Birch Mountain reports third quarter 2007 results



    CALGARY, Nov. 14 /CNW/ - Birch Mountain Resources Ltd. ("Birch Mountain"
or the "Company") (BMD: TSX and AMEX) today reported financial results for the
third quarter ended September 30, 2007, and these are available on the
Company's website at www.birchmountain.com, and are filed at www.sedar.com and
at www.sec.gov.

    Message from the President

    The directors and management believe that the underlying value of the
Company is not adequately reflected in the Company's current share price.
Birch Mountain recently announced it is exploring strategic alternatives to
enhance shareholder value. To assist in these activities, the Board of
Directors established a special committee of independent directors who engaged
RBC Capital Markets ("RBC") as financial advisor for this process.
    RBC's mandate includes providing financial analysis and advice on
business alternatives including a joint venture, merger, sale of the company
or other corporate transaction. Over the past eight weeks, we have had
numerous meetings and discussions and substantial progress has been made.
Additional details will be communicated when they become available.
    Our immediate priority is to obtain short to medium-term financing, while
exploring alternatives that will ensure the long-term viability of our
business.
    Shifting attention to the third quarter, the management team is highly
disappointed with our financial results. As communicated in August, orders had
begun to fall-off in July as construction work in the oil sands declined
rapidly. We observed a general slowdown in the supply of aggregates to site
preparation and infrastructure projects in the region. Sales for the third
quarter were significantly below our expectations, with indicated and expected
orders not materializing. We believe there were several factors influencing
reduced orders including increased labour uncertainty, the Alberta royalty
review, escalating construction costs for oil sands developers, and oil sands
companies finding and using aggregate resources in overburden, which was
anticipated in the 2006 Technical Report.
    In response to these changing market conditions, we initiated the first
steps to reducing our cash burn. This included laying off approximately 35% of
our employees, reducing quarry expenses, minimizing discretionary spending and
a voluntary pay reduction by senior management and the Board.
    The dilemma we faced was that there were still several inquiries for
large quantities that we were discussing with our customers. To secure
potential orders, we had to be able to deliver large tonnages of aggregate
through the height of the construction season.
    Because large orders did not materialize, additional steps have been
taken in the fourth quarter to further reduce the cash burn and adjust our
operations for the winter months. Included in these cutbacks is a further
reduction of 40% in quarry and Calgary office personnel, an overall workforce
reduction of 65% since June 30th, and a reduction of more than 50% in quarry
rental equipment.
    We have retained a core group of skilled and knowledgeable people and the
quarry is open allowing us to meet our customers' needs. Based on discussions
with customers, we believe that sales will materialize for 2008.
    The priorities as we go forward into winter are to maximize our marketing
and sales efforts to secure orders for 2008 and to continue the work to
advance the Hammerstone Project application through to regulatory approval.
    We have made progress in business discussions relating to the South Haul
Road (SHR) with the developers of the proposed East Athabasca Highway. The SHR
will be a key link in the transportation corridor to existing and developing
oil sands projects and will position us for future sales.
    We should not lose sight of the valuable asset that we all own. We
continue to control over 780,000 acres of mineral lands and have approximately
1 billion tonnes in limestone reserves for our use over the next 50 to 60
years.

    Third Quarter Ended September 30, 2007

    Sales revenues for the third quarter were $521,956 and for the nine
months ended September 30, 2007 were $6.2 million. Sales prices obtained for
aggregate products are consistent with the prices in the 2006 Technical
Report. Sales tonnages dropped significantly in the third quarter compared to
the second quarter.
    Interest expenses remained high as the result of increased debt levels.
Indirect quarry costs also remain high as the Company continues with early
operations. Administrative expenses were significantly reduced in the third
quarter of 2007 compared to the second quarter, as the Company implemented
cost control initiatives. Professional fees decreased by approximately
$350,000 because projects were deferred, a hiring freeze was instituted and no
stock option compensation expenses were incurred. Shareholder services and
marketing costs decreased by approximately $115,000 and office costs decreased
approximately $20,000.
    Salaries and benefits were reduced by approximately $100,000 as senior
executives took a voluntary pay reduction of 30% and directors gave up their
quarterly compensation. As part of organizational restructuring, Russ Gerrish,
has moved from the position of Vice President Operations & Engineering to
focus on technical sales. Hansine Ullberg, Vice President Finance and CFO, has
resigned her position and will continue in the accounting function until a
replacement is named. Doug Annable has resigned as an independent director.
The Company thanks Doug, Russ and Hansine for their valued contributions.
    The Company is currently in breach of certain financial covenants under
its senior secured credit facility, on which $12.5 million is outstanding. The
Company has obtained waivers of these covenant violations for the past two
months and is working with the lender to resolve this issue. The lender could
provide notice for the debt to be repaid immediately and, at a time when the
Company does not have the financial resources for repayment, could exercise
their security interests over the assets of the Company.

    Financial Statements (unaudited)

    Summarized unaudited consolidated financial statements as at and for the
three months and nine months ended September 30, 2007 are included in the
tables below. Readers are encouraged to review the full set of unaudited
consolidated financial statements that are available on the Company's website
at www.birchmountain.com, and are filed at www.sedar.com and www.sec.gov.

    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 and
development plans and results, anticipated capital expenditures and financing
thereof, anticipated outcomes and timing of regulatory applications and
approvals 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. Certain amounts in the financial statements are based on
estimates using the best currently available information and assumptions of
management. 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.



    
    Table 1: Consolidated Balance Sheets

    -------------------------------------------------------------------------
                                                Birch Mountain Resources Ltd.
                                                 Consolidated Balance Sheets
      Canadian Dollars                                             UNAUDITED
    -------------------------------------------------------------------------
    As At                                         September 30,  December 31,
                                                         2007          2006
    -------------------------------------------------------------------------
    Assets
    Current
      Cash and cash equivalents                      1,762,703     1,345,483
      Accounts receivable                              864,804     2,202,698
      Inventory                                      4,905,623     5,703,196
      Prepaids and deposits                            688,447     7,995,965
    -------------------------------------------------------------------------
                                                     8,221,577    17,247,342

    Long term prepaids                                 137,294       137,294
    Restricted cash                                  3,000,000     4,250,000
    Property, plant and equipment                   21,829,869    18,729,682
    Mineral properties                              52,387,685    44,608,237
    -------------------------------------------------------------------------
    Total Assets                                    85,576,425    84,972,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Liabilities
    Current
      Bank loan                                     12,185,658             -
      Accounts payable and accrued liabilities       7,280,310     4,113,610
      Current portion of long term debt              1,049,425     1,580,858
      Deferred revenue                                  50,306        50,306
      Deferred lease inducement                         70,631             -
      Other current liabilities                      2,411,425     2,437,781
    -------------------------------------------------------------------------
                                                    23,047,755     8,182,555

    Long term debt                                   5,212,252     6,911,321
    Asset retirement obligation                        313,766     1,100,000
    Convertible debentures                          29,393,449    28,537,087
    -------------------------------------------------------------------------
                                                    57,967,222    44,730,963
    -------------------------------------------------------------------------
    Shareholders' equity
    Share capital                                   49,606,496    47,489,830
    Contributed surplus                             12,094,583    10,236,663
    Deficit                                        (34,091,876)  (17,484,901)
    -------------------------------------------------------------------------
                                                    27,609,203    40,241,592
    -------------------------------------------------------------------------
    Total Liabilities and Shareholders' Equity      85,576,425    84,972,555
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Table 2: Consolidated Income Statements
    -------------------------------------------------------------------------
                                                Birch Mountain Resources Ltd.
              Consolidated Statements of Loss, Comprehensive Loss and Deficit

      Canadian Dollars
      UNAUDITED
    -------------------------------------------------------------------------
                          3 Months      3 Months      9 Months      9 Months
                           Ended         Ended         Ended         Ended
                          Sept 30,      Sept 30,      Sept 30,      Sept 30,
                            2007          2006          2007          2006
    -------------------------------------------------------------------------

    Revenue                520,954       795,812     6,190,011       883,641
    Cost of goods sold     461,193       708,844     4,951,771       787,948
    -------------------------------------------------------------------------
    Gross profit            59,761        86,968     1,238,240        95,693
    -------------------------------------------------------------------------
    Expenses
    Amortization and
     depletion             336,454       122,760       774,843       170,805
    Interest, bank
     charges, foreign
     exchange (gain)/loss
     and accretion of
     debenture discount  1,128,058          (704)    3,096,100         2,191

    Mineral exploration
     costs                 175,647       393,750       434,036       868,704
    Office                 170,889       109,495       484,312       353,440
    Professional fees      248,962       378,312     1,156,679       746,309
    Indirect quarry
     costs               3,995,944       709,866     8,391,107     1,307,383
    Salaries, wages
     and benefits          468,794       263,770     1,210,880       775,719
    Shareholder
     services and
     marketing             149,443       185,872       741,080       787,228
    Stock-based
     compensation          475,587       916,146     1,671,028     2,128,944
    -------------------------------------------------------------------------
                         7,149,778     3,079,267    17,960,065     7,140,723
    -------------------------------------------------------------------------
    Loss before other
     income             (7,090,017)   (2,992,299)  (16,721,825)   (7,045,030)
    -------------------------------------------------------------------------
    Interest and other
     income                 22,797        69,369       114,850       449,526
    -------------------------------------------------------------------------
    Net loss and
     comprehensive loss
     for the period     (7,067,220)   (2,922,930)  (16,606,975)   (6,595,504)
    -------------------------------------------------------------------------

    -------------------------------------------------------------------------
    Deficit, beginning
     of period         (27,024,656)  (10,963,201)  (17,484,901)   (7,290,627)
    -------------------------------------------------------------------------
    Deficit, end of
     period            (34,091,876)  (13,886,131)  (34,091,876)  (13,886,131)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    Loss per share
      Basic and diluted      (0.09)        (0.04)        (0.20)        (0.08)
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------



    Table 3: Consolidated Statement of Cash Flows

    -------------------------------------------------------------------------
                                                Birch Mountain Resources Ltd.
                                        Consolidated Statements of Cash Flows
      Canadian Dollars                                              UNAUDITED
    -------------------------------------------------------------------------
                          3 Months      3 Months      9 Months      9 Months
                           Ended         Ended         Ended         Ended
                          Sept 30,      Sept 30,      Sept 30,      Sept 30,
                            2007          2006          2007          2006
    -------------------------------------------------------------------------
    OPERATING ACTIVITIES

    Net loss            (7,067,220)   (2,922,930)  (16,606,975)   (6,595,504)
    Adjustments for
     non-cash items:
      Depletion and
       accretion on
       mineral properties  148,750             -       230,687             -
      Amortization of
       capital assets      187,704       122,760       544,156       170,805
      Accretion of
       unamortized
       financing costs     133,065             -       314,337             -
      Accretion of
       unamortized
       debenture
       discount            291,566             -       856,362             -
      Stock-based
       compensation        480,466       916,146     1,981,323     2,128,944
      Changes in non-cash
       working capital
       balances:
    Accounts
     receivable          1,629,057    (1,291,220)    1,337,894    (1,589,645)
    Inventory             (251,209)   (1,352,359)    1,097,573    (2,841,122)
    Prepaids and
     deposits              213,845    (4,146,448)    1,744,313    (4,404,579)
    Accounts payable
     and accrued
     liabilities         2,195,886      (480,483)    8,748,218     1,106,819
    Deferred lease
     inducement             70,631             -        70,631             -
    Other current
     liabilities                 -             -       (26,356)     (875,750)
    -------------------------------------------------------------------------
    Cash provided by
     (used in) operating
     activities         (1,967,459)   (9,154,534)      292,163   (12,900,032)
    -------------------------------------------------------------------------
    FINANCING ACTIVITIES

    Issue of common
     shares for cash       900,425         7,500     1,573,888       388,487
    Proceeds from bank
     loan, net of debt
     issue costs         3,985,000    10,000,000    11,853,000    10,000,000
    Proceeds from
     long-term debt         67,380             -        67,380             -
    Proceeds from
     shareholder loan            -     1,100,000             -     1,100,000
    Repayment of
     long-term debt       (248,312)            -    (2,297,882)            -
    -------------------------------------------------------------------------
    Cash provided by
     financing
     activities          4,704,493    11,196,386    11,107,500    11,488,487
    -------------------------------------------------------------------------
    INVESTING ACTIVITIES

    Mineral properties  (1,324,090)   (3,181,607)   (8,676,986)  (17,984,649)
    Restricted cash              -             -     1,250,000    (2,250,000)
    Acquisition of
     property, plant
     and equipment        (829,073)   (5,436,208)   (3,644,343)   (6,380,045)
    -------------------------------------------------------------------------
    Cash used in
     investing
     activities         (2,153,163)   (8,617,815)  (11,071,329)  (26,614,694)
    -------------------------------------------------------------------------
    Increase (decrease)
     in cash and cash
     equivalents           583,871    (6,664,849)      417,220   (28,026,239)
    Cash and cash
     equivalents,
     beginning of
     period              1,178,832    10,961,213     1,345,483    32,322,603
    -------------------------------------------------------------------------
    Cash and cash
     equivalents, end
     of period           1,762,703     4,296,364     1,762,703     4,296,364
    -------------------------------------------------------------------------
    -------------------------------------------------------------------------
    

    %SEDAR: 00003909E




For further information:

For further information: Birch Mountain Resources Ltd., Tel: (403)
262-1838, Fax: (403) 263-9888, Website: www.birchmountain.com

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BIRCH MOUNTAIN RESOURCES LTD.

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