CALGARY, June 26 /PRNewswire-FirstCall/ - Birch Mountain Resources Ltd.
("Birch Mountain") (BMD:TSX Venture Exchange and American Stock Exchange)
has received an independent valuation report from AMEC Americas Limited
("AMEC") on its Hammerstone Project located in the Athabasca oil sands
region of northeastern Alberta. The valuation report was authored by Dr.
Michael Samis, Director of Financial Services for AMEC Mining & Metals, and
incorporates contributions from other AMEC personnel, the Canadian Energy
Research Institute ("CERI"), Dr. Graham A. Davis of the Colorado School of
Mines, Norwest Corporation ("Norwest"), Phoenix Process Engineering, Inc
("Phoenix"), and Birch Mountain. Birch Mountain has also incorporated
information from EnviroSolv Energy LLC ("EnviroSolv") in this news release.
The valuation was carried out concurrently with a prefeasibility update
study that considered new aggregate and reagent products in addition to
those incorporated in the original February 2005 Hammerstone prefeasibility
study. A technical report conforming to Canadian Securities Administrators
National Instrument 43-101 describing the results of the prefeasibility
update study will be issued later this summer.
Highlights
----------
- The net present value ("NPV") of Hammerstone in constant Q2 2006
dollars calculated with unescalated prices and costs, at an
7.5% discount rate is C$1,655 million on a pre-tax basis and
C$1,089 million on an after-tax basis; the internal rate of return
("IRR") is 29.4%.
- Future opportunities identified but not included in the valuation
include cement production, spent lime recalcining, and reclamation of
FGD gypsum and spent lime. When evaluation of these opportunities is
completed, the valuation will be revised.
- Hammerstone limestone reserves (after mining losses) decreased
marginally to 999 million tonnes, with 460 million tonnes ("Mt") of
proven limestone reserves and 539 Mt of probable limestone reserves.
- Probabilistic modeling of the effects of oil price uncertainty on oil
sands bitumen supply to 2070 shows there is little risk that low oil
prices will cause bitumen supply to fall significantly below CERI's
unconstrained bitumen supply model.
- Use of alternative fuels such as bitumen, residual heavy-ends,
asphaltenes, coke and coal instead of natural gas, is expected to
create a significant demand for limestone and lime-based reagents for
desulphurization.
- A total of C$577 million of development capital is required for the
Hammerstone quarry, aggregate plant and limestone processing facility
from 2006 to 2026, with C$416 million in sustaining capital from 2006
to 2060.
Contributors
------------
AMEC is an international project management and services company that
designs, delivers and supports infrastructure assets for customers
worldwide across the public and private sectors. AMEC employs about 44,000
people in more than 40 countries, generating annual turnover of around C$11
billion.
CERI is an independent, not-for-profit research organization, committed
to excellence in the analysis of energy economics and related environmental
issues in the producing, transporting, and consuming sectors. CERI was
founded in 1975 and has produced more than 100 major research studies as
well as numerous smaller works and monographs for all levels of government
and industry, both nationally and internationally.
Graham A. Davis is Professor of Economics and Business at the Colorado
School of Mines in Golden, Colorado. He holds a Ph.D. in Mineral Economics,
an MBA, and a B.Sc in Metallurgical Engineering. His areas of expertise are
project valuation under uncertainty and the economics of mineral and energy
markets.
Phoenix is a multidisciplinary engineering firm in suburban St. Louis,
Missouri, US, providing engineering services to the lime, Portland cement
and industrial minerals industries on a world-wide basis. Phoenix has more
than 40 years of engineering expertise in raw materials studies, process
engineering, feasibility studies, preliminary engineering, detailed
engineering design of production facilities and other services.
Norwest is an internationally recognized consultancy serving the
mining, quarrying, oil and gas industries. With major offices in Canada and
the US, Norwest provides an array of services, from exploration to
marketing, to assist mineral producers, banks, government institutions, and
consumers of mineral products.
EnviroSolv of Terrace Park, Ohio, is a private company with a highly
technical professional team specializing in providing environmentally
friendly solutions to its power and industrial clients. The technical team
has assisted in developing more than 50 patents focused on environmental
emissions and currently the EnviroSolv team is developing advanced
environmental applications for the fossil fuel and natural gas industries.
Background
----------
Since 2002, Birch Mountain has worked to commercialize the industrial
mineral potential of the limestone on its mineral holdings in the Athabasca
region. Two principal products have been identified: limestone aggregates
used in construction, and limestone-based reagents such as quicklime.
Aggregate products are in increasingly short supply in the area, and
Hammerstone is a new and long-lived source of high-quality aggregates for
building oil sands facilities and the necessary supporting infrastructure,
including home and road construction. Limestone is also in demand for its
chemical properties, either as reagent limestone where it is used to remove
sulphur from flue gases derived from combustion of bitumen or other
alternative fuels, or in processed form as quicklime or hydrated lime. The
closest alternate source of quicklime or hydrated lime is in Exshaw,
Alberta, approximately 900 kilometres away from the centre of oil sands
operations.
In 2005, Birch Mountain received regulatory approval to open the Muskeg
Valley Quarry ("MVQ"), a 250 hectare (625 acre), aggregate-only operation
approximately 60 kilometres north of Fort McMurray, Alberta. The MVQ was
opened in December 2005. In May 2006, Birch Mountain filed an application
and environmental impact assessment for Hammerstone with the Alberta
Natural Resources Conservation Board, Alberta Environment and the Alberta
Energy and Utilities Board. When approved, the 1,500 hectare (3,700 acre)
Hammerstone Project, comprising an expanded quarry and aggregate operation,
as well as a limestone processing complex, will be integrated with the
existing MVQ and both will be operated together as Hammerstone.
Prefeasibility Update
---------------------
Following recommendations of the original prefeasibility report, Birch
Mountain has examined the potential of producing additional limestone
aggregate and reagent products from Hammerstone. The list of products
incorporated into the prefeasibility update and valuation report is
provided in Table 1.
Table 1. Limestone-Based Aggregate and Reagent Products from Hammerstone.
-------------------------------------------------------------------------
Aggregate Products Reagent Products Environmental Products
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Included in the prefeasibility update
-------------------------------------------------------------------------
Construction aggregate Reagent limestone
Base aggregate Quicklime
Concrete rock Hydrated lime
Asphalt aggregate
Sub-base/liner
-------------------------------------------------------------------------
Future opportunities (not included in the current valuation)
-------------------------------------------------------------------------
Cement FGD gypsum reclamation
Milk of lime Spent lime recycling
-------------------------------------------------------------------------
The original prefeasibility study was completed in February 2005,
before the opening of the MVQ and start-up of quarrying and aggregate
processing. The information gained from opening the quarry and additional
exploration carried out in 2005 and 2006 has been incorporated into the
prefeasibility update. Since receiving the original prefeasibility report,
Birch Mountain's consultants have applied more than 10,000 hours to
assessing the market for limestone-based industrial minerals, designing the
Hammerstone quarry and associated aggregate plants and limestone processing
facilities, and developing operating principles and practises to ensure
Hammerstone is developed in a safe and environmentally responsible manner.
The prefeasibility update report covers all aspects of the Hammerstone
Project including the market demand and sales models, the quarry, the
aggregate plants and the proposed limestone processing complex. External
consultants and experts have contributed significantly to the
prefeasibility update:
- CERI updated its 2004 oil sands model and supplied long-term expected
oil price and bitumen supply forecasts for the period 2003-2070. In
addition, CERI worked with Dr. Graham Davis to build a deterministic
model of oil sands construction as a function of oil price.
- Dr. Davis used CERI's long-term oil sands bitumen supply model, oil
price forecast and oil sands construction model to develop a
probabilistic, risked estimate of oil sands construction activity and
annual bitumen supply to 2070.
- Norwest reviewed and recalculated the demand parameters used in the
original prefeasibility study and the new reagent product demand
parameters used in the prefeasibility update. Norwest also reviewed
and set the limestone product prices used in the prefeasibility update
report.
- AMEC Earth & Environmental ("AMEC E&E") was retained to complete the
environmental impact assessment for Hammerstone, including the
engineering of surface water and groundwater handling systems, as well
as the long-term operating and closure and reclamation plans.
Additionally, AMEC E&E has worked with Birch Mountain to develop the
corporate Health Safety and Environmental Program and advise on its
implementation.
- The Mining and Metals Division of AMEC Americas Limited ("AMEC M&M")
has provided overall geological, mining and valuation expertise and
completed an independent review of the limestone resources and
reserves at Hammerstone. AMEC M&M has further developed the quarry
plan and schedule to assure delivery of materials from the quarry
according to the sales model and updated the quarry capital and
operating cost estimates. The capital and operating cost estimates for
the aggregate crushing plant were taken from the 2005 pre-feasibility
study and escalated by 6%.
- Phoenix has provided engineering design and Class 4 cost estimates for
the Hammerstone limestone processing complex that includes facilities
for producing quicklime, hydrated lime, milk of lime and has overseen
Birch Mountain's testing and procurement programme.
Sales Model
-----------
Demand for limestone products from Hammerstone is driven by the oil
sands industry, which needs aggregates and limestone-based reagents for its
construction and operations. The original prefeasibility report quantified
oil sands industry demand for limestone products based on the 2004 CERI
base case supply model, an average of five bitumen supply models including
the CERI unconstrained model and four models evaluating bitumen supply at
oil prices of US$25 and US$32 per barrel. Demand parameters linking future
demand for limestone products to oil sands construction and operations were
used to generate long-term demand projections. Sales forecasts were
estimated using market share estimates provided by Birch Mountain.
An alternate method to evaluate long-term oil sands bitumen supply and
supply addition was adopted in the prefeasibility update. A probabilistic
approach was taken by Dr. Davis whereby oil sands bitumen supply and supply
addition are evaluated as outcomes of modeled oil prices, which are allowed
to vary. A deterministic model for bitumen supply addition was constructed
where, above a threshold price, all announced oil sands construction
occurs, and above another lower threshold price, all currently built oil
sands production facilities continue to operate. A Monte Carlo simulation
model calibrated to past oil price behaviour and CERI's long range oil
price forecast was used to simulate 20,000 separate future oil price paths
to 2070. Based on the results of this work, Dr. Davis concluded:
"In most cases the worst case scenario had a mining production of no
more than 10%-15% below the CERI unrisked case. Even so, the worst-case
event is so rare that the mean production from all of the scenarios is
virtually unchanged from the base case unrisked forecast. This implies that
there is essentially no risk that oil prices will fall to such an extent
that planned oil production will be curtailed for any extended period of
time in the Athabasca and Cold Lake region. Other risks, of course, may
inhibit production, though these remain to be modeled."
Based on the results of the CERI/Davis work, the CERI unconstrained or
"unrisked" case has been adopted to model future oil sands bitumen supply
and supply addition and, through the demand parameters supplied by Norwest,
oil sand industry demand for aggregate and reagent products. As in the
prefeasibility study, non-oil sands industry demand for aggregate products
was estimated to be 10% of oil sands demand; non-oil sands demands for
reagent products was not considered. The CERI/Davis model predicts total
oil sands bitumen supply in Alberta will reach 4.7 million barrels per day
by 2020 and 9.7 million barrels per day in 2060 when the Hammerstone quarry
becomes exhausted. In a June 2006 publication, Canada's National Energy
Board ("NEB") forecasts "base case" and "all projects case" oil sands
bitumen supply to be 3.0 and 4.5 million barrels per day, respectively, in
2015. The NEB estimates capital expenditures for oil sands construction for
2006 to 2015 to be C$125 billion for the All Projects Case and C$95 billion
for the Base Case.
Future sales of limestone aggregate and reagent products were estimated
by assessing future market share for products from Hammerstone. For most
aggregate products, market share was decreased from levels used in the
original prefeasibility study and some aggregate demand parameters were
reduced by Norwest to account for reuse of aggregate in oil sands mines.
Market share for concrete rock was increased to 100% over a five-year
period because there are essentially no remaining supplies of surficial
aggregates meeting concrete rock specifications known in the region.
For reagent products, market share was identical to the original
prefeasibility study. Additionally, by analogy to the electrical power
generation sector and from discussions held with a broad cross-section of
present and future oil sands operators and merchant upgraders, it was
assumed that over the next 25 years, the proportion of alternative fuels
used by the oil sands industry will increase to the point where 80% of the
incremental requirements for fuel, power and hydrogen will be met using
alternative fuels such as bitumen, residual heavy ends, asphaltenes, coke
and coal, with about half of this requirement needing limestone and/or
quicklime for desulphurization either directly in fluidized bed
gasification or combustion units, or in post-combustion flue gas
desulphurization. Birch Mountain believes that the more expensive and more
complex IGCC (Integrated Gasification Combined Cycle) type gasification
systems, which require little or no reagent limestone or quicklime, will be
mainly limited to projects that include an on-site upgrader where hydrogen
is required or electrical power can be sold. The NEB has identified
stockpiling of sulphur, a product of IGCC gasification, as a potential
problem, with up to 5 Mt per year being produced by 2015.
Geology
-------
Devonian age limestone of the Moberly Member of the Waterways Formation
underlies the majority of the Hammerstone area, either in outcrop at
surface or below a thin covering of organic soils (muskeg) and/or
overburden (glacial till). Oil sands are generally absent, and the
limestone beds are typically flat lying with a slight dip to the
west-southwest. Some low-amplitude folds have been identified from
drilling. The Hammerstone limestone is open to the south where Moberly
Member limestone has been mapped at surface.
At Hammerstone, the Moberly Member is approximately 45 metres thick and
has been sub-divided into four units (Table 2). The four limestone units
vary in their properties; units 2 and 4 are high quality limestone with
average calcium carbonate contents exceeding 95% and 94%, respectively. The
other two units are variable mixtures of nodular limestone and calcareous
shale. Testing has shown the high-quality units can be used to produce
quicklime and hydrated lime, or reagent limestone, either alone or by
blending with the lower-grade units. Based on upgrading tests conducted by
Birch Mountain, certain limestone units within Unit 3 that contain 15% or
less shale have been segregated as Unit 3-A. This unit is not universally
present, but where it is present it can be separated and used to produce
concrete rock and asphalt aggregate in addition to the construction and
base grade aggregates.
Table 2. Moberly Member limestone units, Hammerstone project area.
-------------------------------------------------------------------------
Unit Rock-type Average Primary products
thickness (m)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4 Nodular & massive 0-6 Concrete rock, asphalt aggregate,
limestone calcinable limestone
3 Nodular limestone & 20.5 Base & construction aggregates,
calcareous shale sub-base/liner. 3-A: concrete
& asphalt aggregate
2 High calcium 4.4 Calcinable limestone, reagent
limestone limestone
1 Nodular limestone & 13 Construction & base aggregates,
calcareous shale reagent limestone
-------------------------------------------------------------------------
Quarrying and Aggregate Plants
------------------------------
AMEC M&M designed the quarry pit, which is constrained to the northeast
by the "Quarry of the Ancestors" archaeological site, to the north and east
by increasing thicknesses of oil sands cover, and to the west by the 200 m
environmental set-back from the Muskeg River. The MVQ has been opened in
the northern part of the Hammerstone project area and quarrying will
proceed southwards. In the prefeasibility update the quarry is planned as a
drill-blast-crush operation with a mobile fleet of mine trucks moving
blasted rock from the quarry face to aggregate plants distributed on the
quarry floor.
The quarry plan and schedule was developed by AMEC to meet the sales
forecasts derived from the CERI/Davis bitumen supply model. Forecasted
sales in the prefeasibility update are larger than those forecast
previously for two reasons: (1) the larger market size in the CERI
unconstrained case, and (2) the new rock products that have been added. The
projected increased sales forecast has resulted in all limestone reserves
being consumed over the 55-year quarry life from 2006 to 2060. Yearly
average projected sales from Hammerstone are listed in Table 3. Three
aggregate plants are planned initially, with one additional plant being
added to meet the large throughput demands from processing Unit 3, the
thickest unit in the quarry.
The quarry pit design includes all unconstrained areas within the
Hammerstone project area. Highwall angles over the shallow deposit are set
at 45 degrees in limestone; overburden will be removed 10m outside the
highwall crest. Over the planned 55-year life of the Hammerstone quarry, an
estimated 61 Mt of topsoil, muskeg and overburden will be removed and
reclaimed and 11.4 Mt of process fines will be reclaimed within the quarry.
Table 3. Projected Average Yearly Limestone Product Sales from
Hammerstone (million tonnes per year)
-------------------------------------------------------------------------
2006 2011 2021 2031 2041 2051
to 2010 to 2020 to 2030 to 2040 to 2050 to 2060
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Aggregate Products
-------------------------------------------------------------------------
Construction 3.787 5.933 7.206 8.216 9.350 10.690
aggregate
-------------------------------------------------------------------------
Base 3.355 5.012 5.919 6.963 7.906 4.446
aggregate
-------------------------------------------------------------------------
Concrete rock 0.327 0.151 0.100 0.152 0.186 0.000
-------------------------------------------------------------------------
Asphalt 0.187 0.068 0.024 0.063 0.080 0.000
aggregate
-------------------------------------------------------------------------
Sub-base/liner 0.283 0.130 0.095 0.119 0.151 0.033
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Reagent Products
-------------------------------------------------------------------------
Reagent 0.196 0.899 1.295 1.706 2.163 1.335
limestone
-------------------------------------------------------------------------
Quicklime 0.028 0.290 0.468 0.636 0.692 0.681
-------------------------------------------------------------------------
Hydrated lime 0.029 0.224 0.323 0.379 0.396 0.000
-------------------------------------------------------------------------
Totals(x) 8.192 12.706 15.429 18.235 20.923 17.186
-------------------------------------------------------------------------
(x) Totals may be subject to rounding error.
Limestone Processing Complex
----------------------------
The original prefeasibility study contemplated a quicklime plant, with
a lime hydration plant described, but not included in the capital plan. The
various plants included in the current limestone processing complex are
outlined in Table 4. Based on recommendations from Phoenix, a limestone
activation plant has been added to the flow sheet. The activating kilns are
designed to remove bitumen from Unit 2 calcinable limestone allowing the
quicklime kilns to operate with pre-heaters, thereby reducing fuel costs.
Activated Unit 2 limestone will also be sold as reagent limestone for flue
gas desulphurization and fluidized bed combustion or gasification.
Table 4. Limestone Processing Complex Sequencing
-----------------------------------------------------------
Plant Output (tonnes/yr) On-Stream
-----------------------------------------------------------
-----------------------------------------------------------
Activation-1 800,000 2009
Activation-2 800,000 2012
Activation-3 800,000 2023
-----------------------------------------------------------
Ultimate capacity 2,400,000
-----------------------------------------------------------
-----------------------------------------------------------
Quicklime-1 200,000 2009
Quicklime-2 200,000 2011
Quicklime-3 600,000 2015
-----------------------------------------------------------
Ultimate capacity 1,000,000
-----------------------------------------------------------
-----------------------------------------------------------
Hydrated lime-1 200,000 2008
Hydrated lime-2 200,000 2013
-----------------------------------------------------------
Ultimate capacity 400,000
-----------------------------------------------------------
Maximum throughput levels are capped at 2.4 Mt per year for the
activation plants, 1 Mt per year for the quicklime plant and 400,000 tonnes
per year for the hydrated lime plant. An optional milk of lime plant with
80,000 tonnes per year has been added in the capital plan, but milk of lime
has not been included in the sales estimate. The limestone processing
complex is scheduled to reach capacity by 2038. After this time, Birch
Mountain's market share for capped products declines because sales are held
constant although demand is projected to rise beyond 2038.
Limestone Reserves
------------------
Limestone reserves estimated for the prefeasibility update are shown in
Table 5. A grade of 100% is assumed for all units. A loss of 5% at the
footwall contact between Unit 1 and the underlying Christina Member was
included to reduce the likelihood of diluting the limestone with footwall
calcareous shale. No dilution or losses were applied to the contacts
between the limestone units because they are gradations of similar
materials. Losses were applied to the Units 1, 3 and 4 to account for
shale-rich interbeds that are waste material.
In clearing organic soils and overburden during opening of the MVQ, it
became apparent that the Unit 4 was not as continuous as it was previously
interpreted to be. This unit is brittle and it is now understood that
exposed knolls of Unit 4 are not continuous below overburden cover, but
occur as isolated outcrops. In winter 2006, a series of backhoe pits were
dug in areas of interpreted Unit 4 below the overburden across Hammerstone
and no Unit 4 was found. Unit 3 is present at all locations where limestone
was encountered. The geological model for units 3 and 4 has been adjusted,
with an increase in Unit 3 volume and a decrease in Unit 4 volume, and a
net overall decrease in limestone reserves to 999 million tonnes comprising
460 Mt of proven limestone reserves and 539 Mt of probable limestone
reserves. The potential negative impact of a decrease in Unit 4 reserves is
offset by the use of Unit 3-A in place of Unit 4 for concrete rock and
asphalt aggregate.
Table 5. Hammerstone limestone reserves as of 2006 June 25
-------------------------------------------------------------------------
Mineable Mineable Total Total
Measured Indicated Mineable Mining Proven Probable Total
Unit Resource Resource Resource Losses Reserves Reserves Reserves
(Mt) (Mt) (Mt) (Mt) (Mt) (Mt)
-------------------------------------------------------------------------
-------------------------------------------------------------------------
4 7 5 12 17% 6 4 10
3A 1 22 23 0% 1 22 23
3 282 377 659 25% 212 283 494
2 60 58 118 0% 60 58 118
1 191 181 372 5% 181 172 353
-------------------------------------------------------------------------
All 541 643 1,184 16% 460 539 999
Units
-------------------------------------------------------------------------
(x) Totals may be subject to rounding error.
The totals shown in Table 5 do not account for the recent mining at the
Muskeg Valley Quarry, however, the total sales tonnage are negligible when
compared to the insitu reserves.
Capital and Operating Costs
---------------------------
Capital costs for the quarry and aggregate plants have been estimated
by AMEC M&M. Phoenix has provided capital cost estimates for the activation
plants, quicklime plants, and hydrated lime plants. All capital for
equipment is based on the cost of new equipment. The development capital
cost estimate for the quarry, the aggregate plant and the limestone
processing complex is C$577 million over the period 2006 to 2026, with a
further C$416 million in sustaining capital required over the life of the
project. This estimate is categorized by AMEC as prefeasibility level with
an expected accuracy of +/- 25%. The estimates are in Q2 2006 Canadian
dollars with no escalation.
Table 6. Capital Cost Profile
--------------------------------------------------------
Time frame Capital item Cost (C$millions)
--------------------------------------------------------
--------------------------------------------------------
2006-2015 Quarry 43
2006-2007 Aggregate plants 16
2007-2009 Activation-1 74
2007-2009 Quicklime-1 70
2008 Hydrate lime-1 4
2008-2011 Quicklime-2 74
2009-2012 Activation-2 74
2013 Hydrate plant-2 4
2012-2015 Quicklime-3 144
2020-2023 Activation-3 74
--------------------------------------------------------
Operating costs over the 55-year life-of-quarry have been estimated on
an owner-operated basis. Costs were calculated in the areas of quarrying,
aggregate processing, activating, quicklime processing, hydrating and site
administration based on data for the Fort McMurray region. The operating
cost estimates assume all equipment is owned and operated by Birch
Mountain, maintenance is performed in-house, labour costs are consistent
with nearby operations. Average unit operating costs per tonne of output
over the life-of-quarry are shown in Table 7.
Table 7. Average Life-of-Quarry Operating Costs
-------------------------------------------------------------------
Cost Area Operating Costs(x) (C$ per tonne output)
Quarrying and haulage 1.88
Aggregate processing 1.66
Activating 9.48
Calcining 36.40
Hydrating 15.22
General / Administration 0.31
-------------------------------------------------------------------
(x) per tonne finished product
Quarry operating costs cover all activities from clearing the property
to delivery of rock to the aggregate plant. Aggregate plant operating costs
cover all costs from delivery of rock to the aggregate plant to the
load-out of stockpiled material. Limestone processing costs include
operating and maintenance and the cost of natural gas. The petroleum coke
price is assumed to be C$30 per tonne and includes an estimated load and
haul cost of $5.00 per tonne.
Financial Analysis
------------------
The Hammerstone valuation was determined by AMEC M&M using the
discounted cash flow ("DCF") method assuming 100% equity in Q2 2006
Canadian dollars. Projections of annual revenues and costs are based on
estimated capital expenditures and operating costs presented in the updated
prefeasibility study for the quarry, the aggregate plant and each plant in
the limestone processing complex. Estimated cash flows were used to
determine the after-tax NPV and IRR for the base case 55-year quarry life.
Provincial taxes were set at 11% and federal taxes at 21% plus a 4% surtax.
Royalties of $0.0441 per tonne payable to the Alberta Government and $0.158
per tonne payable to a royalty holder were included. Following the advice
of the Norwest report, unit prices for construction and base aggregates,
concrete rock, asphalt aggregate and sub-base/liner are $9.00, $8.00,
$30.00, $15.00, and $7.00 per tonne respectively, and are constant over the
life of the quarry. Prices for reagent limestone, quicklime and hydrated
lime are $55.00, $215.00 and $230.00 per tonne, respectively, and are
constant over the life of the quarry.
Results of the base case analysis indicate that the project has a
potential after-tax IRR of 29% and an after-tax NPV of $1,089 million at a
discount rate of 7.5% (see Table 8). The payback period is estimated at 7.3
years from first production.
Table 8. Financial analysis results, pre- and after-tax bases.
Discount Rate 0% 2.5% 5.0% 7.5% 8% 10% 15%
-------------------------------------------------------------------------
Pre-tax NPV(C$ million) $12888 $5865 $2975 $1655 $1485 $990 $409
After-tax NPV $ 8611 $3906 $1972 $1089 $ 976 $644 $254
IRR (%) 29.4%
Sensitivity analysis indicates that the NPV is most sensitive to
changes in product price, less sensitive to changes in processing costs,
and least sensitive to changes in quarrying costs and capital expenditures.
The net present value of the Hammerstone Project will also be materially
affected if sulphur containing alternate fuels are not adopted as
anticipated. Such an occurrence would impact the demand for reagent
limestone in the oil sands industry.
Ongoing Development
-------------------
Three potential opportunities have not been included in the Hammerstone
valuation: cement production, recalcined spent lime and FGD gypsum
reclamation. Phoenix has completed preliminary engineering design and
capital and operating cost estimates for both cement and recalcined spent
lime. Currently for cement, potential sales to the oil sands industry alone
are insufficient to justify building a cement plant. Additional studies
will be undertaken to examine reducing the capital costs for a cement plant
and increasing potential sales by considering exporting cement from the
region and developing additional income streams for the plant such as waste
disposal. For recalcined spent lime, Birch Mountain is working with
suppliers and companies producing spent lime to refine a flowsheet and test
a number of potential applications for the recalcined product. For FGD
gypsum reclamation, Birch Mountain intends to carry out additional
engineering studies to examine integration of the FGD gypsum reclamation
into the active quarrying. Birch Mountain has requested regulatory approval
to construct and operate these facilities, as well as accept gypsum,
produced from various emission sulphur recovery systems, into the quarry to
be incorporated into the final reclamation landscape. The objective of
on-going development is to advance each of these opportunities to the point
where they can be advanced to a Class 4 prefeasibility estimate.
Hugh J. Abercrombie, Ph.D., P.Geol., Vice President, Exploration, is
identified as the qualified person in accordance with Section 1.2 of
National Instrument 43-101.
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 http://www.sedar.com and http://www.sec.gov.
Cautionary Note to US Investors: The terms "reserve", "proven reserve"
and "probable reserve" used in this news release are defined in accordance
with NI 43-101, "Standards of Disclosure for Mineral Projects", under the
guidelines set out by the CIM in, "Standards on Mineral Resources and
Mineral Reserves", adopted by the CIM Council on August 20, 2000. In the
US, Securities and Exchange Commission ("SEC") Industry Guide 7 defines a
mineral reserve as, "That part of a mineral deposit which could be
economically and legally extracted or produced at the time of the reserve
determination." According to interpretations by SEC staff of mining
industry disclosure standards, such terms may not be used by SEC
registrants unless the registrant has completed a "bankable" feasibility
study and all applicable permits are in place or expected imminently. US
investors are cautioned not to place undue reliance on disclosure that is
not issued in accordance with SEC regulations.
The TSX Venture Exchange does not accept responsibility for the adequacy
or accuracy of this news release.
SOURCE Birch Mountain Resources Ltd.
 back to top
CONTACT:
Douglas Rowe, President & CEO or Hansine
Ullberg, VP Finance & CFO Birch Mountain Resources Ltd., Tel
(403) 262-1838, Fax (403) 263-9888, http://www.birchmountain.com; To
request a free copy of this organization's annual report, please
go to http://www.newswire.ca and click on Tools for Investors.
|
