High Purity Alumina (HPA) from Coal Ash or Clay

HIGH-PURITY ALUMINA (HPA) MARKET POTENTIAL AND ORBITE’S COMPETITIVE ADVANTAGES

Prepared by Marcel Côté, Partner, SECOR Guillaume Caudron, Senior Manager, SECOR Joannie Tanguay, Consultant, SECOR September 2012 Version 0

MONTREAL :: NEW YORK :: PARIS :: QUEBEC :: TORONTO :: VANCOUVER

TABLE OF CONTENTS DISCLAIMER AND GENERAL INTRODUCTION .................................................................................................... 3 Disclaimer ................................................................................................................................................................. 3 General Introduction ............................................................................................................................................. 4 The study .............................................................................................................................................................. 4 The methodological framework ...................................................................................................................... 4 Document structure ........................................................................................................................................... 4

1. EXECUTIVE SUMMARY ................................................................................................................................ 5 2. HIGH-PURITY ALUMINA 101 ....................................................................................................................... 6 Alumina and HPA production .............................................................................................................................. 6 HPA markets............................................................................................................................................................. 7

3. THE HIGH-PURITY ALUMINA MARKET ........................................................................................................... 9 Sapphire single-crystal applications .................................................................................................................... 9 Semiconductor applications .............................................................................................................................. 10 Phosphor applications ......................................................................................................................................... 10 Automotive sensor applications ........................................................................................................................ 11 Additional powder applications ........................................................................................................................ 11

4. KEY HIGH-PURITY ALUMINA SUPPLIERS ...................................................................................................... 12 The market is dominated by one Japanese producer: Sumitomo ............................................................. 13 Most HPA producers are located in China ...................................................................................................... 13 Once in operation, Orbite Aluminae would be the only player in North America .................................. 14

5. ORBITE ALUMINAE’S POSITIONING IN THE HIGH-PURITY ALUMINA MARKET ................................................... 15 Logistics and schedule ........................................................................................................................................ 16 Environmental footprint ....................................................................................................................................... 16 Capital and operating costs .............................................................................................................................. 17

6. CONCLUSION......................................................................................................................................... 18 ABOUT… ................................................................................................................................................... 19 About Orbite.......................................................................................................................................................... 19 About SECOR......................................................................................................................................................... 19

ADDITIONAL INFORMATION ......................................................................................................................... 20

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DISCLAIMER AND GENERAL INTRODUCTION DISCLAIMER Some statements contained in this document are forward-looking. These forward-looking statements relate to Orbite’s future financial conditions, intentions, expectations, beliefs and operational or business results. These statements may be current expectations and estimates relating to markets in which Orbite operates and assumptions regarding these markets. In some instances, these statements require management to make assumptions, and there is a significant risk that these assumptions may not be correct. The words “may,” “would,” “could,” “will,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “expect” and other similar expressions, as they relate to Orbite or its market, often identify forward-looking statements. Such statements reflect SECOR’s current beliefs and are based on information currently available. These statements are subject to important risks, uncertainties that are difficult to predict, market versatility, and assumptions that may prove inaccurate. The results or events predicted in forward-looking statements may differ substantially from actual results or events. SECOR and Orbite disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

No reliance may be placed for any purpose whatsoever on the information and opinions contained in this document or on their accuracy or completeness. No representation, warranty or undertaking, expressed or implied, is given as to the accuracy or completeness of the information and opinions contained in this document by SECOR or Orbite, their respective employees or its affiliates, and no liability is accepted by such persons for the accuracy or completeness of any such information and opinions.

Nothing contained herein can be relied upon as a promise or representation as to past or future performance.

Orbite’s Revised Preliminary Economic Assessment published on May 31, 2012 (PEA), is preliminary in nature and it includes Inferred Mineral Resources of aluminous clay as they relate to alumina, metals oxides and earth rare elements 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 have not demonstrated economic viability.

The information of a scientific or technical nature relating to the proposed HPA plant discussed herein has been reviewed and approved by Denis Primeau, Eng., a “qualified person” pursuant to National Instrument 43-101 – Standards of Disclosure of Mineral Projects (NI 43-101). Mr. Primeau is the Chief Engineer of Orbite, and as such, is not independent pursuant to NI 43-101.

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Disclaimer and General Introduction…

GENERAL INTRODUCTION THE STUDY This study analyses the market for high-purity alumina (HPA) and the potential it offers to Orbite Aluminae Inc., which intends to enter the market with its new proprietary technology for extracting alumina from aluminous clay. The paper examines the various environmental and economic benefits stemming from that new process.

THE METHODOLOGICAL FRAMEWORK This study is based on existing studies, public data, and information provided by Orbite. In this document, SECOR presents its point of view on HPA market potential and, more specifically, Orbite Aluminae’s market potential, based on the data collected and its own analysis. This study presents a strategic point of view, not a technical point of view.

DOCUMENT STRUCTURE This document is divided into four sections:    

A short introduction to high-purity alumina and its main characteristics and advantages.

A description of various industrial applications of high-purity alumina.

A portrait of the world’s high-purity alumina producers.

An explanation of Orbite Aluminae’s prospective product offerings and key advantages.

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1. EXECUTIVE SUMMARY 

High-purity alumina (HPA) is the high-end segment of the industrial market for alumina (Al2O3). Most alumina produced (90%+) is used as feedstock for the fabrication of metallic aluminum and is known as smelter grade alumina (SGA). Less than 10% of the alumina supply is directed at other industrial uses.

The high-end product, HPA, accounts for about 15,000 tonnes per year. HPA is used mainly as a highperformance substrate in electronic applications, and its markets are expected to grow at double digit rates through the next decade.



HPA is defined by a purity level of at least 99.99%. The performance and price of this substrate depend on its level of purity. Various levels of purity are available: 4N (99.99%), 5N (99.999%) and 6N (99.9999%).



HPA is the product of many steps of SGA purification. The latter is traditionally extracted via the Bayer process, which relies on dissolving minerals from bauxite with caustic soda and then chemically isolating the alumina, leaving behind toxic red mud. Orbite has developed a new process that relies on hydrochloric acid leaching and that recovers of all the elements of bauxite, leaving no toxic residue.



Worldwide HPA market demand is expected to soar at a compound annual growth rate (CAGR) of 52% from 2009 to 2015, rising from 2,030 tonnes in 2009 to 25,350 tonnes in 2015. The high-technology, energy, and automobile sectors appreciate the substrate’s hardness, high corrosion resistance and high brightness.



HPA has various applications across a broad range of industries:







By 2015, 60% of the HPA produced will be dedicated to sapphire single-crystal applications, supported by LED market demand.



Semiconductors (e.g. for tablets, personal computers, and smart phones among others), phosphor (e.g. plasma televisions), lithium-ion batteries, and automotive sensors are some of the many potential applications for HPA.

Most HPA suppliers are located in Asia: 

China has a dominant position in the HPA market, as eight of the top ten (and 14 of the top 20) suppliers worldwide are Chinese.



The Japanese company Sumitomo had nearly 40% market share in 2009. The market is expected to become more fragmented with Sumitomo’s market share decreasing to about 25% by 2015.



Orbite may become the largest supplier outside of Asia when its HPA plant – currently under construction, with commissioning scheduled for Q1 2013 - achieves its full design capacity by 2015.

This North American production facility may turn out to be a key competitive asset against Chinese competitors.

Orbite’s process has both economic and environmental advantages: 

Orbite’s proprietary technology is an environmentally friendly process, in contrast with the traditional caustic-soda based Bayer process that generates toxic red mud.



Operating costs of HPA facilities are driven mainly by energy and reagents, while a limited portion come from labour and maintenance. Orbite’s North American facility is expected to be competitive in that regard, as its key cost drivers should be lower.

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2. HIGH-PURITY ALUMINA 101 Alumina, as aluminium oxide (Al2O3) is commonly known, is primarily used in the fabrication of aluminum.

Approximately 10% of the global production of alumina is directed at other industrial uses, however, in what is called the non-metallurgical market. The highest value-added segment of the non-metallurgical alumina market is for high-purity alumina (HPA), characterized by a product containing at least 99.99% Al2O3. The purity, size and morphology of the crystallites are the main qualities of this specialized type of alumina.

ALUMINA AND HPA PRODUCTION The most common method used to produce alumina is the Bayer process, developed in the late 19th century in Germany. In it, bauxite is dissolved in caustic soda at high temperature and pressure, producing a solution of sodium aluminate, which is subsequently transformed into aluminum oxide, or alumina. This product, smelter grade alumina (SGA), is used as feedstock by aluminum plants. High purity alumina can then obtained by refining SGA through additional crystallisation cycles.

The residue from the caustic soda treatment in the Bayer process, called red mud, is toxic. It is also produced in large quantities; the production of one tonne of SGA generates two tonnes of red mud. A reddish substance, reflecting its high content in ferric oxide (hematite), red mud also contains silicon, titanium and other elements. It is very difficult to get rid of this environmentally hazardous waste, and its disposal has become one of the major environmental issues of the aluminum industry.

Orbite has developed a proprietary process to extract alumina from aluminous clay without producing red mud or any other toxic residue. The non-polluting Orbite process uses hydrochloric acid instead of caustic soda to extract alumina from clay. In the second phase of the process, hydrochloric acid is regenerated and at the same time ferric ions are recovered and precipitated as high purity ferric oxide. All other residual elements, including rare earths and rare metals, are then recovered leaving environmentally neutral high-purity silicate as another potential high-end product.

The first step in the patented Orbite process consists of crushing and grinding the clay into small particles to maximize surface area for acid leaching. During the next phase, leaching, the particles are acid-leached at high temperature and pressure using hydrochloric acid. All the metals except titanium dissolve as chloride solutions. Silica and titanium remain insoluble and are removed by filtering. The leachate is then processed by first precipitating the aluminum trichloride and removing it as aluminum hexahydrate, which then goes through calcination and is transformed into alumina while recovering and regenerating the hydrochloric acid.

Afterward, the ferric chloride still in the leachate is precipitated, producing ferric hydroxide, which is very pure and can be sold commercially as a specialty by-product. What then remains are metallic solutions: magnesium, gallium, alkali, and rare earths.

No acidic residual remains, doing away with the red mud issue that plagues the Bayer process. The ferric oxide and the metals are sold as by-products. Development work done in Orbite’s research center suggests that the process can be used with a wide range of aluminous clay, with bauxite ore, and even with red mud, which still contains up to 25% in mass of alumina.

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2. High-Purity Alumina 101…

BAYER PROCESS Bauxite from mine

Crusher

Digester

Filter

Bauxite residue Precipitator Rotary kiln

Alumina

Source: International Aluminium Institute

HPA MARKETS Most of the SGA supply is used for the production of aluminium by smelters, through electrolytic reduction.

A small fraction of SGA is processed through further stages of acid leaching to eliminate residual contaminants and to finally produce high-purity alumina (HPA).

HPA is used by various industries, especially in the high-technology, energy, and automobile sectors. The main advantages of HPA are: 

High hardness, appreciated in abrasive applications (magnetic tapes for personal and industrial uses) and for sapphire single-crystal applications (e.g. watch covers).



High corrosion resistance, an important quality in semiconductor manufacturing, where a high level of resistance to plasma corrosion is required (e.g. LED, tablet PC screens).



High brightness, useful in the creation of more efficient and environmentally friendly lighting solutions (e.g. LED lights) or for advertisement solutions (e.g. advertising displays).



Biocompatibility, essential for medical devices (e.g. prostheses, implants).

According to the Chinese research group QYResearch, HPA market demand is expected to grow significantly by 2015, with a minimum annual growth rate of 30% in the next few years. The total CAGR for 2009–2015 is expected to be 52%, rising from 2,030 tonnes in 2009 to 25,350 tonnes in 2015. The substrate can be produced in various formats: foil, sheet, ingot, powder, rod, slug, wire and compound.

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2. High-Purity Alumina 101…

HPA MARKET DEMAND World, in tonnes 30,000

93% 25,350

25,000

100%

Growth rate

90%

Demand (tonnes)

80% 62%

20,000

70%

19,250

62%

60% 14,150

15,000 10,000

50% 36%

10,352

31%

6,390

5,000

40% 30%

37%

20%

3,936 2,030

10% 0%

0 2009

2010

2011

2012

2013

2014

2015

Source: QYResearch 2011–2015 Deep Research Report on Global and China High-Purity Alumina Industry, SECOR Analysis

While demand is expected to soar, the price of HPA is expected to decrease. Projections of price decreases are based on two factors: increased supply supported by the emergence of many small producers, and technological evolution which would lower production costs and thereby lower the price to consumers.

The price of the substrate varies according to its purity level. While 4N (99.99%) alumina is mostly used for more standard commercial applications, 5N (99.999%) and 6N (99.9999%) offer the higher quality and performance required in high-tech applications and tend to be more expensive. The average price for 4N HPA ranges between US $ 30/kg and US $ 60/kg, while the average price for 5N ranges between US $ 90/kg and US $ 120/kg, and for 6N, between US $ 210/kg and US $ 290/kg for the 2009-2015 period time frame.

The price can also vary significantly within a single category (e.g. 6N), depending on the quality level.

HPA MARKET AVERAGE PRICE World, in US $/kg

$ 300

292 277 263

250

$ 250

237

225 210

6N Price

$ 200 $ 150

120

115

110

105

101

97

93

50

48

46

45

$ 100

5N Price 56

54

51

$ 50

4N Price

$0 2009

2010

2011

2012

2013

2014

2015

Source: QYResearch - 2011–2015 Deep Research Report on Global and China High-Purity Alumina Industry, SECOR Analysis

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3. THE HIGH-PURITY ALUMINA MARKET HPA offers a diverse set of characteristics beneficial to various high-technology sectors. While sapphire single-crystal applications are probably the most common, other applications like semiconductors, phosphorbased products, automotive sensors, and powder applications are also important.

SAPPHIRE SINGLE-CRYSTAL APPLICATIONS Nearly half of high-purity alumina production is dedicated to sapphire single-crystal applications. The Verneuil process, a very successful method of manufacturing synthetic gemstones, is a flame fusion process that uses HPA powder. Synthetic sapphires obtained from the Verneuil process are equivalent to natural sapphires and present the same characteristics. Compared to the edge-defined film-fed growth (EFG) process, the Verneuil process offers higher crystallinity, and has boosted the light emitting diode’s (LED) popularity as well as its adoption rate.

In recent years, traditional incandescent light bulbs have been losing ground to more energy-efficient lighting solutions; LEDs in particular have benefited from this shift. According to IBIS World, the demand for new, energy-efficient lights such as LEDs is expected to increase by 2.6% annually over the next 5 years, particularly boosted by United States legislation to phase out incandescent lights bulbs starting in 2012. LED industry analysts expect to see a 25% penetration rate by 2015. This would represent approximately 15,000 tonnes of HPA. The LED market is expected to account for more than half of the total HPA market demand.

LED MARKET DEMAND AS A % OF THE OVERALL HPA MARKET 100%

65%

35%

2010

57%

53%

43%

47%

2011

2012

45%

43%

40%

Non-LED market

55%

57%

60%

LED market

2013

2014

2015

Source: Mackie Research, SECOR Analysis

Artificial sapphires and rubies are used in other applications as well, including fibre optic communication systems, watch covers, advertising displays, cell phones, and home lighting.

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3. The High-Purity Alumina Market‌

SEMICONDUCTOR APPLICATIONS Given its high level of plasma corrosion resistance and its high bending strength, HPA is used in semiconductor wafer processing equipment. Despite global economic events (e.g. burst of the Internet bubble at the beginning of the 2000s, the financial downturn of 2008 and, more recently, the very slow recovery in some regions, such as Europe), semiconductor market demand has maintained steady growth over the last couple of decades with a CAGR of approximately 9% since the end of the 1980s.

Semiconductor market growth is expected to continue over the next few years, although perhaps at a somewhat slower pace.

One of the drivers for semiconductor market demand is the growing impact of emerging markets on global consumption. Demand for semiconductors is boosted by market demand in various underlying applications: data processing, communications, consumer electronics, automotive, and industrial applications. Data processing represents the biggest share of the semiconductor demand, for use in tablets, personal computers, and servers. Communications is the second most important segment, driven by smart phones and broadband Internet. Consumer electronics (televisions, iPods, home appliances, gaming consoles) as well as automotive (light and heavy vehicles) and industrial applications (military, infrastructure and energy) also represent a significant share of the market.

WORLDWIDE SEMICONDUCTOR SALES In billions of US $

295 246 225 210

201

255

300

255 219

162 147

138

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Source: Semiconductor Industry Association, SECOR Analysis

PHOSPHOR APPLICATIONS Phosphor-based products such as plasma display panels (PDPs) account for yet another share of HPA usage.

Plasma televisions are one example of PDP products. PDPs are made of phosphor coatings in plasma cells.

HPA is used to control the characteristics of the phosphorous material. The current and projected market demand for thinner TV screens is expected to continue to grow and to help boost the HPA market demand.

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3. The High-Purity Alumina Market‌

WORLDWIDE TV MARKET BY TECHNOLOGY 300 OLEP PDP LCD (COFL)

250

LCD (LED) CRT RP

Million Units

200

150

100

50

0

2004

2005

2006

2007

2008

2009

2010

2011

2012

2013

2014

Source: Display Search – Quarterly Advanced Global TV Shipment and Forecast Report

The chart above shows that PDP technology (plasma televisions) represents a niche within the worldwide TV market. However, we note the importance and recently increasing market share of LED TVs, which also contain phosphor.

AUTOMOTIVE SENSOR APPLICATIONS Air-to-fuel sensors are devices that control the air and fuel mixture in automotive engines. HPA is used for its high electrical insulating characteristics while also offering high heat conductivity. The demand for light vehicles (passenger cars) and heavy vehicles in emerging countries has a significant impact on overall vehicle demand, which at the same time reinforces the demand for air-to-fuel sensors.

ADDITIONAL POWDER APPLICATIONS HPA is a fairly new industrial-use material. While the substrate is now commonly known and already used extensively in some industry sectors, new applications are emerging, such as in the manufacture of advanced lithium-ion batteries. Given the various advantages that the substrate provides, it is reasonable to expect that new or atypical applications may become mainstream.

HPA has specific additional applications in the field of abrasives, ceramics and separation membranes. For example, HPA usage in the medical sector is gaining importance. An increasing proportion of bioceramics for prostheses and implants make use of HPA. Finally, HPA can also be used in catalytic filters for dust resulting from diesel combustion in diesel engines.

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4. KEY HIGH-PURITY ALUMINA SUPPLIERS There are a limited number of alumina producers, and these are mainly based in China. Although the top market producer is Sumitomo in Japan, the general market is dominated by China, as eight of the top ten (and 14 of the top 20) producers worldwide are Chinese. These eight companies represent approximately 50% of the market. By starting production in Q1 2013, Orbite will become the only HPA producer located in North America.

TOP TEN HPA MARKET PLAYERS BY COUNTRY Production market share

MARKET SHARE

MARKET SHARE

MARKET SHARE

(2009)

(2013P)

(2015P)

Japan (n=1)

39%

24%

23%

China (n=8)

52%

49%

47%

Canada (n=1)

0%

9%

11%

Total Top 10

91%

82%

81%

Others (n>11)

9%

18%

19%

COUNTRY

Source: QYResearch - 2011–2015 Deep Research Report on Global and China High-Purity Alumina Industry, Orbite Aluminae, SECOR Analysis Notes: Chinese companies include one from Taiwan. Market shares are based on production as illustrated in the table next page.

There are smaller players from Russia (Rusgems), South Korea (HMR, Dongho) and France (Baikowski). The total market share for these four players combined is expected to be less than 5% by 2015. A South African company involved in mining and energy, Sasol, has recently announced that it will eventually expand its existing North America facility to produce HPA. Despite these emerging players, HPA availability outside China or Japan is very low.

Orbite’s annual production for 2013 is expected to be 1,050 tonnes (based on 350 days/year of operation).

This production is estimated from a capacity of 3 tonnes per day. Orbite plans to ramp up production in line with market demand by increasing to 5 tonnes per day by the end of 2013 and 10 tonnes per day by 2015.

These projections are based on currently available information and are subject to change. No feasibility or pre-feasibility study has been completed in connection with the HPA plant in accordance with NI 43-101.

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4. Key High-Purity Alumina Suppliers…

TOP TEN HPA MARKET PLAYERS Capacity & production

COMPANY

CAPACITY

PRODUCTION

(TONNES)

(TONNES)

COUNTRY 2013P

2015P

2013P

2015P

Sumitomo Chemical

Japan

4,000

6,000

2,900

5,000

Hebei Pengda Advanced Materials Technology

China

3,000

4,500

2,300

3,500

Zibo Xinfumeng Chemicals

China

2,500

4,000

1,900

3,200

Canada

1,050

3,500

n/a

n/a

Orbite Aluminae* Dalian Rall Fine Ceramics

China

600

1,100

480

980

WEC Superabrasives

Taiwan

550

900

400

680

Zibo Xinmeiyu Alumina

China

400

900

220

660

Zibo Hengji Tianli Industry & Trade

China

300

560

250

440

Hong Fu Crystal Technology

China

360

600

270

480

Ally Corporation

China

260

450

190

340

Source: QYResearch - 2011–2015 Deep Research Report on Global and China High-Purity Alumina Industry, Orbite Aluminae, SECOR Analysis Note: Orbite’s HPA plant is currently under construction and is not in operation.

THE MARKET IS DOMINATED BY ONE JAPANESE PRODUCER: SUMITOMO Sumitomo had almost 40% of the HPA market in 2009. However, its market share is expected to fall below 25% by 2015. Even with a 23% market share, the Japanese company would have a 5% advantage over the second-biggest player, Chinese company Hebei Pengda.

MOST HPA PRODUCERS ARE LOCATED IN CHINA Among the top ten HPA producers, eight are Chinese companies (including WEC Superabrasives in Taiwan); combined they represent approximately 50% of market share. Despite the fact that their market share is expected to slowly decrease over the coming years, it is important to mention that there are several other smaller Chinese players among the top 20 producers. In all, 14 of the top 20 producers worldwide are Chinese.

For various reasons, it could be expected that Chinese producers would serve their local markets first.

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4. Key High-Purity Alumina Suppliers…

and put unnecessary pressure on foreign companies looking for the substrate elsewhere around the world.

According to a recent report from QYResearch (a leading Chinese research group focusing on energy and natural resources), China is already facing a shortage of HPA on its market, and this shortage is expected to increase over the coming years.

Given the fact that most HPA producers are located in China, it could be risky for American or European countries to rely on this single foreign country to obtain alumina. China recently tightened its exports of rare earth elements (REEs), which led to supply vulnerability challenges for many countries, including the United States, which currently depends entirely on imports, mainly from China, for these elements. HPA can be considered a strategic resource in terms of insuring a country’s economic stability. Global buyers would therefore benefit from diversifying their sourcing locations.

ONCE IN OPERATION, ORBITE ALUMINAE WOULD BE THE ONLY PLAYER IN NORTH AMERICA Orbite is expected to become the only HPA producer based in North America. Orbite is located in Canada and owns an aluminous clay deposit near the town of Grande-Vallée, in the Gaspé region of Quebec. The company has direct access to raw material - over 1 billion tonnes of aluminous clay (according to its Revised Preliminary Economic Assessment issued May 31, 2012) - and owns 100% of the mineral rights on the 6,441 hectare Grande-Vallée property. Transportation of alumina will be facilitated by the site’s favorable location near the St. Lawrence River. The river provides easy access to the Quebec City–Windsor corridor, the most densely populated and heavily industrialized region of Canada, as well as to the Northeastern United States, another densely populated and heavily industrialized region of North America. Orbite has developed a proprietary process to produce alumina, which is expected to offer significant advantages to its customers.

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5. ORBITE ALUMINAE’S POSITIONING IN THE HIGHPURITY ALUMINA MARKET Orbite has developed a new process to extract alumina from aluminous clay (containing silica, alumina, hematite, other mixed oxides, rare metals and rare earth elements) found in the Gaspé region of Québec. The process separates alumina from other metals. The hazardous effects of this process are limited despite the use of acid, which is completely recycled and regenerated at the end of the chemical reaction. The proprietary Orbite process has the potential to become a viable substitute for the current industry standard, the Bayer process. Though Orbite’s process was developed to extract alumina from aluminous clay, it can also extract alumina from bauxite and other aluminous ores.

The first step of the process consists in pre-treatment. The clay is crushed, ground and sorted to get the particle size required for leaching. The second step is leaching using concentrated and regenerated hydrochloric acid. Next, the aluminium, iron and other elements are dissolved. Silica is not dissolved and can be removed at this stage. The next step is separating and precipitating the iron using a basic medium reaction, and aluminum hydroxide is then separated and precipitated. Finally, alumina is calcinated to produce the desired powder. For the smelter grade alumina process (SGA), since no additional purification is required, all metals are processed as chlorides.

ORBITE’S PROCESS (SGA)

MgCl2 crystallisation

Unconverted salts conversion and final acid recovery step

Mixed Oxides (Me-O)

MgO production and acid recovery

MgO

Rare Earths / Rare metals (Oxides form)

Mineral preparation and classifying

Semi continuous leaching

Chlorides / solid separation and washing

Iron oxides production and acid recovery

Fe2O3

Aluminum chloride calcination and acid recovery

Alumina (Al2O3)

Aluminium chloride crystallisation

Purified SiO2

Source: Orbite NI 43-101 Revised Technical Report Note: Above-illustrated process is for Smelter Grade Alumina. High-Purity Alumina process would require 2 or 3 additional crystallisation cycles

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5. Orbite Aluminae’s Positioning in the High-Purity Alumina Market…

Orbite representatives have stated in interviews that the company has tested its production at its pilot plant and expects to produce three tonnes of HPA per day by 2013. The company plans to increase its production to ten tonnes per day by 2015 by upgrading the existing facility, depending on demand and its ability to capture market share. A reasonable projection of production (calculated based on 350 days/year) could range between 1,050 tonnes in 2013 and 3,500 tonnes in 2015. With these production levels, Orbite has the potential to become the fourth-largest HPA producer worldwide behind Sumitomo (Japan), Hebei Pengda (China) and Zibo Xinfumeng (China).

Orbite’s HPA targets 5N quality, which means 99.999% purity. Orbite aims to position itself in the high-end segment of 5N. With this level of purity, SECOR believes that Orbite would be able to sell its HPA in 2013 for approximately US $ 120/kg, if existing conditions remain unchanged. If 6N (99.9999% purity) becomes a buoyant market, it is expected that Orbite would be able to serve it by positioning itself in the high-end segment. Orbite could be expected to sell its 6N for approximately US $ 250 / kg, if existing conditions remain unchanged.

LOGISTICS AND SCHEDULE Being the only HPA producer in North America, Orbite would be a natural strategic supplier for North America based customers. North American customers would benefit from reduced transportation time and high quality products. However, in a globalized market, customers from North and South America and even Europe would also benefit from having a producer outside Asia offering a significant capacity.

Given the high added value of the product, transportation costs estimated at US $ 250/tonne on marine cargo are marginal. With an average HPA price of approximately US $ 120,000/tonne (i.e. US $ 120/kg), transportation and other related fees remain negligible, which is expected to keep Orbite’s high-quality substrate competitive globally.

ENVIRONMENTAL FOOTPRINT Orbite doesn’t use the Bayer process to produce HPA. As mentioned earlier in the document, the Bayer process results in caustic residues that are dangerous to people and to the environment. The Bayer process generates red mud, which has had costly environmental and social consequences (as recently seen in Hungary where a red mud tailings pond leaked onto a nearby village, killing ten people and injuring 300 others). With 100 to 120 million tonnes of toxic residue generated annually by traditional processes, red mud is cited as one of the biggest environmental challenges of the alumina industry.

Any industry player with sustainable development as one of its core values would be interested in opting for a solution to eradicate or at least reduce theses negative impacts. Orbite’s HPA offers an environmentally responsible value chain to companies manufacturing HPA-based products and to end-users of these products.

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5. Orbite Aluminae’s Positioning in the High-Purity Alumina Market…

CAPITAL AND OPERATING COSTS Energy accounts for the major part of operating costs of chemical processes. The Province of Quebec, where Orbite’s facility is located, offers a significant supply of clean and affordable energy. Hydroelectricity would enable the company to reduce its unit energy costs, which translates to important savings and thus lower total operating costs. Another important portion of operating costs for HPA production is attributed to reagents in the hydroxide stage. These costs remain more or less the same wherever production takes place. However, conventional HPA processes follow a relatively expensive and polluting route while Orbite’s clean process is also a much lower cost solution. Consequently, we believe that Orbite has the ability to become a low-cost, high-quality cleantech alternative for HPA customers.

As illustrated below, labour and maintenance costs represent only a small portion of total operating costs for alumina producers. Consequently, the fact that Orbite’s production is not located in a low-wage country (e.g.

China) has only a minimal impact on the price competitiveness of the product. Orbite should therefore able to provide a high-quality product at an affordable price. As illustrated below, smelter grade alumina (SGA) costs are initial costs for alumina production, to which high-purity alumina specific costs are added in order to get the global operating costs for high purity alumina production.

OPERATING COSTS Smelter Grade Alumina (SGA)

High-Purity Alumina (HPA) Other 9,1%

Other Mining 6% 3%

Mining 0,1%

Energy 1%

Labour 13% Labour 15,0%

Maintenance 15%

Energy 56% Maintenance 15,0%

Reagents 60%

Reagents 7%

Source: Jacob Securities Equity Research (SGA), Orbite Aluminae (HPA)

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6. CONCLUSION High-purity alumina (HPA) offers many advantages, including superior hardness, superior corrosion resistance, and high brightness. Given these characteristics, it is increasingly used in various industries and for various applications. Market demand for HPA is expected to soar, driven in particular by the growth of the LED market, which is expected to represent 60% of the HPA demand by 2015.

Most HPA production is concentrated in Asia: the market leader is in Japan, while eight of the top ten producers Chinese. The only upcoming player located in North America is Orbite, a Quebec-based company.

Orbite offers many advantages to its customers, most importantly its proprietary alumina production process that is low-cost and eco-friendly. Conventional alumina production is ill-reputed for its hazardous and caustic residues, especially red mud. Orbite’s proprietary process enables the company to produce alumina without this toxic red mud residue, and its process can even be applied to existing stocks of red mud to remediate it while extracting valuable metals. Orbite can offer its customers a high-quality product, a more environmentally friendly alternative to legacy processes, and an opportunity to diversify their alumina supply thereby lessening their dependence on a single country for supply, namely China.

In conclusion, Orbite has the potential to set new standards for the HPA industry and to have a positive impact on companies purchasing alumina. The possibility of diversifying supply sources and thus avoiding supply vulnerability, accessing a high-quality product at a fair price, and having minimal impact on the environment are some of the advantages that Orbite provides to the industry.

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ABOUT… ABOUT ORBITE Orbite Aluminae Inc. is a high-tech Canadian company whose unique technologies could have a significant impact on the aluminum industry. These technologies allow for the environmentally sustainable extraction of smelter grade alumina, high-purity alumina and high-value elements—including rare earths—from locally sourced aluminous clay.

Orbite has exclusive mining rights on its 6,441-hectare Grande-Vallée property, the site of an aluminous clay deposit 32 km northeast of Murdochville, and a 28,000 sq. ft. high-purity alumina production facility in CapChat, both in the Gaspé region. The Revised Preliminary Economic Assessment on Orbite Aluminae – Metallurgical Grade Alumina Project dated May 30, 2012 and effective as of November 24, 2011 and the amended and restated 2010 Field Work Grande-Vallée Property NI 43-101 Technical Report dated August 21, 2011, which are available on Sedar (www.sedar.com), identified an indicated resource of 1 billion tonnes of aluminous clay in part of the deposit, thus representing a half-century of the total current Canadian alumina imported. The higher-quality smelter grade alumina—containing less iron and silicon impurities— produced using Orbite’s process has been independently utilized by internationally renowned facilities such as INRS and SINTEF to produce high-quality aluminum.

The Company also owns the intellectual property rights to a unique Canada and US patented process for extracting alumina from aluminous ores and for which other international patents are also pending. Orbite plans to offer smelter grade alumina (SGA) and high-purity alumina (HPA) and license its technologies to well-qualified producers aiming to reduce their costs and environmental footprint. www.orbitealuminae.com

ABOUT SECOR SECOR is the largest independent strategy and organizational consulting firm in Canada. It has helped top management teams plan and implement their corporate strategies. SECOR relies on over 150 professionals and has offices in Montréal, New York, Paris, Quebec City, Toronto and Vancouver.

For over 35 years SECOR has been helping businesses succeed. Its clients include leading national and global companies as well as medium-sized organizations, governments, departments and agencies. In this time, the firm has developed methodologies and insights based on its experience with the most innovative and successful corporations.

As architects of strategy and transformation, we make strategy happen. We operate according to an alternative model for success in consulting based on customer intimacy. We offer personalized and collaborative support to senior executives who want to dramatically improve performance. www.secorgroup.com

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ADDITIONAL INFORMATION 

2011-2015 Deep Research Report on Global and China High-Purity Alumina Industry, prepared by QYResearch Center and Beijing Hengzhou Bozhi International Information Consulting(December 26, 2011)

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Bauxite News very encouraging, published by Mackie Research Capital Corporation (july 11, 2011)

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Development of High-Purity Alumina, prepared by Sumitomo Chemicals (2007)

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Lighting Fixtures Manufacturing in the US, published by IBISWorld (May 2012)

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Orbite Aluminae Initiating Coverage, prepared by Jacob Securities Equity Research (November 23, 2011)

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Orbite NI 43-101 Revised Technical Report, prepared by Roche and Genivar (May 30, 2012)

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