Birch Mountain looking for buyer (October 15, 2007)

Birch Mountain Resources (BMD-T, BMD-X) has appointed a financial advisor to help assess “strategic alternatives” for the tar sands aggregate producer and former prairie gold explorer.

Birch, whose shares were battered in mid-August after it posted a second-quarter loss of $5.9 million and a first-half loss of $9.5 million, said the alternatives might be a joint venture, a merger or a sale of the company. Independent directors have formed a committee to pilot the program.

Birch’s loss of $5.9 million (7 per share) came on revenue of $4.3 million, appreciably greater than second-quarter revenue in 2006, which was $88,000. Its half-year loss was on revenue of $4.9 million, against a loss of $3.6 million on revenues of $88,000 in the first half of 2006 (all the first-half revenue last year was realized in the second quarter).

The company had about $1.2 million in cash, plus receivables, inventory and pre-paid items of $7.8 million.

Development costs on the operating Muskeg Valley limestone quarry and on the Hammerstone quarry development project contributed significantly to a working-capital crunch: the company has a working capital deficit of $7.7 million. It arranged an additional $4-million bridge loan in addition to a $15.5-million loan facility to cover operations at Muskeg Valley and its general and administrative costs.