Exploration Orbite is turning some heads

When a reservoir of toxic red sludge from an alumina plant burst in Hungary causing an ecological disaster, the prospects for a relatively unknown junior mining company in Quebec called Exploration Orbite (ORT. A-V) shone a little brighter.

That’s because Exploration Orbite has patented a process to extract alumina from aluminous clay rather than bauxite — avoiding the red mud that is created when alumina is extracted from bauxite in a method called the Bayer process, a 19th century invention.

In the Bayer process, bauxite is washed with hot sodium hydroxide, which extracts the aluminum oxide or alumina from the ore. The waste consists of a cocktail of solid impurities, heavy metals such as cadmium, cobalt and lead, and processing chemicals, all of which combine to form the red sludge that destroyed great swaths of the Hungarian countryside earlier this year.

By contrast, the process Exploration Orbite uses is to crush aluminous clay, and then acid-leach it first at room temperature and subsequently at higher temperatures. The leachate is then distilled and more than 90% of the acid is recovered. Iron is precipitated out of the concentrated high pH leachate, leaving an aluminum-rich liquid. The pH of the aluminum-rich liquid is then lowered before it is refined by liquid-liquid extraction to produce metallurgical alumina, which is further processed to yield high-purity alumina.

The solid waste produced from its alumina-extraction process can be “chemically neutralized” and the company claims there are markets for it “including metal-trapping absorbents for sewage treatment and primary material for clay tile and brick manufacture.”

“We won’t have any toxic rejects,” explains Louis Morin, head of investor relations for the company. “At the end of the process, it’s neutralized clay. This process is unique and until this process was invented, there was no way to extract the alumina economically.”

Exploration Orbite owns 100% of the mining rights to an aluminous clay deposit on the Grande-Valle property, about 32 km northeast of Murdochville in the Gasp region of eastern Quebec. Grande-Valle’s red clayey deposits contain a relatively high alumina content of just over 23% on average.

Richard Boudreault, Orbite’s president, was approached by members of the alumina industry in Quebec about six years ago to develop a viable process to extract alumina from the aluminous clays in the province. Quebec is home to about nine refineries, which benefit from the cheap hydroelectric power available in the province.

“My first reaction was no, the Bayer process was a very good process,” Boudreault says in a telephone interview from his home in Quebec, adding that another factor was that the price of alumina at that point was not consistent with developing a process that would be competitive on an economic scale.

Over the course of the next few years, however, the price of alumina started to climb, moving from about US$250 per tonne to today’s price of nearly US$400 per tonne. At the same time, the alumina industry in Quebec started to fret that it was running out of material.

Canada produces about 12% of the world’s aluminum, which requires about 3 billion tonnes of alumina per year, and most of the material is imported. (Two tonnes of alumina are required to produce one tonne of aluminum.)

“To produce alumina from bauxite you need a very large and expensive field and those are hard to find, so it’s getting increasingly difficult for the alumina industry to get supply. . . most of it is imported,” he explains. “Being able to provide Quebec’s alumina industry with alumina without any pollutants in it, in very close quarters, makes quite a difference to them.”

It took Boudreault about three years to develop his patented extraction process and another two to test it. “We developed the process with separation technology that didn’t exist a few years ago,” he says. “It is a completely fluid, completely chemical process and more ecologically sound.”

In 2007, a laboratory-scale pilot line was developed and operated to produce batches of both metallurgical and ultra-pure alumina. Samples were sent for evaluation to potential clients in each market and were determined to be of excellent quality, the company pens in a September 2010 white paper posted on its website, adding that from those samples two companies signed agreements: London-headquartered Amalgamated Metal Corp. and Aluminerie Alouette Inc., which operates the largest modern aluminum smelter in North America and is a consortium of Rio Tinto Alcan, Austria Metall, Hydro Aluminium (Norway), la Socit gnrale de financement (Quebec) and Marubeni of Japan.

Alouette has already spent more than $3 million on the project, according to Morin.

Once the pilot plant starts producing in the next few months, it will turn out about one tonne per day of metallurgical alumina, or 250 kg per day of ultra-pure alumina.

Metallurgical alumina from the pilot plant will be sent to aluminum smelters for pilot-scale integration into their operations during the first six months of operation, while ultra-pure alumina will be sold commercially on international markets during the second six months of production.

The goal is to prove feasibility, optimize process parameters and production costs, assess the environmental impact and design of a full-scale production plant.

“The company is a sleeper that has the potential to be a significant game changer in the aluminium business if the process can be vindicated,” says Romeo D’Angela, head of Novadan Capital in Toronto, and a significant shareholder in the company. “It’s been vindicated in the lab but the pilot plant will allow them to scale it up and take it to the commercial level.”

Steven Palmer, president of AlphaNorth Asset Management in Toronto, added shares of Exploration Orbite to his small-cap portfolio in October. “They have a defined resource and a technology that seems to be able to extract the alumina, and they can basically supply it to the alumina refineries at half the cost of shipping it from South America,” he says. “I bought it because at 40¢ a share there’s significant upside if this is proven to work in a larger scale. The plant is basically built and they’re going to start it up this month.”

Palmer says the company is already attracting attention. “The big alumina companies are watching very closely,” he says. “Remember this is alumina in clay and there are only two or three such deposits in the world that are known… (and this one) makes the most sense because it’s right in the backyard of the alumina refineries.”

The other two aluminous clay deposits are in Russia and China.

On Dec. 1, Exploration Orbite received permission from the Ministry of Natural Resources to extract 500 tons of aluminous clay specimens in bulk from its Grande-Valle site. That quantity is essential to conducting the metallurgical tests slated for early next year.

In November, Exploration Orbite raised $12.15 million in an offering of 27 million units priced at 45¢ per unit. (Each unit comprised a share and a half warrant. Each warrant can be exercised at 75¢ before Nov. 5, 2011, and at 85¢ after that date.) Over 84% of the offering was completed with institutional investors.

In Toronto at presstime, the company shares were trading at 80¢, within a 52-week range of 11¢-84¢.