EX-99.2 3 exh992.htm EXHIBIT 99.2 Birch Mountain Resources Ltd.: News Release - Prepared by TNT Filings Inc.

NEWS RELEASE

BIRCH MOUNTAIN ANNOUNCES THIRD QUARTER 2006 RESULTS

CALGARY, November 13, 2006 - Birch Mountain Resources Ltd. ("Birch Mountain" or the "Company") (BMD:TSXV and AMEX) today reported financial results for the third quarter ended September 30, 2006.

Operating Results

In the third quarter, sales of aggregates continued to increase with revenues recorded of $795,812 with orders totaling over 900,000 tonnes. Inventory of work in progress and finished products at the Muskeg Valley Quarry ("MVQ") doubled to a value of $2,841,122.

The MVQ is well established to meet the anticipated aggregate demands for the balance of the year and into 2007. Quarry operations have continued in the third quarter, removing overburden, excavating pit materials and blasting, crushing and screening limestone to produce processed aggregate products. Space in the quarry has been developed ahead of plan, to facilitate higher efficiency operations and access to all four-limestone units. This has included placing blasted limestone and finished products in inventory as well as preparing pads for product stockpiles and for the new crushing spread.

To assure reliability of supply in the aggregates business, products are inventoried to meet existing and anticipated orders. Production costs are incurred well ahead of customers taking delivery whereas sales revenue is booked on delivery.

The Hitachi EX1800 hydraulic shovel has been commissioned and it is contributing to increased quarry operating efficiency. Erection of the high capacity, custom designed crushing spread acquired by the Company began with delivery of the first components in September and it is expected to be in full operation in December.

Dismantling of the rotary kilns, pre-heaters and associated equipment purchased in the second quarter has proceeded and much of the equipment has now been shipped to Fort McMurray. All the equipment will be on site at the MVQ by the end of the year where it will be stored until the company receives regulatory approval to commence construction and operation of the limestone processing facilities.

Effective immediately, Dan Rocheleau CA, has been appointed Acting Chief Financial Officer by the Board of Directors, replacing Hansine Ullberg who is on maternity leave. Dan joined the Company as Director of Financial Reporting in June 2006.


The Board of Directors approved the issuance of 80,000 stock options to a new employee from the Company's stock option plan at a price of $4.40.

Financial Results for September 30, 2006 (unaudited)

Birch Mountain is an early stage operating company with as yet insufficient revenue to meet its yearly operating and capital requirements. The Company has a negative working capital balance at September 30th of $9,477,936, a decrease of approximately $36 million from December 31, 2005. The funds were primarily used to open the MVQ and bring the development forward to where the MVQ can efficiently serve the demand for large volumes of on-spec limestone aggregate products.

For the third quarter ended September 30, 2006, the Company incurred a loss of $2,922,930 (2005 - $1,162,030) and at September 30, 2006 had a deficit of $13,886,131.

The Company's main expenditures are categorized as administrative expenses, quarry operations and mineral costs. Each category increased for the quarter ended September 30, 2006, compared to the same period in 2005, as the Company focused on operations at the MVQ, advancing work on the Hammerstone Project and the dismantling and shipping of kiln components to the site.

Total administrative expenses for the third quarter 2006 were $1,975,650 as compared to $1,152,192 in 2005. Adjusting for stock based expenses of $916,146 and $477,783 for 2006 and 2005 respectively, adjusted G&A expenses were $1,059,503 for 2006 as compared $674,409 in 2005. The largest contributors to this increase were increases in professional fees of approximately $187,000 as a result of amounts paid for strategic, legal and financing advice plus a one-time fee for the arrangement of a credit facility. Shareholder services and promotion expenses increased by $42,000 as result of the Company's expanded shareholder base, and an increase of approximately $101,000 in salaries due to the addition of staff. Quarry operating costs totaled $709,866 for the third quarter of 2006. No quarry operating costs were reported in 2005, because the quarry was not in operation. Mineral exploration costs expensed in the income statement were $393,750 for the third quarter of 2006 as compared to $83,450 for 2005. This increase resulted from expenditures for ongoing permit to lease conversions, and sampling and field studies to explore satellite quarry opportunities on the Company's mineral permits.

The Company also incurred significant expenditures for mineral development that are capitalized. Total capitalized mineral costs for third quarter 2006 were $7,565,504 as compared to $2,442,921 for 2005. With respect to expenditures capitalized, during the third quarter of 2006, 95% of these expenditures were on the continued development of the MVQ. Of the $7.5M of expenditures capitalized, $6.8M or 89% related to site preparation and stripping costs, which included further construction of the road system as well as pads for product stockpiles and the new crushing spread. Another $375,000 or 5% of this increase related to work on the Hammerstone Application and the 2006 Technical Report, which is comprised largely of professional fees for consultants who assist in the regulatory, environmental and technical work required. Finally, $283,000 related to increased salary costs for the Hammerstone Project including a new executive hired and additional project management staff for the Hammerstone plant facilities.


Summarized unaudited consolidated financial statements as at, and for the three months and nine months ended September 30, 2006, are reported in the tables below. The Company encourages readers to review the Third Quarter 2006 Financial Report and other informational disclosures at www.sedar.com and www.sec.gov.

TABLE A: Consolidated Statements of Loss and Deficit    
 

 

 

 

 

 

3 Months Ended

3 Months Ended

9 Months Ended

9 Months Ended

For the periods ended

Sept 30, 2006

Sept 30, 2005

Sept 30, 2006

Sept 30, 2005

 

 

 

 

 

Sales revenue

795,812

-

883,641

-

Cost of sales

708,844

-

787,948

-

Gross profit

86,968

-

95,693

-

 

 

 

 

 

Other Expenses (Income)

 

 

 

 

Amortization, accretion and depletion

122,760

16,658

170,805

45,325

Mineral exploration costs

393,750

83,450

868,704

442,999

Office

109,495

153,637

355,631

362,528

Professional fees

378,312

191,208

746,309

684,279

Quarry operation costs

709,866

-

1,307,383

-

Salaries and benefits

263,066

169,019

775,719

469,079

Shareholder services and promotion

185,872

143,887

787,228

508,168

Stock-based compensation

916,146

477,783

2,128,944

1,262,066

Interest income (69,369) (73,612) (449,526) (123,202)
 

3,009,898

1,162,030

6,691,197

3,651,242

Loss for the period (2,922,930) (1,162,030) (6,595,504) (3,651,242)
Deficit, beginning of period (10,963,201) (5,138,021) (7,290,627) (2,648,809)
Deficit, end of period (13,886,131) (6,300,051) (13,886,131) (6,300,051)
 

 

 

 

 

Loss per share, basic and diluted (0.04) (0.01) (0.08)

(0.05)

 


 

 

 

TABLE B: Consolidated Balance Sheets

 

 

 

 

 

As At

September 30, 2006

December 31, 2005

 

 

 

Assets

 

 

Current

 

 

Cash and cash equivalents

4,296,364

32,322,603

Accounts receivable

2,066,100

476,455

Inventory

2,841,122

-

Prepaids and deposits

4,846,124

441,545

 

14,049,710

33,240,603

 

 

 

Restricted cash

3,250,000

1,000,000

Long-term prepaids

231,489

232,489

Property, plant and equipment

7,921,815

425,112

Mineral properties

38,277,530

13,662,648

Total Assets

63,730,544

48,560,852

 

 

 

Liabilities

 

 

Current

 

 

Accounts payable and accrued liabilities

9,719,843

3,369,083

Current portion of capital lease obligation

181,679

-

Bank loan

10,000,000

-

Other loan

1,105,304

-

Deferred revenue

50,306

50,306

Other current liabilities

2,470,514

3,346,264

 

23,527,646

6,765,653

 

 

 

Capital lease obligation

1,017,432

-

Asset retirement obligation

1,125,719

360,000

 

25,670,797

7,125,653

 

 

 

Shareholders' equity

 

 

Share capital

47,437,830

46,950,953

Contributed surplus

4,508,048

1,774,873

Deficit (13,886,131) (7,290,627)
 

38,059,747

41,435,199

Total Liabilities and Shareholders' Equity

63,730,544

48,560,852

 


TABLE C: Consolidated Statements of Cash Flows
 

3 Months Ended

3 Months Ended

9 Months Ended

9 Months Ended

 

Sept 30, 2006

Sept 30, 2005

Sept 30, 2006

Sept 30, 2005

         
Cash flows used in operating activities

 

 

 

 

Cash paid to suppliers (8,638,922)

98,710

(11,554,958) (764,656)
Cash paid to employees (561,407) (281,165) (1,758,239) (838,913)
Interest received

45,795

15,205

413,165

57,744

Net cash used in operating activities (9,154,533) (167,250) (12,900,032) (1,545,825)
Cash flows used in investing activities

 

 

 

 

Mineral exploration (3,181,607) (1,810,054) (17,984,649) (3,724,510)
Movement in restricted cash

-

(1,000,000) (2,250,000) (1,000,000)
Purchase of capital assets (5,436,208) (23,045) (6,380,045) (77,553)
Net cash used in investing activities (8,617,815) (2,833,099) (26,614,694) (4,802,063)
Cash flows from financing activities

 

 

 

 

Issuance of common shares for cash

7,500

34,595,948

388,487

36,611,230

Proceeds from shareholder loan

1,100,000

-

1,100,000

-

Proceeds from short term bank loan

10,000,000

-

10,000,000

-

Net cash provided by financing activities

11,107,500

34,595,948

11,488,487

36,611,230

Increase/(decrease) in cash and cash equivalents (6,664,849)

31,595,599

(28,026,239)

30,263,342

Cash and cash equivalents, beginning of period

10,961,213

4,112,013

32,322,603

5,444,270

Cash and cash equivalents, end of period

4,296,364

35,707,612

4,296,364

35,707,612

 

 


RESTATEMENT OF DECEMBER 31, 2005 AND 2004 FINANCIAL STATEMENTS RELATED TO EXPLORATION EXPENSE TREATMENT UNDER U.S. GAAP

The Company announces that it has restated its previously issued audited consolidated financial statements for the years ended December 31, 2005 and 2004. Management is of the opinion that the above restatement does not affect the underlying value of the Company.

The decision results from further analysis of accounting practices of mining companies reporting in the United States ("U.S."). Some minor amendments have been reflected and the Company has amended its accounting policy under U.S. GAAP for capitalization of costs associated with mineral properties. The adopted accounting policies under Canadian GAAP and the amended accounting policy under U.S. GAAP are consistent with the disclosure of mineral reserves under Canadian and U.S. regulations. In Canada, reserves disclosure must conform to National Instrument 43-101 of the Canadian Securities Regulators ("NI 43-101"). In the U.S., Industry Guide 7 ("IG7") of the US Securities and Exchange Commission (the "SEC") governs the disclosure of mineral reserves. For accounting purposes in Canada, the Company capitalizes development costs for mineral properties that contain proven and probable mineral reserves conforming to NI 43-101. For accounting purposes in the U.S., the Company expenses these costs because its mineral properties do not contain mineral reserves that conform to IG7.

Under United States ("U.S.") GAAP, the Company has amended its accounting policy under U.S. GAAP to expense costs associated with mineral properties instead of capitalizing such costs as previously reported in the U.S. GAAP note to the December 31, 2005 and 2004 audited consolidated financial statements.

The restatement will result in changes to previously reported expenses, losses, earnings per share, mineral properties, accumulated deficit, and mineral properties for U.S. GAAP purposes for December 31, 2005 and 2004. For the December 31, 2003 financials statements, under U.S. GAAP, all costs associated with mineral costs were expensed and as a result there is no impact on the December 31, 2003 financial statements. The Company's financial statements under Canadian GAAP for all years are unaffected.

As a result of the restatement, the previously reported financial statements under Canadian and U.S. GAAP, as reported in the Material difference between Canadian and United States generally accepted accounting principles note in the consolidated financial statements, are amended as are outlined in Table D.


TABLE D: Consolidated Financial Statements

U.S. GAAP

December 31,

December 31,

December 31,

December 31,

 

2005

2005

2004

2004

 

 

 

 

 

 

As restated

As Previously

As restated

As Previously

 

 

Reported

 

Reported

 

 

 

 

 

Interest income

332,568

332,568

48,190

48,190

Expenses

15,253,992

4,974,386

6,088,480

4,124,810

Loss for the year (14,921,424) (4,641,818) (6,040,290) (4,076,620)
Loss per share (0.21) (0.08) (0.11) (0.07)
 

 

 

 

 

Total assets

34,791,878

47,035,153

6,043,054

8,006,724

Liabilities

7,125,653

7,125,653

3,080,787

3,080,787

Shareholders' equity

27,666,225

39,909,500

2,962,267

4,925,937

 
FOR FURTHER INFORMATION, PLEASE CONTACT:
   
Douglas Rowe, President & CEO, or Equity Communications, LLC
Dan Rocheleau, Acting CFO Steve Chizzak, Regional Vice President
Birch Mountain Resources Ltd.  
Tel: 403.262.1838 Fax: 403.263.9888 Tel: 908.688.9111 Fax: 908.686.9111

For further information on Birch Mountain, please visit the Company's website at www.birchmountain.com

Forward Looking Statements: This news release contains certain forward-looking statements. All statements, other than statements of historical fact, included herein, including without limitation, statements regarding potential mineralization, resources and reserves, exploration results, research and development results, and the future plans and objectives of Birch Mountain are forward-looking statements that involve various risks and uncertainties. There can be no assurance that such statements will prove to be accurate and actual results and future events could differ materially from those anticipated in such statements. Important factors that could cause actual results to differ materially from Birch Mountain's expectations are disclosed elsewhere in documents that are available to the public at www.sedar.com and www.sec.gov.

The TSX Venture Exchange does not accept responsibility for the adequacy or accuracy of this news release.