Orbite Aluminae Inc.

Orbite Aluminae Inc.

May 31, 2012 09:08 ET

Orbite Files Revised Preliminary Economic Assessment Technical Report (PEA) Confirming Economic Results

MONTREAL, QUEBEC--(Marketwire - May 31, 2012) - Orbite Aluminae Inc. (TSX:ORT) (the "Company") is pleased to announce the issuance of a Revised Preliminary Economic Assessment ("Revised PEA") Technical Report which clarifies disclosure provided in the Company's initial PEA issued on January 12, 2012 ("January PEA") and confirms the favorable preliminary economic assessment of the Company's projected Smelter Grade Alumina (SGA) production plant.

The Revised PEA, which is fully compliant with NI 43-101 Respecting standards of Disclosure for mineral projects ("NI-43-101"), is based on the work and expertise of eight expert independent Qualified Persons and is consistent with the conclusions reached by the audit report (the Audit) (see Press Release dated March 30, 2012), carried out by the engineering firm Roche Ltd and by consulting geologist Alex W. Knox, M. Sc., a rare earth specialist.

The Revised PEA reclassifies the rare earth and rare metal grades of the Company's alumina resources from the Inferred to the Indicated category and provides alternative pricing scenarios regarding market prices of alumina, hematite, silica and magnesium oxides as well as rare earths, which prices were subject to significant variations in the last year. The Revised PEA also provides alternative energy sources and pricing scenarios in light of the uncertain availability of natural gas in the vicinity of the projected SGA plant location, which is used as a reference benchmark for energy purposes. The overall preliminary economic assessment of the project is not materially altered as a consequence of the revisions brought to the Revised PEA.

Summary of revised disclosure

Changes made to chapters dealing with History, Geological Setting, Mineralisation, Deposit Types, Exploration Work, Drilling, Sample Preparation, Analyses and Security, and Data Verification, are mostly comprised of added historical and geological information available in previously published geological and technical reports. These chapters also incorporate all available drilling and geological information from the 2011 field campaign which was only partially incorporated in the January PEA, thus providing a more comprehensive description of the geological origins of the aluminous clay deposit and the presence of rare earth elements and metals.

In relation to the mineral resources classification, grade predictability was easily achieved, as it generally is with industrial mineral deposits. The geometry of the geology is also relatively simple providing volume consistency regardless of method used. Given the relatively well defined volumes of claystone and mudstone within the chosen envelop of the block model, combined with the density of drilling, it was possible to classify all the main oxides, including aluminum, silica, iron, magnesium and rare earths into the Indicated Category.

The following table shows the grades within the 1,040 million tonnes of Indicated Resources for the Marin Sector of the Company's Grande-Vallée Project. The average grade takes into account a cut-off grade of 18% AlΓééOΓéâ, and a density of 2.6g/cm3. The effective date of this mineral resource estimate is November 23, 2011.

Table of Grade Estimates Following 2011 Exploration Work

Oxide Grade
AlΓééOΓéâ 23.37%
SiOΓéé 52.62%
FeΓééOΓéâ 8.42%
MgO 1.64%
Others 6.90%
RMO & REO 563 ppm

The data for rare earth and metal oxides (REO and RMO) includes 142 assays, many fewer than the 2,606 assays for major oxides. As a result, the grades for REO and RMO are not as precise as those for Al2O3 in the claystone and mudstone. REO and RMO are also found in much smaller quantity, 420 to 660 ppm, within an average of 23.4% Al2O3 grade. However, similar distribution and statistical signatures, including a correlation by clay type to Al2O3, indicate that REO and RMO should display similar patterns once additional assays become available.

The Revised PEA details assumptions regarding the choice of rare earth spot prices selected in the January PEA by adding a cautionary statement that revenue estimates of $392 M for REO and RMO correspond to August 2011 spot pricing estimates. As at November 23, 2011, REO and RMO spot pricing, which were significantly lower than that in effect in August 2011, indicated corresponding revenues of $247 M, falling well within the limits of the sensitivity analysis tables provided in the January PEA, which remained unchanged in the Revised PEA.

The original economic target remains alumina and the viability of the project depends on alumina recovery. REE and RM are found at low concentrations. The REE and RM alone do not justify the project and should thus be considered as by-products.

Revisions have also been brought to Orbite's procedures for quality assurance and quality control (QA/QC) which led to the implementation of comprehensive internal procedures currently being practised within the Company. Prior to the application of the new procedures, Orbite was relying solely on standard procedures of reputable independent laboratories, while it now adds its own additional independent QA/QC procedures.

The chapter on Project Infrastructure of the Revised PEA adds clarification on the usage of fossil fuels. It emphasizes the fact that fossil fuels, or alternative fuels, are required to operate the plant and comprise a considerable part of the projected operational expenses. The process cannot be operated entirely on electricity due to the fact that the calcination stage, which accounts for approximately half of the energy required, requires a direct flame. Electricity is also costlier than some fossil fuels such as natural gas, biomass, biomethanisation, coal, and other sources of alternative fuels.

For the purpose of the PEA, natural gas from local sources was established as reference benchmark for energy and pricing purposes. At this time, there are no identified/classified natural gas reserves compliant with the NI 51-101 Standards of Disclosure in the Gaspé area. Nevertheless, there is potential for natural gas and light fuel in the area although there are currently no production facilities (wells or pipelines) in operation in the Gaspé area nor in the general area where Orbite intends to build its first metallurgical grade alumina plant. The hypothesis of the PEA is that natural gas, or other fossil fuel, would be available within a 20 km radius of the facility with permanent storage and handling systems for gaseous, solid and or liquefied fuel. The PEA CAPEX estimate is that such handling and storage systems would represent approximately $8 M, an amount which will be further assessed for the Feasibility study.

A cost of $4.00/GJ (Giga Joule) delivered to the plant was estimated to be a reasonable benchmark. A risk matrix will be developed for the Feasibility study in order to provide the most cost efficient scenarios and arrangements. Plant costs are very sensitive to fuel costs. In the event of a 10% fuel cost increase relative to the $4.00/GJ price reference, the plant operating expenses would increase by approximately 5% to 6% ($6 M or about $12/t of alumina produced) or would decrease accordingly in case of a price reduction. If there was no natural gas immediately available, then light fuel oil could be available in that pricing range within the vicinity area. Even a proper mix of coal/pet coke at a very stable price per Giga Joule (GJ) such as $3.50 to $3.70/GJ is envisioned, which is 7.5% less than the reference value used in the Revised PEA. At the end of November 2012, gas was at $2.80/GJ being 30% below the reference price. The estimated OPEX and CAPEX for the project cover all those aspects.

Summary of preliminary economic assessment

The Revised PEA does not alter the two (2) Preliminary Economic Assessment scenarios provided in the January PEA. Under scenario 1, which considers revenues generated from alumina and hematite only, the Revised PEA concludes that the Company's projected SGA plant, assuming a 25-year operation requiring a $473 M initial investment, would generate a steady annual EBITDA of $154 M, while the internal rate of return (IRR) would be 33%, and the pre-tax net present value (NPV) at a 10% discount rate for the first SGA plant would be $949 M, with a payback period of 3.1 years. A detailed sensitivity analysis was performed with varying alumina prices from $325/t to $425/t and with hematite prices following the same trends ($125/t to $200/t), making the IRR vary from 19% to 33%, and the NPV from $338 M to $949M, or from $1.65/share to $4.64/share on a fully diluted basis, for each plant considered, when using a 10% discount rate. Market alumina prices have varied between $325 and $425 over the last 12 months.

Under scenario 2, which considers revenues generated from all potential marketable products and is the Company's preferred scenario, the Revised PEA concludes that the Company's projected SGA plant, assuming a 25-year operation requiring a $500 M initial investment, would generate a steady annual EBITDA of $572 M, while the internal rate of return (IRR) would be 114%, and the net present value (NPV) at 10% discount rate would be $4.8 B, with a payback period of less than one year. Preliminary marketability analysis information tends to confirm the potential market for these products, although further detailed market analysis will have to be carried out in the Feasibility study. A sensitivity analysis was performed, using the same hypothesis as Scenario 1 for alumina and hematite pricing ranges, and varying the silica market price from $10 to $25/tonne, revenues from magnesium oxides and other oxides from $8.6 M to $11.6 M and rare earths and rare metals by ± 40% up to ± 65% respectively.

The Revised PEA is available on the Company's website (www.orbitealuminae.com) and on sedar (www.sedar.com).

The technical content of this press release has been reviewed and approved by Guy Saucier, Eng. (Roche Ltd.), Alex Knox, P. Geol. (AWK Geological Consulting Ltd.), Rod Doran, P. Eng. (Genivar Inc.) and Denis Primeau, Eng. Chief Engineer, Orbite Aluminae Inc., all qualified persons under NI 43-101 respecting standards of Disclosure for Mineral Projects.

About Orbite

Orbite currently owns 100% of the mining rights over a total of 60,984 hectares including the Grande-Vallee property measuring 6,665 hectares, the site of an aluminous clay deposit located 23 km south of Grande-Vallee, and a 2,600 mΓéé facility in the process of being converted into a high-purity alumina plant in Cap Chat, in the Gaspe region. An NI 43-101 report identified over 1 billion tonnes of aluminous clay in part of the deposit. The Company also owns ten different families of intellectual property rights (and patent pending), protected by Canadian and U.S. patents, for extracting alumina and for which patents are also pending in other countries. www.orbitealuminae.com.

Forward-looking statements

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 Company 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 Company 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 Company'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 March 22, 2012 on SEDAR, and could cause actual events or results to differ materially from those projected in any forward-looking statements. The Company 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.

Contact Information

    Frederic Berard
    Vice-President and General Manager
    H+K Strategies
    Tel.: 514-395-0375

    Jacques Bedard
    Orbite Aluminae Inc.
    Tel.: 514-744-6264 Ext : 111

    Louis Morin
    Investor Relations
    Tel.: 514-591-3988

    Jason Monaco
    Managing Partner
    First Canadian Capital Corp.
    Tel.: 416-742-5600

    Nicole Blanchard
    Investor Relations
    Sun International Communications
    Tel.: 450-973-6600