraction. The
location, quantity, grade, geological characteristics and continuity of a
Mineral Resource are known, estimated or interpreted from specific geological
evidence and knowledge.
A Mineral Resource is subdivide into the following classifications:
An 'Inferred Mineral Resource' is that part of a Mineral
Resource for which quantity and grade or quality can be estimated on the basis
of geological evidence and limited sampling and reasonably assumed, but not
verified, geological and grade continuity. The estimate is based on limited
information and sampling gathered through appropriate techniques from
locations such as outcrops, trenches, pits, workings and drill holes.
An 'Indicated Mineral Resource' is that part of a Mineral
Resource for which quantity, grade or quality, densities, shape and physical
characteristics, can be estimated with a level of confidence sufficient to
allow the appropriate application of technical and economic parameters, to
support mine planning and evaluation of the economic viability of the deposit.
The estimate is based on detailed and reliable exploration and testing
information gathered through appropriate techniques from locations such as
outcrops, trenches, pits, workings and drill holes that are spaced closely
enough for geological and grade continuity to be reasonably assumed.
A 'Measured Mineral Resource' is that part of a Mineral
Resource for which quantity, grade or quality, densities, shape, and physical
characteristics are so well established that they can be estimated with
confidence sufficient to allow the appropriate application of technical and
economic parameters, to support production planning and evaluation of the
economic viability of the deposit. The estimate is based on detailed and
reliable exploration, sampling and testing information gathered through
appropriate techniques from locations such as outcrops, trenches, pits,
workings and drill holes that are spaced closely enough to confirm both
geological and grade continuity.
NI43-101 allows Measured and Indicated Resources to be totaled. Inferred
Resources must always be reported separately.
Mineral resource estimates for an industrial mineral
project such as Hammerstone require that a number of additional factors be
taken into account. From the CIM guidelines on reserve and resource estimation
for industrial minerals is the following quote:

"In addition to the General Guidelines, and in particular
with respect to industrial minerals deposits, the assessment of the various
characteristics of the deposit as well as quality and market factors should
be taken into account with respect to the following: Mineral Resource
Estimation Critical elements to the Mineral Resource estimate for industrial
minerals are: (i) the consideration of the physical and chemical properties
of the subject mineral; (ii) the spatial

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relationship of these properties within the mineral
occurrence; and (iii) the relationship of the physical and chemical
properties of the mineral to the available market(s)."

BMR is seeking to market the following products from the different
limestone units at Hammerstone:

Table 17-1: Specifications and Source Units for all Products

Product

Typical Uses

Relevant Specifications

Source Units

Construction Aggregate

Road surfacing, general

Alberta Transportation Designation 4

Unit 3, Unit 1

construction

Base Aggregate

Base course aggregate

Alberta Transportation Designation 2

Unit 3, Unit 1

Sub-base Aggregate

Pit-run fill, road sub-base

Alberta Transportation Designation 6

Unit 3

Concrete Rock

Coarse component of concrete

CSA – A23.1

Unit 4, Unit 3

Asphalt Aggregate

Asphalt pavement

AB Transportation Designation 1

Unit 4, Unit 3

City of Calgary Type "A"

Shale Liner

Above ground storage tanks,

AEP (1997) Guidelines

Unit 3

settling pond dikes

Quicklime

Flue gas Desulphurization,

Oil sands company FGD quicklime

Unit 2

specifications

Reagent limestone

Flue gas Desulphurization,

Variable, dependent on user system-

Unit 1, Unit 2, Unit 3A,

Fluidized Bed Combustion

specific design

Unit 4

Source -After BMR 2006 EIA

Unit 2 has the physical and chemical properties to supply
all products, both aggregate and reagent limestones. Unit 4 has been tested
along with Unit 2 for the highest quality products. For this report, it is
designated to supply concrete aggregate, reagent limestone. It will be used
for high quality products as much as possible as is shown in the geology
section (Section 7), it has the smallest areal extent and hence, a smaller
overall volume when compared to the other units. Units 1 and 3 will supply the
bulk of the middle to lower value aggregate products. However, there are
opportunities to supply some higher value products from these units when the
quality warrants it and/or the unit material undergoes upgrading.
A density of 2.7 kg/m3 was used for all quicklime and aggregate tonnage
calculations (Section 16).

17.1     Product quality and market acceptability
17.1.1 Calcinable Limestone Quality Results

Unit 2 shows consistent thickness and lithology throughout
the Hammerstone project area as described in Section 7.2. The quicklime
properties of Unit 2 are described in Section 16. Unit 2 shows minimal
geochemical variation in CaO, MgO and LOI. AMEC reviewed the results of key
quality measurements used in assessing quicklime resources and found that they
gave consistent and favourable results for Unit 2 samples.
Additional confidence in the continuity of quicklime
properties of Unit 2 and Unit 4 is provided by whole rock geochemical analyses
of 2002/2003 drill core and surface samples. A proxy "potential CaO" can be
calculated from whole rock geochemical analysis:

Potential CaO+MgO = [(CaO + MgO)/(Sum – LOI)] x 100%

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where "Sum" is the sum of all measured components and "LOI"
is loss-on-ignition. Calculated potential CaO+MgO and FFE potential CaO show
agreement within one percentage point (Table 17-2).
The potential CaO+MgO calculated from whole rock
geochemical analysis of Unit 2 in the 2002/2003 drill holes exceeds client
specifications⁽¹⁰⁾ in most cases (Table 17-3). For Unit 4, the
potential CaO + MgO values, calculated from whole rock geochemical analysis of
the KAR01-series and GDP04-series surface samples, meets or exceeds levels
deemed acceptable by potential customers and demonstrates good chemical
continuity (Table 17-4).

Table 17-2: Potential CaO+MgO from Geochemistry vs. Potential CaO from FFE
Testing

Drill Hole

BM02-03

BM02-04

BM02-05

Unit

Unit 4

Unit 2

Unit 2

Potential CaO+MgO from geochemistry
89.84
94.18
94.36

Potential CaO (FFE)

88.92

94.47

93.66

Difference

0.92

-0.29

0.70

Table 17-3: Unit 2 Potential CaO+MgO from Geochemistry

Drill Hole

Potential CaO+MgO

BM02-02

95.94

BM02-03
94.52

BM02-04
94.18

BM02-05
94.36

BM02-06
94.42

BM02-08
89.35

Mean
93.79

St. Dev.

2.27

Table 17-4: Unit 4 Potential CaO+MgO from Geochemistry

Sample Series

KAR01

GDP04

Sample size

N = 21

N = 60

Mean
93.12
93.36

St. Dev.

1.70

2.33

These results taken as a whole demonstrate that Unit 2 and
Unit 4 have the physical and chemical properties to supply the current and
future calcinable lime market that exists in the Athabasca oils sands area.

17.1.2 Aggregate Quality Results

Aggregate testing and lithological analysis demonstrates
that Unit 1, Unit 3, and Unit 4 will provide material to meet a variety of
relevant aggregate specifications. Section 19 states that aggregate produced
from Hammerstone will be marketed primarily to the oil sands industry for a
variety of uses. Aggregate resources have been categorized based on Canadian
Standards

^{10 Client's names withheld for reasons of confidentiality.

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Association (CSA) specifications for Concrete Materials
(Standard A23.1), Alberta Transportation (AT) Standard Specifications for
Highway Construction, and local oil sands industry specifications. Material
designations and corresponding testing criterion are shown on Table 17-5. One
aggregate testing criterion, Los Angeles abrasion (L.A. abrasion), was used to
define the resource broadly into four designations. Three material types must
also meet other qualifications particular to their intended uses, such as
magnesium sulphate soundness (M.S.S.) for concrete and Plasticity Index (PI) for
A-grade and B-grade aggregates.
A total of 36 samples have been tested for aggregate
properties by EBA Engineering Consultants Ltd. of Calgary, Alberta: 24 from Unit
4, 16 from Unit 3, and 12 from Unit 1. A summary of the results as they relate
to aggregate designation is given in Table 17-6 and Table 17-7. In this table,
plasticity index is not shown as all samples tested were declared "NonPlastic."
Details of aggregate testing procedures and detailed results are discussed in
Section 16.

Table 17-5: Aggregate Market Designations

Hammerstone

Concrete

A-grade

B-grade

B grade Aggregate

C-grade

Designation

Aggregate

Aggregate

Aggregate

Aggregate

Typical Uses

Interior and

Asphalt concrete

Base course

Surface coarse

Pit-run gravel fill

exterior walls and
pavement,
aggregate,
aggregate

columns, footings,

interior slabs

Governing CSA/
CSA – A23.1
AT - Designation 1
AT - Designation 2
AT - Designation 4
AT - Designation 6

AT Designation

L.A. Abrasion
<40%
<40%
<50%
N/A
N/A

M.S.S.
<18%
N/A
N/A
N/A
N/A

Plasticity Index

N/A

NP

NP-6

NP-8

N/A

Note - N/A = Not Applicable

Additional information regarding aggregate properties has
been estimated by utilizing the visual estimate of shale percentage from
lithological drill logs (Table 17-6 and Table 17-7), a plot of visual estimate
shale percentage vs. L.A. abrasion test result for the samples (Figure 17-1),
illustrates a linear relationship between the two values with the equation of
the line of best fit:

L.A. Abrasion = Shale% x 0.68 + 24.35

This demonstrates that a visual estimate of shale percent
could be used as a guideline for L.A. abrasion values to assist in the
prediction of aggregate designation where L.A. abrasion testing was not
performed. A comparison of L.A. abrasion calculated from shale percentage and
actual results obtained by EBA shows good agreement overall (Table 17-6 and
Table 17-7).

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Figure 17-1: Visual Estimate Shale Percentage vs. EBA L.A. Abrasion Test
Result
Table 17-6: L.A. Abrasion Comparison Summary (Unit 1 )

Maximum

Shale Percentage

Difference between

EBA L.A.
Aggregate
Wt. Avg.
Equivalent
EBA and Equivalent

Sample #
Abrasion
Designation
Shale Percentage
L.A. Abrasion
shale %

Unit 1

BM03-A1-005
32.2
A
20
38.0
-5.8

BM04-C1-008
32.7
A
15
34.6
-1.9

BM04-C1-009
27.7
A
14
33.9
-6.2

BM04-C1-010
37.0
A
12
32.5
+4.5

BM04-A1-014
35.1
A
14
33.9
+1.2

BM04-A1-015
37.0
A
15
34.6
+2.4

BM04-A1-016
34.6
A
12
32.5
+2.1

BM04-A1-019
34.0
A
15
34.6
-0.6

BM04-A1-024
30.0
A
12
32.5
-2.5

BM04-A1-025
33.8
A
17
35.9
-2.1

BM04-A1-026
35.3
A
15
34.6
+0.7

BM04-A1-029

32.6

A

15

34.6

-2.0

Mean

33.5

A

-

34.4

-0.9

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Table 17-7: Aggregate L.A. Abrasion Comparison Summary (Units 4 & 3)

Maximum

Shale Percentage

Difference between

EBA L.A.
Aggregate
Wt. Avg.
Equivalent
EBA and Equivalent

Sample #

Abrasion

Designation⁽²⁾

Shale Percentage

L.A. Abrasion

shale %

Unit 4

BM03-C4-004
27.3
concrete
5
27.8
-0.5

BM04-C4-006
30.6
concrete
5
27.8
+2.8

BM04-C4-007
32.1
concrete
5
27.8
+4.3

UQUMP04-01A
28.1
concrete
5
27.8
+0.3

UQUMP04-01B¹
48.9
B
-
50
-

UQUMP04-01C
27.3
concrete
5
27.8
-0.5

UQUMP04-02
27.1
concrete
5
27.8
-0.7

UQUMP04-03
27.8
concrete
5
27.8
0.0

UQUMP04-04
27.8
concrete
5
27.8
0.0

UQUMP04-05
37.3
A
5
27.8
+9.5

UQUMP04-06
32.3
concrete

UQUMP04-07
28.9
A

UQUMP04-08
33.2
-

UQUMP04-09
26.3
-

UQUMP04-10
28.8
-

UQUMP04-12
30.0
-

UQUMP04-13
25.9
concrete

UQUMP04-14
24.0
-

UQUMP04-15
24.6
concrete

UQUMP04-16
25.6
-

UQUMP04-17
27.9
-

UQUMP04-18
26.9
concrete

UQUMP04-19
28.3
-

UQUMP04-20
32.3
-

UQUMP04-0

32.0
-

Mean

28.9

-

-

-

-

Unit 3

BM03-A3-001
34.0
A
15
34.6
-0.6

BM03-B3-002
51.0
C
32
46.1
+4.9

BM03-A3-003
N/A
-
20
38.0
-

BM04-A3-011
38.3
A
20
38.0
+0.3

BM04-B3-012
56.2
C
50
58.4
-2.2

BM04-B3-013
51.6
C
34
47.5
+4.1

BM04-A3-017
35.5
A
25
41.4
-5.9

BM04-A3-018
33.3
A
14
33.9
-0.6

BM04-B3-020
62.5
C
55
61.8
+0.7

BM04-B3-021
51.7
C
28
43.4
+8.3

BM04-B3-022
39.1
A
22
39.3
-0.2

BM04-A3-023
37.4
A
21
38.6
-1.2

BM04-B3-027
48.2
B
36
48.8
-0.6

BM04-A3-028

38.6

A

23

40.0

-1.4

Mean

44.4

B

-

43.6

+0.8

Note: (1) Shale bed in Unit 4, not included in Unit 4 average

           (2)Designation only
where M.S.S. test was also available (see Table 16-1)

The majority of the L.A. abrasion and M.S.S. values for Unit 4 surpass the
requisite specifications for concrete aggregate for all but extreme exposure
classes F-1, C-1, and C-2

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(L.A. abrasion < 35%, M.S.S.< 18%). Two samples exceed
these specifications. One sample, UQUMP04-01B was collected from a shale bed
in the Unit 4 in the 300 tonne test pit (see Section 7.2 for description of
shale bed and Section 16 for description of test pit). It and sample
UQUMP04-05, described as being unusually shaley, are below the specifications
for concrete aggregate. It is anticipated that shaley bands and contact zones
will be avoided in the extraction of Unit 4. The reserve tonnage for Unit 4
has been adjusted to account for mining loss in the shale bed.
All L.A. abrasion values for Unit 1 exceed the requisite
specifications for AT Designation 1 (< 40%), and all plasticity index tests
indicated "Non-Plastic;" therefore, all of Unit 1 can be designated as ATT
Designation 1. It can also be used for Designation 2 or 4 aggregate.
For Unit 3 as a whole, all tests returned "Non-Plastic,"
and the L.A. abrasion varies from 33.3% to 62.5% with an average of 44.4% as
shown in Table 17-7. The L.A. results reflect the lateral and vertical
lithological variation in Unit 3 described in Section 7.2. Previously, BMR had
decided to simplify the resource model for Unit 3 by recognizing that Unit 3
as a single whole unit rather than selectively quarrying individual beds.
Since that last Technical Report was released, BMR has realized that there is
potential to upgrade selective sub-units of Unit 3 through specialized
crushing and screening, (see section 16). BMR targeted a band that was logged
as 15% shale or less for a single test. Results on Table 17-8 show a marked
improvement to LA Abrasion and MSS values. The sub-unit of Unit 3 with 15%
shale or less has been labeled Unit 3A. Where present, it could be marketed as
high as concrete aggregate.

Table 17-8: L.A. Abrasion and MSS values for upgraded Unit 3A samples

Sample Number

L.A. Abrasion¹

MMS

L-66

26.5

8.3

L-67

29.5

7.0

Note (1) - Average for Unit 3 as a whole was 44.4%

17.1.3 Reagent Limestone - direct ship quality

Calcium carbonate is the active component of reagent
limestone sold for use in desulphurization. There are no strict criteria
governing the composition of reagent limestone used in FGD or FBC. In some
cases, where it is desirable to market the gypsum by-product of the reaction
between limestone and sulphur-bearing flue gases, a 95 % CaCO3 quality
limestone may be specified. However, in other cases where by-product resale is
not contemplated, limestone containing calcium carbonate concentrations as low
as 80 % CaCO3 may be used. For example, the Red Hills lignite fired 440 MW
(net) power plant located in Choctaw County, Mississippi, has a design
criterion of 80 % quality limestone used in a circulating fluidized bed
combustion system (Alstom, 2003). For marketing purposes, three grades of
reagent limestone are proposed: 85 %, 90 % and 95 % calcium carbonate, with a
nominal or overall average composition of 90 % CaCO3.
For purposes of resource definition, rock and process fines
from units 1, 2, 3A and 4 were allowed to be used for reagent limestone, as
long as the average annual composition of the reagent limestone met or
exceeded the nominal 90% calcium carbonate minimum specification. Limestone
slated for use as an FGD reagent was either free of hydrocarbons (i.e., units
1, 3A and 4), or was from Unit 2 in which case it was processed through the
activation kiln. Unit 2

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limestone containing bitumen was permitted in reagent limestone slated for
use in fluidized bed combustion where the volatile component would be consumed
within the combustion zone.

17.2 Resource Estimation
17.2.1 Geological Modeling

The geological modeling of the Hammerstone project incorporated the
following data sets: 1996 to 2004 drill cores on or near the project; mapping
programs in August 2001, July 2003, September 2003, February 2004, May 2004,
backhoe test pit program from 2005 and, information from the bulk sample pit
and the MVQ operating pit. Additional information was observed from existing
public domain data from oil sands delineation drill holes near the project.
All data were incorporated into a Microsoft Access database. Where multiple
holes were drilled at one location (example: BM02-05 and BM02-06), unit depth
information was merged to make one set of data. The surface elevation data
from the LiDAR survey was re-sampled to a 5 m x 5 m grid and contoured at a 1
m interval to allow for easier and faster processing speeds.
The subsurface information in the database was examined by
BMR geologists and interpreted using Surpac Minex Group Quarry software. Drill
hole intercepts of units, together with all surface outcrop information, were
used to create three-dimensional surfaces for each of the units within the
project area; these include the top of the Christina Member (ore body
footwall), the top of Units 1 through 4 and, the topographic surface. The
Devonian-Cretaceous unconformity was also modeled.
All of the surfaces except the top of Unit 4 and the
Devonian-Cretaceous unconformity were generated using inverse distance data
modeling based on the drill hole intercepts and were modified to incorporate
reasonable geological interpretations. Surface elevation data were used to
model the surface of Unit 4 in areas of mapped outcrops. After the opening of
the MVQ in late 2005, it was determined that Unit 4 did not continue
stratigraphically between the known outcrops but had been eroded. Away from
the outcrops, the thickness of the overburden was subtracted from the surface
elevation data to give the top of the surface of Unit 3.
In the northernmost section of the project area, the top of
the limestone is defined by the Devonian-Cretaceous unconformity. Where
applicable, the quarry unit surfaces were truncated against the unconformity
surface. The resulting surfaces reflect the partial and complete erosion of
the quarry units in the northeast of the project area

17.2.2 Volume calculations - general

AMEC received these interpreted surfaces from BMR. They
were inserted into the mine planning software package MineSight
by Minted, Inc., Tucson, Arizona. AMEC also received the
geological data base which was also ported into MineSight
. Data checks between the drill hole data in MineSight
and the original drill hole logs was performed as part
of the validation process. With the drill hole data base in place, AMEC next
checked the surface interpretation against the drill hole data. AMEC confirmed
that the surfaces honoured the drill hole data with discrepancies explained by
core recovery issues.

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The surfaces were used to populate a 3D block model (100 by
100 by 10 meters) with Unit codes and Unit block partials assigned to each
block in the model. A sub-set of these values were visually verified on cross
sections and fence diagrams to confirm the values had been calculated
correctly in the model. Volumes were calculated from the 3D block model using
the Hammerstone property boundary, the Hammerstone pit boundary and the plant
site location boundary.

17.2.3 Volume calculations - sub-units of UNIT 3

In the 2005 Technical Report, it was determined that Unit
3's variable stratigraphy would not be correlated from hole to hole. The unit
was accepted as a heterogeneous whole and assigned to one product, on average.
In the interim, BMR has performed a single test on a 40 tonne bulk sample
taken adjacent to the original test pit. Unit 3 material classed as 15% shale
and material classed as 30% shale were bulk sampled and shipped to Metso
Minerals testing. As outlined in Section 16.2, specialized crushing and
screening techniques were performed on the samples and one of the saves from
the tests was sent to EBA Engineering for aggregate quality tests. Results
showed that the material classed as 15% shale could be upgraded to produce
limestone that could be used for all aggregate products, including Portland
cement aggregate (concrete rock).
Based on this test result and, some comparative analysis
between Unit 3 shale percentages versus L.A. Abrasion index numbers, BMR, has
proposed a subdivided Unit 3 into three (3) sub-units. Without the data
density to do proper correlation of the various shale percentage sub- units
within Unit 3, it was decided that the use of this more generalized approached
to estimate a volume for Unit 3A would still be appropriate.
Subdivision is based on the visual estimate of shale percentage.

Table 17-9: Subdivisions of Unit 3

Unit 3 sub-unit name

Shale percentage

Possible Products

Concrete aggregate, asphalt aggregate,

Unit 3A

0% - 15%

FGD/FBC reagents, base aggregate

Unit 3B

15% - 35%

Base and Construction aggregate⁽¹⁾

Pit-run gravel, low permeability liner

Unit 3C

Above 35%

material⁽²⁾

Notes: (1) Base and Construction aggregate consists of Alberta Transportation
Designation 2 and 4 aggregate

             (2)
Pit-run consists of Alberta Transportation Designation 6 aggregate

The second step of this reclassification of Unit 3 involved
the statistical analysis of shale percentage in the drill hole data, This
classification was to provide the volume ratios for each of the sub-units of
Unit 3. BMR's analysis produced the following division table.

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Table 17-10: Statistical ratio of sub-units within Unit 3

Sub Unit Name

Percent of whole unit volume

Unit 3A

15%

Unit 3B

60%

Unit 3C

25%

AMEC has reviewed the statistical analysis and was able to
reproduce values very close to the BMR ratios in Table 17-10. AMEC has
accepted BMR's ratios for volume calculation of sub units of Unit 3.

17.2.4 Resource classification

No consistent classification guidelines for measured and
indicated resources exist for limestone aggregate deposits. Using the CIM
resource definitions as a guideline, AMEC and BMR developed a resource
classification protocol that takes into account the geological continuity of
the rock units in the Hammerstone project area. The high degree of physical
continuity and consistency in product properties of the limestone units,
combined with demonstration that a viable market for this material can
reasonably be developed (Section 19), support classification of these deposits
into measured and indicated mineral resource categories.
For Unit 2, measured resource status is assigned to an area
within a 500 m radius of all drill hole intersections having either a
favourable calcine test or favourable potential CaO+MgO calculated from whole
rock geochemical analysis. Indicated resource status is assigned to all other
areas.
Favourable calcine tests were achieved from drill holes
BM96-04, BM02-04, BM02-05, BM04-01, BM04-02, BM04-03, BM04-04, and BM96-05.
Therefore, Unit 2 within a 500 m radius of these drill hole locations was
assigned to measured mineral resource (Figure 17-3). As there is less than 200
m separation between the measured mineral resources at drill holes BM04-04,
BM04-01, and BM04-02, these three areas were combined. Drill holes with
favourable potential CaO+MgO from whole rock geochemistry include BM02-04,
BM02-03, and BM02-05; therefore, Unit 2 within 500 m of these locations is
assigned to a measured resource. This results in most of the northern part of
the project area being assigned to measured mineral resource. The remaining
Unit 2 was assigned as indicated mineral resources.
As demonstrated in Sections 7.2 and 17.1.2 above, aggregate
testing and lithological logging provide sufficient confidence in aggregate
properties to assign measured resource status for Unit 1 and Unit 3 to an area
of 500 m radius around all drill holes. Measured mineral resource status for
Unit 1 is demonstrated on Figure 17-2. The area surrounding drill holes
BM04-04, BM04-01, and BM04-02 was combined because the measured resources are
separated by less than 200 m. Indicated resource status was assigned to
remaining areas greater than 500 m from the drill holes and along the
erosional edge of Unit 1 in the north where the unit is eroded. Measured
resource status for Unit 3 is shown on Figure 17-4. The area surrounding drill
holes

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BM04-04, BM04-01, and BM04-02 was combined because the
Measured resources are separated by less than 200 m. Indicated mineral
resource status is assigned to Unit 3 areas greater than 500 m from the drill
holes. Indicated mineral resource status is also assigned where Unit 3 is
interpreted to have been eroded along the erosional edge of Unit 1 in the
north and in locations where the upper portions of Unit 3 have been eroded
The sub units of Unit 3 receive the same classification as
Unit 3 as a whole except for Unit 3A which has the potential to produce higher
value products. The classification for Unit 3A is independent of the rest of
Unit 3 but, sub Unit 3A is capable of substituting for the other sub units in
Unit 3. The classification is based on where Unit 3A is found in drill holes
and sampled in a test pit. A zone around the bulk sample pit where the test on
Unit 3A material was made, is classed as Measured Unit 3a resource. The areas
around Unit 3 drill holes classed as measured are stepped down one class to
Indicated for Unit 3A resource. The rest of the area is classed as Inferred
for Unit 3A. Unit 3A classifications are shown on Figure 17-5 Using these
boundaries, AMEC has determined that Unit 3A only occurs as measured and
indicated over 24.5% of the area covered by Unit 3. Therefore, AMEC believes
that Unit 3A only accounts for 3.7% of total volume of Unit 3, not the 15%
shown in Table 17-10 above. This is the value that AMEC has used for
estimating the resources of Unit 3A.

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Measured mineral resource is assigned to all mapped
outcrops of Unit 4 (Figure 17-6). The portions of Unit 4 that lay under the
Cretaceous cover along the east side of the property have been split between
indicated and inferred. This has been done to account for the lack of evidence
that the erosional nature of Unit 4 exists over the exposed portion does not
continue under the Cretaceous cover. AMEC has proposed that Unit 4 under the
Cretaceous but outside the Shell exclusion boundary is classed as indicated
resource. The remainder east of the Shell exclusion boundary is classed as
inferred.
Mineral resource tonnages for units 1 to 4 are shown in Table 17-11.

Table 17-11: Mineral Resource Tonnage (in millions of metric tonnes)

Units

Sub-Units

Designations

Measured

Indicated

Total

ATT 1,2,4,6;

240.5

245.2

485.7

1

reagent limestone

Quicklime, Hydrated

2

lime
79.5
78.8
158.3

Concrete rock, ATT

3A
1,2; reagent
1.0
25.2
26.2

limestone

ATT 2,4, 6; Shale

3B+3C
liner

322.7

459.3

782.0

3
Subtotal

323.7
484.5
808.2

Reagent limestone,

4

Concrete rock

7.1

5.5

12.6

Total

650.8

814.0

1464.8

Notes:

Specific Gravity of 2.70 used for all units

Include 5% loss on Unit 1 against footwall

Include 5% loss on Units 3 and 4 against overburden

AMEC calculations show Measured Unit 3A = 3.63% of
volume, Indicated = 96.37% of volume

17.3     Reserves

To declare a Mineral Reserve for Hammerstone, a number of technical factors
must me met. These are summarized in the NI43-101 definition of a reserve,
A Mineral Reserve is the economically mineable part of a
Measured or Indicated Mineral Resource demonstrated by at least a Preliminary
Feasibility Study. This Study must include adequate information on mining,
processing, metallurgical, economic and other relevant factors that
demonstrate, at the time of reporting, that economic extraction can be
justified. A Mineral Reserve includes diluting materials and allowances for
losses that may occur when the material is mined.

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AMEC has determined that the following guidelines for reserve
classification have been met by BMR:

A pre-feasibility study has been
completed (by AMEC) on the mine and plants required for this operation. A
recently released updated cash flow based on updates of the Pre-Feasibility
Study shows positive NPV for the Hammerstone project (see section 19.11)

Marketing studies have been
submitted to BMR by Canadian Energy Research Institute (CERI)⁽¹¹⁾,
and Norwest Corporation⁽¹²⁾ These show a reasonable expectation
of significant local demand for all the materials being produced by BMR at
Hammerstone.

BMR is currently operating the
Muskeg Valley Quarry at the site of the Hammerstone Project for which it has
received operating and environmental licenses and permits.

The Hammerstone quarry pit design includes the current MVQ and
most of the remaining unrestricted areas of the BMR Hammerstone project bounds
(refer to Figure 4-3). The restricted areas include:

a 200 m offset from the Muskeg River,

the archaeological exclusion zone in the northeast corner,

the area to the north and north east excluded for
infrastructure and access and,

the areas included in Shell's oil sands mining plans along
the eastern edge (Shell exclusion zone).

The pit crest outline is shown on Figure 19-11 and
subsequent mine schedule figures. Highwall angles are set at 45° in limestone.
The overburden will be removed 10 m outside the highwall crest and sloped back
at a minimum of two to one.
Based on this pit outline, the limestone reserves were
calculated for each of the four units. The results are summarized in Table
17-12. As specified for reporting an industrial mineral reserve, the
designated uses for each unit are also shown in the table. Criteria for
specific gravity, loss and dilution are summarized in the notes following the
table.
During operations, the weathered rock will be removed with
the overburden, and the top of limestone will be cleaned before drilling and
blasting the upper unit. No losses or dilution were considered necessary at
the contacts between the limestone units as they are gradations of the same
material.

^{_________________

11 CERI is an independent, non-profit research institute committed to
excellence in the analysis of energy economics and related environmental policy
issues in the energy producing, transportation, and consuming sectors.
^{12 Norwest Corp. is an independent Calgary, Canada based company
providing national and international engineering consulting to the mining and
energy sectors.

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Table 17-12: Mineral Reserve Tonnage (in millions of metric tonnes)

Units

Sub-Units

Designations

Proven

Probable

Total

ATT 1,2,4,6;

181.1

172.0

353.1

1

reagent limestone

Quicklime, Hydrated

2

lime
59.9
58.0
117.7

Concrete rock, ATT

3A
1,2; reagent
0.8
22.4
23.2

limestone

ATT 2,4, 6; Shale

3B+3C
liner

211.7

282.6

494.3

3
Subtotal

212.5
305.0
517.5

Reagent limestone,

4

Concrete rock

5.6

4.5

10.1

Total

459.2

539.5

998.7

Notes:

Specific Gravity of 2.70 used for all units

includes 5% mining loss on Unit 1 against footwall

includes 25% mining loss in Unit 3
against overburden and internal shale zones (excluding sub Unit 3A which has
no mining loss)

includes 17% mining loss in Unit 4 against
overburden and internal shale zone

AMEC calculations show Proven Unit 3A = 3.63% of
volume, Probable = 96.37% of volume

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18.0 OTHER RELEVANT DATA AND INFORMATION

There is no other relevant data and information for this property.

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19.0 REQUIREMENTS FOR TECHNICAL REPORTS ON PRODUCTION AND DEVELOPMENT
PROPERTIES

19.1 Introduction

The Hammerstone prefeasibility update study and subsequent
internal pre-feasibility update report, upon which this NI 43-101 Technical
Report is based, defined the geological, engineering, process, and financial
criteria necessary to develop a quarry plan and mineral reserve estimate for
the Hammerstone Project. AMEC considers this study to be to at a
pre-feasibility level of accuracy, and expects the capital and operating cost
estimates to be ±25%.
All dollar figures ($) are quoted in 2006 Canadian dollars.

19.2 Project Description

The Hammerstone Project comprises a limestone quarry, an
aggregate processing plant and limestone processing complex. The quarry will
include and expand upon the existing Muskeg Valley Quarry and grow to cover an
area of approximately 1,608 hectares and has a projected life of approximately
55 years. Quarrying will progress from north to south exposing the rock units
required for production as needed. Production rates are based on projected
aggregate, reagent limestone and lime sales. Projected sales were derived from
documenting current aggregate and lime supply and projecting future demand for
lime and limestone products based on future oil sands construction and
production growth as well as non-oil sands infrastructure and municipal demand
for aggregate products.
The aggregate processing plant is designed to produce and the
five aggregate products considered in this report:

construction aggregate,

base aggregate,

concrete rock,

asphalt aggregate, and

sub-base / liner,

As well, the aggregate plant will produce crushed limestone
for sale as reagent limestone, or for use as calcinable limestone feedstock
for calcining to produce quicklime. There will be up to four independent
aggregate processing spreads, each assigned a specific production duty.
Aggregate processing systems are currently being acquired, and will be
installed sequentially as the quarry expands to meet increasing demand for
aggregates. Aggregate processing systems will be semi-mobile, and they will be
moved to keep pace with the advancing face of the quarry. This will minimize
the amount of movement and manipulation of source rock and product, reducing
operating costs, vehicle emissions, and dust generation.

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The limestone processing complex will produce activated
limestone, quicklime and hydrated lime. Activated limestone will be produced
in up to three kilns using bitumen-bearing calcinable limestone from Unit 2 as
feedstock. The bitumen-free activated limestone will be sold directly as
reagent limestone for FGD, or used as a feedstock for producing quicklime.
Quicklime will be produced in up to three rotary calcining kilns using both
activated limestone and bitumen-free calcinable limestone from Unit 4.
Quicklime will be sold directly as a reagent for FGD or used as a feedstock
for producing hydrated lime. Up to two hydrating plants will be constructed to
produce hydrated lime for sale as a reagent for water treatment. The first
activating, quicklime and hydrating plants are scheduled to come on stream in
2009, and additional activating and calcining kilns and hydrating plants being
constructed as product demand grows.

19.3     Industrial Mineral Demand,
Supply, and Pricing

Forecasts of future aggregate and reagent limestone demand and product
pricing have been updated from the AMEC NI 43-101 report dated March 2005.
Demand for industrial mineral products has been estimated
from an independent model that forecasts oil sands construction activity and
bitumen production capacity based on oil price simulations. Annual demand for
various aggregate products is forecast by multiplying the annual oil sands
bitumen production capacity and construction activity by demand factors which
estimate the amount of each aggregate and reagent limestone product consumed
per barrel of bitumen produced or per barrel of bitumen capacity constructed
in that year. Demand for individual reagent limestone products and quicklime
for flue-gas desulphurization purposes is estimated by using a model developed
to assess the present and future use of sulphur-containing fuels used as an
alternative to natural gas. Reagent limestone may be used to absorb sulphur
from combustion of these fuels to comply regulatory limits for sulphur
emissions. Demand for hydrated lime for water treatment at SAGD and upgrading
operations is also estimated using demand parameters linked to annual bitumen
production.
Product pricing was based on an updated review by BMR which has been
independently reviewed and modified by Norwest.
BMR sales forecasts have been updated based on the new demand projections
and revised market share estimates.
Local supply forecasts for aggregate products from non-BMR deposits are
from the forecast provided in previous NI 43-101 report (AMEC, 2005)..

19.3.1 19.3.1 Market for aggregate and reagent limestone products

The Hammerstone Project is centrally located among numerous
existing and planned bitumen extraction and upgrading projects in the Alberta
oil sands region. These projects and the associated infrastructure and
municipal development, are the primary sources of demand for aggregate and
reagent limestone products in the Fort McMurray region.
The characteristics of the demand for aggregate and reagent
limestone products changes between the construction and operation phases of
bitumen extraction and upgrading projects. The construction phase requires a
range of aggregate products. These include sub-base, base

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and construction aggregates for building roads and
production facilities. In addition, asphalt aggregate is required for road
building, concrete rock for building bridges, foundations and other
structures, and low permeability shale to construct impermeable liners and
surface water control structures. There is little or no demand for reagent
limestone during the construction phase of oil sands projects.
The operation of oil sands bitumen production facilities
also requires aggregate products for ongoing mine and in situ project
development, facilities maintenance and support, but in amounts much smaller
than during the construction phase. Demand for reagent limestone products is
driven by oil sands operations where they are used for boiler feed-water
treatment and for the control of sulphur emissions (desulphurization) where
alternative fuels containing sulphur are used instead of natural gas. The
reagent limestone products used for desulphurization are crushed limestone
with a high calcium carbonate content for flue gas desulphurization (FGD) or
fluidized bed combustion (FBC), and quicklime for FGD. Hydrated lime is used
for water treatment at in-situ extraction and upgrading projects.
The operational use of aggregate and reagent limestone
products by the oil sands industry will become more important over time as the
number and scale of bitumen production and upgrading projects increase.
There are other potential markets and opportunities for limestone or
value-added limestone-based products from the Hammerstone project. These
include but are not limited to:

1) the pulp and paper mills located north and
east of Edmonton consume quicklime in making paper,
2) the upgraders and coal-fired
power plants located in the Edmonton / Fort Saskatchewan regions which will
consume reagent limestone products for desulphurization, and
3) municipal water and waste water treatment
plants using hydrated lime to treat water and which may use quicklime in
processing waste.

For the purposes of this report, only the demand for
limestone and limestone-derived products from the oil sands industry and
related infrastructure and municipal development in the Fort McMurray region
are considered.

19.3.2 19.3.2 Supply of aggregate and reagent limestone products

Current supplies of glaciofluvial aggregates in the Fort
McMurray region are limited in both size and quality. Poplar Creek is an
aggregate quarry and is rapidly nearing total depletion. Susan Lake is another
aggregate quarry that is believed to have less than 5 to 10 years' supply and
is scheduled to be buried beneath a tailings structure within 10 years.
Although additional deposits have been found recently, they are typically
small and inadequate to assure a long-lived supply for construction and
operation of oil sands mining and in situ projects. Typically, aggregate
deposits remaining in the region are sand-rich and contain ironstone,
rendering them inappropriate for use in manufacturing concrete (personal
communication, R. Gerrish, 2004).

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A review of current aggregate resources was undertaken to
assess the impact of a new source of aggregates from the proposed Hammerstone
quarry. The information on aggregate supply is based on data included in
aggregate surveys by the Athabasca Regional Issues Working Group (RIWG) that
were published in 2003 and 2004⁽¹³⁾. The RIWG surveys differentiate
between two types of aggregate: road quality aggregate and concrete aggregate.
Aggregate is defined by RIWG as being gravel "...consisting of 50% or more
particles of a size of 5 mm or larger..." but no information defining road
quality and concrete aggregate qualities is provided. Supply data for the
region are given in Table 19-1.

Table 19-1: Road quality and concrete aggregate supply, Regional Municipality
of Wood Buffalo

North of Fort McMurray

Year

Source

South of Ft. McMurray

East of Ath R.

West of Ath R.

Total

Road Quality Aggregate (tonnes)

2003
RIWG/03
2,068,897
59,860,000
5,125,000
67,053,897

2004
RIWG/04
205,000
49,610,000
31,100,550
80,915,550

Converted from m³ using in situ aggregate
density 2.05 t/m³

Concrete Aggregate (tonnes)

2003
RIWG/03
1,816,592
1,800,000
4,500,000
8,116,592

2004
RIWG/04
-
1,620,000
450,000
2,070,000

Converted from m³ using concrete aggregate
density 1.80 t/m³

The aggregate supplies reported in the RIWG surveys show
some variation between 2003 and 2004 that could reflect aggregate production,
resource addition from new discoveries, or inconsistencies in reporting
between the two years. For instance, 10.2 Mt was apparently produced east of
the Athabasca River north of Fort McMurray, while 26.0 Mt of road quality
aggregate was apparently discovered west of the Athabasca River, with an
overall increase in road quality aggregate in the region of 13.9 Mt between
2003 and 2004. Similar unexplained differences are noted between the 2003 and
2004 concrete aggregate data, resulting in a drop of 6.0 Mt. Rather than
ascribe any particular explanation to these differences, the results of the
2004 RIWG survey will be taken as the most accurate estimate of remaining road
quality and concrete aggregates, which were 80.9 Mt and 2.1 Mt, respectively
in 2004.
Quicklime and hydrated lime are not currently produced in
the region and must be trucked in from plants located elsewhere. The four
closest plants to Fort McMurray are owned by Graymont Western Canada Inc and
Graymont Western US Inc. The Summit plant at Coleman, Alberta, is not believed
to be operating at present. Competing sources of quicklime, their respective
capacities and approximate road distances from the location of the proposed
Hammerstone limestone processing complex are listed in Table 19-2.

^{__________________

13 The two RIWG surveys used are identified as the 2002 and 2003 RIWG
aggregate surveys but were published in 2003 and 2004, respectively. It is
herein assumed that the supply figures are the end-of-year supply for the survey
year and demand is the forecast demand for the upcoming year. In this report,
supply and demand data for the 2002 and 2003 RIWG aggregate surveys are reported
in the 2003 and 2004 calendar years.

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Table 19-2: Competing Quicklime Plants, Canadian Prairies and Northern US
Plains

Capacity

Distance

Plant¹

Location

Province/State

Operator

(kt/a)

(km)

Exshaw

Exshaw

Alberta

Graymont Western Canada Inc.

180

900

Summit
Coleman
Alberta
Graymont Western Canada Inc.
50
1,050

Faulkner
Faulkner
Manitoba
Graymont Western Canada Inc.
117
1,500

Indian Creek

Townsend

Montana

Graymont Western US Inc.

300

2,000

1 Data from government and industry
sources.

Crushed limestone for FGD is used at the Tar Island
Powerplant operated by TransAlta on behalf of Suncor. This limestone is
believed to be obtained from Waterways Formation limestone exposed at the base
of Suncor's original pit located on the west side of the Athabasca River,
north of the Tar Island complex. Low-grade shaly limestone has also been
purchased from Birch Mountain by Syncrude and Suncor where it occurs at the
base of their respective Aurora and Steepbank / Millennium mines and is
periodically exposed through removal of the overlying oil sands. No commercial
sources of limestone, including high-calcium reagent grade limestone,
currently exist in the region, other than Birch Mountain's Muskeg Valley
Quarry and Hammerstone Project.

19.3.3 19.3.3 Current demand for aggregate, reagent limestone and lime
products

Demand for aggregate in the Fort McMurray region is
primarily for meeting the construction and operating requirements of the oil
sands industry. Prior to obtaining the RIWG survey data, BMR initiated a
freedom of information (FOI) request to the Alberta government to obtain
information on the amount of aggregate supplied from government-owned gravel
pits at Susan Lake and Poplar Creek operated by AMI. Table 19-3 shows the
reported demand levels for road quality and concrete aggregate based on the
FOI response (1998 to 2002) and RIWG surveys. The 2004 RIWG survey reported
future demand estimates for five years through to 2008.
Based on information reported in the 2003 and 2004 RIWG
aggregate surveys (see Table 19-3); the average demand for road quality
aggregate over the period 2003 to 2008 is 7.7 Mt and for concrete aggregate,
1.5 Mt. However, concrete aggregate comprises both rock and sand, of which BMR
currently plans to produce only concrete rock. Typically, concrete rock makes
up about 55% of a concrete aggregate; therefore, the average demand for
concrete rock is estimated from the survey to be 0.8 Mt/a.
Both RIWG surveys deal only with glaciofluvial gravels and
specifically exclude BMR's limestone currently being used for aggregate
purposes by oil sands producers Syncrude and Suncor. Both companies have
purchased limestone exposed at the bottom of their oil sands mines from BMR.
Table 19-4 shows the amount of limestone from BMR leases underlying the oil
sands mines used by Syncrude and Suncor and filed in royalty reports by BMR to
the Alberta government. The five year average annual limestone use for
aggregate by Syncrude and Suncor for 2001 to 2005 is 2.2 Mt. Therefore, based
on historical limestone aggregate use and RIWG reported data, the current
average aggregate demand is estimated to be 10.7 Mt annually, of which 8.5 Mt
is estimated to come from deposits of glaciofluvial gravels.

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Although precise figures are not publicly available, Birch
Mountain estimates that current use of reagent grade limestone in neutralizing
sulphur emissions in the region amounts to approximately 250,000 to 300,000
tonnes per year. This represents demand from the Tar Island power plant that
is fueled by delayed coke produced by Suncor.

Table 19-3: Road quality and concrete aggregate demand, Regional Municipality
of Wood Buffalo

South of Ft.

North of Fort McMurray

Year

Source

McMurray

East of Ath R.

West of Ath R.

Total

Road Quality Aggregate (tonnes)

1998
AMI
nd
663,691
1,127,633
1,791,323

1999
AMI
nd
608,632
873,238
1,481,870

2000
AMI
nd
4,149,842
873,238
5,023,080

2001
AMI
nd
3,669,570
972,315
4,641,885

2002
AMI
nd
2,176,072
1,097,129
3,273,201

FOI data converted from yd³
using in situ aggregate density of 1.57 t/yd³ (Poplar Creek)

Converted from "loose m³" using aggregate
density 1.80 t/m³(Susan Lake)

2003

RIWG/03

594,826

9,532,500

3,883,725

14,011,051

2004
RIWG/04
1,103,925
2,250,900
4,247,600
7,602,425

2005
RIWG/04
294,175
2,216,050
6,123,350
8,633,575

2006
RIWG/04
140,425
2,334,950
4,259,900
6,735,275

2007
RIWG/04
27,675
2,363,650
2,484,600
4,875,925

2008

RIWG/04

112,750

2,246,800

1,771,200

4,130,750

Average 2003 to 2008

7,664,833

Concrete Aggregate (tonnes)

2003
RIWG/03
363,562
-
369,000
732,562

2004
RIWG/03
-
882,000
90,000
972,000

2005
RIWG/03
90,000
1,690,200
171,000
1,951,200

2006
RIWG/03
-
1,323,000
405,000
1,728,000

2007
RIWG/03
-
1,974,600
180,000
2,154,600

2008

RIWG/03

-

1,332,000

180,000

1,512,000

Converted from m3 using concrete aggregate density 1.80
t/m³ (RIWG surveys)

Average 2003 to 2008

1,508,394

Concrete rock (@55%)

829,617

Note: nd = no date

Table 19-4: Limestone produced from Birch Mountain's leases for use as
aggregate by oil sands mining companies.

South of Fort

North of Fort McMurray

Year

Source

McMurray

E of Ath R.

W of Ath R.
Total

Limestone Aggregate (t)

2000
OSCo
nu
109,898
nu
109,898

2001
OSCo
nu
1,226,736
nu
1,226,736

2002
OSCo
nu
2,356,742
nu
2,356,742

2003
OSCo
nu
2,324,936
nu
2,324,936

2004
OSCo
nu
2,344,476
nu
2,344,476

2005

OSCo

nu

2,823,986

nu

2,823,986

Five year average 2001 to 2005

2,215,375

OSCo = oil sands companies; nu =
not used

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No independent information has been found on the
consumption of quicklime by the oil sands industry or other industries in the
region. Quicklime is used as a reagent in existing industrial and municipal
water treatment facilities and by the pulp-and-paper industry. Some
information has been obtained from public disclosure of chemical reagents used
in the oil sands industry. Birch Mountain estimates that the current total
market for quicklime and hydrated lime in northeastern Alberta is 50,000 to
100,000 tonnes per year. Much of the current demand is probably in the Cold
Lake region, where water treatment is required for in situ steam-assisted
recovery of bitumen from the oil sands.

19.3.4 Projected long-term oil sands construction activity and bitumen
production capacity

The original prefeasibility study (AMEC, 2005) forecasted
demand for aggregate and reagent limestone products by linking demand for
these products to a model of long-term construction activity and bitumen
production capacity in the oil sands industry. This oil sands construction and
production model was provided by Canadian Energy Research Institute (CERI) and
was derived from CERI Study No. 108, Oil Sands Supply Outlook, Potential
Supply and Costs of Crude Bitumen and Synthetic Crude Oil in Canada,
2003-2017. CERI's extended model for BMR developed high-, base- and low-case
forecasts of oil sands bitumen supply from 2005 to 2070 for two oil price
scenarios, one where the West Texas Intermediate (WTI) price averaged
US$25/bbl and the other where this price averaged US$32/bbl. The bitumen
supply was estimated in CERI's base case scenario to rise to a maximum
approaching 5.4 million barrels per day in 2050, staying near this level
through to 2070.
Annual demand for each aggregate and reagent limestone
product was then estimated for the period 2006 to 2070 by multiplying CERI's
construction activity and bitumen production forecasts by demand factors that
estimated the amount of aggregate and reagent products required per barrel of
capacity construction or production. These demand factors were calculated from
industry data by BMR and then independently reviewed and revised by CERI.
Oil price has increased to levels above US$70/bbl since
completing the 2005 prefeasibility report. It appears that average oil prices
will be higher than those underpinning CERI's extended bitumen production
model. For this reason, BMR contracted CERI and Professor Graham Davis, a
mineral economist and professor at the Colorado School of Mines, to update
CERI's previous model so that it considers how higher oil prices and oil price
uncertainty affects bitumen production and capacity addition. The resulting
CERI / Davis model and its forecasts of oil sands construction and production
are used in this report as one component of the estimate for BMR's aggregate
and reagent limestone products.
The CERI / Davis model estimates oil sands construction
activity and bitumen production from 2006 to 2070 for open pit mining and
in-situ extraction of bitumen in the North Athabasca region, the in-situ
recovery of bitumen in both the South Athabasca and Cold Lake regions, and the
upgrading of bitumen into synthetic crude oil in the South and North Athabasca
regions. Their model uses Monte Carlo simulation of future oil prices to
forecast bitumen production and construction levels. It is based on the CERI
estimate that it is economical (i.e., that capital and operating costs are
recovered and that the expected profit is large enough to compensate investors
for risk exposure and the time value of money) to add oil sands capacity when
the WTI spot price for oil is above a trigger level of approximately
US$32.70/bbl in real terms. It incorporates a reverting oil price uncertainty
model (CERI (2006) and Davis (2006)) for which

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CERI estimates the long-term equilibrium price to which the
WTI spot price reverts is US$63 per barrel in real terms. AMEC has reviewed
the reports of CERI (2006) and Davis (2006) and accepted their work for the
purposes of this report.
The CERI / Davis model incorporates the following production and
construction rules:

Construction activity from 2006 to 2015 is based
on current project announcements. After 2015, the expected annual capacity
increases for North Athabasca surface mining is 1%, increases for in-situ
bitumen recovery capacity in the North and South Athabasca regions is 3%,
and 0% for in-situ bitumen recovery increases in the Cold Lake area.
Upgrading capacity grows at ratio of 53% to the increases of bitumen
production capacity in the North Athabasca, South Athabasca, and Cold Lake
regions.

Existing mining and upgrading projects are
shutdown if the WTI spot price falls below US$10.60/bbl. Existing in-situ
production facilities are shut down if the WTI spot price drops below
US$7.90/bbl.

Planned construction of all oil sands projects is
delayed if the real WTI spot price falls below US$32.70/bbl.

Incremental capacity additions require 3 years to
become operational from the start of construction.

Construction activity that has previously been
shelved due to a WTI prices falling below approximately US$32.70/bbl can be
brought back on stream with new construction within the constraint that the
greatest combined annual addition rate is either the maximum of the
construction rate over the past five years or a 6% output growth rate,
whichever is less.

The expected annual bitumen production and upgrading
capacities from simulating oil sands capacity expansion using the CERI / Davis
model are shown in Figure 19-1. Table 19-5 details the forecast average daily
bitumen production for each region by decade and industry activity. Their
model predicts that the addition of bitumen production and upgrading capacity
is likely to follow CERI's unconstrained case, with minimal probability of a
prolonged drop in oil prices below $US32.70 per barrel and a consequent delay
in oil sands expansion, and a very low probability that operating oil sands
projects will terminate production prior to reserve exhaustion. The CERI /
Davis model predicts that oil sands bitumen supply will continuously increase
over the period 2006 to 2070, reaching nearly 12 million barrels per day by
2070.
AMEC independently rebuilt the CERI / Davis model and reran
the simulations to determine how sensitive expected bitumen production and
upgrading capacity was to lower long-term equilibrium WTI oil prices. AMEC's
simulations confirmed their results and demonstrated that the oil sands
expansion predicted by the CERI / Davis model is largely unaffected by changes
in the long-term equilibrium WTI oil price unless this price is set at or
below US$40/bbl. Figure 19-2 shows the percentage reduction in expected
production and upgrading capacity for various lower long-term equilibrium WTI
oil prices. Figure 19-2 illustrates that at a long-term equilibrium WTI oil
price of $40, the maximum reduction in the expected total bitumen production
compared to CERI / Davis model is less than 5% prior to 2045 and less than 8%
between 2045 and 2070.

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It is important to note that the CERI / Davis model only
considers the impact of oil prices on oil sands construction and bitumen
production. Some factors, such as difficulties in accessing labour or capital,
could delay expansion of oil sands bitumen supply. Other factors, including
environmental factors such as access to water and pollutant emission
restrictions, may have the effect of capping ultimate oil sands bitumen supply
capacities below the predicted levels.

Figure 19-1: Projected daily bitumen producing and upgrading capacity for the
North Athabasca, South Athabasca, and Cold Lake regions from the CERI / Davis
model.

Table 19-5: Average daily bitumen production capacity by decade, oil sands
region, and activity.

Average daily
bitumen production capacity by decade, region

Period

and industry activity (thousand barrels per day)

North

North

South

Duration
Athabasca
Athabasca
Athabasca
Cold Lake
Athabasca

Start
End
(years)
Mining
In-situ
In-situ
In-situ
Upgrading

2006
2010
5
1054.6
200.6
355.7
391.6
1057.9

2011
2020
10
2409.2
670.6
618.6
409.7
2196.5

2021
2030
10
2976.4
978.7
866.3
404.3
2791.7

2031
2040
10
3287.8
1317.9
1166.5
404.3
3300.2

2041
2050
10
3631.7
1771.1
1567.7
404.3
3941.2

2051
2060
10
4011.7
2380.2
2106.8
404.3
4758.6

2061
2070
10
4431.4
3198.8
2831.4
404.3
5808.5

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Figure 19-2: Variation in expected total bitumen production compared to the
base case CERI / Davis model when lower long-term equilibrium WTI prices are
used.

19.3.5 Projected long-term demand for aggregate products

The total demand for aggregate products from the Fort
McMurray oil sands region is estimated using construction and production
demand factors for individual aggregate products to translate projected oil
sands construction activity and bitumen production from the CERI / Davis model
into demand for each product. These factors vary with aggregate product, oil
sands region, project phase, and oil sands industry segment. Regional demand
for an individual aggregate product during a particular year is estimated by
multiplying its demand factor for a particular oil sands activity and project
phase by the estimated amount of annual capacity added (for construction
demand) or bitumen production (for operations demand). Annual total demand for
a particular aggregate product is the sum of individual demands across region,
oil sands activity, and project phase (construction and production).
The aggregate products for which demand is estimated
include construction aggregate, base aggregate, concrete rock, asphalt
aggregate, and sub-base / liner. For aggregates, the geographical regions
considered are North Athabasca and South Athabasca. The Cold Lake region is
not considered because it is assumed that the Hammerstone Project will sell no

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aggregate into this region because transportation distances make an
aggregate supply from Fort McMurray region uneconomic.
Demand factors for construction aggregate, base aggregate
and concrete rock used in the 2005 prefeasibility study were independently
reviewed and modified by Norwest (2006) after analysis of historical oil sands
industry data and project engineering estimates. Demand factors for asphalt
rock and sub-base/liner aggregate were provided by BMR but not independently
verified by Norwest or AMEC. AMEC believes that the demand factors for these
products are preliminary and should be reviewed as the market for these
products evolves. AMEC further notes that estimated production of asphalt rock
and sub/base liner and their associated revenues are small compared to those
estimated for other aggregate products.
Projections of regional infrastructure and municipal demand
for aggregate products does not use demand factors and is calculated as 10% of
overall oil sands demand for a particular product. Norwest (2006) believes
that this is a reasonable assumption because of the large scale of oil sands
development.
Table 19-6 details the average annual oil sands and
municipal demand for individual aggregate products from 2006 to 2060 in the
North Athabasca and South Athabasca regions. BMR sales of aggregate products
are calculated in section 19.3.8 by multiplying estimated annual demand for
each aggregate product by forecast market share.

Table 19-6: Average oil sands and municipal demand for aggregate products in
the North Athabasca and South Athabasca regions.

Period horizon
Period
Average annual
oil sands aggregate product demand by decade

duration

(million tones per year)

Construction

Base

Concrete

Asphalt

Sub-base /

Start

End

(years)

aggregate

aggregate

rock

aggregate

liner

2006

2010

5

9.254

9.254

0.371

0.215

0.637

2011
2020
10
8.922
8.922
0.152
0.069
0.203

2021
2030
10
10.045
10.045
0.126
0.051
0.151

2031
2040
10
11.413
11.413
0.153
0.064
0.190

2041
2050
10
13.031
13.031
0.188
0.082
0.242

2051
2060
10
14.964
14.964
0.233
0.105
0.310

19.3.6 Projected long-term energy demand in the oil sands industry

Oil sands energy consumption may become a fundamental
driver of future reagent limestone and quicklime demand if alternative fuels
containing sulphur are partially adopted in place of natural gas as an energy
source in the oil sands industry. When burnt, these fuels release sulphur that
must be captured prior to the release of combustion gases into the atmosphere.
FGD and FBC technologies are widely used and consume limestone and quicklime
as principal reagents as part of reliable, cost-effective processes to capture
sulphur when coals, cokes and other fuels that contain sulphur are burnt.
An energy substitution model for the oil sands industry was
developed by BMR to forecast the potential future market for reagent limestone
products used in desulphurization. This model links energy requirements for
bitumen production and upgrading to the demand for reagent

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limestone products from burning alternative fuels. It
incorporates assumptions regarding the substitution rate and level of
alternative fuels used in place of natural gas, the types of alternative fuels
used, and the technologies adopted for their combustion.
The resulting demand forecasts for Birch Mountain's reagent
limestone and quicklime products used in FBC and FGD are uncertain. However,
this model is an important component of the project's economic analysis
because it reflects BMR's understanding of the project business environment
and provides guidance on how the market for reagent limestone products may
evolve. This guidance, and insights into deviations from it based on future
operating experience, can assist management with decisions to optimize
economic value and return, and minimize capital risk such as the possibility
of installing excess capacity.
At this time, natural gas is the preferred fuel for
generating power, heat, steam and hydrogen because it has been abundant in the
past and has fewer environmental consequences compared to other fuel sources.
However, industry commentators have stated that the oil sands industry may
need to adopt alternative energy sources in the future as production from
conventional natural gas sources decline and the price of natural gas becomes
more volatile. The Alberta Chamber of Resources has stated in their report Oil
Sands Technology Roadmap (OSTRM; 2004, p. 4) that "The historical dependence
on abundant and inexpensive natural gas, for fuel and the generation of
hydrogen, must change. With or without a third development wave beyond 2012,
the industry will need to encourage the further development of options to use
bitumen based products, or alternatives such as coal."
The OSTRM also highlights that continued reliance by the
oil sands industry on natural gas as a fuel source is problematic with the
statement on page 14 "An extrapolation of natural gas usage by oil sands
development to 2030, as based on current project natural gas rates for a
reasonable mix of projects is shown in Figure 2.3 [OSTRM p. 14, this figure is
not reproduced here]. In this scenario, natural gas usage would rise from 10%
of combined WCSB [Western Canada Sedimentary Basin], Coal Bed Methane (CBM)
and Mackenzie supply by 2012, to an unthinkable 60% or more by 2030. Such a
demand level, combined with competition from other markets in the face of
dwindling reserves, will only drive price increases. LNG imports into North
America may begin to set price levels. The "business as usual" case is clearly
unsustainable and uneconomical. The solution is energy and hydrogen
self-sufficiency, either through the use of residues, or external energy
alternatives, such as coal or nuclear."
CERI reiterates these OSTRM statements in their
cogeneration report Cogeneration Opportunities for Canadian Oil Sands Projects
– Part 3: Cogeneration Options and Opportunities (CERI, 2005, p. 18) with the
statement "The tight supply of natural gas and increasing demand are creating
surging and volatile prices. The price volatility and predicted future trend
of natural gas prices, along with availability of natural gas, are all
critical elements for oil sands operations. Higher natural gas prices lead to
higher operating costs, and high gas price volatility increases the potential
risk of these gas intensive projects. This environment is prompting the oil
sands industry to consider alternative fuels and technologies."
These statements support the assumption that the oil sands
industry will use non-natural gas sources for some of its fuel, power and
hydrogen needs in the future. Unfortunately, it is difficult to predict with
certainty how quickly and to what degree alternative fuels will be adopted

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even though the previous statements make the migration from natural gas to
alternative fuels appear imminent.
The energy consumption model used in this report relies on
information provided by BMR, published sources, and other third-party
consultants under contract to BMR. The purpose of the consumption model is to
outline one possible scenario of how alternative fuels are adopted into the
oil sands industry. An estimate of future reagent product demand and BMR sales
of reagent product can then be made using this scenario. Other scenarios for
adopting alternative fuels are possible which will affect forecast demand for
reagent products. An analysis is included in section 19.9 that indicates the
sensitivity of project economics to changes in reagent limestone and quicklime
revenues. These changes may arise due to variation in reagent limestone and
quicklime prices, in the amounts of these products sold or a combination of
the two.
Projected natural gas use with no consumption restrictions
A forecast of natural gas consumption for fuel, power and
hydrogen was obtained using the CERI / Davis model of bitumen production and
published natural gas demand factors. The forecast is based on current energy
consumption patterns with no substitution by alternative fuels. Natural gas is
used directly for heat and fuel in all oil sands industry activities and
indirectly through power generation. It is also used as a source of hydrogen
in the upgrading process.
CERI (2005) and the Alberta Chamber of Resources (2004)
provide demand factors for natural gas as fuel. A demand factor for natural
gas consumed in power generation is obtained by multiplying an electricity
demand factor (CERI, 2005) by a natural gas heat rate of 8.8 Gj/MWh (CERI,
2005) and a natural gas energy factor of 0.952 Mcf/Gj (National Energy Board –
Energy Conversion Tables, 2006). Table 19-7 presents the demand factors used
to determine natural gas consumption.
Figure 19-3 projects unrestricted daily natural gas
consumption for fuel and generating power and hydrogen, based on current
energy consumption patterns and with no substitution by alternative fuels. The
line with triangular data markers plots natural gas consumption along the
Y-axis on the left side of the graph versus time. The data points were
obtained by summing natural gas consumption for fuel and generating power and
hydrogen in North Athabasca, South Athabasca, and Cold Lake. Consumption in
each of these regions was estimated by multiplying either annual bitumen
production or annual upgrading capacity (see figure 19-1) by the associated
natural gas demand factor which is equal to the sum of the fuel and power /
hydrogen generation demand factors for natural gas in Table 19-7.
Figure 19-4 divides total unrestricted natural gas
consumption into categories of fuel, power generation, and hydrogen
production. Natural gas is primarily consumed as a fuel to produce steam and
heat and as a fuel and feedstock for the production of hydrogen by steam
methane reforming.

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Table 19-7: Natural gas demand factors in the oil sands industry for fuel and
generation of power and hydrogen.

Fuel
Power
generation
Hydrogen

Oil sands
Natural gas
Electricity
Natural gas
Natural gas

activity

demand (Mcf/bbl)

demand (MWh/bbl)

demand (Mcf/bbl)

demand (Mcf/bbl)

Mining

0.250

0.012

0.101

0.0

In-situ extraction
1.250
0.010
0.084
0.0

Upgrading
0.080
0.008
0.067
0.400

Figure 19-3: Forecast unrestricted natural gas consumption for fuel, power
and hydrogen and total projected annual energy consumption in the oil sand
industry.

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Figure 19-4: Projected unrestricted daily natural gas consumption for fuel,
power and hydrogen production.

Total energy consumption represented by unrestricted natural gas use

A forecast of future energy requirements for the oil sands
industry in the North Athabasca, South Athabasca and Cold Lake regions is
required for modeling possible scenarios of alternative energy consumption.
Table 19-8 provides fuel, power, and hydrogen intensity factors for mining,
in-situ extraction, and upgrading. These intensity factors are calculated as
the product of the natural gas factors from Table 19-7 and the natural gas
energy content of 1.05 Gj/Mcf (National Energy Board – Energy Conversion
Tables, 2006). These factors are used to determine overall energy consumption
in each region in a similar manner as the natural gas consumption calculation.

AMEC notes that the production of hydrogen during bitumen
upgrading consumes natural gas as both a fuel to create heat and steam, and as
a feedstock for generating hydrogen. The hydrogen energy intensity factor
presented in Table 19-8 may be unrepresentative in that it is derived from a
natural gas intensity factor (see Table 19-7) that summarizes both these uses.
This factor may underestimate the use of desulphurizing reagents required
during hydrogen production when an alternative fuel such as petroleum coke is
used as a hydrogen source. Due to the lower hydrogen contents in the
alternative fuels, it is likely the hydrogen generating process will have a
lower efficiency when an alternative fuel is used instead of natural gas. This
would result in a greater amount of alternative fuel being consumed in
generating an equivalent amount of hydrogen to processes using natural gas,
thereby increasing the requirement for reagent limestone or quicklime. Further
work is needed to quantify the use of

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alternative fuels as a replacement for natural gas as a feedstock in the
hydrogen production process.
Figure 19-3 also displays forecast energy demand from 2006
to 2070. The black line with cross data markers plots energy consumption along
the Y-axis on the right side of Figure 19-3 versus time. This line may be
produced using energy intensity factors or by multiplying overall natural gas
consumption by the energy content of natural gas.

Table 19-8: Energy intensity factors for fuel, power, and hydrogen production
from natural gas.

Activity

Fuel intensity

Power intensity

Hydrogen intensity

factor (Gj / bbl)

factor (Gj / bbl)

factor (Gj/bbl)

Mining

0.263

0.106

0.0

In-situ extraction

1.313

0.088

0.0

Upgrading

0.084

0.070

0.420

Alternative fuels in the oil sands industry

The Alberta Chamber of Resources (2004)
considers petroleum coke, asphaltenes, bitumen, and coal as possible
alternatives to natural gas for fuel and generating of power and hydrogen.
Petroleum coke and asphaltenes are produced as byproducts from bitumen
upgrading processes and may be burned directly or through either fluidized bed
combustion or gasification technologies. Bitumen produced during mining or
in-situ extraction may be used as a fuel source at smaller oil sand projects
while coal may be imported or mined from the Firebag Coal deposit, a
low-quality coal deposit in the North Athabasca region.
Current examples of alternative fuel use in
the oil sands industry includes the combustion of petroleum coke for power and
steam generation at the Suncor Tar Island site, and the combustion of
off-gases produced in the fluid coking process at Syncrude's Mildred Lake
site. Opti-Nexen is constructing the Long Lake project that will convert the
asphaltenes extracted during upgrading into a synthetic gas that will provide
both fuel and hydrogen.
The total energy intensity for the oil sands
projects will increase when alternative fuels are used for power generation
because there is a decrease in generation efficiency. The decrease in
efficiency is highlighted by comparing heat rates of each fuel type for power
generation. This report uses a heat rate for natural gas of 8.8 Gj/MWh and for
alternative fuels a heat rate of 10.6 Gj/MWh (10,000 Btu/MWh).
Table 19-9 outlines the increase in energy
intensity from using alternate fuels in power generation. The power intensity
of alternative fuels is calculated by multiplying the power intensity factor
for natural gas by the ratio of the alternative fuel heat rate to the natural
gas heat rate. An estimate of total energy intensity for projects using
alternative fuels is calculated by summing fuel and hydrogen intensities
provided in Table 19-8 and the power intensity factor for alternative fuels
calculated in Table 19-9.

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Table 19-9: Revision of energy intensity factors for alternative fuel use in
power generation.

Activity

Power intensity factor

Power intensity factor

Total energy intensity

with natural gas

with alternative fuels

factor with alternative

(Gj/bbl)

(Gj/bbl)

fuels (Gj/bbl)

Mining

0.106

0.127

0.389

In-situ extraction

0.088

0.106

1.419

Upgrading

0.070

0.085

0.589

The energy content and sulphur content of each alternative
fuel are required to model their use as a source of fuel and power in the oil
sands industry. Energy content dictates the amount of each alternative fuel
required to meet energy demand. Sulphur content determines the amount of
sulphur that must be captured to meet environmental controls when alternative
fuels are used.
Table 19-10 presents the energy content of each alternative
fuel and the annual alternative fuel consumption factor for each fuel by oil
sands industry activity. Each factor is calculated by dividing the total
energy intensity factor in Table 19-9 by the alternative fuel's energy content
provided in Table 19-10 and multiplying the result by 365 days/year. The
amount of alternative fuel required per year for a particular activity and
region can be calculated by multiplying the portion of forecast daily bitumen
capacity (see Figure 19-1) consuming alternative fuels by the associated
alternative fuel consumption factor in Table 19-10.

Table 19-10: Alternative fuel energy content and annual alternative fuel
consumption factor by oil sands industry activity.

Alternative
Energy
Annual
alternative fuel consumption factor

fuel
content
(tonne per year
/ bbl daily capacity)

(Gj/tonne)

Mining

In-situ

Upgrading

Bitumen

40.8

3.484

12.697

5.269

Petroleum coke
33.5
4.234
15.432
6.403

Asphaltene
38.2
3.718
13.549
5.622

Firebag Coal

22.3

6.360

23.179

9.618

Table 19-11 presents for each alternative fuel its sulphur
content and its sulphur production factor by oil sands industry activity. Each
factor is calculated by multiplying the annual alternative fuel consumption
factor from Table 19-10 by sulphur content. The amount of sulphur produced per
year for a particular activity, region and alternative fuel can be calculated
by multiplying the portion of forecast daily bitumen capacity using a
particular alternative fuel by the associated sulphur production factor in
Table 19-11.

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Table 19-11: Alternative fuel sulphur content and annual sulphur production
factor by oil sands industry activity.

Alternative
Sulphur
Annual sulphur
production factor

fuel
content
(tonne per year
/ bbl daily capacity)

(%)

Mining

In-situ

Upgrading

Bitumen

4.8

0.167

0.609

0.253

Petroleum coke
6.3
0.267
0.972
0.403

Asphaltene
6.6
0.245
0.894
0.371

Firebag Coal
3.0
0.191
0.695
0.289

Projected alternative fuel use in the oil sands industry
The previous sub-sections of section 19-3.4 have provided
forecasts of natural gas use and total energy requirements for the oil sands
industry. These forecasts have been supplemented with a section discussing
possible alternative fuels and some of their characteristics for generating
power and heat. Additional assumptions are required to estimate the adoption
of alternative fuels needed to calculate the projected demand for reagent
limestone and quicklime for desulphurization by FGD and FBC.
BMR has assumed that alternative fuels will be adopted with
increasing preference to provide power and heat for additions of new capacity
only in the oil sands industry. The initial adoption of alternative fuels is
0% in Cold Lake and South Athabasca regions and is estimated to be 15% in the
North Athabasca region. The positive initial use of alternative fuels in North
Athabasca recognizes Syncrude's use of synthetic gas from fluid coking and use
of pulverized petroleum coke by Suncor / TransAlta. The BMR adoption model
assumes that alternative fuel use increases incrementally each year for new
oil sands capacity to a maximum natural gas replacement proportion of 80%. The
maximum substitution rate of alternative fuels for natural gas is reached in
25 years for the North Athabasca region with its large integrated mining
projects and 20 years for the South Athabasca and Cold Lake regions where
smaller in-situ extraction projects predominate.
A key feature of the BMR adoption model is that existing
capacity and new capacity powered and fueled by natural gas will continue to
use natural gas until 2070. No allowance has been made for retrofitting of
existing power, heat and hydrogen facilities.
Figure 19-5 outlines BMR's forecast replacement of natural
gas by alternative fuels for oil sands energy needs from 2006 to 2070. The
line with triangular data markers plots natural gas consumption as a
proportion of total energy consumption along the Y-axis on the left side of
the graph versus time. The line with cross data markers plots alternative fuel
consumption as a proportion of total energy consumption on the right side of
the graph. This figure shows that the maximum replacement of natural gas by
alternative fuels is approximately 66% in 2070 using the BMR model. The use of
natural gas and alternative fuels is evenly split between the two in 2030 and
natural gas predominates until this time.
Figure 19-5 also presents the revised natural gas requirements for the oil
sands industry when alternative fuels are introduced according to the BMR
adoption model. The solid black line

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outlines revised natural gas consumption when alternative
fuels are adopted and can be compared to forecast unrestricted gas consumption
detailed in Figure 19-3. Using the assumptions adopted herein, natural gas use
in the oil sands region still more than triples, from an estimated 1.3 Bcf/d
(billion cubic feet per day) today to 4.6 Bcf/d in 2070.

Figure 19-5: Division of energy consumed between alternative fuels and
natural gas used in this study; revised natural gas consumption with alternative
fuels.

BMR also estimated the mix of alternative fuels used in
each region based on availability of different fuel types. For example,
petroleum coke is assumed to be 50% of the alternative fuel mix in North
Athabasca where it is produced by Syncrude and Suncor, and in the future by
CNRL at Horizon. Petroleum coke use is assumed to be 20% in the South
Athabasca region where it is within shipping distance of the coke producers
and 0% at Cold Lake. Likewise, BMR only considers coal use for the North
Athabasca region where it is available from the Firebag Coal deposit. Table
19-12 presents BMR's alternative fuel mix assumptions for the three oil sands
regions.

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Table 19-12: Alternative fuel mix assumptions.

Alternative
Alternative
fuel proportion

fuel

North Athabasca

South Athabasca

Cold Lake

Bitumen

30%

60%

80%

Petroleum coke
50%
20%
0%

Asphaltene
15%
20%
20%

Firebag Coal
5%
0%
0%

Alternative fuel combustion technologies and sulphur mitigation
requirements
Three alternative fuel combustion technologies are
considered in the energy consumption model. These are 1) high temperature
gasification by integrated gasification combined cycle (IGCC), 2) direct
combustion, and 3) fluidized bed combustion or gasification. All three
technologies are either being used or will be used in the future. Suncor's Tar
Island site burns petroleum coke by direct combustion while Syncrude uses
fluidized bed gasification in its cokers to generate synthetic gas that is
burned in CO (carbon monoxide) boilers at its Mildred Lake site. Opti-Nexen is
currently building an IGCC-type gasifier at its Long Lake project.
IGCC plants combine an alternative fuel gasification unit
with a gas-fired combined cycle power generation unit. These plants are
capable of co-producing hydrogen, have greater thermal efficiencies than
conventional plants, are high capital cost and do not require reagent
limestone or quicklime for desulphurization. A potential disadvantage of this
technology is the production of chemically pure sulphur as a byproduct.
Byproduct sulphur production has been identified as a
potential problem since Fort McMurray is a great distance from large sulphur
consumers. The National Energy Board (2006) states, "The stockpiling of
sulphur is a physical problem. By 2015, sulphur recovery could generate as
much as five million tonnes of sulphur per year." The OSTRM (2004, p. 17, 18)
provides a more detailed description of the problem with the statement:
"A "mixed [petroleum] product" industry might therefore be
producing anywhere from 10-12 Mega-tonne per year by 2030, depending on the
extent of full upgrading in Canada by that time. Putting this into current
context, it is equal to about half of the internationally traded sulphur
worldwide, and is almost double Canada's seaborne exports today.
The handling of sulphur from oil sands production is a
challenge, given the global glut of sulphur, the high-cost of transport from
our landlocked supplies, and continuing non-discretionary production from
natural gas and refineries. New technologies to use the sulphur by-product in
non-traditional ways, such as cement, sulphur enhanced road asphalt, as well
as in plant nutrient demand growth, all offer ways to mitigate the world
supply-demand imbalance. However, the oil sands industry needs to deal with
medium and long-term storage."
Direct combustion plants burn alternative fuel in a boiler
to produce steam for use in power generation, SAGD bitumen recovery, mining /
extraction operations and bitumen upgrading. Fluidized bed combustion plants
suspend alternative fuels in air jets to improve boiler

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combustion and heat transfer. These plants have lower
capital costs than IGCC plants but also have lower thermal efficiencies.
Fluidized bed combustion operates at lower temperatures than direct combustion
or IGCC, with lower consequent production of thermal NOx (nitrous oxides).
Direct and fluidized-bed combustion (FBC) plants require
crushed reagent limestone or quicklime to capture the sulphur contained in
alternative fuel. Direct combustion plants use quicklime or reagent limestone
in a flue-gas desulphurization (FGD) unit for post-combustion sulphur capture.
Reagent limestone is injected into the boiler with the alternative fuel at an
FBC plant where it captures sulphur within the combustion zone.
BMR assumes that the selection of alternative fuel
technology will be guided by the nature of oil sands operations and the
assumed fuel mix in each region. IGCC is assumed to be used in power and heat
generation for 50% of the new capacity burning alternative fuels in North
Athabasca because of its large integrated mining/extraction/upgrading projects
with a requirement for hydrogen. The selection of IGCC is set at 40% in the
South Athabasca and Cold Lake regions where the use of bitumen as an
alternative fuel is assumed to predominate (see Table 19-13).

Table 19-13: Division of alternative fuel combustion technologies by region.

Alternative
Alternative
fuel combustion technology proportions

fuel

North Athabasca

South Athabasca

Cold Lake

Integrated gasification

50%
40%
40%

combined cycle

Direct combustion
30%
35%
40%

Fluidized bed combustion

20%

25%

20%

The assumptions made regarding the selection of alternative
fuel combustion technologies allows the division of energy requirements
between natural gas and alternative fuels in Figure 19-5 to be further
subdivided. Figure 19-6 presents the division of energy needs met by natural
gas, alternative fuels using IGCC technology, and alternative fuels using
either direct or fluidized-bed combustion. This figure illustrates the BMR
model forecast that by 2070 approximately one-third of energy needs will be
met natural gas, one-third by alternative fuels consumed at IGCC plants, and
one-third by alternative fuels consumed at either direct or fluidized-bed
combustion plants. In 2020, the forecast division is 57% natural gas, and 43%
alternative fuels, with the alternative fuels evenly split between IGCC plants
and either direct or fluidized bed combustion.

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Figure 19-6: Annual proportion of forecast energy
requirements met by natural gas, alternate fuels combustion with IGCC, and
alternate fuels consumed with either direct or fluidized-bed combustion.

19.3.7 Projected long-term demand for reagent limestone and lime products

Reagent limestone and lime products are required to capture
sulphur when alternative fuels are burned in place of natural gas and during
water treatment of boiler waters at SAGD and mining / extraction operations.
Demand for reagent products for both these applications are forecast based on
the CERI / Davis model of construction activity and bitumen production using
product demand factors.
Hydrated lime is used to reduce alkalinity and hardness of
boiler feed waters and to remove dissolved silica in co-produced waters at
in-situ operations. The hydrated lime demand factors from the original
prefeasibility study (AMEC, 2005) were used in this report. At mining /
extraction operations, it is assumed that 0.075 tonnes of hydrated lime are
required annually for every barrel of daily bitumen production. The demand
factor at in-situ operations is assumed to be 0.058 tonnes per year for each
barrel of daily bitumen production. The demand factor for upgrading operations
is assumed to be zero.

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Reagent limestone and FGD quicklime demand from alternative
fuels utilization is forecast from the CERI / Davis model using the applicable
reagent limestone / quicklime product demand factor. This factor is derived
from an estimate of the amount of reagent limestone or quicklime product
required to capture the sulphur released when a particular alternative fuel is
burned with either direct or fluidized-bed combustion given an oil sands
activity.
BMR has assumed that all sulphur is liberated as sulphur
dioxide (SO2) gas when an alternative fuel is burned. Quicklime or reagent
limestone is used to capture sulphur as part of an inert gypsum byproduct
(CaSO4) at direct or fluidized-bed combustion plants burning alternative
fuels. Gypsum is formed as a byproduct when sulphur dioxide reacts with either
quicklime (CaO) or reagent limestone (CaCO3). The amount of reagent limestone
product consumed in this reaction is dependent on the type of alternative fuel
burnt, the molecular weight ratio of reagent limestone product to sulphur
dioxide and the efficiency of the reaction.
Table 19-14 presents the FBC and FGD reagent limestone
consumption factors given an alternative fuel and oil sands industry activity.
The factors are calculated by multiplying the sulphur production factor from
Table 19-11 by the molecular weight ratio of 3.125 and an efficiency factor of
1.10. The weight ratio was calculated by dividing the molecular weight of
reagent limestone (Ca: 1 x 40 = 40, C: 1 x 12 = 12, O: 3 x 16 = 48; Total:
100) by the molecular weight of sulphur (S: 1 x 32 = 32). The efficiency
factor was provided by Envirosolv Energy and increases the theoretical amount
of reagent limestone required to account for sulphur capture efficiency being
less than 100%. Norwest Corporation reviewed the method and calculations used
to derive the demand parameters in Table 19-14.

Table 19-14: FBC / FGD reagent limestone consumption factors.

FBC / FGD
reagent limestone consumption factor

Alternative fuel
(tonne per year
/ bbl daily capacity)

Mining

In-situ

Upgrading

Bitumen

0.575

2.095

0.869

Petroleum coke
0.917
3.342
1.387

Asphaltene
0.844
3.074
1.276

Firebag Coal

0.656

2.390

0.992

Table 19-15 presents the quicklime consumption factors
given an alternative fuel and oil sands industry activity. The factors are
calculated by multiplying the sulphur production factor from Table 19-11 by
the molecular weight ratio of 1.75 and an efficiency factor of 1.05. The
weight ratio was calculated by dividing the molecular weight of quicklime (Ca:
1 x 40 = 40, O: 1 x 16 = 16; Total: 56) by the molecular weight of sulphur.
The efficiency factor was also provided by Envirosolv Energy. Norwest
Corporation reviewed the method and calculations used to derive the demand
parameters in Table 19-15.

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Table 19-15: Quicklime consumption factors.

Alternative fuel
Quicklime
consumption factor

(tonne per year /
bbl daily capacity)

Mining

In-situ

Upgrading

Bitumen

0.307

1.120

0.465

Petroleum coke
0.490
1.786
0.741

Asphaltene
0.451
1.643
0.682

Firebag Coal
0.351
1.278
0.530

BMR made assumptions about regional preferences between
reagent limestone and quicklime for desulphurization based on the increased
unit cost of transporting reagent limestone compared to quicklime. In North
Athabasca, quicklime use was assumed to be 30% and reagent limestone 70% of
desulphurization demand for reagent limestone product given that this region
is closest to the Hammerstone project. In South Athabasca, quicklime demand
was assumed to be 33% and reagent limestone 67% of demand whereas this was the
reverse in the Cold Lake region. Table 19-16 presents BMR's assumptions
regarding reagent limestone product preference for desulphurization.

Table 19-16: Selection of FGD limestone and quicklime product at direct
combustion plants by region.

Reagent limestone product

Reagent limestone product proportions

North Athabasca

South Athabasca

Cold Lake

FGD / FBC reagent limestone

70%

66%

33%

Quick lime

30%

33%

66%

Table 19-17 presents the total projected industry demand
for each reagent limestone product from 2006 to 2060. Hydrated lime demand is
calculated by multiplying bitumen production by region and industry activity
(Figure 19-1) by the associated demand factors presented at the start of this
section and summing the results.
Demand for FBC / FGD reagent limestone or quicklime is also
calculated by multiplying bitumen production for each region and industry
activity by a product demand factor and summing the individual results.
However, there is no single demand factor for quicklime or FBC / FGD reagent
limestone as there is for individual aggregate products because their demand
factors vary by year. The quicklime and FBC / FGD limestone demand factors
vary with year because of the assumption that alternative fuels will
increasingly replace natural gas for steam and power generation as new
capacity is built. These variable demand factors are calculated on an annual
basis from the following inputs:

1) The use of alternative fuels as a proportion of total energy
consumption in the oil sands industry (Figure 19-5).
2) Consumption factors for reagent limestone product by activity and
alternative fuel (Table 19-14 and Table 19-15).

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3) The alternative fuel mix by region (Table 19-12).
4) The selection of sulphur control technologies (Table 19-13).
5) The preference for a particular limestone product (Table 19-16).
6) An adjustment for average product limestone content of 90%.

Table 19-17: Average annual demand for reagent limestone product demand in
the North Athabasca, South Athabasca and Cold Lake regions.

Period horizon
Period
Average annual
oil sands reagent limestone product demand

duration

(million tonnes)

(years)

FGD

FBC

Quick

Hydrated

Start

End

limestone

limestone

lime

lime

2006

2010

5

0.137

0.201

0.088

0.134

2011
2020
10
0.578
0.818
0.343
0.279

2021
2030
10
0.922
1.303
0.541
0.354

2031
2040
10
1.267
1.797
0.744
0.414

2041
2050
10
1.715
2.440
1.007
0.489

2051
2060
10
2.302
3.283
1.354
0.585

19.3.8 Forecast market share and Birch Mountain sales

BMR forecast future sales by estimating their annual share
of the market for each aggregate and reagent limestone product in the North
Athabasca, South Athabasca, and Cold Lake regions. Regional product sales were
calculated by multiplying market share and total product demand. Total BMR
product sales were the sum of regional product sales with a limit imposed for
production constraints.
Regional market share was estimated after considering the
distance between the region and the Hammerstone Quarry, the distance between
non-local competitors and the region, and the possibility of local sources of
aggregate or reagent limestone product. Market share estimates have been
reduced from those used in the prefeasibility study except for concrete rock.
Table 19-18 compares the maximum market shares in the prefeasibility study and
the current report by region for individual products. Figure 19-7 to Figure
19-9 present the BMR estimate of market share for each product and region from
2006 to 2060.
Table 19-19 and Table 19-20 present the average BMR sales
of aggregate and reagent limestone product. These sales were calculated from
the total product demand estimates which underlie Table 19-6 and Table 19-17
and the market share forecasts presented in Figure 19-7 to Figure 19-9.

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Table 19-18: Maximum BMR market share of aggregate and
reagent limestone product demand in the North Athabasca, South Athabasca and
Cold Lake regions used in the 2005 and 2006 pre-feasibility reports.

Maximum BMR market share (%)

Aggregate or reagent

limestone product

North Athabasca

South Athabasca

Cold Lake

2005

2006

2005

2006

2005

2006

Construction aggregate

90

75

50

45

0

0

Base Aggregate
90
65
30
25
0
0

Concrete rock
90
100
70
90
0
0

Asphalt rock
na
100
na
90
na
0

Sub base / liner
na
70
na
40
na
0

Reagent limestone
na
90
na
80
na
50

Quicklime
95
90
85
80
50
50

Hydrated lime
na
95
na
85
na
60

Construction aggregate

90

75

50

45

0

0

Table 19-19: Average BMR sales of aggregate products in the North Athabasca
and South Athabasca regions.

Period horizon
Period

BMR sales of aggregate product (million tonnes)

duration

Base

Construction

Concrete

Asphalt

Sub-base

Start

End

(years)

aggregate

aggregate

rock

rock

liner

2006

2010

5

3.355

3.787

0.327

0.187

0.283

2011
2020
10
5.012
5.933
0.151
0.068
0.130

2021
2030
10
5.919
7.206
0.100
0.024
0.095

2031
2040
10
6.963
8.216
0.152
0.063
0.119

2041
2050
10
7.906
9.350
0.186
0.080
0.151

2051
2060
10
4.446
10.690
0.001
0.000
0.033

Table 19-20: Average BMR sales of reagent limestone product in the North
Athabasca, South Athabasca and Cold Lake regions.

Period horizon
Period

Average BMR sales of reagent limestone product
(million tonnes)

duration

FGD

FBC

Quick

Hydrated

Start

End

(years)

limestone

limestone

lime

lime

2006

2010

5

0.046

0.150

0.028

0.029

2011
2020
10
0.483
0.416
0.290
0.224

2021
2030
10
0.801
0.494
0.468
0.323

2031
2040
10
1.075
0.631
0.636
0.379

2041
2050
10
1.051
1.112
0.692
0.396

2051
2060
10
0.348
0.987
0.681
0.000

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Figure 19-7: Birch Mountain market share of aggregate and reagent limestone
product demand in the North Athabasca region.

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Figure 19-8: Birch Mountain market share of aggregate and reagent limestone
product demand in the South Athabasca region.

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Figure 19-9: Birch Mountain market share reagent limestone product demand in
the Cold Lake region.

19.3.9 Pricing for aggregate and reagent limestone products

Pricing information for aggregate and reagent limestone products are not
generally available publicly in the Fort McMurray region.
The majority of aggregate in the Fort McMurray region comes
from the Susan Lake and Poplar Creek gravel pits which are publicly owned but
privately operated. These gravel pits are owned by the Alberta government.
Aggregate producers operating in these pits pay royalties of $1.40/tonne and
$2.20/tonne for gravel from the Susan Lake and Poplar Creek pits respectively.
Aggregate pricing in the Fort McMurray region typically is done on a spot or
job basis, and long-term contracts are uncommon.
Birch Mountain estimated the prices for aggregate products
through interviews with aggregate suppliers and consumers. These estimates
were independently reviewed by Norwest Corporation who found the estimates
reasonable based on their own experiences in the region and through
discussions with suppliers and contractors. Norwest specifically noted that
the large increase in the concrete rock price was reasonable and reflected
imminent shortages for this product.

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Norwest Corporation also provided an
independent review of quicklime and hydrated lime product prices and these
prices were used in this report. Their estimates were based on the expected
landed price in Fort McMurray from the nearest third-party supplier. The
landed price comprises two components: the plant gate price and the cost of
transport. Norwest reviewed plant gate prices from several sources including
Natural Resources Canada. Their estimated plant gate price for quicklime is
C$120/tonne with the balance of the price representing the cost of truck
transport from Canmore Alberta. Norwest noted that hydrated lime commonly
sells at a premium of C$10 to C$15 per tonne over quicklime reflecting
additional processing costs.
AMEC performed a preliminary cost estimate
of transporting 1000000 tonnes of reagent limestone or quicklime per annum by
rail into the Fort McMurray region from Calgary Alberta. The estimated cost
was C$0.09 per tonne per kilometer which results in a rail transport cost of
C$83 per tonne assuming a Calgary-Fort McMurray rail transport distance of 925
kilometers. AMEC notes that in Canada the rail cost of moving material in a
north-south direction can be appreciably greater than the cost of moving
material in the east-west direction because the rail distances are shorter and
there is often more transfer of materials between trains.
This estimate includes the cost of
transferring reagent limestone product between trucks and rail hoppers in both
Calgary and Fort McMurray. This estimate does not consider the cost
implications of possible capacity restrictions or the capital costs associated
with possible rail line improvements in the future.
Norwest Corporation reviewed BMR's estimate of FGD/FBC
reagent limestone price and believes it is reasonable.
Table 19-21 details the prices used in this report for
aggregate and reagent limestone products.

Table 19-21: Forecast BMR prices for aggregate and reagent
limestone products used in the 2005 and 2006 pre-feasibility reports.

Aggregate or reagent

Price (CAD$/tonne)

limestone product

2005

2006

Construction aggregate

8.00

9.00

Base aggregate
6.00
8.00

Concrete rock
14.50
30.00

Asphalt rock
N/A
15.00

Sub base / liner
N/A
7.00

FBC limestone
N/A
55.00

FGD limestone
N/A
55.00

Quick lime
195.00
215.00

Hydrated lime

N/A

230.00

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19.4 Muskeg Valley Quarry (MVQ) Operations

The Muskeg Valley Quarry (MVQ) and aggregate processing
plant are currently in a state of development. Contractors are being use to
develop the quarry and to date limited quantities of material have been
quarried and processed for sale. As the quantities have been limited, no
updates to the surface topography based on quarrying have been completed.
Given the size of the current excavation relative to the entire Hammerstone
Project, the quarried amount is not expected to be material. When regulatory
approvals and operating permits for the Hammerstone Project have been
received, the Hammerstone Project will be developed as a single integrated
operation that incorporates the existing MVQ and aggregate operation into the
larger Hammerstone Quarry, aggregate processing plant and limestone processing
complex.
Limited cost and production data was available from the MVQ
Operations and given its currently small scale and initial startup conditions
it was decided to not use the data for forecasting future costs and
production.

19.5 Hammerstone Production Forecast

The production forecast for the Hammerstone quarry is
designed to meet the aggregate and reagent limestone sales forecast described
above and is shown in Table 19-22. Mining losses are given in Table 19-23. In
order to achieve maximum flexibility in developing the quarry plan,
unit-for-unit substitution was permitted where two or more units could be used
to supply the same products. The substitution rules are shown in Table 19-24.
These rules were necessary due to the different mining losses for each unit.

The production plan has brought some overburden stripping
ahead in time in order to smooth the production profile. After more detailed
planning, and with the assistance of a contractor to take the peaks off of
later years, some of this stripping could be deferred. The current plan
assumes that the overburden will be stored in a dump along the east side of
the lease. Once quarry floor is available, overburden and other waste products
can be stored in-pit. Future work should examine the quarrying and dumping
sequence in order to better optimize the quarry plan.

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Table 19-22: Hammerstone Production Forecast

Quarry Unit

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

Unit 1

0

0

0

0

236

3

479

692

0

0

Unit 2

0

0

0

211

679

189

377

956

0

0

Unit 3 (plus 85% of quarried unit 3a)

4,634

9,960

11,533

11,270

10,487

12,699

12,222

13,863

13,174

16,047

Unit 3a (15% of quarried unit 3a)

364

759

909

727

679

628

487

365

916

1,095

Unit 4

979

1,652

338

1,013

72

1,803

817

525

2,483

1,523

Overburden

11,135

10,172

7,568

9,004

7,190

3,066

6,783

1,274

1,198

844

TOTAL MINED

17,112

22,542

20,349

22,224

19,343

18,388

21,164

17,674

17,772

19,510

2016 to

2021 to

2026 to

2031 to

2041 to

2051 to

Quarry Unit

2020

2025

2030

2040

2050

2060

Total

Unit 1

10,828

6,422

37,661

80,179

71,701

181,335

389,536

Unit 2

11,998

10,650

13,394

32,201

30,882

15,793

117,332

Unit 3 (plus 85% of quarried unit 3a)

78,859

78,886

60,382

142,296

178,932

2,257

657,500

Unit 3a (15% of quarried unit 3a)

5,387

3,818

171

3,120

3,721

10

23,154

Unit 4

546

458

384

82

117

0

12,792

Overburden

402

1,169

473

0

329

0

60,606

TOTAL MINED

108,018

101,404

112,464

257,879

285,682

199,395

1,260,919

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Table 19-23: Hammerstone Mining Losses

Unit

Mining Loss

4

0%

3
25%

2
0%

1
6%

Table 19-24: Hammerstone Substitution Rules

Unit

4

3A

2

1

4

1

na

1.03

na

3
na
1
na
1.16

2
0.97
na
1
1.14

1
na
0.86
na
1

Quarrying will generally progress from north to south.
Figures 19-1 through 19-5 show the site layout and pit progression through the
quarry life. The mining schedule has been designed to produce the materials as
required by the demand model that was produced by BMR.
Development work will include surface ditching for drainage
to dewater the overburden material at least one year ahead of removal. Access
roads will be constructed on a limestone base wherever practical. Any
merchantable timber will be salvaged before clearing and grubbing the area.
Muskeg, topsoil, and weathered rock will be removed by a combination of dozing
and excavating with backhoes or front-end wheel loaders into trucks for
haulage to stockpiles along the eastern edge of the quarry. The top of the
limestone surface will be cleaned by scraping with a dozer or grader to
minimize organic or other contaminants in the finished products.
Once the top of the limestone is cleaned it will be ready
for drilling. The limestone units must be drilled and blasted separately to
maintain product quality. Operational experience will help in delineating the
contacts between the units. No dilution was included in the unit volumes, as
the contacts are gradations of the same material.
Unit 4, the uppermost unit, will be drilled and blasted in a single bench
then loaded and hauled to the crusher to expose Unit 3.
Where over 10 m thick, Unit 3 will be quarried in two
benches. During the pre-feasibility update Unit 3 was subdivided into Unit 3
and Unit 3A where 3A was determined to be a higher quality sub-unit that could
be used for higher value products. In order to help ensure adequate support
equipment would be available to help selectively quarry Unit 3A, additional
dozer time was allocated to the entire unit. Given current operating
experience at the MVQ it was assumed that only 65% of Unit 3 would require
blasting, with the remaining proportion being free dug.
The removal of Unit 3 exposes Unit 2, which will be
quarried as a single bench and is the main source of feed for the reagent
plant. All of Unit 2 was assumed to require blasting and additional support
equipment was allocated to assist in separating this high value unit from Unit
3 and Unit 1.

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Unit 1, the lowest unit in the limestone deposit, will be
quarried in either one or two benches depending on feed requirements and
thickness. The majority of Unit 1 was assumed to require blasting.
The quarrying plan is driven by the need to provide the
high value reagent limestone, primarily from Unit 2 and Unit 4. The plan
assumed that quarrying could occur in separate locations in the pit in order
to achieve the required product feed. Further quarry plans should investigate
the costs associated with the remote quarrying locations to ensure that this
is a reasonable development sequence.

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19.6 Quarry Production Equipment

The equipment selection was based on the pre-feasibility
study. The equipment was initially matched with the production volumes and
anticipated bench height, which has been nominally set at a maximum of 5 m in
accordance with the thickness of the units being mined (Table 19-25). Further
work should be completed to review the equipment selection given the updated
production schedule as there is likely an opportunity to utilize larger, more
cost efficient equipment.

Table 19-25: Hammerstone Mining Equipment

Number of Units

Equipment
Size

Initial

Year 7

Year 15

Drilling

Tracked Diesel-hydraulic drill

3.5 to 6.0 in

1

4

5

Loading

Hydraulic Shovel

7.5 m³

1

2

2

Wheel Loaders

6.0 m³

2

3

3

Trucks

Rear Dump Haulage truck

50 t

11

14

17

Support Equipment

Tracked bulldozer with Ripper
300 kW
2
4

4

Grader
200 kW
1
1

2

Water Truck

50 t

1

1

1

Tracked diesel-hydraulic drills will be used for blast-hole
drilling. Initial pattern size is based on "rules of thumb" developed by E.l.
DuPont, modified for blasting in limestone. Based on information obtained by
AMEC from other limestone quarry operations, the anticipated powder factor
(PF) will be approximately 0.25 kg of explosive per tonne of rock blasted.
Initially, blasting will be the responsibility of a
contractor, however, it is anticipated that the owner will assume this
responsibility in time. A two man blasting crew will dewater, prime, load and
stem the blast holes. Blast design and tie-in will be checked by the on-site
engineer to ensure quality control. It is not anticipated that water will
create many difficulties for the blasting operation; however, for the purposes
of costing it is assumed that some water resistant explosives will be
utilized.
Rock will be excavated with either a hydraulic shovel (7.5
m3 bucket) or a front-end wheel loader (6.0 m3 bucket) working on quarrying
benches from 3 m to 5 m high. Additional units will be purchased as production
increases. For the larger bench heights, additional dozer support may be
necessary to maintain a safe digging environment for the loaders and or
shovels. The selected loader is matched to the proposed 50 tonne class haulage
trucks.
At the run of quarry stockpiles, near the primary crusher,
another loader will be required to ensure continuous feed of the correct
material to the hopper. This loader will tram material from stockpile to the
hopper, load out reject material as required, load trucks for haulage to the
limestone processing complex, as well as performing stockpile maintenance.
This unit will be

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identical to the quarry loader to ensure quarry flexibility and efficiency,
ease of maintenance and operator training, and reduced parts inventory.
The initial truck fleet will consist of eleven 50 tonne
rear dump mechanical drive trucks. The haulage fleet grows as the production
requirements increase following the sales forecast. Haul truck requirements
are based on estimated haulage profiles from previous work on the Hammerstone
project. More detailed haulage studies should be completed as the project
advances.
The support equipment will be used for bench and road
maintenance, ditch preparation and maintenance, drill pattern preparation,
stockpile construction, site access road maintenance, and reclamation. Support
equipment will include a backhoe excavator, tracked dozers, road graders, a
water truck for dust suppression, pickup trucks and mobile equipment
maintenance and service vehicles.

19.7 Process Description
19.7.1 Aggregate Operations

In the Muskeg Valley Quarry operation, aggregate production
plants capable of producing 7,000,000 tonnes/yr of specific product or suite
of products, are currently being acquired and assembled. These plants will
continue to operate as the quarry extends from the currently approved MVQ into
the Hammerstone quarry extension. To increase quarry production to produce
25,000,000 tonnes/yr (up to 30,000,000 tonnes/yr in a peak production year)
for both aggregate sales and to supply the Hammerstone plants, a scaling up of
aggregate production is required.
The aggregate production system is designed to produce four
separate classes of products: construction grade aggregate, base grade
aggregate, concrete rock, and crushed limestone for sale as reagent limestone,
or used for calcining for quicklime and cement production. There will be four
independent aggregate processing plants, each assigned a specific production
duty. Aggregate processing plants are currently being acquired, and will be
installed sequentially as the quarry expands to meet increasing demand for
aggregates. Aggregate processing plants will be semi-mobile, and will be moved
to keep pace with the advancing face of the quarry. This will minimize the
amount of movement and manipulation of source rock and product, reducing
operating costs, vehicle emissions, and dust generation.
In all aggregate plants, excavators, loaders, and/or
hydraulic shovels will be used to move blasted, in situ limestone from the
quarry face on to the aggregate production system. A grizzly is used to scalp
the oversize material and allow the balance of the material to flow into a
feeder unit. The feeder controls the rate at which the material flows into a
primary crusher. The primary crusher breaks the rock down to a nominal size of
150 mm before throughput on a series of conveyors to a secondary crushing
unit, consisting of cone-type crushers followed by multi-deck screens. By
selecting the appropriate screen deck openings, the desired sizes of
aggregates can be drawn off the various levels and sent to stockpiles near
each aggregate production facility. Oversize materials will be circulated back
to the primary crusher.

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Designated routes into and out of the quarry
will be established to safely and efficiently manage traffic flow. Transfer of
crushed limestone for sale as reagent limestone, and to the processing
facilities, will be accomplished by the mine haul-trucks.
At each stockpile location, rubber-tired front-end loaders
will load aggregate onto transport trucks for delivery to customer sites.

Each of the four aggregate plants is
described below in terms of their primary production duty. However,
intermediate products produced in one plant may be moved to another, depending
upon the quality of limestone encountered during quarrying. These product
transfers are not quantified nor shown in the drawings, as the quantities and
types of transfers cannot be predicted. Quarry operations will constantly be
adjusted to maximize recovery of quality products, and operational efficiency.

Process losses, in the forms of fines, for each of the units
are shown in Table 19-26.

Table 19-26: Process Losses

Process

Unit

Losses (%)

4

19

3

9

2

29

1

9

Note: Fines from Units 4, 2 & 3 are collected and used in the process (Units
2&4) or as liner material (Unit 3)

Aggregate General
Aggregate Production Plant#1:

Aggregate Plant #1 (Aggregate 1) will process limestone
mainly acquired from Units 2 and 4, producing various size fractions of
concrete-quality rock or crushed limestone feedstock for the kilns (Figure
19-15). Fractured rock from the quarry face will be fed into a primary crusher
and from there to a secondary cone crusher to reduce the material to specified
sizes. A series of screens will be used to separate and sort the rock by size
fraction. Oversize materials will be directed back to a secondary crusher.
Processing of crushed rock will depend upon the end use of the limestone
(concrete rock or calcinable limestone).
Concrete-quality limestone will be screened following
crushing, with undersize materials removed, stored and diverted to FGD
limestone sales, or to direct placement reclamation areas. Rock of 5 to 14 mm
and 14 to 28 mm can be separately moved by conveyor to the wash facility for
further removal of fines (generally shales). To make aggregate for ready-mixed

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concrete, washing may be necessary to reduce the silt content to an
acceptable level. The wash plant comprises a screening unit with attached
spray bars.
Rock from Unit 2, suitable for calcining, will be crushed
in the primary and secondary crusher systems, separated into two size
fractions (10 to 25 mm and 25 to 55 mm) through a series of screens, and moved
to temporary storage piles. A front-end loader will load these materials onto
a belt conveyor for transport to the limestone processing area for production
into quicklime.
Aggregate-1 will produce, on average, the nominal hourly
tonnages of product shown in Figure 19-15. The products are discharged into
stockpiles and concrete rock is transferred via front-end loader to off-site
haul trucks, which are weighed before leaving the property. Limestone
designated as feed material for the calcining kilns will be moved to the
limestone processing facility area by the mine haul-trucks.

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Figure 19-15: Aggregate 1

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Figure 19-16: Aggregate 2

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Table 19-27: Aggregate-1 Production Rates

Production

Product

Rate (t/h)

55 to 25 mm crushed limestone

300

25 to 10 mm crushed limestone

300

-10 mm crushed limestone fines reject

150

28 to 14 mm concrete rock

120

14 to 5 mm concrete rock

120

-5 mm concrete rock fines reject

60

Aggregate Plant #2:

Aggregate Plant #2 (Aggregate-2) will produce various
products, including concrete, asphalt rock, base grade aggregates, and pond
liner materials acquired predominantly from Unit 3 and Unit 3A. A two-stage
crushing process, with an auxiliary stage to crush oversize materials and
screening to remove fines, will be used to produce one or two size fractions of
aggregate products. Fines will be transported by truck to overburden storage
areas, or to areas undergoing active reclamation for direct placement.
Initially, a single crushing and screening line will be used; in about 2008 a
second line will be added, at which time rock from the primary crusher will be
split into two identical, parallel processing lines. Figure 19-16 shows a
typical layout for Aggregate-2 process at full production capacity of two
spreads.
Undersize materials will be split into two streams. One
stream will be rejected to the fines stockpile (approximately 10% of plant feed
tonnage), in order to remove shale from the final product), while the other
joins the tertiary crusher product.
On average, Aggregate-2 will produce the nominal hourly
tonnages of product shown in Table 19-28. The products are discharged into
stockpiles and transferred via front-end loader to off-site haul trucks, which
will be weighed before leaving the property.

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Table 19-28: Aggregate-2 Production Rates

Production

Product

Rate (t/h)

0 to 150 mm base grade aggregate

800

Pond liner material

500

Concrete Rock

300

Fines reject

160

Experience in the MVQ has shown that not all Unit 3
materials need to be blasted; in many places, Unit 3 may be quarried using a
large hydraulic backhoe or shovel. Clay rich shale within the limestone matrix
reduces the overall quality of this unit, however, with selective crushing and
screening, the shaley material can be removed and are highly effective in the
construction of liners for dikes and ponds. Once separated from the matrix,
the limestone is of a very high quality for use in concrete production.
Evaluations are ongoing, and will continue through the life of the Project, to
ensure that the maximum value and use of this material is realized.

Aggregate Plant #3

The third Aggregate Plant (Aggregate-3) is shown
schematically in Figure 19-17. Aggregate-3 will process limestone acquired
primarily from Unit 1, producing various size fractions of construction grade
aggregates. Rock from the primary crusher will be moved by conveyor to a
secondary cone crusher, which will further reduce the rock to specified sizes.
A series of screens and conveyors will then separate and sort the rock by size
fraction, and direct the fractions to appropriate storage stockpiles. A fines
separator may be required in the production of certain aggregate gradations.
The fines reject material, predominantly shale, will be stored separately, and
ultimately used as backfill in the quarry as part of the progressive
reclamation program.

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Figure 19-17: Aggregate 3

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On average, Aggregate-3 will produce the hourly tonnages of
product shown in Table 19-29. The products are discharged into stockpiles and
transferred via front-end loader to off-site haul trucks, which will be
weighed before leaving the property.

Table 19-29: Aggregate-3 Production Rates

Production

Product

Rate (t/h)

75 to 0 mm construction grade aggregate

230

75 to 40 mm construction grade aggregate

100

40 to 0 mm construction grade aggregate

175

40 to 20 mm construction grade aggregate

35

20 to 0 mm construction grade aggregate

70

Fines reject

70

Aggregate Plant #4

In order to produce the quantities of aggregate anticipated
to be required by the regional market, a fourth Aggregate Plant (Aggregate-4)
will be required as Aggregate-2 reaches capacity (about 2015). Aggregate-4
will be a duplicate of Aggregate-2 (Figure 19-16) producing the same products,
at approximately the same rates, as shown in Table 19-29.

Aggregate Product Transport

Aggregate products will be loaded from quarry stockpiles
into customer or customer-contracted trucks for transport to customer sites.
Loaded trucks will be weighed at the sales gate prior to leaving the site.
Loading the product in the quarry eliminates the need for an intra-quarry
transport fleet and eliminates the need for a separate product handling and
storage facility. Transport trucks will follow designated routes within the
quarry to the product stockpiles, and exit the quarry by designated routes
after loading.
Crushed limestone suitable for calcining will be moved by mine haul-trucks
from Aggregate-1 to stockpiles near the limestone processing complex.

19.7.2 Quicklime Production

Quicklime production will begin in 2009. Initially, the
quicklime processing system will include an activation plant, which removes
bitumen from the limestone, and a quicklime production plant. As demand for
quicklime increases, additional activation and quicklime plants will be
constructed and commissioned. The reagent grade limestone produced by the
activation plant will be used directly in some flue gas emission control
systems, therefore, it is expected that a

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portion of this product will be marketed. The remainder
will be processed into quicklime. The full quicklime production system,
comprising three activation plants and three quicklime plants, is shown
schematically in Figure 19-18.
Construction of each of the activation and quicklime plants
is scheduled to meet expected market demands for the activated limestone and
quicklime products. Ultimately (by 2040), each of the three quicklime plants
will be paired with an activation plant. Plants will be sized, and
construction will be staged in a manner that allows for a single activation
plant to support the feed requirements of more than one quicklime plant. The
first of the Hammerstone quicklime plants will be constructed concurrently
with the first of the activation plants, with construction beginning in 2007
and initial operation anticipated in 2009.
The kilns within each plant will be fired using a blend of
coke and natural gas. Start-up and shutdown of the kilns will be done using
100% natural gas as the fuel source. During normal operations, coke will be
ground in a vertical roller mill and processed in a fuel feed and firing
system engineered specifically for each kiln. It is expected that fuel
requirements overall will be met by a blend of 80% coke and 20% natural gas.
The products within the kilns, limestone and quicklime, will react with the
sulphur in the fuel, resulting in a small amount of gypsum (CaSO4) in the
final product, and removing virtually all of the sulphur within the kiln flue
gases. Any remaining sulphur will be removed by using a final SO2 scrubber in
the flue gas system. Birch Mountain is investigating opportunities to increase
the proportion of coke in the fuel feed mixture, as this would reduce reliance
on natural gas in favour of a fuel source abundantly available in the region.
Coke preparation processes for the initial plants, Activation-1 and
Quicklime-1 are illustrated in Figure 19-19 and Figure 19-11. The same process
will be used for future plants.

Activation Plants

The presence of hydrocarbons in limestone feed is known to
cause operational problems within pre-heater type quicklime kilns.
Hydrocarbons volatize in the kiln and can either ignite in the presence of
oxygen, or condense on cold parts of the pre-heater surfaces and the limestone
feed. Either of these outcomes results in equipment malfunction and increased
maintenance requirements. Therefore, removal of hydrocarbons from the
limestone is a critical first step in the process to produce quicklime.

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Figure 19-18: Quicklime Production Schematic

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Crushed, calcinable limestone from the quarry will first be
passed through an activation kiln to remove and completely combust volatile
organic constituents (VOCs) from the limestone. While the primary purpose of the
activation plant is to produce a high-grade limestone cleaned of organic
substances that is suitable for further processing into quicklime, the product,
by itself, will be a reagent grade limestone suitable for scrubbing SO2 in some
types of emission control systems currently in use in the Fort McMurray area.

This activation plant includes a rotary kiln measuring 3.5 m
in diameter and 50 m in length, set at 4
slope. The limestone is introduced into the upper end, where
natural gas and coke are fired through a low-NOx burner to heat the limestone to
450 C to 600
C as it travels down the rotary kiln. Hydrocarbons within
the limestone will be released into the kiln, and at the kiln discharge, these
gases are transferred into a refractory lined chamber into which preheated air
and a small amount of additional fuel is introduced to ignite any unburned
hydrocarbons and carbon monoxide.

The gas stream is then divided into two paths. One path takes
these hot gases to the feed end of the kiln, where they are re-introduced into
the kiln. This reduces the fuel required to heat the limestone. The second path
passes into a cooling tower into which water and a small amount of milk of lime
is sprayed to cool the gases and to capture any SO2 present in them. The gases
are then transferred to a baghouse system (fabric filters equipped with woven
fibreglass bags) to collect any particulate before they enter the main plant
discharge stack.
The product of the activation plant, a high calcium carbonate
limestone, will discharge from the rotary kiln to a "Niems" contact cooler into
which combustion air is introduced to cool the limestone. The warmed air, which
may contain a small quantity of VOC and CO, is directed to the combustion
chamber, where any residual VOCs or CO will be burned.
At full capacity, three activation plants will be constructed
and operated at the Hammerstone Project. They will be constructed in stages
keyed to expected market demands for activated limestone and quicklime. Each
plant will be sized to produce 800,000 tonnes/yr at full production.
Construction of Activation-1 will begin in 2007, with operation scheduled to
begin in 2009. This plant will initially need to operate for approximately 100
days/yr, producing 230,000 tonnes/yr of activated limestone to support the
operation of the first quicklime plant. Additional operating time will be
required to produce high quality, activated limestone that will be sold for SO2
scrubbing uses. Raw material flows and criteria for Activation-1 are presented
in Figure 19-21 and Figure 19-22.
The timing for construction and operation of the second
(Activation-2) and third (Activation-3) plants is keyed to anticipated market
demands for activated limestone and quicklime. Both of these plants will be
sized to produce 800,000 tonnes/yr of activated limestone.
Construction of Activation-2 is scheduled for 2013 with
commissioning in 2015. Activation-3 is not expected to be required until
approximately 2023. Activation-1 and Activation-2 will meet quicklime plant feed
requirements as well as market demands for activated limestone through to 2023.
Activation-2 and Activation-3 will be sized and designed to be similar to the
initial plant.

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Energy and mass balances for each activation plant are shown in Table 19-30
and Table 19-31, respectively.

Table 19-30: Mass Balance – Activation Plant

Material and Gas Input

kg/min

Material and Gas Output

kg/min

Dry Kiln Feed

1,667.0

Limestone

1,511.8

Kiln Feed Moisture

69.5

Combustion Chamber Exit Gases

1,941.7

Fuel to Kiln - Coke

18.6

Dust in Kiln Exit Gase

16.8

Fuel to Kiln - Nat. Gas

21.0

Fuel Ash

0.5

Fuel in Limestone

33.3

Other Losses

157.9

Fuel to Combustion Chamber

21.5

Secondary Air to Kiln

716.7

Primary Air to Kiln

181.4

Secondary Air to Comb. Chamber

362.9

Coke Conveying Air to Kiln

30.8

Hood Leak Air

45.4

Leak Air at Feed End Seal

45.4

Leak Air with Preheater Feed

45.4

Gas Cooling Water

370.0

Total Input

3,628.9

Total Output

3,628.7

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Figure 19-21: Raw Materials

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Figure 19-22: Activation 1 – Limestone Purification Process

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Table 19-31: Heat Balance – Activation Plant

Material and Gas Input

kJ/min

Material and Gas Output

kJ/min

Dry Kiln Feed

13,400

Limestone

913,929

Kiln Feed Moisture

2,907

Combustion Chamber Exit Gases

3,974,581

Fuel to Kiln incl. bitumen in
LS

14,932

Dust in Kiln Exit Gas

6,200

Fuel to Combustion Chamber

5,931

Endothermic Heat: H2O

992,540

Secondary Air to Kiln

1,460,662

Endothermic Heat: CO2

123,292

Primary air to Kiln

12,118

Radiation Loss

1,066,356

Tertiary Air to Combustion CHR

762,806

Primary Air to Combustion CHR

4,088

Hood Leak Air

397

Leak Air at Feed End Seal

451

Leak Air at Combustion Chamber

271

Fuel Combustion (incl. Bitumen
in LS)

4,070,210

Limestone Exothermic Heat

697,750

Gas Cooling Water

30,976

Total Input

7,076,899

Total Output

7,076,898

Quicklime Plants

Activated limestone produced by the activation plant(s)
will be screened and the coarse fraction placed in a storage bin. A blend of
this high quality limestone and limestone not containing organic substances
from the quarry (Unit 4) will be prepared for calcining in a manner that
ensures production of quicklime meeting customer specifications. A
pre-determined blend of the two limestone feed materials will be prepared by
weigh-feeders and transferred by belt conveyor and bucket elevator to the
quicklime plant preheater.
The preheater uses the hot gases exiting the rotary kiln to
heat the limestone feed to the kiln. This reduces fuel consumption and also
serves to cool the gases, increasing the effectiveness of SO2 scrubbing by the
calcium carbonate in the system, and reducing the temperature to one
acceptable for the baghouse filter system.
The quicklime kiln is a refractory-lined rotating cylinder
measuring 4.1 m in diameter and 53 m in length, inclined at 3
to 4
. Preheated limestone is introduced into the upper end and fuel
is fired at the discharge end. This counter-current flow allows the limestone
to reach a temperature of 950
C at the core of the rock. At this temperature, calcium oxide (CaO;
lime) and carbon dioxide (CO2) are produced from the calcium carbonate
(limestone). It is important to not allow the limestone temperature to reach
higher levels as this causes hard burning, reduced reactivity and
re-carbonation of the lime. The speed of rotation of the kiln, a steady feed
rate to the pre-heater and rotary kiln, a controlled firing rate and close
monitoring of the temperature profile are critical operating variables. The
process will be monitored and controlled by computer in a central control
room. Released CO2 and combustion gases travel up the kiln and into the
pre-heater, transferring their heat to the limestone feedstock, before being
directed to the exhaust gas treatment stream.

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Calcium oxide (lime or quicklime) is the active agent in
many dry and wet flue gas desulphurization processes, in which CaO and SO2
react to form CaSO4 (gypsum), which is subsequently removed from the air
stream as a particulate in a baghouse system. The use of coke as a fuel for
the kiln will result in the generation of some SO2. The presence of CaO and
SO2 together within the kiln results in gypsum formation and a high proportion
of SO2 will be removed before the gases exit the kiln. Injection of a lime
hydrate slurry into the gas stream ahead of the particulate filter will be
used to remove the remainder of the SO2 from the kiln tail gas. In addition to
removing SO2 through the production of gypsum, the hydrated lime dry scrubber
will also remove any metals in the gas stream.
Particulates in the kiln-preheater gas stream, whether
produced physically (rock particulates) in the kiln system, or chemically in
the kiln or hydrated lime dry scrubber, will be cleaned in a fabric filter
type dust collector (the baghouse). The temperature of the inlet gases will be
limited to 260 C, as the
filter bags will deteriorate at higher temperatures. A bleed-in ambient air
cooling system will be used to temper these gases when necessary. Gases will
be drawn through the system by an induced draft fan, driven by an induction
motor with an adjustable frequency drive to control fan speed and therefore
gas flow rate. The materials collected in the baghouse will be periodically
removed and placed in an engineered cell in the reclamation program. Gases
will discharge to the atmosphere through a 65 m tall stack.

Hot lime discharged from the rotary kiln enters a Niems
contact lime cooler. Combustion air, blown into the bottom of the vessel,
permeates up through the bed of hot lime as it is discharged from the kiln.
Cooled lime (quicklime, at approximately 135
C) will be discharged through a cluster of gates at the
bottom of the cooling vessel; gates will open in a predetermined sequence to
discharge the cooled lime to a hot material conveyor. Lime from the Niems
cooler will be moved by a pan type conveyor designed to handle hot material to
a belt conveyor, and from there to a double-deck screen. The coarse fraction (
25 mm) is crushed in a single roll crusher, conveyed by
bucket elevator and discharged into concrete storage silos. The intermediate
fraction is discharged to the bucket elevator and into the same silo. The fine
fraction will be conveyed to a second bucket elevator and discharged into a
separate silo. These lime fines are the feedstock to the hydrated lime
process.

Hydrated lime will be prepared by mixing dry lime fines
with water in predetermined proportions (0.32 kg of water per kg of CaO).
Quicklime and dry hydrated lime will be shipped in dry form to the market.
These dry products will be transferred from silos to bulk trailers, equipped
with pneumatic unloading systems and pulled by conventional highway tractors.

Quicklime plants will be operated on a continuous 24 h/d
basis to minimize the heat losses and reduce stress on refractory lining that
would occur with cyclical operation. Typically, one or two planned shutdowns
of up to 35 days total duration will be required annually for maintenance
purposes. In the first few years of operation, product demand may be less than
design capacity for the plant. At decreased feed rates, the efficiency of the
kiln is reduced and operating costs increase. To the extent possible, lower
demand will be accommodated by increasing the length of the planned shutdowns,
thus reducing total operating hours.

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Quicklime production is forecast to begin with the first
plant (Quicklime-1) in 2009, and to ramp up to 200,000 tonnes/yr by 2011.
Process flow diagrams representing Quicklime-1 operations are shown in Figure
19-23 to Figure 19-25.
In 2008, construction of Quicklime-2 will begin, with
commissioning in 2011. This facility will be similar to Quicklime-1 in
capacity (200,000 tonnes/yr) and process. Therefore, the mass balances and air
emissions described for Quicklime-1 also represent Quicklime-2 operation.
Construction of Quicklime-3 will start in 2012 and commissioned in 2015 (Based
on projected regional demand for quicklime, Quicklime-3 will have a capacity
of 600,000 tonnes/yr. The process flow diagram for Quicklime-1 and Quicklime-2
applies to Quicklime-3, except that the size and flows of various components
will be sized upwards in proportion to the increase in capacity.
Energy, and mass balances for Quicklime-1 are shown in
Table 19-32 and Table 19-33, respectively. Quicklime-2 will be identical to
Quicklime-1, and for Quicklime-3, all quantities will be scaled up by a factor
of three.

Table 19-32: Mass Balance – Quicklime 1

Material and Gas Input

kg/min

Material and Gas Output

kg/min

Dry Kiln Feed

893.6

Lime

416.4

Kiln Feed Moisture

37.2

Preheater Exit Gases

1,788.4

Fuel to Kiln

95.3

Dust in Kiln Exit Gas

41.6

Secondary Air to Kiln

987.5

Fuel Ash

2.2

Primary Air to Kiln

141.2

Other Losses

87.2

Hood Leak Air

59.4

Leak Air at Feed End Seal

85.8

Leak Air with Preheater Feed

35.8

Total Input

2,335.8

Total Output

2,335.8

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Figure 19-25: Finished Lime & Limestone Product Packaging

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Table 19-33: Heat Balance – Quicklime-1

Material and Gas Input

kJ/min

Material and Gas Output

kJ/min

Dry Kiln Feed

7,184

Lime

689,639

Kiln Feed Moisture

1,559

Preheater Exit Gases

658,177

Fuel to Kiln

13,751

Dust in Kiln Exit Gas

14,043

Secondary Air to Kiln

1,039,900

Endothermic Heat: H2O

85,059

Primary Air to Kiln

7,249

Endothermic Heat: CO2

1,386,361

Hood Leak Air

276

Radiation Loss

1,074,514

Leak Air at Feed End Seal

399

Leak Air at Preheater Feed

166

Fuel Combustion

2,663,004

Lime Exothermic Heat

174,306

Total Input

3,907,794

Total Output

3,907,793

Auxiliary Quicklime Production Equipment

In addition to the demand for activated limestone and
quicklime in FGD systems, Birch Mountain also anticipates a market for
hydrated lime which is derived from quicklime, and the manufacturing, storage,
and loading facilities will be installed on-site.
Hydrated lime will be produced for use in the treatment of
water. The hydrate equipment will be designed to produce 400,000 tonnes/yr
with the sale of product to commence in 2009. Hydrated lime is a dry powder
produced by treating quicklime with enough water to satisfy its chemical
affinity for water. Quicklime produced by the lime plants will be transferred
from storage and metered into a hydrator. The hydrator mechanically mixes the
quicklime and water together at a controlled rate to optimize the consistency
and size distribution of the final product. Hydrators commonly utilize either
screws or paddles depending upon the manufacturer, to physically agitate and
mix the quicklime and water together. Hydrated lime leaving the hydrator is
sent through an impact mill to ensure lumps are removed and the final product
is pulverized. Once pulverized, the product is collected utilizing a cyclone
and a dust collector. From these units the product is then transferred via a
pneumatic pump system to a storage silo ready for distribution.

Process Plants Workforce

It is projected that, at full operation, a workforce of 55
to 70 persons, mostly working 12 hour shifts, days and nights, 8 days on and 4
days off, will be required to operate the limestone processing complex.

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19.8 Site Infrastructure
19.8.1 Fuel

The activation and quicklime kilns will be fired using a
blend of coke and natural gas fuel requirements are 1 Gj per tonne of output
for the activation kilns, 6.4 Gj per tonne of output from the quicklime kilns.

Coke is widely used as a fuel in quicklime manufacturing
and its abundance in the oil sands region as a by-product of bitumen upgrading
makes it an ideal kiln fuel. Based on its higher energy content and lower
hardness, Birch Mountain plans to use utilize coke produced in delayed cokers.
At full production after 2040, approximately 750 tonnes per day (274,000
tonnes per year) of delayed coke will be required. At an estimated minimum
annual delayed coke production of 6 million tonnes per year in 2012, Birch
Mountain's coke requirements represent less than 5% of the delayed coke
produced in the region, and will likely be less because coke production is
expected to increase as regional bitumen production increases.
Natural gas will be used to supplement coke as fuel for the
activation, and quicklime kilns. Estimated daily requirements for natural gas
rise from 39 x 103 m3/d in 2009 to 146 x 103 m3/d in 2015, reaching 164 x 103
m3/d at full production in the limestone processing complex, post-2023.
These volumes represent less that 0.25% of forecasted oil sands industry
natural gas consumption, and availability of natural gas for the project is
not a concern.

19.8.2 Operating Power

ATCO is in the process of constructing a 260 kV power line,
which will cross the north end of the Birch Mountain Mineral Surface Lease (MSL),
and be in operation in 2007. ATCO has indicated that this line can easily
supply all of Hammerstone's anticipated power requirements.
A substation, complete with line protection and isolation,
will be constructed at the quarry site approximately 0.8 km from the ATCO
transmission line. The main substation will be west of the main access road.
This substation will include the following major equipment:

main circuit breaker;

isolation switches;

utility metering;

a power transformer for reduction of voltage from 260 kV to
4.16 kV for site distribution; and

5 kV switchgear.

Power will be fed from the substation via underground,
concrete encased cables to individual 5 kV circuit breakers, each feeding
switchgear, transformers, motor control centres, lighting and low power
circuits for one plant. These will be installed within electrical rooms
located near the

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plants, administration areas, warehouses and shops. Motors
of 300 hp and larger will be operated on 4,160 V, while those smaller will
operate on 600 V. Electrical power requirements for the limestone processing
plants in 2009 are estimated to be typically 3,400 kW. This will increase as
plants are added, with the 2018 average being 13,100 kW. Installed (connected)
and average anticipated operating load estimates for 2009, 2013, and 2018 are
shown in Table 19-34.

Table 19-34: Plant Installed Electrical Loads (kW)

2009

2013

2018

Component

Installed

Average

Installed

Average

Installed

Average

Activation Plants

1,500

1,000

3,000

2,000

4,500

3,000

Quicklime Plants

3,000

1,800

6,000

3,600

12,000

9,000

Hydrating Plant

500

300

1,000

600

1,000

600

Administration, scale house, maintenance, lab

and water treatmen areas

500

300

600

400

800

500

Totals

5,500

3,400

10,600

6,600

18,300

13,100

Electrical power requirements for the quarry are estimated
to be 3600 kW. The quarry will be operated with mobile crushing and conveying
equipment, and power will be supplied by portable diesel powered 600 V
generating equipment that moves with it. Associated with each generator there
will be a 600 V motor control centre and feeding motors and a lighting
transformer and distribution panel that will supply 120/240 V for lighting
systems and smaller load requirements.

19.9 Capital Cost Estimate

The estimated cost to construct, install and commission the
facilities described in this report is C$577 million. This estimate is
categorized as pre-feasibility level with an expected accuracy of ±25%. This
amount includes the direct field costs of executing four crushing plants,
three activation plants, three calcining plants, two hydration plants, and the
indirect costs associated with design, construction and commissioning.
The estimate is summarized in Table 19-35. The base costing
is 1st quarter, 2006 Canadian dollars with no allowance for escalation beyond
that time. Interest or financing costs during construction are not included.

A development capital expenditure profile is provided in
Figure 19-26 to 2025. This figure highlights three phases of capital
expenditure. An initial phase to 2012 requires expenditure of C$276 million to
build the crushing and lime plants and purchase initial mining equipment. A
second phase between 2013 and 2015 requires C$227 million to expand the lime
plant if forecast reagent limestone demand is achieved. A final activation
kiln is installed at a cost of C$74 million from 2020 to 2023 if required.

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Table 19-35: Summary of Capital Costs

Construction horizon

Total

Area

Start

Finish

($ million)

Mining capital

42.9

Crushing plants

16.4

Activation plant #1
2007
2009
73.7

Activation plant #2
2013
2015
73.7

Activation plant #3
2020
2023
73.8

Lime plant #1
2007
2009
69.7

Lime plant #2
2008
2011
74.0

Lime plant #3
2012
2015
144.0

Hydration plant #1
2008
2008
4.3

Hydration plant #2

2013

2013

4.3

Total Capital Cost

576.5

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Figure 19-26: Cumulative development capital profile

The capital cost estimate is based on the following project data:

design criteria
flowsheets
general arrangement drawings
single-line electrical drawing
equipment list
supplemental sketches as required
budget quotations from vendors
regional climatic data
in-house database

project work breakdown structure (WBS) and code of
accounts.

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According to AMEC classifications, this estimate is categorized as
pre-feasibility level, with a likely accuracy of ±25%. Owner's costs and
working capital are not included.
A major assumption is that all crushed material required for the project
will be supplied by BMR at no cost to the project.

19.10 Operating Cost Estimate
19.10.1 Summary

The operating cost estimate is based on an Owner-operated
quarry, aggregate plant, calcining, and hydration plant facilities. Costs have
been calculated for the four main areas of quarrying, aggregate processing,
calcining, hydration, and general and administration. Costs have been
developed from data considered applicable to the Fort McMurray area. Table
19-36 shows the overall average operating cost anticipated for the Hammerstone
Project over its planned 55 year life.

Table 19-36: Estimated Average Operating Cost for the Hammerstone Project

Area

Cost per Tonne Product ($)

Quarrying and rock haulage

1.88

Aggregate plant processing
1.66

Activation plant
9.48

Calcining plant processing
36.40

Hydration plant costs
15.22

General and administration

0.30

19.10.2 Quarrying

Quarry operating costs cover all activities from clearing the
property to the point where material is delivered to the crushing facility and
waste rock is placed in the waste rock pile.

The costs include drilling, blasting, loading, hauling, dozing
and wages and salary. These costs are summarized in Table 19-37, averaged over
the life of the project. Included in the table is also the cost of removing the
overburden to a stockpile and the re-handling from stockpiles to the primary
crushers. The unit quarrying cost in Table 19-37 is lower than the unit
quarrying cost of the previous table because it is calculated on the basis of
material moved. The amount of material moved also includes overburden and waste
in addition to the amount of product.

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Table 19-37: Average Life-of-Quarry Operating Costs

Activity

Percentage of

Area

($/t mined)

Mining Costs (%)

Drilling

0.19

11

Blasting

0.24

13

Loading

0.29

16

Hauling

0.64

35

Dozing

0.14

8

Primary Support

0.09

5

Ancillary

0.09

5

Staff

0.12

7

Total

1.80

100

19.10.3 Aggregate Operation

The estimate is based on quotations for other projects in the Fort McMurray
area, consultations with crushing contractors and equipment suppliers, and
experience working in the industry.
The aggregate operation covers the cost categories shown in
Table 19-38, with all costs based on the sales tonnage on representing an
average over the life-of-quarry. For the period examined, the average cost
totals $1.66/t product.

Table 19-38: Aggregate Plant Life-of-Quarry Operating Costs

Activity

Percentage of Costs

Area

($/t product)

(%)

Power

0.47

28

Maintenance

0.75

46

Load and Hauling

0.17

10

Wages and Salaries

0.21

13

Fines rehandle

0.06

3

Total

1.66

100

19.10.4 Activation and Calcining Operation

Activation and calcining process costs have been broken
into components as detailed in Table 19-39 and Table 19-40. The costs include
all administrative personnel, operators and mechanics, operating consumables,
fuel, and maintenance parts for the activation and calcining operations.

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Table 19-39: Activation Operating Cost

Activity

Percentage of Costs

Area

($/t product)

(%)

Operations / maintenance

3.17

33

Wages and Salaries

2.15

23

Fuel

2.56

27

Power

0.74

8

Insurance / miscellaneous

0.86

9

Total

9.48

100

Table 19-40: Calcining Operating Cost

Activity

Percentage of Costs

Area

($/t product)

(%)

Operations / maintenance

4.60

12

Wages and Salaries
10.47
29

Fuel
12.45
34

Power
4.64
13

Insurance / miscellaneous

4.24

12

Total

36.40

100

19.10.5 Hydration Operation

Hydration costs are broken into components as detailed in
Table 19-41. The costs include all administrative personnel, operators and
mechanics, operating consumables, power, and maintenance parts for the
hydration operations.

Table 19-41: Hydration Operating Cost

Activity

Percentage of Costs

Area

($/t product)

(%)

Operations / maintenance

2.94

19

Wages and Salaries
9.57
63

Fuel
0.00
0

Power
0.55
4

Insurance / miscellaneous

2.15

14

Total

15.21

100

19.10.6 General and Administration

G&A costs include administrative personnel, head office
support, human relations, general office supplies, safety and training
supplies, taxes, travel, insurance, permits, building maintenance,
environmental management, and employee transportation to and from the
job-site. These costs are not directly chargeable to the quarry or plant
areas. The G&A cost is C$0.30/t product.

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19.10.7 Contingency

A contingency of 15% has been applied to the G&A operating costs only.

19.10.8 Assumptions

The following assumptions have been made in regard to the operating costs:

equipment is owned and operated by BMR
maintenance is carried out in-house
labour costs are in line with the surrounding operations

job classifications across the project will
incorporate a fair amount of flexibility
a labour burden of 35% has been included
a contingency of 15% has been added to the G&A costs.

19.11 Financial Analysis
19.11.1 Summary

The Hammerstone project was analyzed using a discounted
cash flow approach assuming 100% equity in 1st quarter 2006 Canadian dollars.
Projections for annual revenues and costs are based on data developed for the
quarry, process plant, capital expenditures and operating costs. Estimated
project cash flows were used to calculate base case pre-tax net present value
(NPV), after-tax NPV, pre-tax internal rate of return (IRR) and after-tax IRR.
Prices and costs were set at constant 2006 levels; aggregate and reagent
limestone prices were taken from Norwest's report dated May 18, 2006.
The base-case analysis estimates the project's pre-tax NPV
at C$1669 million on a pre-tax basis and after-tax NPV at C$1099 million using
a 7.5% discount rate. These results are slightly higher than those reported in
AMEC's valuation memorandum dated 25 June 2006 because a review of activation
plant capacity requirements demonstrated that construction start for the
second activation plant could be delayed until 2013.
Table 19-42 provides the project NPV at various risk-adjusted discount
rates. These results can be interpreted in the following manner.
Undiscounted cash flow figures are based upon projections
of revenues and costs for the life of the project from 2006 to 2060. Expected
cumulative project revenue totals C$19,949 million over the life of the
project. Expected total operating costs and reclamation costs are C$5,886
million. Total royalties paid to the Alberta government and a third party over
the life of the project are expected to be C$182 million. Capital expenditure
including sustaining capital is expected to total C$989 million. Provincial
and federal corporate income taxes are estimated to total C$4,278 million.
Expected net cash flow before tax is the difference between revenue and the
sum of operating costs, reclamation costs, royalties and capital costs and is
equal to C$12,891 million. Expected

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after-tax net cash flow is equal to C$8,613 million and is equal to the
difference between net cash flow before tax and the total taxes paid to the
provincial and federal governments.
The cumulative cash flow numbers reported in the previous
two paragraphs do not include any adjustments for the time value of money or
any adjustments for risk. Project net cash flows (i.e. the amount the investor
receives) are distributed over the life of the project and the actual net cash
flow amount is uncertain. Investors are risk averse and prefer to receive cash
flow sooner rather than later. They require compensation for delaying the
receipt of cash into the future and for being exposed to investment (cash
flow) uncertainty. This compensation is calculated by discounting.
This report assumes that the time value of money is equal
to 2.5%. At this rate, a certain dollar of net cash flow received 20 years in
the future is worth C$0.610 today (i.e. an investor receiving C$1 with
certainty in 20 years is only willing to pay C$0.610 for it today). The
difference between C$1 and C$0.610 is compensation for deferring the receipt
of cash for 20 years. This is calculated using the discrete discounting
formula (1+RFRate)-Year where Year is equal to 20 and RFRate is equal to 2.5%.
The current value of a certain dollar in each project year is calculated with
this formula by using the appropriate year.
The project's cumulative time-discounted net cash flow
(after-tax NPV at 2.5%) is C$3,913 million. This represents the
time-discounted value of the project before calculating the compensation an
investor requires for exposure to uncertainty (risk). The difference between
the cumulative after-tax net cash flow of C$8613 million and the cumulative
time-discounted net cash flow is C$4,700 million. It is the investor's
compensation for deferring the receipt of project net cash flow. The project's
after-tax NPV at 2.5% represents an estimate of the amount an investor would
pay today for the expected cumulative after-tax net cash flow without
considering the value effects of uncertainty (i.e. there is no risk
adjustment).
Investors are also risk averse so an adjustment for net
cash flow uncertainty is required to determine project net present value. One
method of accounting for the value effects of uncertainty is to increase the
discount rate so that it incorporates a risk premium. A risk premium of 5%
would increase the discount rate to 7.5%. At this rate, an uncertain dollar of
net cash flow received 20 years in the future is worth C$0.235 today (i.e. an
investor expecting to receive C$1 in 20 years is only willing to pay C$0.235
for it today). The difference between C$1 and C$0.235 is compensation for both
deferring the receipt of cash for 20 years and for being exposed to cash flow
uncertainty. This is calculated using the discrete discounting formula
(1+RFRate+RiskPremium)-Year where Year is equal to 20, RFRate is equal to
2.5%, and RiskPremium is equal to 5%.
The project's after-tax NPV at 7.5% is C$1,099 million. The
difference between the cumulative time-adjusted after-tax net cash flow of
C$3,913 million and the project NPV at 7.5% is C$2,814 million. This
difference is the investor's compensation for exposure to project uncertainty
and it is known as a risk adjustment. The project's after-tax NPV at 7.5% is
an estimate of the amount an investor would pay today for the expected
cumulative after-tax net cash flow when the discount rate component for the
time value of money is 2.5% and the discount rate component for risk is 5%.

Higher (lower) discount rates can be used to calculate project NPV if an
investor believes the appropriate risk premium is greater (less) than 5%.

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The project's pre-tax IRR is estimated to be 36.2% and
after-tax IRR is estimated to be 31.2%. The payback period is estimated at 5.9
years from first production. The base-case quarry life is 55 years.

Table 19-42: Variation in NPV (C$ million) with Discount Rate and IRR

0%

2.5%

5%

7.5%

8.0%

10%

12.5%

15%

Pre-tax NPV

12891

5874

2987

1669

1500

1005

640

424

Pre-tax IRR (%)
36.3%

After-tax NPV
8613
3913
1981
1099
986
655
411
266

After-tax IRR (%)

31.2%

19.11.2 Sensitivity Analysis

Sensitivity analysis was performed by varying quarrying
cost, process cost, product price and capital expenditure across a range of
minus 20% to plus 20%. The cash flow model is most sensitive to changes in
reagent limestone and aggregate product price, significantly less sensitive to
mining costs, processing cost, and capital costs, and least sensitive to lime
plant fuel cost (see Figure 19-27 and Figure 19-28).

Figure 19-27: Sensitivity of Pre-tax NPV using a 7.5% discount rate (C$
million)

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Figure 19-28: Sensitivity of After-tax NPV at 7.5% discount rate (C$ million)

19.11.3 Valuation Methodology

A discounted cash flow analysis was used to value the
Hammerstone Project. This method requires projecting annual cash inflows (or
revenues) and then subtracting annual cash outflows such as operating costs,
corporate income taxes, and capital costs. The resulting net annual cash flows
are discounted to the date of valuation at a chosen discount rate that
comprises the risk-free interest rate and a risk-adjustment. The project's NPV
is the sum of the discounted net annual cash flows. The date of valuation is
assumed to be the start of 2006. For discounting purposes, cash flow is
recognized at the end of the year.
An internal rate of return is calculated, equivalent to the
rate of return at which NPV equals zero. The payback period is stated as the
number of years from the production start date required to pay back the
initial capital investment, excluding sunk costs, and based on the
undiscounted cash flow.

Aggregate and Reagent Limestone Product Marketing

Norwest provided an independent report setting aggregate and reagent
limestone product prices for the Fort McMurray region. Their analysis
recognized the depletion of alternative

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2006 NI43-101 TECHNICAL REPORT

sources of aggregate, the lack of large-scale local reagent
limestone producers, and the truck transport cost of importing reagent
limestone from producers outside the region. This analysis did not consider
the possibility of using rail to import reagent limestone and the capital
investment required to upgrade current rail facilities or build new rail
facilities for such importation. All products are assumed to be sold at
constant 2006 prices detailed in the Norwest report.
Demand for aggregate and reagent limestone was estimated by
converting forecast oil sands construction activity and installed bitumen
production capacity into product demand with a construction and production
demand factors. CERI and Professor Graham Davis provided a model of bitumen
production and oil sands construction based on current announced projects and
an annual expansion increment once the announced projects are completed.
Norwest provided an independent report that included aggregate demand factors
for construction activity and bitumen production capacity. Norwest reviewed
and accepted demand factors linking reagent limestone product use to the
bitumen production capacity..

Taxation

The valuation model includes federal and provincial
corporate income taxes. These tax calculations recognize possible tax loss
carry-forward situations with a maximum of seven year duration, Class 41a
depreciation of development capital, and Class 41 depreciation of sustaining
capital. There were no instances of the tax loss carry-forward provision being
required in the cash flow model with the current production and output pricing
assumptions.

Royalties

Royalties on quarry production have been included in the
financial analysis. The Alberta Government receives a royalty of C$0.0441/t
limestone sold. There is also an additional third party royalty of C$0.158/t
of limestone sold.

Bonds, Reclamation, and Salvage

Reclamation costs have been estimated at $530,000 per year. Future
financial analysis should explore this matter further.

Other Assumptions

The major assumptions used in developing the cash flow model are outlined
below:

The valuation date of 1 January 2006 is based on
contract operations starting immediately with no pre-production period.

End-of-year cash flows were used for discounting
purposes.

Working capital was set at two months' operating
cost less one-half month of payables.

The financial analysis is based on 100% equity
financing.

Product pricing is based on FOB Hammerstone site;
no allowance is made for product delivery charges.

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Product losses and insurance are not included in
the financial analysis.

No allowance is made for inflation of revenues or
costs.

Ore grade is assumed to be 100%.

All quarried material is processed, and the value
is realized in the year of production.

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2006 NI43-101 TECHNICAL REPORT

20.0 CONCLUSIONS AND RECOMMENDATIONS

The following conclusions may be drawn based on the, "Hammerstone Project
Prefeasibility Study Report (February 2005)." and it's subsequent 2006 update:

The Hammerstone Quarry contains sufficient reserves for over 50 years of
production based on the updated product demand and sales forecast.
A viable market for the aggregate and reagent limestone products exists in
the local Fort McMurray area.
The Hammerstone Project can produce quality aggregate, quicklime and other
reagent limestone products suitable for the oil sands industry and local
infrastructure markets.
It is reasonable to expect that the limestone can be
quarried, processed and sold at a profit given the processes described, the
expected sales quantity, the close proximity to the market and, the estimated
prices for the final saleable products.
Birch Mountain should expand it's testing program for
upgrading Unit 3 quality as it relates to segregated sub-units based on shale
content. A test pit or bulk sample scale program must increase the number of
samples for testing and, expand the geographic area of the test locations.
Positive results similar to the single test currently available will allow for
the upward adjustment of measured and indicated resources for Unit 3
sub-units. A subsequent increase in sub-unit 3A reserves would be expected
(following a mine scheduling review) which will lead to additional options for
higher value product sales. This will also provide a wider flexibility in the
product mix so BMR can react much more quickly to changing customer demands.
This recommendation should be implemented before the final feasibility study
is completed.

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2006 NI43-101 TECHNICAL REPORT

21.0 REFERENCES

Alberta Chamber of Resources, 2004. Oil Sands Technology Roadmap, Unlocking
the Potential, Alberta Chamber of Resources, January 2004, 82 p.
Alstom, 2003. Recent Alstom Power large CFB and scale up
aspects including steps to supercritical. Jean-Xavier Morin, 47th
International Energy Agency Workshop on Large Scale CFB, Zlotnicki, Poland,
October 13, 2003, 15 p.
(Web reference: http://www.iea.org/TECH/fbc/pdf/47/morin47.pdf)
AMEC Americas Ltd, 2005. Birch Mountain Resouces Ltd. Hammerstone Projedt
Pre-Feasibility Study Report. February 2005.
AMEC Americas Ltd, 2005. Hammerstone Project, Alberta. Independent
Qualified Person's Review and Technical Report. March 2005.
Canadian Energy Research Institute, 2005. Cogeneration Opportunities for
Canadian Oil Sands Projects - Part 2: Oil Sands Supply Outlook to 2020, 117 p

Canadian Energy Research Institute, The, 2005. Cogeneration Opportunities
for Canadian Oil Sands Projects – Part 3: Cogeneration Options and
Opportunities, 105 p.
Canadian Energy Research Institute, The, 2006. The Role of
the Canadian Energy Research Institute in Assessing Future Activity in the
Development of Alberta's Oil Sands Resources, a report prepared for Birch
Mountain Resources Ltd.
Davis, Graham A., 2006. Estimating Probabilistic Alberta
Oil Sands Oil Production to 2070, for use in Aggregate and Chemical-Grade
Limestone Demand Modeling at AMEC Americas; a report prepared for Birch
Mountain Resources Ltd. May 7, 2006.
National Energy Board, 2006. Canada's Oil Sands, Opportunities and
Challenges to 2015: An Update. National Energy Board, June 2006, 71 p.
Norwest Corporation, 2006. Update on Limestone Products Market Demand and
Pricing; a report prepared for Birch Mountain Resources Ltd. May 18, 2006.
Regional Issues Working Group, 2003. Athabasca Oil Sands Companies, 2002
Aggregate Survey Summary. Athabasca Regional Issues Working Group, February
2003.
Regional Issues Working Group, 2004. 2003 Aggregate Supply & Demand Survey.
Athabasca Regional Issues Working Group, Annual Resource and Development
Surveys, February 2003.

Project No.:

Page 21-1

APPENDIX A

List Appendices if A

AMEC Americas Limited

111 Dunsmuir Street, Suite 400

Vancouver, B.C. V6B 5W3

CANADA

Tel +1 604-664-3471

Fax +1 604-664-3041

www.amec.com}}}}}}

Year	Number of	Series Samples
	Sites Sampled
2001	25	KAR01
2003	18	GDP03
2003	31	KAR03
2004	6	GKR04
2004	20	UQUMP04
2004	74	GDP04
2005	5	BMBS05
2006	26	TP06

Units	Sub-Units	Designations	Measured	Indicated	Total
		ATT 1,2,4,6;
1		reagent	240.5	245.2	485.7
		limestone
2		Quicklime,	79.5	78.8	158.3
		Hydrated lime
		Concrete rock,
	3A	ATT 1,2;	1.0	25.2	26.2
		reagent
		limestone
	3B+3C	ATT 2,4, 6;	322.7	459.3	782.0
		Shale liner
3	Subtotal		323.7	484.5	808.2
		Reagent
4		limestone,	7.1	5.5	12.6
		Concrete rock
Total			650.8	814.0	1464.8

Units	Sub-Units	Designations	Proven	Probable	Total
1		ATT 1,2,4,6; reagent limestone	181.1	172.0	353.1
2		Quicklime, Hydrated lime	59.9	58.0	117.7
	3A	Concrete rock, ATT 1,2; reagent limestone	0.8	22.4	23.2
	3B+3C	ATT 2,4, 6; Shale liner	211.7	282.6	494.3
	3B+3C	ATT 2,4, 6; Shale liner	211.7	282.6	494.3
3	Subtotal		212.5	305.0	517.5

4		Reagent limestone, Concrete rock	5.6	4.5	10.1
Total			459.2	539.5	998.7

	Construction horizon		Total
Area	Start	Finish	($ million)
Mining capital			42.9
Crushing plants			16.4
Activation plant #1	2007	2009	73.7
Activation plant #2	2013	2015	73.7
Activation plant #3	2020	2023	73.8
Lime plant #1	2007	2009	69.7
Lime plant #2	2008	2011	74.0
Lime plant #3	2012	2015	144.0
Hydration plant #1	2008	2008	4.3
Hydration plant #2	2013	2013	4.3
Total Capital Cost			576.5

	Area	Cost per Tonne Product ($)
	Quarrying and rock haulage	1.88
	Aggregate plant processing	1.66
	Activation plant	9.48
	Calcining plant processing	36.40
	Hydration plant costs	15.22
	General and administration	0.30

	0%	2.5%	5%	7.5%	8.0%	10%	12.5%	15%
Pre-tax NPV	12,891	5874	2987	1669	1500	1005	640	424
Pre-tax IRR (%)	36.3%
After-tax NPV	8613	3913	1981	1099	986	655	411	266
After-tax IRR (%)	31.2%


¹ Includes studies by AMEC, CERI, Dr. Graham Davis, Norwest Corporation and Phoenix Process Engineering Inc. See Section 21: References for details


² Source - Section 1.4 of the Hammerstone EIA.
³ Source - Table 8.12 of the Hammerstone EIA.

Age	Group	Formation	Member	Lithology	Thickness⁽⁴⁾
Quaternary	-	-	-	Till	Thin to absent
Lower Cretaceous	Mannville	McMurray	-	Oilsands, siltstone, shale	Thin to absent
Unconformity
Upper Devonian	Beaverhill	Waterways	Moberly⁽⁵⁾	Nodular and fossiliferous limestone	40 - 45 m
	Lake				(eroded at top)
			Christina,	Nodular limestone, calcareous shale	102 m
			Calumet Firebag
		Slave Point	-	Limestone	10 m
		Ft. Vermilion	-	Anhydrite, shale, limestone, dolomite	17 m
Middle Devonian	Elk Point	Watt Mountain	-	Anhydrite, shale, limestone, dolomite
		Prairie Evaporite	-	Anhydrite, salt, dolomite	48 m
		Methy	-	Dolomite, dolomitic limestone,	70 m
				anhydrite
		La Loche/	-	Basal coarse conglomerate,	32 m
		McLean River		sandstone, shale, minor
				anhydrite/gypsum
Unconformity
Precambrian	-	-	-	Granitoid-mafic gneisses	-


⁴ Thickness of the Moberly Member and younger are from geological information within the project area. Unit thickness below Moberly Member is from drill hole LAC94-02, located approximately 2.5 km to the northeast of the project area
⁵ Interval of interest in the Hammerstone project area. The Ft. Vermilion and Watt Mountain formations were logged as one unit in the Hammerstone Project region.

Unit	Lithology	Average Thickness
Unit 4	Massive/nodular limestone	0 m to 6 m
	Nodular limestone, interbedded
Unit 3	limestone/calcareous shale,	20.5 m
	calcareous shale
Unit 2	Fossiliferous and Nodular Limestone	4.4 m

Unit 1	^{Nodular limestone, minor calcareous}	13.0 m
	shale

Unit 3 sub-unit name	Shale percentage	Possible Products if successfully upgraded(1)
Unit 3A	0% - 15%	Concrete aggregate, asphalt aggregate, reagent limestone, base aggregate
Unit 3B	15% - 35%	Base and Construction aggregate
Unit 3C	Above 35%	Pit-run gravel,sub-base aggregate, low permeability liner material

Unit	Lab	Sample	CaCO3%
Unit 1	FFE Minerals	U104-08A	86.52
Unit 1	ACME Labs	BMQCS02-06	84.25
Unit 1	ACME Labs	BMQCS03-05	81.31
Unit 1	ACME Labs	BMQCS04-05	82.81
Unit 1	ACME Labs	BMQCS05-04	82.67
Unit 1	ACME Labs	BMQCS06-04	81.00
		Average (ACME)	82.41
Unit 2	FFE Minerals	MQU96-04	94.12
Unit 2	FFE Minerals	BM02-04	94.81
Unit 2	FFE Minerals	BM02-05	94.21
Unit 2	FFE Minerals	MQU04-01	96.30
Unit 2	FFE Minerals	MQU04-02	95.80
Unit 2	FFE Minerals	MQU04-03	96.30
Unit 2	FFE Minerals	MQU04-04	96.40
		Average	95.42
Unit 4	FFE Minerals	BMQCS-03-6ii	89.42
Unit 4	FFE Minerals	GDP03-07	93.40
Unit 4	FFE Minerals	GKR04-01	95.30
Unit 4	FFE Minerals	GKR04-03	95.50
Unit 4	FFE Minerals	GKR04-04	94.90
Unit 4	FFE Minerals	GKR04-05	95.30
Unit 4	FFE Minerals	UQU04-05	93.70
		Average	93.93

Compounds	Elements
SiO2	Ba
Al2O3	Ni
Fe2O3	Sr
MgO	Zr
Cao	Y
Na2O	Nb
K2O	Sc
TiO2	Total C
P2O5	Total S
MnO
Cr2O3
LOI

	Depth to Top of Unit							Thickness
Drill Hole	Limestone	Unit 4	Unit 3	Unit 2	Unit 1	Christina	Total Depth	Unit 4	Unit 3	Unit 2	Unit 1
BM96-01¹	5.40	5.40	6.20	30.00	33.00	45.80	55.80	-	23.80	3.00	12.80
BM96-02¹	23.00	-	-	42.50	45.90	58.10	68.10	-	-	3.40	12.20
BM96-03¹	4.60	4.60	7.35	30.50	34.30	47.25	48.25	-	23.15	3.80	12.95
BM96-04	13.70	-	-	20.2	25.30	37.95	48.95	-	-	5.10	12.65
BM96-05	32.00	-	-	52.50	56.00	69.30	79.30	-	-	3.50	13.30
BM02-02	surface	surface	3.66	25.20	29.40	41.50	45.11	-	21.54	4.20	12.10
BM02-03	surface	surface	5.13	24.60	29.20	-	30.50	5.13	19.47	4.60	-
BM02-04	5.50	-	-	25.80	30.20	-	31.85	-	-	4.40	-
BM02-05	6.65	-	-	13.10	17.82	30.85	35.40	-	-	4.72	13.03
BM02-06	2.15	-	-	8.5	12.95	-	21.70	-	-	4.45	-
BM02-08	11.20	-	-	-	15.25	-	15.85	-	-	-	-
BM04-01²	surface	surface	-	23.40	26.10	41.70	44.50	-	-	2.70	15.60
BM04-02²	surface	surface	-	24.60	30.00	41.20	42.00	-	-	5.40	11.20
BM04-03	surface	surface	6.00	26.00	30.60	43.40	45.00	6.00	20.00	4.60	12.80
BM04-04	3.80	-	-	24.40	28.10	41.65	42.00	-	-	3.70	13.55
BM04-05	surface	surface	6.00	26.50	30.50	44.50	46.00	6.00	20.50	4.00	14.00
BM04-06	2.00	-	4.40	25.60	30.30	43.30	45.00	-	21.20	4.70	13.00
BM04-07	1.00	-	-	6.95	11.25	24.00	27.00	-	-	4.30	12.75
BM04-08	14.00	-	-	18.40	22.80	36.00	39.00	-	-	4.40	13.20
BM04-09	3.00	-	-	6.60	11.70	24.60	27.00	-	-	5.10	12.90
BM04-10	4.00	-	5.50	-	-	-	8.50	-	-	-	-
Mean									20.54	4.37	13.08

Lithology	Share %	Lms Nodule	Shale Bed
Massive Limestone	0 to 5	Size (cm)	Thickness
Nodular Limestone with Wispy Shale	5 to 10	N/A	NA/
Nodular Limestone in Shale Mix	10 to 30	<1	<1
Shaley Nodular Limestone	30 to 50	1 - 3	1 - 3
Shale with Limestone Nodules	50 to 70	3 - 5	3 - 5
Calcareous Share	> 70	> 5	> 5

Structure
ND - Not Determined
0 - None Observed
1 - Minor Fracturing
2 - Minor Fracturing w/localized (<1m) moderate fracturing
3 - Moderate Fracturing 1-5 meter
4 - Moderate Fracturing >5 meters, localized intense fracturing
5 - brecciation and/or intense fracturing over >1 meter and/or inclined >20 degrees

Alterations		Shale Color	Color
De-Calcification		Tan	White
Sideritization		Brown	Tan
Silicification		Orange	Brown
		Grey	Orange
Secondary Mineralizations		Lt. Grey	Grey
Sulphides		Dk. Grey	Lt. Grey
Barite		Green	Dk. Grey
Pyrrhotite		Lt. Green

Formation
Quaternary
McMurray
Moberly
Christina
Calumet
Firebag

			Bulk Relative	Bulk Relative	Apparent Relative	Absorption
EBA Sample #	LA Abrasion	MSS	Density	Density-SSD	Density	(%)	Plasticity
UNIT 4 (UNIT 4)
BM03-C4-004	27.3	0.9	-	-	-	-	-
BM04-C4-006	30.6	18.0	-	-	-	-	NP
BM04-C4-007	32.1	7.0	2.491	2.574	2.715	3.3	-
UQUMP04-01A	28.1	9.5	-	-	-	-	-
UQUMP04-01C	27.3	-	-	-	-	-	-
UQUMP04-02	27.1	-	-	-	-	-	-
UQUMP04-03	27.8	21.1	-	-	-	-	-
UQUMP04-04	27.8	9.4	-	-	-	-	-
UQUMP04-05	37.3	-	-	-	-	-	-
UQUMP04-06	32.3	7.4	-	-	-	-	-
UQUMP04-07	28.9	16	-	-	-	-	-
UQUMP04-08	33.2	-	-	-	-	-	-
UQUMP04-09	26.3	-	-	-	-	-	-
UQUMP04-10	28.8	-	-	-	-	-	-
UQUMP04-12	30.0	-	-	-	-	-	-
UQUMP04-13	25.9	9.1	-	-	-	-	-
UQUMP04-14	24.0	-	-	-	-	-	-
UQUMP04-15	24.6	10.7	-	-	-	-	-
UQUMP04-16	25.6	-	-	-	-	-	-
UQUMP04-17	27.9	-	-	-	-	-	-
UQUMP04-18	26.9	11.3	-	-	-	-	-
UQUMP04-19	28.3	-	-	-	-	-	-
UQUMP04-20	32.3	-	-	-	-	-	-
UQUMP04-0	32.0	-	-	-	-	-	-
Average(arithmetic)	28.9	10.9	-	-	-	-	-
UNIT 3
BM03-A3-001	34.0	24.8	2.569	2.616	2.695	1.8	-
BM03-B3-002	51.0	-	-	-	-	-	-
BM03-A3-003	-	53.1	-	-	-	-	-
BM04-A3-011	38.3	-	-	-	-	-	NP
BM04-B3-012	56.2	-	-	-	-	-	-
BM04-B3-013	51.6	-	-	-	-	-	-
BM04-A3-017	35.5	-	-	-	-	-	NP
BM04-A3-018	33.3	-	-	-	-	-	NP
BM04-B3-020	62.5	-	-	-	-	-	-
BM04-B3-021	51.7	-	-	-	-	-	-
BM04-B3-022	39.1	-	-	-	-	-	-
BM04-A3-023	37.4	53.7	-	-	-	-	NP
BM04-B3-027	48.2	-	-	-	-	-	-
BM04-A3-028	38.6	-	-	-	-	-	NP
Average	44.4	43.9	-	-	-	-	-
UNIT 3A*
L-66	26.5	8.3
L-67	29.5	7.0
UNIT 1
BM03-A1-005	32.2	25.9	-	-	-	-	-
BM04-C1-008	32.7	22.3	-	-	-	-	NP
BM04-C1-009	27.7	59.7	-	-	-	-	NP
BM04-C1-010	37.0	53.5	-	-	-	-	NP
BM04-A1-014	35.1	31.7	-	-	-	-	NP
BM04-A1-015	37.0	62.3	-	-	-	-	NP
BM04-A1-016	34.6	36.5	-	-	-	-	NP
BM04-A1-019	34.0	51.4	-	-	-	-	NP
BM04-A1-024	30.0	33.0	-	-	-	-	NP
BM04-A1-025	33.8	15.6	2.575	2.630	2.726	2.1	-
BM04-A1-026	35.3	48.2	-	-	-	-	NP
BM04-A1-029	32.6	37.0	-	-	-	-	NP
Average	33.5	39.8	-	-	-	-	-
BM00-002	49.4	AMPa (Compressive Strength of Rock)			-	-	-

Time (weeks)	Expansion (%)
	Sample TC04-	Sample TC04-	Sample TC04-	Sample TC04-
	01 agg. +	02 agg. + L-53	01 agg. + L53	02 agg. +
	TCO4-01 sand	sand	sand	TC04-01 sand
0	0.000	0.000	0.000	0.000
1	-0.002	-0.006	-0.005	-0.003
2	-0.002	-0.006	-0.001	-0.001
4	0.000	-0.003	0.000	-0.001
8	0.000	-0.002	-0.003	0.001
13	0.006	-0.002	0.007	0.006
18	0.004	0.001	0.006	0.005
28	0.009	0.004	0.008	0.009
39	0.004	0.001	0.008	0.005
56	0.006	0.001	0.010	0.005

Product	Typical Uses	Relevant Specifications	Source Units
Construction Aggregate	Road surfacing, general	Alberta Transportation Designation 4	Unit 3, Unit 1
	construction
Base Aggregate	Base course aggregate	Alberta Transportation Designation 2	Unit 3, Unit 1
Sub-base Aggregate	Pit-run fill, road sub-base	Alberta Transportation Designation 6	Unit 3
Concrete Rock	Coarse component of concrete	CSA – A23.1	Unit 4, Unit 3
Asphalt Aggregate	Asphalt pavement	AB Transportation Designation 1	Unit 4, Unit 3
		City of Calgary Type "A"
Shale Liner	Above ground storage tanks,	AEP (1997) Guidelines	Unit 3
	settling pond dikes
Quicklime	Flue gas Desulphurization,	Oil sands company FGD quicklime	Unit 2
		specifications
Reagent limestone	Flue gas Desulphurization,	Variable, dependent on user system-	Unit 1, Unit 2, Unit 3A,
	Fluidized Bed Combustion	specific design	Unit 4

Drill Hole	BM02-03	BM02-04	BM02-05
Unit	Unit 4	Unit 2	Unit 2
Potential CaO+MgO from geochemistry	89.84	94.18	94.36
Potential CaO (FFE)	88.92	94.47	93.66
Difference	0.92	-0.29	0.70

Drill Hole	Potential CaO+MgO
BM02-02	95.94
BM02-03	94.52
BM02-04	94.18
BM02-05	94.36
BM02-06	94.42
BM02-08	89.35
Mean	93.79
St. Dev.	2.27

Sample Series	KAR01	GDP04
Sample size	N = 21	N = 60
Mean	93.12	93.36
St. Dev.	1.70	2.33

Hammerstone	Concrete	A-grade	B-grade	B grade Aggregate	C-grade
Designation	Aggregate	Aggregate	Aggregate		Aggregate
Typical Uses	Interior and	Asphalt concrete	Base course	Surface coarse	Pit-run gravel fill
	exterior walls and	pavement,	aggregate,	aggregate
	columns, footings,
	interior slabs
Governing CSA/	CSA – A23.1	AT - Designation 1	AT - Designation 2	AT - Designation 4 AT - Designation 6
AT Designation
L.A. Abrasion	<40%	<40%	<50%	N/A	N/A
M.S.S.	<18%	N/A	N/A	N/A	N/A
Plasticity Index	N/A	NP	NP-6	NP-8	N/A

		Maximum		Shale Percentage	Difference between
	EBA L.A.	Aggregate	Wt. Avg.	Equivalent	EBA and Equivalent
Sample #	Abrasion	Designation	Shale Percentage	L.A. Abrasion	shale %
Unit 1
BM03-A1-005	32.2	A	20	38.0	-5.8
BM04-C1-008	32.7	A	15	34.6	-1.9
BM04-C1-009	27.7	A	14	33.9	-6.2
BM04-C1-010	37.0	A	12	32.5	+4.5
BM04-A1-014	35.1	A	14	33.9	+1.2
BM04-A1-015	37.0	A	15	34.6	+2.4
BM04-A1-016	34.6	A	12	32.5	+2.1
BM04-A1-019	34.0	A	15	34.6	-0.6
BM04-A1-024	30.0	A	12	32.5	-2.5
BM04-A1-025	33.8	A	17	35.9	-2.1
BM04-A1-026	35.3	A	15	34.6	+0.7
BM04-A1-029	32.6	A	15	34.6	-2.0
Mean	33.5	A	-	34.4	-0.9

Unit 3 sub-unit name	Shale percentage	Possible Products
		Concrete aggregate, asphalt aggregate,
Unit 3A	0% - 15%	FGD/FBC reagents, base aggregate
Unit 3B	15% - 35%	Base and Construction aggregate⁽¹⁾
		Pit-run gravel, low permeability liner
Unit 3C	Above 35%	material⁽²⁾

Sub Unit Name	Percent of whole unit volume
Unit 3A	15%
Unit 3B	60%
Unit 3C	25%

			North of Fort McMurray
Year	Source	South of Ft. McMurray	East of Ath R.	West of Ath R.	Total
Road Quality Aggregate (tonnes)
2003	RIWG/03	2,068,897	59,860,000	5,125,000	67,053,897
2004	RIWG/04	205,000	49,610,000	31,100,550	80,915,550
Converted from m³ using in situ aggregate density 2.05 t/m³
Concrete Aggregate (tonnes)
2003	RIWG/03	1,816,592	1,800,000	4,500,000	8,116,592
2004	RIWG/04	-	1,620,000	450,000	2,070,000
Converted from m³ using concrete aggregate density 1.80 t/m³

				Capacity	Distance
Plant¹	Location	Province/State	Operator	(kt/a)	(km)
Exshaw	Exshaw	Alberta	Graymont Western Canada Inc.	180	900
Summit	Coleman	Alberta	Graymont Western Canada Inc.	50	1,050
Faulkner	Faulkner	Manitoba	Graymont Western Canada Inc.	117	1,500
Indian Creek	Townsend	Montana	Graymont Western US Inc.	300	2,000

		South of Ft.	North of Fort McMurray
Year	Source	McMurray	East of Ath R.	West of Ath R.	Total

Road Quality Aggregate (tonnes)
1998	AMI	nd	663,691	1,127,633	1,791,323
1999	AMI	nd	608,632	873,238	1,481,870
2000	AMI	nd	4,149,842	873,238	5,023,080
2001	AMI	nd	3,669,570	972,315	4,641,885
2002	AMI	nd	2,176,072	1,097,129	3,273,201
FOI data converted from yd³ using in situ aggregate density of 1.57 t/yd³ (Poplar Creek)
Converted from "loose m³" using aggregate density 1.80 t/m³(Susan Lake)
2003	RIWG/03	594,826	9,532,500	3,883,725	14,011,051
2004	RIWG/04	1,103,925	2,250,900	4,247,600	7,602,425
2005	RIWG/04	294,175	2,216,050	6,123,350	8,633,575
2006	RIWG/04	140,425	2,334,950	4,259,900	6,735,275
2007	RIWG/04	27,675	2,363,650	2,484,600	4,875,925
2008	RIWG/04	112,750	2,246,800	1,771,200	4,130,750
Average 2003 to 2008					7,664,833
Concrete Aggregate (tonnes)
2003	RIWG/03	363,562	-	369,000	732,562
2004	RIWG/03	-	882,000	90,000	972,000
2005	RIWG/03	90,000	1,690,200	171,000	1,951,200
2006	RIWG/03	-	1,323,000	405,000	1,728,000
2007	RIWG/03	-	1,974,600	180,000	2,154,600
2008	RIWG/03	-	1,332,000	180,000	1,512,000
Converted from m3 using concrete aggregate density 1.80 t/m³ (RIWG surveys)
Average 2003 to 2008		1,508,394
Concrete rock (@55%)					829,617
Note: nd = no date

		South of Fort	North of Fort McMurray
Year	Source	McMurray	E of Ath R.	W of Ath R.	Total
Limestone Aggregate (t)
2000	OSCo	nu	109,898	nu	109,898
2001	OSCo	nu	1,226,736	nu	1,226,736
2002	OSCo	nu	2,356,742	nu	2,356,742
2003	OSCo	nu	2,324,936	nu	2,324,936
2004	OSCo	nu	2,344,476	nu	2,344,476
2005	OSCo	nu	2,823,986	nu	2,823,986
Five year average 2001 to 2005					2,215,375
OSCo = oil sands companies; nu = not used