Orbite eyes high-grade alumina production in 2015

Orbite Aluminae (TSX: ORT; OTCQX: EORBF) says its high-purity alumina (HPA) plant in Cap-Chat, Que., is on track to reach commercial production early next year.

The Montreal-based firm recently appointed Claude Lamoureux — formerly CEO of the Ontario Teachers’ Pension Plan — as chairman. Lamoureux will replace Lionel Léveillé, who will stay on the board as an independent member.

Orbite’s president and CEO Glenn Kelly thanked Léveillé for his six-year service and said the junior will benefit from Lamoureux’s experience, as it “transitions from a technology development company to an operational commercial entity.”

Earlier this year Kelly, previously Orbite’s chief operating officer, took the helm from Richard Boudreault, as he steered the struggling company back on course.

On a recent conference call, Kelly told analysts that Orbite has arranged enough funds to bring the delayed HPA plant to commercial production next year.

According to this plan construction should start by July, followed by commissioning in November and December. The HPA plant should ramp up to 3 tons per day of commercial production in early 2015. 

To reach this goal, the company is working through its to-do list. It has ordered a calcination system for producing high-purity alumina from Outotec of Germany, a global minerals and metals processing firm, using a $4-million loan from Canada Economic Development. The company received $3.8 million of the non-interest bearing loan in March, and should get the remaining $200,000 in 2015.  

Orbite intends to fund the rest of the plant with the financial support of its U.S.-based institutional investor, Crede Capital Group, and the Quebec government.

The provincial government has agreed to make a $10-million equity investment in the company through its financial arm Investissement Québec. This financing should conclude shortly.

Crede Capital, which closed a $16-million financing with Orbite last December, said it would buy up to $40 million of the company’s debentures. Orbite anticipates closing a $10-million tranche by mid-July, followed by a $30-million tranche, pending shareholder and regulatory approvals.

“Following the challenges of 2013 we have secured sufficient capital to execute on our priorities,” Kelly said on the call. “We are progressing well against our 12-month timeline for the completion of the HPA facility, and we are excited by our increasing visibility on commercialization.”

The company has budgeted $28.3 million in capital expenditures for the plant this year, of which it has spent $7.3 million in the first quarter.

The HPA plant should initially produce 3 tons per day of high-purity alumina, with a possibility of expanding to 5 tons per day. It will use smelter-grade alumina as feedstock before processing ore from the company’s Grande-Vallée aluminous clay deposit in Gaspé, Que.

High-purity alumina typically grades 99.99% (4N) or higher, and is used in electronics such as LED lighting applications and displays. The company performed several pilot tests to verify and optimize the production quality at its technology development centre in Laval, Que. It aims to produce alumina with a purity level of 99.999% (5N).

Once the HPA plant is up and running, Orbite will focus on its medium- to long-term goals, which include using its proprietary processes and technologies to extract other high-value products such as scandium, gallium, rare-earth elements and smelter-grade alumina from a variety of feedstock, including aluminous clay, bauxite, red mud and fly ash. 

Orbite is in talks with potential joint-venture partners — including Glencore Xstrata (LSE: GLEN) — to build a SGA plant.

It adds that the non-binding partnership agreement with Russia’s Rusal has been terminated, as the parties couldn’t agree on the terms.

Orbite shares closed May 14 at 27.5¢, after losing nearly 7% a day earlier on its first-quarter results, where it reported a $4.4-million net loss, up from $3.9 million a year ago. The company has $5.3 million in cash and equivalents, and a $5.3-million working capital.

Euro Pacific analyst Luisa Moreno says Orbite is “progressing according to plan.” She wrote in an emailed response that “I do not have reasons to doubt that Orbite will be able to achieve the 3-ton-per-day target by the first quarter of 2015.” She has a “speculative buy” and a 55¢ target price.