Exploration Orbite produces first aluminum

Exploration Orbite (ORT.A-V) has had a wild ride over the last year — moving from a low of 12.5¢ a share in July 2010 to a high of $5.69 on April 12 2011, before slipping to the $3 range in the recent market slowdown.  

On May 25, news that the Montreal-based junior had produced its first samples of aluminum from alumina that was produced at its Cap-Chat facility popped the company’s share price up 9.9% or 36¢ to close the day at $4.01 with 5.1 million shares changing hands.

Exploration Orbite has patented a process to extract metallurgical alumina and high-purity alumina from its claystone deposit in the Gaspe Region of Quebec, about 32 km northeast of Murdochville.

The aluminum samples that were successfully produced came from alumina processed at the junior’s 28,000 sq. foot “at scale” production facility in Cap Chat, also in the Gaspe Region.

Several analysts believe Orbite’s stock is significantly undervalued. Marc Johnson of M Partners in Toronto has a 12-month target price of $15 per share — a potential return of 274%.

“Orbite has succeeded over previous uneconomic Bayer-alternative processes by eliminating several high-cost steps and improving recoveries through a novel arrangement of off-the-shelf equipment,” he wrote in a research note to clients on May 26. “Our high purity alumina valuation is based on producing 350 tonnes per year in 2012 and increasing to 1,750 tonnes by 2014.”

Matt Gowing of Mackie Research raised his target price on the stock from $7.40 per share to $8.00 “to account for this key de-risking milestone” and “increased the probability of the Smelter Grade Alumina (SGA) facility reaching commercial operations to 60%, up from 45%.”

The aluminum samples were produced on behalf of Orbite under the direction of Lionel Roue, a professor who specializes in the electrochemistry of aluminum production, at the National Institute of Scientific Research – Energy, Materials and Communications.

The samples were manufactured using Orbite’s Cap-Chat smelter grade alumina, which is designed to meet industry standards for purity and particle size or granulometry, the company reported in a press release.

Roue explained in a statement that the tests confirmed the alumina produced by Orbite “has a similar behaviour into a molten salt reduction cell as the conventional alumina used by most of the aluminum smelters around the world.”

Richard Boudreault, the company’s chief executive, described the production of aluminum from Orbite’s smelter grade alumina as a “vital step” and an “enormous milestone” that demonstrated the company’s ability to make a “superior quality, high-demand smelter grade alumina product,” and to do so more efficiently and without the environmental impact associated with the Bayer process, currently the most commonly used process in the industry.

“Not only have we produced metallurgical alumina from Gaspesia clay, but we have done so under the supervision of an independent research centre, demonstrating that aluminum can be produced using the standards, technology and methods of the alumina industry,” Boudreault continued.

An SGA feasibility study is expected to be completed before the end of this year or early next year.

“We’re going to start production in the first or second quarter of 2012 of high-purity alumina, followed a year later with smelter-grade alumina,” Boudreault told The Northern Miner in a telephone interview from Montreal. “Most of the technical challenges are behind us. Each of our facilities is producing at scale so there are no scale issues that are going to come up.”

Boudreault added that the pilot facility is being modified to produce high-grade alumina so very little cap-ex or technical development work will be required. “We’ll use the same facilities, just upgrade some of them to go from semi-continuous to a fully continuous process,” he explained. “We’re going to multiply the lines we have to a 750-tonne-per-day smelter grade alumina production facility by mid-2013,” he says.

Orbite holds 100% of the mining rights on its 6,441-hectare Grande-Vallee property in the Gaspe Peninsula, which has an indicated resource of more than 1 billion tonnes of aluminous clay in part of the deposit, which the company says represents “a half-century of the total current Canadian alumina imported.”

Joel Fournier, Orbite’s vice president of technology, noted that the traditional Bayer process can take “up to 36 hours during crystal growth in order to reach the appropriate granulometry.”

Orbite’s patented process, by contrast, “offers significant competitive advantages in terms of both crystal precipitation and the growth period, which is reduced to a fraction of the time required by the Bayer process,” he asserted.

It’s also far more environmentally friendly. Johnson of M Partners notes that Orbite’s process “does not generate wastes while also recovering valuable by-products such as scandium and gallium.”

By contrast, “the inefficient Bayer process has been used for 124 years because it was the lowest cost process available to an industry that overlooked the environmental hazards of producing red mud (a toxic iron-heavy waste product).”

Gowing of Mackie Research, who initiated coverage in a 38-page research note on Mar. 22, described Orbite as a “game-changing alumina production company” and noted that the “market opportunity of its patented processing invention is profound as it may allow for low-cost alumina production within a Quebec aluminum industry that imports $3 billion of higher-cost alumina to feed its refineries.”

Boudreault, who holds a master of engineering degree from Cornell University and an MBA from the University of Sherbrooke, notes that the company is already in discussions with a number of different aluminum companies. “We can’t announce anything yet but yes we are in discussions with a few of them – one per continent except Antarctica.”