Orbite Releases Positive Preliminary Economic Assessment for Its Planned Metallurgical Grade Alumina Plant With the Capacity to Extract Value-Added Oxides, Rare Metals and Rare Earth Oxides

Economics show $7.7 billion NPV with an IRR of 114% and payback in less than one year

Orbite Aluminae Inc. (TSX: ORT.TO - News) ("Orbite") is pleased to announce the results of the Preliminary Economic Assessment ("PEA") prepared by Genivar Inc. on its planned commercial metallurgical grade alumina (SGA) production plant (the "Plant"). Orbite plans to produce an estimated 539,700 tonnes per year of alumina, 189,000 tonnes of pure 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, including, among others, dysprosium, erbium, europium, yttrium, cerium, neodymium, praseodymium, and terbium, and rare metals such as gallium and scandium.

All figures are in Canadian dollars except where noted.

Highlights

 

--  Indicated resource of approximately 1 billion metric tonnes of
    homogeneous aluminous clay (23.13% average concentration alumina) as per
    NI 43-101.
--  Based on conservative metal oxides selling prices (August 2011) and a 5%
    discount rate, the PEA reveals a pre-tax net present value (NPV) of $7.7
    billion, generating an internal rate of return ("IRR") of 114% and a
    payback of under one year.
--  Average production cost:
    --  $44.53 / tonne of clay for all foreseen products;
    --  $42.71 / tonne of clay for alumina and hematite alone.
--  Feasibility Study underway with contract awarded to Genivar Inc. and
    expected to be completed during the first half of 2012, with planned
    commissioning in late 2013.

"The operations outlined in this PEA for Orbite's metallurgical grade alumina plant forecasted for initial production through the end of 2013 confirms the potential for high-value, low net production cost alumina and other value-added products. The projected high NPV, net cash flows, and relatively low unit cost compared to standard existing alumina processes provide strategic positioning for Orbite and its planned SGA production plant," said Richard Boudreault, Orbite's President and CEO. "Aluminum is the second most used metal after iron. We are therefore establishing the basis of our unique alumina extraction process and paving the way for the production of metallurgical alumina to meet growing demand from the global aluminium industry. This PEA also explains the net advantages of using an eco-friendly process while extracting high purity value-added products.

"We are pleased with the level of expertise and rigor of all of the parties involved in the Preliminary Economic Assessment of the planned metallurgical alumina production plant," continued Mr. Boudreault. "The exercise has also provided us with considerable insight into potential opportunities for further improvement of the already attractive economics. These include adapting existing technologies (i.e. calcination and acid recovery) and finding new ways to extract high purity products in addition to the alumina, while gaining considerable energy efficiency and thus greatly simplifying the process flow sheet. These opportunities will be validated during the Feasibility Study phase, which is ongoing at Genivar. The relatively low operating unit cost of production coupled with a much lower capital cost requirement than standard alumina greenfield projects using existing processes mean that this operation has the potential to be highly profitable in rapid time due to our unique alumina extraction process."

The table below summarizes the highlights of the PEA (all currency is CAN$, pre-tax):

 

------------------------------------------------------------------------
NPV at 5% discount rate                                     $7.7 billion
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IRR                                                                 114%
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Total Estimated CAPEX                                     $498.5 million
------------------------------------------------------------------------
Estimated OPEX
(All products):                                         $44.53/t of clay
(Alumina and hematite):                                 $42.71/t of clay
------------------------------------------------------------------------
Average annual EBITDA                                     $571.7 million
------------------------------------------------------------------------
Estimated open pit mine life at
present estimated production rate                           greater than
(Reference for one plant)                                      100 years
------------------------------------------------------------------------
In-pit indicated resources                                  greater than
(at 23.13% Al2O3):                              800 M - 1 billion tonnes
------------------------------------------------------------------------
Revenues to be generated by                                    2013-2014
------------------------------------------------------------------------
Payback                                                      11.0 months
------------------------------------------------------------------------

"We are impressed by Orbite's visionary process, which is capable of refining alumina while at the same time extracting other high purity oxides, silica and hematite as well as certain high-value rare elements and metals from a local Gaspesian source of clay," said Andre-Martin Bouchard, Eng., Vice President at Genivar. "In addition, the process deploys technologies that will ensure that the local environment will be preserved, compared to current alumina refining processes, thus ensuring the sustainable development of the Gaspe region. We have also looked at the economics of producing and marketing only alumina and hematite, to validate the robustness of the project. In this case, the IRR was 33%, with an NPV of 1.7 B$ and a payback of 3.1 years at a 5% discount rate, demonstrating a strong business case."

 

NPV sensitivities at various discount rates (25 years)

                                     Pre-Tax NPV                     Payback
Discount Rate                         (Million)                     (Months)
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5%                                        $7,730                        11.0
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7.5%                                      $5,998                        11.3
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10%                                       $4,783                        11.5
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The project shows favourable economic potential across a range of discount rates. The operations outlined in this PEA are projected to generate average annual revenue of more than $702 million over the first 25 years of mine life, with yearly EBITDA of approximately $571.7 million.

 

Revenue:

Alumina                                                        $ 229,377,175
----------------------------------------------------------------------------
Fe2O3 (Hematite)                                                $ 37,859,680
----------------------------------------------------------------------------
SiO2 (High purity silica)                                       $ 30,715,708
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MgO                                                             $ 11,126,400
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Mixed oxides                                                       $ 520,443
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Rare earth elements                                            $ 392,868,097
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TOTAL                                                          $ 702,467,503
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Costs:

Mining                                                          $ 11,747,706
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Processing                                                     $ 100,246,505
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Marketing                                                        $ 1,122,500
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TOTAL COSTS                                                    $ 113,116,711
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Profit before royalty                                          $ 589,350,792
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3% net operating profit royalty(i)                              $ 17,680,524
(First 5 years only)
----------------------------------------------------------------------------
EBITDA                                                         $ 571,670,269
----------------------------------------------------------------------------
(i)  Applies for the first 5 years of operations, subject to a buyout at end
     of year 5.

Patented technology

Orbite owns the intellectual property rights to a unique Canada and U.S. patented process, a radical innovation aimed at extracting alumina from aluminous ores and for which international patents are also pending in many other countries, such as Brazil, Russia, Australia and Japan as well as in Europe. The patented Orbite process has the potential to become a viable alternative to the industry standard Bayer and other alumina processes, resulting in significant revenues when the technology is licensed to qualified alumina producers. Orbite is planning on marketing smelter grade alumina (SGA), high purity hematite, magnesium oxide, and silica, as well as producing rare earths oxides. Orbite also has several other patents pending related to various processes for producing such products.

Based on the chemical and metallurgical work completed at Orbite's production pilot plant facility and taking advantage of adaptable technologies for the acid recovery systems, the PEA estimated that the process is expected to yield an average of 93% weight recovery of Al2O3, higher than 90% on hematite, magnesium oxides, and high purity silica, and a conservative 75% for the extraction of rare earths, namely dysprosium, erbium, europium, yttrium, cerium, neodymium, praseodymium, and terbium, and rare metals such as gallium and scandium.

Details and assumptions

Total initial capital expenditures (including contingency) are estimated at $498.5 million to produce alumina and other value-added products. The initial capital cost estimate excludes mine closure costs and sustaining capital. Costs for mining equipment and all required infrastructures are included in the capital expenditure costs. The initial assessment of the preferred port facility suggests that sufficient capacity currently exists for the planned initial production. Energy supply represents one of the key elements of the Orbite project, as with all mining, chemical and hydrometallurgical projects. For the purpose of this study, electrical power and natural gas, which is known to be present but not readily available in the mining site vicinity, have been used as the reference energy source. The Henry Hub Index (September 2011) is used as the reference for natural gas prices. A $4.00/GJ has been used for the PEA evaluation.

 

CAPEX preliminary evaluation:

Summary of estimated initial capital costs                         Million $
----------------------------------------------------------------------------
Mining, environmental, tailings                                         33.8
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Major buildings and process equipment                                  335.0
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Plant infrastructure                                                    24.2
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Other infrastructures                                                   45.0
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Contingency                                                             60.5
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TOTAL                                                                  498.5
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Consistent with industry practices, this PEA has been prepared with an accuracy of +/-30%. As the project progresses through the ongoing feasibility stage, advancement in the basic engineering will improve the accuracy to approximately +/-15%.

The Feasibility Study scope of work involves a comprehensive review of all project characteristics-from process validation to capital costs, operational costs, and basic engineering leading to the detailed engineering, marketing, environmental, health & safety, and other considerations-in order to further validate and integrate the various technical aspects of the project. The Feasibility Study report is expected to be published during the first half of 2012.

Qualified persons

The preliminary economic assessment was prepared by leading independent industry consultants, all Qualified Persons (QP) under National Instrument 43-101. The QPs have reviewed and approved the content of this news release. The following consultants participated in the study:

 

--  Genivar Inc. a leading independent and top ranking engineering firm
--  The geological model and resources estimate were provided to Genivar by
    Jean-Guy Levaque, Eng., QP, and responsible for Orbite's NI 43-101
    compliant mineral resources estimate. The PEA was prepared by Rod Doran,
    P. Eng. (30 years' experience as a mining/metallurgical engineer) under
    the supervision of Andre-Martin Bouchard, Eng. with Genivar. Both Mr.
    Doran and Mr. Bouchard are independent Qualified Persons as defined by
    NI 43-101, are independent of Orbite, and have reviewed the technical
    information contained in this news release. Many other third party
    specialists also contributed to the PEA.

The complete PEA report will be filed on SEDAR and Orbite's Web site within 45 days of this news release.

CONFERENCE CALL

Orbite will hold a conference call on Tuesday, November 29, 2011, at 10:30 AM (EST) to discuss the results of the PEA and respond to questions from interested parties.

The conference call can be accessed by dialling: 416-981-9000 or toll free in North America: 1-800-892-9785 or by going to the Company's Web site at www.orbitealuminae.com.

An instant replay of the conference call will be available until December 15, 2011, at the following numbers: 1-416-626-4100 or toll free 800-558-5253, code# 21548806

About Genivar Inc.

Genivar is a leading Canadian engineering services company providing private and public-sector clients with a full range of professional consulting services through all project phases, including planning, design, construction and maintenance. Ranging in size, its clients operate in various market segments, including the building, industrial, power, municipal infrastructure, mining, transportation and environmental sectors. Genivar is one of the largest engineering services companies in Canada by number of employees, with more than 4,700 managers, professionals, technicians, technologists and support staff in over 100 cities in Canada and internationally. Genivar received the 2011 Schreyer Award, presented to the designers of the project with the highest technical merit. www.genivar.com

About Orbite

Orbite owns 100% of the mining rights on approximately 6,441 hectares of a Grande-Vallee property, the site of an aluminous clay deposit located 23 km to the south of Grande-Vallee, and a 2 600 sq. m. full scale pilot plant in Cap Chat, in the Gaspe region. The NI 43-101 report issued in August 2011 has identified an Indicated Resource of about 1 Billion tonnes of aluminous clay in part of the deposit. The Company also owns the intellectual property rights to a unique Canada and U.S.-patented process for extracting alumina from aluminous ores and for which patents are also pending in other countries. www.orbitealuminae.com

The PEA is preliminary in nature and it includes Indicated mineral resources of aluminous clay that are considered too speculative geologically to have the economic considerations applied to them that would enable them to be categorized as mineral reserves. There is no certainty that the conclusions reached in the PEA will be realized. Mineral resources that are not mineral reserves do not have demonstrated economic viability.

Regulation 43-101 and forward-looking statements

The Preliminary Economic Assessment ('PEA') referred to herein constitutes a "preliminary economic assessment" within the meaning of Regulation 43-101 respecting standards of disclosure for mineral projects (Quebec) ("Regulation 43-101"). All references contained in this PEA pertains only to the production of smelter grade alumina (SGA) (including projected daily production levels) and the production of other resources, including rare earths, and have been made by assuming that the technical, financial and economic feasibility of such operations will be further demonstrated. No preliminary feasibility study, pre-feasibility study, nor a feasibility study pursuant to the requirements of Regulation 43-101 has been completed to date.

Certain information contained in this document may include "forward-looking information", particularly regarding the daily production of the projected plant described in this PEA, the anticipated cost of the construction of such plant producing SGA and other resources including rare earths. 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 November 14, 2011 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. As for projected dates of beginning of operations, namely the year 2013 for the SGA production plant projected to be put into service, this date is an objective and that many steps (feasibility study, financing, environmental and government authorizations and other important an usual conditions) remain before confirming any particular schedule. Notwithstanding the PEA, no independent study has confirmed the feasibility of putting the production plant described herein into service according to the projected dates and its projected financial and economic performance.

Readers are invited to consult the Report on the Geological Study prepared in conformity with Regulation 43-101 and the Annual Information Form of the Corporation, both amended and restated and respectively filed on August 21 and 25, 2011 and the Management's Discussion and Analysis filed on November 14, 2011 which are available at www.sedar.com or on the Corporation's website at www.orbitealuminae.com.
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