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ORBITE ALUMINAE TSX:ORT; OTCQX:EORBF: $2.66 — SPECULATIVE BUY 12-MONTH TARGET PRICE: $8.00 | PROJECTED RETURN: 201%
HPA Plant — Site Visit
On January 31, 2013, Orbite invited analysts to the High Purity Alumina (HPA) plant in Cap-Chat, Quebec. Key takeaways include:
? Most of the equipment is on site: All of the front-end equipment required for the clay preparation plant (CPP), acid leaching plant (ALP) and the crystallization plant (CP) are currently on site and have the capacity to support production of 5+ tonnes per day (tpd) of HPA. However, the acid recovery circuit needs to be upgraded to a higher capacity ? a larger furnace from Outotec is expected to arrive in the coming weeks. The production rate is still small (0.42 tonnes/week) but we expect a ramp-up to 1 tpd this quarter, once all of the equipment is on site. Packaging and storage of HPA have yet to be automated.
? Commissioning of each sub-plant is expected to be completed by 2Q 2013: Orbite is currently commissioning each of the sub-plants or sections of the HPA plant. Once all the sections are optimized, they will be fully integrated to form a continuous process.
? HPA plant similar to the future smelter-grade alumina plant: As we were able to attest, changes in the pH of the leachate by addition of a base reagent are not part of the current HPA plant in Cap-Chat. The new expanded plant no longer produces the intermediate smelter-grade alumina hydroxide product; it only produces aluminum hexahydrate as an intermediate product. Also, as part of the full conversion to a smelter-grade alumina (SGA) equivalent plant, Orbite will produce a number of by- products, including scandium, gallium and rare earths. The by-products refinery is expected to be commissioned in 2Q 2013.
? Commercial production expected in 2Q 2013: If the integration and conversion phases progress on schedule, Orbite believes it could reach commercial production by the summer.
? Definitive feasibility study (DFS) delayed until 4Q 2013: The HPA plant is expected to include all the major sections of the future SGA plant. Orbite has decided to delay the DFS until after the HPA plant is fully operational.
ACTION — BUY
We maintain our Speculative Buy recommendation and $8.00 target price.