Orbite Aluminae Inc. (TSX:ORT) (OTCQX:EORBF) ("Orbite", or the "Corporation")
announced today the filing of its second quarter and six months ended June 30,
2014 financial results.
Second Quarter Highlights
All dollar amounts are in Canadian dollars unless stated otherwise.
-- Continued to advance its high purity alumina ("HPA") project development
in line with previously announced timelines, including detailed
engineering, project management and procurement.
-- Additional pilot trials were conducted at the Corporation`s Technology
Development Center ("TDC") in Laval, Quebec, for the optimization of
product quality, production yields and operating costs.
-- A successful production campaign was completed at the Cap-Chat HPA
facility, producing aluminum hexahydrate crystals (precursor of HPA) to
confirm optimum design conditions at industrial scale.
-- Made key technical and operational appointments with a Director of
Engineering and a Plant Manager.
-- Completed a $10 million equity investment from Ressources Quebec ("RQ"),
a subsidiary of Investissement Quebec, through a private placement.
-- Announced the nomination of Mr. Claude Lamoureux as Chairman of the
Board of Directors and the appointment of Mr. Glenn Kelly, as President
and CEO and as a member of the Board. The appointments were subsequently
ratified at the Corporation's June 19, 2014 General and Special Meeting
of Shareholders.
-- Terminated its memorandum of understanding with Rusal UC pertaining to
its Smelter Grade Alumina initiative, and announced the intention to
engage with other interested parties.
-- Obtained approval at the June 19 AGM to change the Corporation's name to
"ORBITE TECHNOLOGIES INC. / TECHNOLOGIES ORBITE INC." as Board and
management consider this name to reflect better the Corporation's
comprehensive business initiatives beyond alumina. The new name is
expected to become effective in mid-September.
-- Maintained strict costs control and continued to operate within budget
estimates.
-- Cash and Short-Term Investments of $9.0 million as at June 30, 2014.
Positive Working Capital of $11.2 million. Pro-forma the issuance of
series X subsequent to the quarter, Cash and Short-Term Investments of
$19.0 million as at June 30, 2014. Positive Working Capital of $21.2
million.
-- Non-current Investment tax credits receivable pledged against the $25
million debentures of $25.7 million.
-- Property, Plant and Equipment of $70.1 million.
-- Quarterly Net loss and Comprehensive loss of $4.3 million or $0.02 per
share, up by $0.9 million compared to Q2-2013, and down by $0.1 million
compared to Q1-2014.
-- Continued cost control resulted in cash flows used in operations
decreasing by $0.9 million to $3.3 million, as compared to the same
period in the prior year. Including non-cash working capital items, cash
flows used in operating activities increased by $0.8 million to $5.6
million.
-- Cash flows from financing activities of $10.6 million, as compared to
cash flows used in financing activities of $0.02 million.
-- Cash flows used for investing activities of $1.3 million, as compared to
$6.7 million for Q2 2013.
-- Shareholders' equity of $97.0 million.
Events Subsequent to the Quarter
-- Announced a $10 million debenture financing following the exercise of
Series X Subscription Rights. Pro forma this investment, liquidity as at
June 30 stood at $19.0 million, with positive working capital of $21.2
million.
-- Announced that the calcinator equipment ordered from Outotec in Germany
has arrived in Quebec, as well as that vessel construction is
progressing according to schedule and in line with specifications and
quality requirements.
-- The Corporation received an initial payment of $6 million from tax
authorities in consideration of investment tax credits on the equipment
purchased for manufacturing and processing in the Gaspe region. The
payment relates to the 2012 financial year, and the Corporation expects
subsequent payments to follow. The amount will be deposited in a
segregated account and serve as security for the convertible debentures
issued in December 2012.
Management commentary
"We are now over six months into the project to complete our HPA facility, and
continue to execute well against our 12-month timeline and remain within
budget," stated Glenn Kelly, Orbite's CEO. "With the arrival of the calcination
equipment in Quebec, we are now gearing up towards the construction phase of the
project, with site preparation underway. Concurrently, we are conducting
technical work at our TDC and in Cap-Chat to support the commissioning and
start-up phase, and continue to be on target for commercial production in the
first quarter of 2015."
He continued, "On a corporate level, we have significantly strengthened our
financial position with funding from Ressources Quebec, as well as the exercise
of the Series X subscription rights. This has put us in a position of strength
to not only continue our progress towards commercialization, but also to set in
motion the early stages of our waste monetization initiative."
Mr. Kelly concluded, "As we draw nearer to commissioning of the plant, we also
are setting in motion our commercial activities. The successful production run
at Cap-Chat has provided us with sufficient precursor material to develop
samples that prospective customers have requested to satisfy their supplier
qualification process. We are excited about our progress and I look forward to
updating the market regularly on our progress in the coming months."
Q2 Operating and Construction Update - HPA Plant
During the 2nd quarter of 2014, Orbite continued the development of its HPA
project with its engineering partners Seneca for detailed engineering, Groupe
Alphard for project management and procurement, with Outotec for the supply of
its calcination system, and with CMI for the supply of the acid recovery system
for the production of high purity alumina.
At its Technology Development Center ("TDC") in Laval, Quebec, the Corporation
performed additional pilot trials on HPA synthesis and purification steps to
optimize product quality, production yields, as well as operating costs.
Equipment testing was also pursued to define operating parameters to customize
product for specific applications.
At the Cap-Chat HPA facility, the Corporation ran a production campaign of
aluminum hexahydrate crystals (precursor of HPA) to confirm optimum design
conditions at industrial scale as well as to produce high quality intermediate
for processing into customer samples for their supplier qualification processes.
All results were positive and in line with expectations based on work conducted
at the TDC and engineering calculations.
The Corporation also performed additional calcination trials at Outotec's pilot
center in Germany to confirm benefits of process development carried out at its
TDC and provide supplier data in order to develop advanced process control logic
for the Cap-Chat calcination system.
Outotec's manufacturing of the calcination system (decomposer, calciner and
cooler) is progressing according to schedule. On July 14, 2014, Orbite announced
that the calcinator equipment ordered from Outotec in Germany had arrived in
Quebec. The shipment, representing approximately 50% of the total investment in
the calcination system, includes a combination of refractory and solids handling
devices, as well as monitoring and control instrumentation. Also expected to
arrive at the plant from Outotec's facility in Burlington, Ontario, are
pre-shaped refractory bricks. Progress on fabrication of the vessels for the
calcination system at Outotec's Burlington facility is also progressing
according to schedule, with all progress and quality inspection reports being
positive. The various components of the calcination system will be shipped to
the Cap-Chat facility in accordance with the construction schedule.
On the engineering front, Seneca is finalizing the detailed engineering,
integrating the findings of the HAZOP (hazard and operability review) as well as
the latest information from the equipment suppliers.
The Corporation is advancing equipment procurement with different suppliers. It
also initiated the tender process for the construction portion, refractory
installation & curing, as well as for equipment fabrication. The contract for
erecting the plant's structural features was awarded, and Orbite expects to
award other major construction and fabrication contracts shortly.
With input from its various partners, Orbite is optimizing the construction
sequence and schedule for the project. The site is presently being prepared for
the arrival of construction equipment and crews, and construction is anticipated
to commence in August, following the Quebec construction holiday (July 19th thru
August 3rd).
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
second quarter 2014 decreased by $1,397,202 to $3,568,786, compared to
$4,965,988 during the same period in 2013. The decrease is attributable mainly
to a reduction in general and administrative charges. Loss before net finance
income (expense) and income and mining taxes for the six months ended June 30,
2014 decreased by $825,467 to $6,982,905, compared to $7,808,372 during the same
period in 2013. The decrease is due mainly to a reduction in general and
administrative charges, which are partially offset by higher HPA plant operation
expenses.
Net loss for the three and six months ended June 30, 2014 amounted to $4,285,455
($0.02 per share) and 8,696,622 ($0.03 per share), compared to $3,393,289 ($0.02
per share) and 3,904,257 ($0.02 per share) during the same period in 2013. The
increase of $4,792,365 for the six month period compared to the same period in
the prior year is mainly due to the non-cash mark-to-market increase in fair
value of the convertible debentures presented under net finance expense, which
is partially offset by a $825,467 reduction in the operating expenses.
Research and development charges
Research and development charges consist of employee personnel related costs
(salaries and social benefits), share-based payments, consultant expenses and
material costs for Orbite's Technology Development Center in Laval. These
charges are presented net of government research and development investment tax
credits, and other government assistance of $21,221 and $44,675 for the three
and six months ended June 30, 2014, and $25,474 and $43,096 for the same periods
in 2013. Research and development charges decreased by $66,631 in the quarter
compared to same quarter in 2013 due to a decrease in salaries, external lab
analysis, and consulting fees, partially offset by an increase in lab
consumables. Research and development charges increased by $31,021 during the
first six months.
General and administrative charges
General and administration charges consist mostly of personnel related costs
(salaries and social benefits), share-based payment expenses, consulting,
accounting, business development, legal, and investor relation costs relating to
the head office activities. General and administrative costs decreased by
$1,708,562 during the quarter compared to the same period in 2013. General and
administrative costs decreased by $1,643,153 during the six months ended June
30, 2014, as compared to the same period in 2013. The decrease was attributable
to a decrease in share-based payments, salaries, professional fees, as well as a
general reduction in expenses resulting from the cost reduction program put in
place in 2013.
HPA plant operations
HPA plant operations include administration, operating and maintenance costs for
the HPA plant at Cap-Chat. Costs incurred at the HPA plant that relate directly
to the installation of equipment and the commissioning of the plant, and that
meet the IFRS criteria for capitalization, are capitalized under property plant
and equipment. HPA plant operation expenses increased by $84,809 during the
quarter ended June 30, 2014, and increased by $463,187 during the six months
ended June 30, 2014, as compared to the same period in 2013, due to an increase
in operating and maintenance activities, as HPA related costs in the first
quarter of 2013 were mostly capitalized.
Other expense (income)
Other expense (income) increased by $293,182 and $323,478 during the quarter and
the six months ended June 30, 2014, as compared to the same periods in 2013, due
mainly to the payments to compensate purchasers of flow-through securities
issued in December 2012 for adverse tax consequences incurred, as the
Corporation did not meet the spending requirement related to qualifying Canadian
mineral exploration expenses.
Financial position
Cash and short-term investments
Cash and short-term investments decreased by $1,243,945 during the first six
months 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, as well as the $10 million equity
funding from Ressources Quebec, a subsidiary of Investissement Quebec.
Investment tax credits
Investment tax credits classified as current increased by $2,110,027 during the
first six months of 2014 compared to December 31, 2013 as a result of the
recognition of the 2014 accrued investment tax credits receivable on the
equipment purchased for manufacturing and processing in the Gaspe region.
Investment tax credits classified as non-current relating to the 2012 and 2013
fiscal year, are pledged as security against the $25 million convertible
debentures issued in December 2012. The funds the Corporation will receive upon
reimbursement of the 2012 and 2013 investment tax credits will be deposited in a
segregated account and serve as security for the convertible debenture. These
funds will be released to the Corporation according to the terms of the trust
indenture agreement.
Property, plant, and equipment
Property, plant, and equipment ("PP&E") increased by $5,236,630 during the first
six months of 2014 compared to December 31, 2013. The net increase resulted from
an increase of $9,608,118, before investment tax credits, in the investment in
PP&E, attributable mainly to the HPA plant. The investments were partially
offset by $4,191,822 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 $1,840,007 and decreased by $10,543,043, respectively, during the
first six months of 2014, as compared to December 31, 2013. The decrease in
convertible debentures resulted mainly from the exercise of the debenture
conversion option by some of the December 2013 debenture holders. The increase
in long term-debt is principally due to the receipt of the $3.8 million
financial contribution by Canada Economic Development, recorded at amortized
cost.
Share capital and warrants
Share capital and warrants increased by $23,032,847 mainly due to the issuance
of common shares as a result of the conversion option by some of the December
2013 debenture holders during the first quarter, as well as the $10 million
equity funding from Ressources Quebec.
Cash Flows
Cash Flows from Operating Activities
Cash flows used in operating activities increased by $809,889 during the quarter
ended June 30, 2014 compared to the same period in 2013. The cash flows used for
operations decreased by $853,848 during the second quarter compared to the one
in 2013 while the cash flows used for non-cash working capital items, mainly
accounts payable, increased by $1,638,907 during the second quarter ended June
30, 2014 compared to 2013. Cash flows used in operating activities increased by
$5,346,438 for the six months ended June 30, 2014 compared to the same period in
2013. The cash flows used for operations decreased by $475,648 during the six
months ended June 30, 2014 compared to the same period in 2013. During the six
month period ending June 30, 2014, the cash flows used for non-cash working
capital items amounted to $2,241,256 mainly to cover the accounts payable
whereas during the six months ended June 30, 2013, the Corporation received cash
from non-cash working capital items for an amount of 3,521,650 of which
$3,491,245 were sales taxes receivable.
Cash Flows from Financing Activities
Cash flows from financing activities increased by $10,592,355 during the quarter
ended June 30, 2014 compared to the same period in 2013 and increased by
$14,514,177 during the first six months compared to the same period in 2013. The
increase is mainly due to the financial contribution received from Canada
Economic Development during the first quarter and the equity funding by
Ressources Quebec during the quarter ended June 30, 2014.
Cash Flows used in Investing Activities
Cash flows used in investing activities decreased by $5,410,192 during the
quarter ended June 30, 2014 compared to the same period in 2013 and decreased by
$21,356,419 during the first six months compared to the same period in 2013. The
decrease is mainly due to a reduction in investments in the HPA plant
construction and exploration and evaluation assets.
Liquidity and Capital Resources
As at June 30, 2014, the Corporation had aggregate cash and short-term
investments balance of $9,035,517 and positive working capital (current assets
less current liabilities) of $11,149,379. Following the exercise of series X on
July 11, 2014, the Corporation had, on a pro-forma basis, cash and short-term
investments of $19,035,517 and positive working capital (current assets less
current liabilities) of $21,149,379.
Equity investment from Investissement Quebec
On May 27, 2014, the Corporation completed a private placement with Ressources
Quebec (RQ), a subsidiary of Investissement Quebec, which resulted in the
issuance of 35,714,286 units at a price of $ 0.28 per unit. Each unit was
comprised of one Class A share and one half (1/2) of one Class A share purchase
warrant. Each full warrant entitles RQ to purchase one Class A share of the
Corporation at a price of $ 0.33 for 36 months from the date of closing.
Convertible debentures
On July 11, 2014 Orbite announced that Crede Capital Group, LLC ("Crede") had
completed an investment of $10,000,000 in the form of convertible debentures and
warrants pursuant to the exercise of the Series X Subscription Rights (the
"Subscription Rights"), as issued on March 11, 2014.
Under the placement, Crede purchased units of the Corporation consisting of
$10,000,000 principal amount of convertible unsecured debentures (the
"Debentures") and 13,000,000 warrants (the "Warrants") of the Corporation. The
Debentures will mature five years from issuance, namely July 11, 2019 and will
bear interest at a rate of 7.5% per annum (the "Interest"). Each Debenture is
convertible, at the option of the holder, at any time prior to the maturity
date, into class A shares of the Corporation ("Shares") at a conversion price of
$0.50 per Share (the "Conversion Price"), representing the 5 day VWAP at time of
the conditional exercise of the Series X subscription rights. Upon conversion,
the holder shall also be entitled to Shares equal to the additional interest
such holder would have received if it had held the Debenture until maturity,
divided by the market price of the Shares prior to the date of conversion (the
"Make-Whole Amount"), in addition to accrued and unpaid Interest, in cash or in
Shares at the Corporation's discretion. Each Warrant entitles the holder to
purchase one Share for a period of three years from its issuance at a price of
$0.60 per share (equivalent to the Conversion Price plus a 20% premium).
In connection with the placement, the regulatory authorities required certain
changes to the initial terms of the Subscription Rights, namely that the maximum
number of Shares issuable upon conversion of the Debentures on account of the
principal amount and the Make-Whole Amount not exceed the principal amount of
the Debentures converted, divided by the Conversion Price less 25%. The parties
further agreed that the Make-Whole Amount would not be reduced by 1% for each 1%
that the current market price of the Shares at the time of conversion exceeds
the Conversion Price and that the number of Warrants would correspond to 65% of
the number of Shares into which the principal amount of Debentures is
convertible.
In connection with the placement, the Corporation paid a fee of 6% of the amount
of the investment and issued a total of 1,200,000 finder warrants to Euro
Pacific Canada Inc. and Roth Capital LLC. Each finder warrant entitles the
holder to purchase one Share for a price of $0.60 per share for a period of two
years and is nontransferable.
Following the exercise of the series X subscription rights, the series Y
subscription rights issued on March 10, 2014 remain outstanding. Such series Y
subscription rights provide for the future subscription of $30 million in
additional units having identical terms to those of the Units issued in 2013
(see note 7 of the December 31, 2013 Annual Financial Statements), 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.
The obligations of the investor under the Series Y subscription rights are
subject to several conditions, including obtaining certain regulatory approvals,
including TSX approval, and approval of the Corporation's shareholders.
Orbite management will hold a conference call and provide a live audio webcast
today, Wednesday, July 30, 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: July 30, 2014
Time: 10 a.m. (EDT)
Dial in number: +1 (888) 231-8191 / +1 (647) 427-7450
Webcast: http://bit.ly/1sQKJkY
Taped replay: +1.855.859.2056
+1 514.807.9274
+1 416.849.0833
Encore password: 78983471
Available until: 12.00 midnight (ET), Wednesday, August 13, 2014
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 June 30, 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
by-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 finalizing its first commercial high-purity alumina (HPA)
production plant in Cap-Chat, Quebec and has completed the basic engineering for
a proposed smelter-grade alumina (SGA) production plant, which would use clay
mined from its Grande-Vallee deposit. The Corporation's intellectual property
portfolio contains 16 intellectual property families, and the Corporationowns
the intellectual property rights to 11 patents and 72 pending patent
applications in 10 different countries. 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, Quebec,
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 Corporationor 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 Corporations 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 July 30, 2014 on SEDAR.
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.
FOR FURTHER INFORMATION PLEASE CONTACT:
CONTACT INFORMATION:
TMX EQUICOM
Mark Lakmaaker, External Investor Relations Consultant
1-800-385-5451 ext. 248
mlakmaaker@tmxequicom.com
For Media Inquiries:
TMX EQUICOM
Crystal Quast, External Media Relations Consultant
1-800-385-5451, ext. 266
cquast@tmxequicom.com
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