MOUNTAIN TIMBER WOOD PRODUCTS, LLC.

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Special Focus
Loggers tap emerging biomass market
Wood pellet expansion planned in Marcell, second plant is proposed in Mountain Iron.














7/1/2007
by Wayne Nelson






There’s little demand for tamarack and pine pulp and loggers usually leave these species in the woods when they cut their
timber stumpage in northern Minnesota.

But these underused species — along with sawmill residues – burn hot and clean, and with processing into wood fuel
pellets, can help meet huge residential demand that’s emerged in Europe.

In response, a group of Northeastern Minnesota loggers has sealed a tentative deal to supply wood pellets to a major
European distributor.

They also are positioning themselves to tap a market for wood pellets in the Upper Midwest that’s expected to develop as
the full impact of permanently-high fossil fuel prices settles into the public consciousness.

Meanwhile, there’s enough demand from schools and businesses with furnaces that can use wood pellets for a phased
production ramp up on the commercial side, said Joann “Tink” Birchem, a familiar face in the region’s logging sector.

“There are a lot of people in the Upper Midwest who still don’t know about wood pellets,” she said. “We’re going to Europe
to get started.”

She and her husband Jerry operate Birchem Logging in Mountain Iron, one of the region’s largest logging companies.

The Birchems are founding members of Forest Management Systems Cooperative, a Northeastern Minnesota logger group
that was the first in the nation to become FSC-(Forest Stewardship Council) certified. The certification attests to
independently verified sustainable logging practices and the seal has become a powerful international marketing tool.

She also is chief executive of two affiliated ventures aiming to tap these emerging markets for wood pellets, Valley Forest
Wood Products, LLC and Mountain Timber Wood Products, LLC.

The first project would be a $3 million expansion of the Valley Forest sawmill in Marcell. The LLC acquired it earlier this
year. The second venture, would be an $8.5 million wood pellet plant to be built next to Birchem Logging in Mountain Iron. It
would operate as Mountain Timber.

The Marcell project is scheduled to begin in July with completion in August. Birchem hopes to start construction at the
Mountain Iron site by the end of summer and begin operating the new pellet plant in late winter.

The Birchems themselves are the majority investor in each of these limited liability corporations, and several of the co-op’s
members also are investors, she said.

Collectively, loggers and other silent investors with interests in the region’s wood products sector have contributed about
75 percent of the venture equity in the two LLCs. The European pellet distributor, CGC Biomass, based in Madrid, Spain,
holds the remaining 25 percent ownership, she said.

The equity investment in the two LLCs represents about 30 percent of the overall financing for the two wood pellet projects.
The LLCs are finalizing bank loans for the remaining 70 percent of project costs.

Valley Forest sawmill near Marcell in northern Itasca County closed after its proprieter died last year. Another firm leased
and ran it briefly. Valley Forest LLC acquired and modified it and began limited wood pellet production in May. Birchem said
production can continue through the construction period.

The expanded operation would have design capacity to produce 60,000 tons of pellets per year. Valley Forest is operating
with a single shift of five employees and will expand to 24/7 operation as demand warrants, she said. It is operating under
the old air quality permit granted to the previous owner by the Minnesota Pollution Control Agency. Birchem said the permit
adjustment required to operate at the higher production level should not pose a problem.

The new Mountain Timber plant requires a new air permit and Birchem hopes to have it in hand so bank loans can be
finalized by late summer and construction can begin.

Mountain Timber would be the larger of the two plants. Its design capacity would be 100 tons with first year production
estimated at about 80,000 tons. Partner CGC Biomass has committed to purchase 60,000 tons of wood pellets per year
until U.S. demand catches up with Europe, Birchem said. “I’m convinced this market will grow.”




There’s little demand for tamarack and pine pulp and loggers usually leave these species in the woods when they cut their
timber stumpage in northern Minnesota.

But these underused species — along with sawmill residues – burn hot and clean, and with processing into wood fuel
pellets, can help meet huge residential demand that’s emerged in Europe.

In response, a group of Northeastern Minnesota loggers has sealed a tentative deal to supply wood pellets to a major
European distributor.

They also are positioning themselves to tap a market for wood pellets in the Upper Midwest that’s expected to develop as
the full impact of permanently-high fossil fuel prices settles into the public consciousness.

Meanwhile, there’s enough demand from schools and businesses with furnaces that can use wood pellets for a phased
production ramp up on the commercial side, said Joann “Tink” Birchem, a familiar face in the region’s logging sector.

“There are a lot of people in the Upper Midwest who still don’t know about wood pellets,” she said. “We’re going to Europe
to get started.”

She and her husband Jerry operate Birchem Logging in Mountain Iron, one of the region’s largest logging companies.

The Birchems are founding members of Forest Management Systems Cooperative, a Northeastern Minnesota logger group
that was the first in the nation to become FSC-(Forest Stewardship Council) certified. The certification attests to
independently verified sustainable logging practices and the seal has become a powerful international marketing tool.

She also is chief executive of two affiliated ventures aiming to tap these emerging markets for wood pellets, Valley Forest
Wood Products, LLC and Mountain Timber Wood Products, LLC.

The first project would be a $3 million expansion of the Valley Forest sawmill in Marcell. The LLC acquired it earlier this
year. The second venture, would be an $8.5 million wood pellet plant to be built next to Birchem Logging in Mountain Iron. It
would operate as Mountain Timber.

The Marcell project is scheduled to begin in July with completion in August. Birchem hopes to start construction at the
Mountain Iron site by the end of summer and begin operating the new pellet plant in late winter.

The Birchems themselves are the majority investor in each of these limited liability corporations, and several of the co-op’s
members also are investors, she said.

Collectively, loggers and other silent investors with interests in the region’s wood products sector have contributed about
75 percent of the venture equity in the two LLCs. The European pellet distributor, CGC Biomass, based in Madrid, Spain,
holds the remaining 25 percent ownership, she said.

The equity investment in the two LLCs represents about 30 percent of the overall financing for the two wood pellet projects.
The LLCs are finalizing bank loans for the remaining 70 percent of project costs.

Valley Forest sawmill near Marcell in northern Itasca County closed after its proprieter died last year. Another firm leased
and ran it briefly. Valley Forest LLC acquired and modified it and began limited wood pellet production in May. Birchem said
production can continue through the construction period.

The expanded operation would have design capacity to produce 60,000 tons of pellets per year. Valley Forest is operating
with a single shift of five employees and will expand to 24/7 operation as demand warrants, she said. It is operating under
the old air quality permit granted to the previous owner by the Minnesota Pollution Control Agency. Birchem said the permit
adjustment required to operate at the higher production level should not pose a problem.

The new Mountain Timber plant requires a new air permit and Birchem hopes to have it in hand so bank loans can be
finalized by late summer and construction can begin.

Mountain Timber would be the larger of the two plants. Its design capacity would be 100 tons with first year production
estimated at about 80,000 tons. Partner CGC Biomass has committed to purchase 60,000 tons of wood pellets per year
until U.S. demand catches up with Europe, Birchem said. “I’m convinced this market will grow.”