PEA sets out $7.7B NPV for Orbite’s alumina project

Orbite Aluminae (ORT-T) has released some hard numbers showing the potential of its patented aluminum-extraction process and corresponding project, which it promises will transform the industry.

Focusing on the Marin aluminous clay deposit that forms part of the company’s Gaspé-based project, a preliminary economic assessment (PEA) has set a hefty $7.7 billion pre-tax net present value (NPV) and a 114% internal rate of return (IRR), based on a 5% discount rate and a 25-year mine life.

The numbers, however, depend on not only recovering 540,000 tonnes of alumina per year, but also 189,000 tonnes of hematite, 1.2 million tonnes of high-purity silica, 28,000 tonnes of magnesium oxides, 104,000 tonnes of other value-added oxides and 820 tonnes of rare metal and rare earth oxides.

As of an August technical report, the Marin sector of the 64.4-sq.-km property hosts 800 million to 1 billion indicated tonnes grading 23.13% alumina in clay and mudstone. The report did not specify rare earth content. Based on alumina and hematite alone, the NPV comes in at $1.7 billion and the IRR at 33%.

The PEA, meanwhile, estimates that of $702 million in potential annual revenue, alumina would constitute just under a third at $229.4 million, while rare earth elements would bring in $393 million, hematite $37.9 million, silica $30.7 million, magnesium oxide $11.1 million and mixed oxides about $520,000. The company did not release the prices on which the PEA was based, noting only that they were based on “conservative metal oxide selling prices” as of August. Hours after the PEA was released Orbite clarified rare earth resources as inferred and set out estimated grades for the rare earths based on various analyses.

Resource estimates on the project are somewhat complicated by the novelty of the deposit and corresponding processing method, with testing ongoing. In September Orbite mined a 3,000-tonne bulk sample to conduct more pilot testing at its Cap-Chat plant and allow larger-scale testing. The company plans to adjust the process as it works towards a feasibility study due by mid-2012.

For the PEA, authors used data from test work Orbite has already completed at its Cap-Chat pilot plant as well as data from existing technologies, and assumed average recoveries of: 93% for alumina; higher than 90% for hematite, magnesium oxides and silica; and 75% for rare earths.

Cost-wise, Orbite is looking at initial capital expenditures of almost $500 million, which would be paid back in under a year, while annual processing costs are estimated at just over $100 million and mining costs at almost $12 million. Operating costs per tonne of clay come in at $44.53 for all products, or $42.71 for alumina and hematite. The project also hosts a 3% net operating profit royalty, which the company can buy out after five years.

Orbite took the unusual step of announcing the PEA’s exact release days early, with the company’s stock price responding by gaining 43¢ to close at $2.95 the day before the release. But the Toronto Stock Exchange halted trading in the company’s stock shortly after markets opened, requesting more details about the study’s rare earth component. When trading resumed the following day the company gained 5¢ to $3 on 19.6 million shares traded. Several days later it was back down to $2.60.