HPA1 - Cap Chat HPA Plant - De-risked using Full Scale Pilot Plant

Latest press release has another revenue related news (5 TPD will be reached this year).  The other revenue-related news was the Sept. 21st press release in which Orbite stated the HPA Plant will produce HP-silica.

Orbite’s high-purity alumina (HPA) plant, on track to be completed by the end of 2012, is expected to produce silica of greater than 99.9% purity [=4N &+]. The Company’s smelter-grade alumina (SGA) plant, projected to begin its first phase of operations in 2014, will have the potential to produce up to 1.2 million tonnes of silica ranging from 95% to more than 99.9% at maximum capacity.

1-     HP-alumina

4N to 6N from \$50,000 to \$500,000 /ton

3 TPD = 1000 TPY

5 TPD = 1800 TPY

Using an average net selling price per ton of \$120,000 /ton (operating costs removed), we get the following revenues:

\$ 120 M per year (@ 3 TPD)

\$ 216 M per year (@ 5 TPD)

2- HP-silica

High-purity silica corresponding to the processing of 3 to 5 TPD of HP-alumina = 2200 to 3700 TPY of silica to be processed (not much).

= 2,200,000 kg to 3,700,000 kg of resulting HP-silica (per year).

Conservatively using 2,000,000 kg of processed silica:

a.     Assuming HP-silica 4N level can be achieved without additional major investment (which is very likely), at 2M kg per year * \$16.42 /kg = \$ 33 M/year of additional revenue.

b.     If reaching 5N level (Company is aiming for 7N kevel), let's say for half of it (1M kg of 4N and 1M kg of 5N of HP silica):

4N, 1M kg * \$16.42 /kg = \$ 16.4 M (\$ 30 M - using 3.7 M kg * 50%)

5N, 1M kg * \$100 /kg = \$ 100 M (\$ 185 M - using 3.7 M kg * 50%)

Total (4N+5N HP-silica) = \$116 M (\$215 M)

= additional revenues of \$116 M per year from HP-silica using quite conservative quantities. This is for HPA1 alone.

Assuming most costs already covered by the high-purity alumina.

So, with the HP-silica and HP-alumina alone, HPA1 will generate profit in the order of \$1 M per day.

This is without considering HP-hematite, magnesium oxides, gallium & scandium, etc.

Rough figures, for HPA1 alone:

Approx. 200 M shares, up to 2\$ EPS

P/E = 8 à 16\$ per share

P/E= 12 (constant growth stock) à24\$ per share

This is NOT considering:

-         SGA Plants (with several Billions NPV per Plant – that increased from PEA with 20% opex reduction; significant increase of REE/RM extraction rates; complete or close to complete Engineering – ready for construction)

-         Huge resources + now potential addition of alumina-rich kaolin of Nova Scotia

-         Leading REE/RM outside China – will be the first to produce Scandium and Gallium in 2013; CLEAN technology

-         Solution to Red Mud - 3B ton of residues worldwide that can now be seen as a resource; similar for Fly Ash.

Wake up Mr Market, you’ve been put to sleep by Short Interests - HPA1 Plant about to rev.

Wake up analysts – you are in late from latest press releases...

Alumina1