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Aluminum giants take note of this Quebec junior

Orbite Aluminae's president and CEO describes plans to conquer part of the high purity and smelter grade alumina industries.


Author: Kip Keen

Posted: Thursday , 28 Jun 2012



HALIFAX, NS (MINEWEB) -

It is a humble beginning. In the past year Orbite Aluminae (TSX: ORT) has produced around 100 tonnes of alumina along with rare earth oxides at its Cap-Chat pilot plant in the Gaspé region of Quebec. This has enabled Orbite to test "all sorts of things," Richard Boudreault, Orbite's president and CEO, told Mineweb, as it optimizes how best to extract alumina and rare earths using novel extraction techniques that Orbite has or is patenting.

"We're getting very nice results," Boudreault said of the process that allows Orbite to process alumina and rare earths from atypical sources including clay deposits and red muds, as the leftovers from conventional processing of aluminum ores by the Bayer method are called.

But if the small pilot plant at Cap Chat is humble, Orbite's plans are not. Orbite has started construction on an expanded facility where it expects to start producing 1,000 tonnes a year of high purity alumina (HPA), along with rare earths, starting in 2013. The economics of the HPA plant, step one for Orbite in a greater quest that also involves taking on more conventional smelter grade alumina (SGA), are looking good.

"We expect margins in the 80- to 90-percent range once in steady state production," Boudreault said.

High-purity alumina is not the stuff of kitchen pots and pans. It is used in high tech applications especially in the aerospace, automobile and electronic industries. It is not a massive market, nor is it a miniscule one. And it is growing. Boudreault said the size of HPA market is in the 100,000-tonne-per-year range and expanding by about eight to nine percent a year.

Boudreault also estimated the market was 10,000 tonnes in deficit. The exact deficit - let alone prices - of HPA are hard to pin down, however. "It's one of those opaque markets," Boudreault said.

But the prices HPA fetches are compelling. Though they range widely, from well under $100 a kilo, they can reach several hundred dollars per kilo HPA for the really good stuff. Price depends much on purity and grain size. The finer and purer, the higher the HPA price. And what a manufacturer wants in these terms differs according to the HPA application.

"Some will want no iron; some will not tolerate silica," Boudreault said, while others may request the inclusion of titanium oxides. "There are specific recipes for most of these people," said Boudreault. Now, he said, the sorting out of potential recipes with potential clients has begun.

Light emitting diode (LED) fabricators would be the big score. Boudreault said they make up about 60 percent of the HPA market and require especially high purity HPA. He sounds hopeful. "Our product is likely to have characteristics they are seeking," Boudreault said. He estimated the price HPA fetches in the LED industry at around $100 per kilo.

Orbite's plan is to have the Cap Chat HPA plant - an expansion of its pilot testing facility - online in early 2013 and hitting production of around 1,000 tonnes HPA per year at steady state. Within a few years of coming online Boudreault said Orbite would ramp up to several thousand tonnes HPA per year, possibly garnering it a significant portion of the world HPA market.

Orbite has estimated the cost of the initial HPA plant to be between $26 million and $30 million and given Orbite has nearly C$70 million in the bank - in cash and short term investments - Boudreault said the project is fully funded.

To Orbite's bottom line Boudreault sees HPA production as an important near-term cashflow generator that will help it fund a more costly project: Orbite has plans to build a much larger SGA facility using its proprietary methods. In the Gaspé, Orbite holds leases to a large unconventional source of aluminum and rare earths that it hopes to bring into production after the HPA plant goes live. Its indicated resource, a clay deposit, is about a billion tonnes @ 23.37 percent Al2O3, 52.62 percent SiO2, 8.42 percent Fe2O3, 1.64 percent MgO and 6.9 percent mixed oxides and 563 ppm rare earths. The plan, as set out in a recent scoping study, would be to produce 2.5 million tonnes per year of SGA over a 25-year mine life. Orbite has said the SGA project would cost $500 million to build and, at a five percent discount, would have a whopping $7.7 billion net present value.

Investors may want to know: Will Orbite's grand plans to finish building an HPA plant and then move onto an SGA facility mean painful dilution? Boudreault suggested not. "We don't expect to. We have enough money to cover equipment costs (for the HPA plant)," Boudreault said. Then he expected "cash flow to pull us into the next step," the much more expensive SGA facility. Financing for that, were the SGA project to go forward, would include debt, along with funding from possible joint venture partners, Boudreault said.

As far as revenue streams go, so long as Orbite's process proves workable on an industrial scale, licensing of its methods may also be lucrative. In this sense Orbite's chief asset may not be its physical facilities and resources but its intellectual properties.

"That's what we think," Boudreault agreed, noting it was hard to judge whether markets valued Orbite mostly for its coming alumina production or its intellectual properties, which it likes to describe as "game changing."

Aluminum giants have taken note. In the past few months Orbite has signed memorandums of understanding (MOU) with Rusal and Nalco. Boudreault hopes the MOUs will lead to joint ventures on an SGA plant at Cap-Chat and then licensing deals that would give them the right to use Orbite's methods on their home turf. Russia for Rusal; India for Nalco.

Orbite's method has potential on two major fronts for aluminum producers. It might be used on aluminum ores owned by majors such as Rusal and Nalco and it also shows promise as a way to reprocess red mud, waste left behind after conventional processing of aluminous ores.

The potential in red muds is something Boudreault sounds most passionate about. If it works, the process could prove handy in remediating extensive stores of "extremely polluting" red mud at processing sites. To that end, early metallurgical testing shows Orbite's patented or patent-pending processes can extract alumina - and rare earths as well - left over in red mud and in so doing render the red mud more or less benign.

"Orbite's process converts red mud into a dry, inert and environmentally neutral product as residue (leachate) and can reduce residual volumes by more than 90 percent compared to the product's initial state," Orbite recently stated in an outline of metallurgical tests on red mud.

The potential there, if Orbite's process prove economical, could be huge. It could give aluminum producers a way to reduce their environmental footprint and mitigation costs, and even, in some cases, an added revenue stream. Boudreault said whether the process proves economic - in the sense of profit generation - depends much on the alumina grade of red muds. While some red muds contain little in the way of leftover aluminum, more typically, Boudreault said, the Bayer process leaves behind some 50-percent of aluminum. Residual grades can be in the 20-percent range, akin to Orbite's own aluminous clay deposit in the Gaspé.

"We have done some numbers and it can generate a payback after a few years," Boudreault said. But he added as a caveat, "It depends very much on the site."