Orbite Announces First Quarter 2014 Results and Updates
Construction of HPA Facility
MONTREAL, QUEBEC--(Marketwired - May 13, 2014) - Orbite Aluminae
Inc. (TSX:ORT)(OTCQX:EORBF) ("Orbite", or the "Corporation")
announced today the filing of its first quarter financial results
ended March 31, 2014 and provided an update on the construction of
its HPA facility.
First Quarter Highlights
All dollar amounts are in Canadian dollars unless stated
otherwise.
- Advanced its high purity alumina ("HPA") project development
with its partners for detailed engineering, project management,
procurement, as well as ordered the calcination system for the
production of HPA.
- Received a $3.8 million non-interest bearing repayable
financial contribution from Canada Economic Development.
- Announced that the Government of Québec formally approved a $10
million equity investment in Orbite. The finalization of the equity
investment by the Government of Québec continues to proceed as
planned.
- Issued series X and Y subscription rights, requiring the
institutional investor to purchase up to $40 million of the
Corporation's debentures. Orbite has chosen to defer the 10M$
investment under the series X subscription rights. Initially
contemplated for May 15th, 2014, the Company anticipates to effect
closing no later than mid-July 2014. Upon shareholder approval, the
investor will be required to invest a further $30 million of
debentures of the Corporation under the series Y subscription
rights following completion of the series X investment.
- Continued to control its costs and operate within budget
estimates.
- Cash and Short-Term Investments of $5.3 million as at March 31,
2014. Positive Working Capital of $5.3 million.
- Non-current Investment tax credits receivable of $27.3
million.
- Property, Plant and Equipment of $66.9 million.
- Quarterly Net loss and Comprehensive loss of $4.4 million or
$0.02 per share, up by $3.9 million compared to Q1-2013, and down
by $4.6 million, or 51%, compared to Q4-2013.
- Cash flows used in operating activities of $3.6 million.
- Cash flows from financing activities of $3.9 million.
- Cash flows used for investing activities of $5.3 million.
- Shareholders' equity of $89.0 million, up 8.2% from December
31, 2013.
Events Subsequent to the Quarter
- Orbite announced the nomination of Mr. Claude Lamoureux as
Chairman of the Board of Directors of the Corporation and the
appointment of Mr. Glenn Kelly, the Corporation's President and
CEO, as a member of the Board.
- Orbite ended ongoing discussions and terminated its memorandum
of understanding with Rusal UC pertaining to its Smelter Grade
Alumina project.
"We continue to execute well against our twelve-month time line
towards completion of our HPA production facility, and I am pleased
with our progress, which provides increasing visibility on our
commercialization," stated Glenn Kelly, Orbite's CEO. "In the past
quarter, we accomplished a number of important milestones, such as
the ordering of the calcinator from world leader Outotec. We
concluded a limited production run, the results of which were
positive and in line with our expectations based on work done at
our state of the art Technology Development Centre. Other important
deliverables, such as detailed engineering, project management,
schedule finalization and preparing for equipment ordering and
construction are all progressing as planned. Other highlights for
the quarter include the $3.8 million non-interest bearing loan
received from Canada Economic Development, and the announcement by
Investissement Québec that they will be making a $10 million equity
investment in the Corporation. Finalization of this funding is
anticipated shortly."
Mr. Kelly concluded, "With the funding from the Québec and
Federal governments, the Series X subscription rights leading to
the anticipated completion of the next $10 million tranche by
mid-July, as well as the issuance of the Series Y subscription
rights, we are sufficiently capitalized to see us through to
commercialization. In the coming months, we will increase our
commercial efforts to engage with prospective clients in their
supplier qualification processes. I look forward to informing the
market on our progress in the coming quarters."
Q1 Operating and Construction Update - HPA Plant
During the 1st quarter of 2014, Orbite advanced its HPA project
development with its partners Seneca for detailed engineering,
Groupe Alphard for project management and procurement, and with
Outotec for the supply of its calcination system for the production
of high purity alumina.
At its Technology Development Center ("TDC") in Laval, Québec,
the Corporation performed numerous pilot trials in order to define
the ideal conditions for the HPA synthesis to optimize product
quality, production yields as well as operating costs. It also
defined operating parameters for different feedstocks. All these
are incorporated in the design basis for the HPA project in
Cap-Chat.
At the Cap-Chat HPA facility, the Corporation ran a series of
successful trials with two commercial feedstocks for the production
of aluminium hexahydrate crystals (precursor of the High Purity
Alumina) in order to confirm the optimum design conditions at
industrial scale as well as to produce high quality feed material
for processing of customer samples for their qualification steps.
During one of the production trials at the HPA Cap-Chat facility
and as reported during our March 17th Conference Call, an incident
occurred on a leaching reactor, which resulted in a water line
breakage and an accidental release of a mixture of acid, water and
solids. No one was hurt and there will be no material impact on
either operations or finances. The release was fully contained
within the process building and captured in the waste water
containment. The cause of the incident has been ascertained and the
damaged equipment is being repaired following thorough inspection.
The engineering team is working closely with the insurance
companies to minimize costs to the Corporation.
The Corporation also performed calcination trials at pilot
centers operated by two suppliers which confirmed processing
performance and product quality with both systems. Material
produced was fully tested at the TDC. Following a thorough
technical and commercial assessment of the two offers, the
Corporation entered into a supply agreement with Outotec Oyj and
Outotec Canada for the supply of the calcination system and
auxiliary equipment. During the quarter, Orbite received a $3.8
million financial contribution from Canada Economic Development
that was used to purchase the Outotec calcinator. The balance of
$0.2 million remaining will be received in 2015. Process design and
safety review have been completed and Outotec has begun production
of the three main vessels in its fabrication shop in Burlington,
Ontario. The Corporation is presently fine-tuning the process
control strategy with Outotec's German engineering team. The
Corporation expects to be receiving the first shipment of material
from Germany in June, including the refractory, auxiliary equipment
and HCl scrubbing systems.
On the engineering front, Seneca is progressing as scheduled
with the detailed engineering. The Corporation is planning to
initiate procurement for the remainder of the equipment and
instrumentation in May. The Corporation also expects to complete
very shortly a hazard and operability review ("HAZOP").
Together with its various partners, the Corporation is
finalizing the detailed construction schedule and establishing the
pre-fabrication and the onsite construction requirements.
Preliminary discussions with construction companies will commence
shortly, and the tender process will be held for contract awards in
June with construction start planned for July.
On March 28, 2012, the Corporation announced the signing of a
non-binding Memorandum of Understanding ("MOU") with UC RUSAL,
pursuant to which the parties intended to invest into a
joint-venture for the construction and operation of an SGA plant.
Despite extensive and lengthy negotiations, the parties were unable
to agree on terms satisfactory to Orbite. As a consequence thereof,
the Corporation announces it has terminated the MOU.
Although not a short term priority, the Corporation intends
initiating discussions with other potential SGA partners, including
Glencore with whom the Corporation executed a binding SGA offtake
agreement, regarding a joint venture partnership of its
contemplated SGA production facility.
Summary of Financial Results
Comprehensive loss
The Corporation is a development stage company and has no
revenues.
Loss before net finance income (expense) and income and mining
taxes for the first quarter 2014 increased by $571,535 to
$3,414,119, compared to $2,842,384 during the same period in 2013.
The increase is attributable mainly to higher HPA plant operation
expenses since HPA related costs for Q1 2013 were mostly
capitalized and not expensed.
Net loss for the first quarter 2014 increased by $3,900,199 to
$4,411,167 ($0.02 per share), compared to $510,968 during the same
period in 2013. However, this increase is due mainly to a
$3,342,900 non-cash mark-to-market increase in fair value of the
convertible debentures presented under net finance expense.
Research and development charges
Research and development charges are generally comprised of
employee benefit expenses (salaries and social benefits),
share-based payments, consultant expenses and material costs for
the Corporation's Technology Development Center in Laval. These
charges are presented net of government research and development
investment tax credits, and other government assistance of $23,400
and $17,600 for the quarters ended March 31, 2014 and 2013,
respectively. Research and development charges increased by $97,652
during the first quarter compared to the same period in 2013 as a
result of an increase in salaries, consulting fees and share-based
payments.
General and administrative charges
General and administration charges consist mostly of employee
benefits (salaries and social benefits), share-based payment
expenses, consulting, accounting, business development, legal, and
investor relation costs relating to head office activities. General
and administrative costs increased by $65,409 during the first
quarter compared to the same period in 2013. The increase resulted
principally from an increase in share-based payments ($213,386) as
well as an accrued severance payment ($166,000), partially offset
by decreases in professional fees and a general reduction in
expenses resulting from our 2013 cost reduction program.
HPA plant operations
HPA plant operations include administration, care and
maintenance costs for the HPA plant in Cap-Chat (Québec) since the
pilot plant activities ceased at the end of the second quarter of
2012. Costs incurred at the HPA plant relating directly to the
installation of equipment and commissioning of the plant which meet
the IFRS criteria for capitalization, are capitalized in property
plant and equipment. HPA plant operation expenses increased by
$378,378 during the first quarter ended March 31, 2014 compared to
the same period in 2013 due to additional personnel dedicated to
operating activities, whereas HPA related costs were mostly
capitalized during the first quarter of 2013.
Other financial gains (losses)
The Corporation recognized a loss of $986,187 during the first
quarter compared to a gain of $2,353,769 in the same period of
2013. The loss during the first quarter is mainly due to the
non-cash mark-to-market adjustment relating to the 2013 convertible
debentures. The gain during the first quarter of 2013 is
principally due to the decrease in fair value of the embedded
derivative relating to the 2012 convertible debentures conversion
option resulting from a decrease in the Corporation's share
price.
Financial position
Cash and short-term investments
Cash and short-term investments decreased by $4,972,031 during
the first quarter of 2014 compared to December 31, 2013. The
decrease was mainly due to the continued investment in the
construction of the HPA plant, research and development, general
administration and HPA plant operating expenses. The decrease was
partially offset by the $3.8 million financial contribution
received from Canada Economic Development.
Property, plant, and equipment
Property, plant, and equipment ("PP&E") increased by
$2,028,486 during the first quarter of 2014 compared to December
31, 2013. The net increase resulted from an increase of $5,813,816
before investment tax credits, in the investment in PP&E
attributable mainly to the HPA plant, partially offset by
$3,711,178 in government grants and refundable investment tax
credits on equipment purchases for the HPA plant and the recording
of depreciation during the period.
Long-term debt and convertible debentures
Long-term debt (including short-term portion) and convertible
debentures increased by $1,752,058 and decreased by $9,514,405
respectively, during the first quarter of 2014, as compared to
December 31, 2013. The decrease in convertible debentures results
mainly from the exercise of the debenture conversion option by some
2013 debenture holders. The increase in long term-debt is
principally due to the receipt of the $3.8 million financial
contribution from Canada Economic Development recorded at amortized
cost. The loan from Canada Economic Development is non-interest
bearing.
Share capital and warrants
Share capital and warrants increased by $10,422,658 mainly due
to the issuance of common shares as a result of the conversion of
2013 debentures during the first quarter.
Cash Flows
Cash Flows from Operating Activities
Cash flows used in operating activities were $3,551,223 during
the first quarter compared to cash inflows of $985,326 during the
same period in 2013. Excluding the non-cash working capital items,
and interest paid and received, the cash flows used in operations
amounted to $2,646,867 in 2014 compared to $2,268,667 in 2013. The
increase of $378,200 is mainly the result of the higher HPA plant
administration, care and maintenance cost. The cash flows used in
the non-cash working capital items during the first quarter
amounted to $427,735 compared to inflows of $3,696,264 in 2013. The
significant inflow in 2013 was due to significant sales tax
reimbursements during the period.
Cash Flows from Financing Activities
Cash flows from financing activities increased by $3,921,822
during the quarter ended March 31, 2014 compared to the same period
in 2013, mainly due to the financial contribution received from
Canada Economic Development during the period ended March 31,
2014.
Cash Flows used in Investing Activities
Cash flows used in investing activities decreased by $15,946,227
during the quarter ended March 31, 2014 compared to the same period
in 2013, mainly due to a reduction in investments in the HPA plant
construction and exploration and evaluation assets.
Liquidity and Capital Resources
As at March 31, 2014, the Corporation had aggregate cash and
short-term investments balance of $5,307,431 and positive working
capital (current assets less current liabilities) of
$5,273,709.
Repayable financial contribution from Canada Economic
Development
On January 30, 2014, Orbite announced it was granted a $4
million non-interest bearing repayable financial contribution from
Canada Economic Development ("CED") for Québec regions to be used
for the purchase and installation of the alumina calcinator, a key
element in Orbite's high purity alumina production facility. Based
on the agreement, the Corporation received $3,800,000 in March
2014, with the remaining $200,000 to be received in 2015. The
contribution is interest free, repayable in 10 consecutive equal
semi-annual installments starting 24 months following completion of
the HPA Facility. The Loan is secured by a first ranking movable
hypothec against the Corporation's movable assets located on the
premises of the Corporation's high purity alumina production
facility in Cap-Chat, until such time as the calcination equipment
is installed and functional, at which time the loan will be secured
exclusively by such calcination equipment. In 2010 and 2011 the
Corporation received unsecured loans totalling $800,000 from CED,
whose maturity was deferred until April 1st, 2016. This loan is
also being secured by a first ranking movable hypothec against the
Corporation's movable assets located on the premises of the
Cap-Chat Facility, until such time as the calcination equipment is
installed and functional, at which time the Loan will be secured
exclusively by such calcination equipment.
The Corporation intends to complete the financing of the
construction and commissioning of the HPA plant through the
following sources of funds:
Equity investment from Investissement Québec
On March 3, 2014, the Corporation announced that the Government
of Québec formally approved a $10 million equity investment in
Orbite by Investissement Québec ("IQ"), a mandatory of the
Québec Government. Terms and conditions of the investment,
including timing and pricing, are expected to be settled
shortly.
Convertible debentures
Orbite also secured a binding commitment by a U.S. based
institutional investor providing for the future subscription of $40
million in additional units by way of private placement ("the
Subscription Commitment") having identical terms to those of the
Units issued in December 2013 (see note 7 of the Annual Financial
Statements for the year ended December 31, 2013), with the
exception that the conversion price shall be based on the 5 day
volume weighted average price ("VWAP") of the Corporation's shares
on the last trading day prior to the date on which the subscription
rights in respect of which the units are issued first become
exercisable, and the Warrants granted shall be equivalent to 45% of
the number of Common Shares into which the Debentures are
convertible, exercisable at a 20% premium over such conversion
price.
As per the terms of the Subscription Commitment, the investor
subscribed, on March 10, 2014, to the two (2) series of
subscription rights (the "Series X Subscription Rights" and the
"Series Y Subscription Rights" and collectively the "Subscription
Rights"). The Subscription Rights will be exercisable by the
investor and by the Corporation. Upon exercise, the Subscription
Rights will require the investor to purchase Additional Units in
the total subscription amount of up to $40 million, as follows:
- Series X Subscription Rights, requiring the investor upon
exercise to purchase Additional Units in the amount of $10 million,
failing which such Subscription Rights as well as the rights of
Series Y will expire and
- Series Y Subscription Rights, requiring the investor upon
exercise to purchase Additional Units in the amount of up to $30
million based on aggregate trading value benchmarks on the Common
Shares. The Series Y Subscription Rights are over a 24 month period
and are only exercisable if the Series X Subscription Rights are
exercised otherwise they will immediately expire.
As per the Corporation's press release dated March 14, the
Series X Subscription Rights and Series Y Subscription Rights were
issued upon the terms provided in the subscription agreement and
summarized in the Corporation's amended and restated prospectus
dated December 6, 2013.
The obligations of the Investor under the Subscription Rights
are subject to several conditions, including obtaining certain
regulatory approvals, including TSX approval, and approval of the
Corporation's shareholders prior to the exercise of the Series Y
Subscription Rights.
Orbite management will hold a conference call and provide a live
audio webcast today, May 13, 2014 at 10 a.m. to discuss the
Corporation's financials and provide an update on the Corporation's
HPA project.
CONFERENCE CALL DETAILS:
Date: |
May 13, 2014 |
Time: |
10 a.m. (EDT) |
Dial in number: |
+1 (888) 231-8191 / +1 (647) 427-7450 |
Webcast: |
http://bit.ly/1o8xFVM |
Taped replay: |
+1 (855) 859-2056 |
|
+1 (514) 807-9274 |
|
+1 (416) 849-0833 |
|
Available until 12:00 midnight (EDT),
Monday, May 27, 2014 |
|
Reference number: 44095234 |
Notice to Reader
The information provided in this press release is entirely
qualified by the disclosures in the Corporation's Financial
Statements and Management Discussion & Analysis (MD&A) for
the quarter ended March 31, 2014, which are available at
www.orbitealuminae.com and under the Corporation's profile at
www.sedar.com.
About Orbite
Orbite Aluminae Inc. is a Canadian cleantech company whose
innovative and proprietary processes are expected to produce
alumina and other high-value products, such as rare earth and rare
metal oxides, at one of the lowest costs in the industry, and in a
sustainable fashion, using feedstocks that include aluminous clay,
kaolin, nepheline, bauxite, red mud and fly ash. Orbite is
currently in the process of finalizing its first commercial
high-purity alumina (HPA) production plant in Cap-Chat, Québec and
has completed the basic engineering for a proposed smelter-grade
alumina (SGA) production plant, which would use clay mined from its
Grande-Vallée deposit. The Corporation's intellectual property
portfolio contains 15 intellectual property families, and the
Corporation owns the intellectual property rights to 11 patents and
66 pending patent applications in 10 different countries and
regions. The first intellectual property family is patented in
Canada, USA, Australia, China, and Russia. The Corporation also
operates a state of the art technology development center in Laval,
Québec, where its technologies are developed and validated.
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 Corporation 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 Corporation 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 Corporation'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 May 13, 2014.
The Corporation 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.
TMX EQUICOMMark Lakmaaker, External Investor Relations
Consultant1-800-385-5451 ext. 248mlakmaaker@tmxequicom.comFor Media
Inquiries:TMX EQUICOMShaun Smith, External Media Relations
Consultant1-800-385-5451, ext. 252ssmith@tmxequicom.com
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