MONTRÉAL, QUÉBEC--(Marketwired - March 17, 2014) - Orbite Aluminae Inc. (TSX:ORT)(OTCQX:EORBF) ("Orbite", or the "Corporation") announced today the filing of its Consolidated Financial Statements for the year ended December 31, 2013. The Corporation reported a net loss of $15.0 million ($0.08 per share) compared to $16.9 million ($0.09 per share) for 2012, representing a decrease of $1.9 million, or 11%, compared to the year ended December 31, 2012. All dollar amounts are in Canadian dollars unless stated otherwise.
Fourth Quarter Highlights and Material Subsequent Events:
- Completed a prospectus offering of $16 million and executed a binding commitment for up to $40 million in additional funding.
- Received a $4 million non-interest bearing repayable financial contribution from Canada Economic Development.
- Announced that the Government of Québec formally approved a $10 million equity investment in Orbite.
- Continued to implement cost reduction measures during the fourth quarter ended December 31, 2013, leading to a 36% decrease in General and Administration expenses compared to the third quarter of 2013.
- Decided strategically not to spend the $2.8 million balance required to be spent on qualified exploration expenditures relating to its flow-through shares and opted to use such funds for working capital purposes and indemnify its flow-through shareholders ($1.7 million).
- Cash and Short-Term Investments of $10.3 million as at December 31, 2013.
- Positive Working Capital of $9.8 million.
- Non-current Investment tax credits receivable of $25.7 million.
- Property, Plant and Equipment of $64.9 million, up by $16.8 million.
- Quarterly Net loss and Comprehensive loss of $9.0 million or $0.05 per share.
- Cash flows used in operating activities of $4.4 million.
- Cash flows from financing activities of $13.8 million.
- Cash flows used for investing activities of $3.5 million.
- Shareholders' equity of $82.3 million, up 9% from December 31, 2012
"We are proud to have completed our financing plan, providing Orbite with access to up to $70 million in new capital." said Glenn Kelly, Orbite's Chief Executive Officer. "Despite significant challenges in 2013, we are now sufficiently capitalized to execute on our main priorities. We believe that following a transformative year, we have turned the corner and are in a good position to capitalize on the opportunities our technology creates, and build greater shareholder value through the execution of our strategy."
Summary of Financial Results
The Corporation is a development stage company and has no revenues.
Net loss for Q4 2013 increased by $6,038,422 to $9,031,007 ($0.05 per share), compared to $2,992,585 million ($0.02 per share) for Q4 2012. However, this increase is due mainly to exceptional charges recorded during the quarter, comprising of the transaction costs pertaining to the issuance of the 2013 convertible debentures ($3,367,000), the flow through indemnity($1,667,000), disassembly and handling costs of equipment due to the delay in HPA construction ($535,000), and the mark to market adjustment resulting from the increase in fair value of the convertible debentures ($1,982,000) between the date of inception and December 31, 2013 which are presented under net finance expense. Adjusted for these effects, non-GAAP net loss for the quarter was $1,480,007, a 51% improvement over Q4 2012 and 30% over Q3 2013.
Research and development charges in Q4 2013 decreased by $473,037 or 62% to $285,807 compared to the same quarter in 2012. General and administrative charges decreased by $867,843, or 45%, to $1,057,540 compared to the same quarter last year. The decrease in R&D and general and administrative expenses is attributable mainly to a decrease in share-based compensation and cost reduction measures implemented during the latter half of 2013.
HPA Plant operation expenses for Q4 2013 increased by $408,983 or 57% to $1,128,742, compared to Q4 2012. This increase was attributable mainly to a one-off charge in relation to the disassembly and handling costs of certain equipment due to the delay in HPA construction and the increase in plant size following the conversion of the pilot plant into an HPA facility. .
Other Income decreased by $1,083,588 in Q4 2013, as compared to the same quarter last year. Other Income in 2013 results from the reversal of the flow-through shares premium liability in regards to the flow-through shares issued in December 2012. However, the Corporation opted strategically not to spend the $2.8 million balance required to be spent on qualified exploration expenditures, and will use such funds for its working capital. Since the Corporation did not spend the required qualifying Canadian mineral exploration expenses, an expense in other income of $1,667,000 was also recorded to reflect the indemnification penalty the Corporation will incur to compensate adverse tax consequences incurred by purchasers of such flow-through securities.
For fiscal 2013, net loss decreased by $1,870,649 or 11% to $15,037,992 ($0.08 per share), compared to $16,908,641 ($0.09 per share) for fiscal 2012. The decrease is due mainly to a 77% reduction in research and development costs to $1,470,124 for full year 2013, as compared to 2012, a 23% decrease in general and administration charges to $8,372,414, offset partially by an increase in HPA Plant operation expenses of $1,708,966 and an increase of 1,471,438 in other expenses during fiscal 2013, as compared to 2012. The net finance expense decreased by $2,242,728 to $1,431,486 in 2013 when compared to the year ended December 31, 2012.
Cash and short-term investments
Cash and short-term investments decreased by $30,271,504 during 2013 compared to December 31, 2012. The decrease was mainly due to investments in the construction of the HPA plant, exploration and evaluation activities related to the smelter-grade alumina project, research and development, general administration and HPA plant operation expenses. The decrease was partially offset by the collection of sales taxes receivable and the issuance of $16 million of convertible debentures.
Sales taxes and other receivables
Sales taxes and other receivables decreased by $3,683,291 during 2013 compared to December 31, 2012. The decrease of sales taxes (GST, QST and HST) receivable from the Federal and Provincial governments is primarily due to the reimbursement of previously filed returns and the reduction in the amounts receivable at the end of December due to a lower volume of purchases compared to 2012.
Prepaid expenses and others
Prepaid expenses and others increased by $479,183 during 2013 compared to December 31, 2012. The increase is mainly due to higher insurance costs resulting from the extension of the construction phase and the fair value variation of debentures which is partially offset by lower financing fees.
Investment tax credits
Investment tax credits classified as non-current increased by $5,724,316 during 2013 compared to December 31, 2012 as a result of the recognition of investment tax credits receivable on the equipment purchased for manufacturing and processing in the Gaspé region. The Corporation has pledged all refundable investment tax credits from 2012 and 2013, totaling up to $25.7 million, related to its manufacturing and processing facility in the Gaspé region, as security for the $25 million convertible debentures issued in December 2012.
The funds the Corporation will receive upon reimbursement of the investment tax credits will be deposited in a segregated account and serve as security for the convertible debenture. These funds will be released to the Corporation according to the terms of the trust indenture agreement.
Property, plant, and equipment
Property, plant, and equipment ("PP&E") increased by $16,843,507 during 2013 compared to December 31, 2012. The net increase results from an increase of $22,887,984 before investment tax credits in the investment in PP&E, attributable mainly to the HPA plant, partially offset by $5,724,316 in government grants and refundable investment tax credits on equipment purchases for the HPA plant and the recording of depreciation during the period.
Patents increased by $467,459 during 2013 compared to December 31, 2012. The increase is principally due to the costs resulting from the filing of patent applications in several jurisdictions in 2013, following the filing of 29 national entry phases in various countries and 7 international patent applications (PCT).
Exploration and evaluation assets
Exploration and evaluation assets increased by $1,896,665 during 2013 compared to December 31, 2012. The increase is mainly due to the evaluation work done on the Chaswood (Nova Scotia) properties, the preparatory work for upcoming studies and exploration work on the Rimouski - Cap-Chat properties and the continuation of engineering studies relating to the SGA project.
Accounts payable and accrued liabilities
Accounts payable and accrued liabilities decreased by $23,825,905 during 2013 compared to the prior year, mainly as a result of the settlement agreement with certain suppliers and payments made during the year, as well as a lower purchase volume during the fourth quarter of 2013, compared to the fourth quarter of 2012.
Provisions increased by $239,310 during 2013 compared to December 31, 2012. The provisions pertain to billing disputes with suppliers, of which several have been resolved (see note 9 to the annual consolidated financial statements).
Flow-through shares premium liability
The flow-through shares premium liability decreased by $751,400 during 2013 compared to December 31, 2012. The Corporation reversed the remaining flow-through shares premium liability as a result of the Corporation opting strategically to use the balance of $2,830,000 not incurred in additional qualifying Canadian mineral exploration activities as working capital.
Derivative financial instrument
The Corporation has a derivative financial instrument recognized on the statement of financial position representing the estimated fair value of the convertible debentures holders' conversion option (refer to note 14 of the annual consolidated financial statements for a description of the convertible debt, the embedded derivatives and their accounting treatment). The derivative which meets the definition of a financial liability for accounting purposes is recognized at its estimated fair value and the changes in fair value recognized in comprehensive loss in the period the change occurs. The derivative will expire upon the maturity of the convertible debentures or earlier if the conversion right is exercised by the holders. There is no future cash-payment associated with the recognized liability which is presented as a non-current liability. The fair value of the derivative may change significantly from period to period due to the underlying change in the share price. If the conversion option is not exercised prior to maturity, the derivative's fair value will be zero when it expires. During 2013, the derivative financial instrument liability decreased by $4,162,471 compared to December 31, 2012 mainly due to the decrease in the share price.
Long-term debt and convertible debentures
Long-term debt (including short-term portion) and convertible debentures increased by $171,485 and $12,728,406 respectively during 2013 compared to December 31, 2012, principally due to interest accretion on these debts and the issuance of new debentures in December 2013, partially offset by repayments or debenture conversions.
Share capital and warrants
Share capital and warrants increased by $20,426,694 mainly due to the issuance of common shares as a result of the conversion option by some of the 2013 debenture holders in December, 2013 and the issuance of common shares in settlement of liabilities with two suppliers in July, 2013.
Contributed surplus increased by $1,514,823 during 2013 compared to December 31, 2012 mainly due to the recognition of share-based payments and the issuance of broker's warrants pertaining to the issuance of the 2013 convertible debentures.
Cash Flow Statement
Cash flows used in operating activities increased by $503,032 during the quarter ended December 31, 2013 compared to the same period in 2012. The increase is mainly due to transaction costs totaling $2,988,000, paid upon the issuance of the 2013 convertible debentures and the interest paid on the 2012 convertible debentures. Expenses were partially offset by a decrease in non-cash working capital items. Cash flows used in operating activities decreased by $1,075,043 during the year ended December 31, 2013 compared to 2012. The decrease is attributable mainly to a decrease in non-cash working capital items, as well as a decrease in R&D and General and Administration expenses resulting from cost reduction measures introduced during the third quarter of 2013.
Cash Flows from Financing Activities
Cash flows from financing activities decreased by $15,886,164 and $16,545,191 during the quarter and the year, respectively, as compared to the same periods in 2012. The decrease is primarily due to lower amounts raised from convertible debentures and issuance of shares.
Cash Flows used in Investing Activities
Cash flows used in investing activities decreased by $19,718,457 during Q4 2013 compared to the same period in 2012, mainly due to a reduction in investments in the HPA plant construction and exploration and evaluation assets, which were partially offset by a reduction in the inflows from short-term investments. Cash flows used in investing activities increased by $46,703,543 for fiscal 2013 compared to 2012, mainly due to a reduction in the inflows from short-term investments, partially offset by a reduction in cash flows invested in the HPA plant construction and exploration and evaluation assets.
Liquidity and Capital Resources
The Corporation is a development stage company that has not yet generated any revenues or significant cash flows from its operations. The Company's source of funding has primarily been from the sale of equity and debt securities, and to a lesser extent, earning interest income, which is highly dependent on the cash balances and prevailing interest rates. The Corporation has limited financial resources, has no recurring revenues and continues to rely on the issuance of shares, debt or other sources of financing to fund its overhead, HPA plant construction, commissioning and ongoing operations and to advance its development-stage projects. As at December 31, 2013, the Corporation had aggregate cash and short-term investments balance of $10,279,462 and positive working capital (current assets less current liabilities) of $9,818,539.
On December 10, 2013 ("Closing Date") the Corporation completed a public offering of convertible debentures in the aggregate principal amount of $16,000,000. The 2013 convertible debentures consist of 16,000 units at $1000 principal amount. The convertible debentures bear interest at a rate of 7.5% per annum to be paid semi-annually in arrears on May 31 and November 30 of each year. Each unit consists of (i) unsecured unsubordinated debentures convertible at the option of the holders at any time prior to the close of business on the tenth business day immediately preceding the maturity date, into Class A shares of the Corporation at a price of $0.40 per share and (ii) 875 share warrants, each exercisable into one Class A share of the Corporation at a price of $0.48 for a period of 36 months following issuance. Holders who convert their debentures will receive accrued and unpaid interest to the date of conversion in addition to a make-whole interest payment equal to the interest amount that such holder would have received if such holder had held the debentures until the maturity date (the "Make-Whole Amount"). Such Make-Whole Amount shall be reduced by 1% for each 1% that the five (5) day Volume Weighted Average Price ("VWAP") of the Common Shares on the TSX at time of conversion exceeds the conversion price. The interest may be paid, at the sole option of the Corporation, in cash or in Common Shares whereas the Make-Whole interest (if any) will be paid in Common Shares.
The broker agent of the Offering received a commission of 6% of gross proceeds raised in addition to 2,400,000 broker warrants; each such warrant is convertible into one class A share of the Corporation at a price of $0.48 for a period of 36 months following issuance.
The Corporation intends to complete the financing of the construction and commissioning of the HPA plant through the following sources of funds:
- Convertible debentures
Orbite has secured a binding commitment by a U.S. based institutional investor providing for the future subscription of $40 million in additional units by way of private placement ("the Subscription Commitment") having identical terms to those of the Units issued pursuant to the above, with the exception that the conversion price shall be based on the 5 day volume weighted average price ("VWAP") of the Corporation's shares on the last trading day prior to the date on which the subscription rights in respect of which the units are issued first become exercisable, and the Warrants granted shall be equivalent to 45% of the number of Common Shares into which the Debentures are convertible, exercisable at a 20% premium over such conversion price.
As per the terms of the Subscription Commitment, the investor subscribed, on March 10, 2014, to the two (2) series of subscription rights (the "Series X Subscription Rights" and the "Series Y Subscription Rights" and collectively the "Subscription Rights"). The Subscription Rights will be exercisable by the investor and by the Corporation. Upon exercise, the Subscription Rights will require the investor to purchase Additional Units in the total subscription amount of up to $40 million, as follows:
Series X Subscription Rights, requiring the investor upon exercise to purchase Additional Units in the amount of $10 million, exercisable beginning on the earlier of (i) July 11, 2014, and (ii) the date of qualification of the underlying units by prospectus, which will not be prior to April 10, 2014;
Series Y Subscription Rights, requiring the investor upon exercise to purchase Additional Units in the amount of up to $30 million based on aggregate trading value benchmarks on the Common Shares, exercisable beginning on October 10, 2014.
The obligations of the subscriber under the Subscription Rights are subject to several conditions, including obtaining certain regulatory approvals, including TSX approval, and approval of the Corporation's shareholders prior to the exercise of the Series Y Subscription Rights.
- Repayable financial contribution from Canada Economic Development
On January 30, 2014, Orbite announced it was granted a $ 4,000,000 non-interest bearing repayable financial contribution from Canada Economic Development for Québec regions to be used for the purchase and installation of the alumina calcinator, a key element in Orbite's high purity alumina production facility. The contribution is interest free, repayable in 10 consecutive equal semi-annual installments starting 24 months following completion of the HPA Facility and was awarded through Canada Economic Development's Québec Economic Development Program.
- Equity investment from Investissement Québec
On March 3, 2013, the Corporation, announced that the Government of Québec formally approved a 10M$ equity investment in Orbite by Investissement Québec ("IQ"), a mandatory of the Québec Government. Terms and condition of the investment, including timing and pricing, are expected to be settled shortly. Orbite management will hold a conference call and provide a live audio webcast today, March 17, 2014 at 10:30 a.m. to discuss the Company's financials and provide an update on the Company's HPA project.
|CONFERENCE CALL DETAILS:
||March 17, 2014
||10:30 a.m. (EDT)
|Dial in number:
||+1 (888) 231-8191 / +1 (647) 427-7450
||+1 (855) 859-2056
||+1 (514) 807-9274
||+1 (416) 849-0833
||Available until 12:00 midnight (EDT), Monday, March 31, 2014
Notice to Reader
The information provided in this press release is entirely qualified by the disclosures in the Corporation's Financial Statements and Management Discussion & Analysis (MD&A) for the year ended December 31, 2013, which are available at www.orbitealuminae.com and under the Corporation's profile at www.sedar.com.
Orbite Aluminae Inc. is a Canadian cleantech company who's innovative and proprietary processes are expected to produce alumina and other high-value by-products, such as rare earth and rare metal oxides, at one of the lowest costs in the industry, and in a sustainable fashion, using feedstocks that include aluminous clay, kaolin, nepheline, bauxite, red mud and fly ash. Orbite is currently finalizing its first commercial high-purity alumina (HPA) production plant in Cap-Chat, Québec and has completed the basic engineering for a proposed smelter-grade alumina (SGA) production plant, which would use clay mined from its Grande-Vallée deposit. The Corporation's intellectual property portfolio contains 15 intellectual property families, and the Corporation owns the intellectual property rights to 11 patents and 57 pending patent applications in 10 different countries and regions. The first intellectual property family is patented in Canada, USA, Australia, China, and Russia. The Company also operates a state of the art technology development center in Laval, Quebec, where its technologies are developed and validated.
Certain information contained in this document may include "forward-looking information". Without limiting the foregoing, the information and any forward-looking information may include statements regarding projects, costs, objectives and future returns of the Corporation or hypotheses underlying these items. In this document, words such as "may", "would", "could", "will", "likely", "believe", "expect", "anticipate", "intend", "plan", "estimate" and similar words and the negative form thereof are used to identify forward-looking statements. Forward-looking statements should not be read as guarantees of future performance or results, and will not necessarily be accurate indications of whether, or the times at or by which, such future performance will be achieved. Forward-looking statements and information are based on information available at the time and/or the Corporation management's good-faith beliefs with respect to future events and are subject to known or unknown risks, uncertainties, assumptions and other unpredictable factors, many of which are beyond the Corporation's control. These risks uncertainties and assumptions include, but are not limited to, those described in the section of the Management's Discussion and Analysis (MD&A) entitled "Risk and Uncertainties" as filed on November 14, 2013 on.
The Corporation does not intend, nor does it undertake, any obligation to update or revise any forward-looking information or statements contained in this document to reflect subsequent information, events or circumstances or otherwise, except as required by applicable laws.