Orbite blasts research report criticizing company’s alumina production process

Orbite Aluminae Inc., the Quebec junior miner that struck a preliminary collaboration deal with Russian aluminum giant United Co. Rusal, says a research report casting doubt on the economics of its alumina-making processes is error-riddled and that the analyst who wrote it is “mixed up.”

“This report is a bit far-fetched,” Orbite founder and chief executive Richard Boudreault said in an interview about the 8-page note published April 9 by Byron Capital Markets analyst Jon Hykawy. “There are an enormous amount of things that are erroneous in it.”

The crux of Byron’s research report is that acid regeneration technology by SMS Siemag being used by Orbite may be unworkable, throwing the economics of Orbite’s Quebec alumina-making project into doubt. It recommends shareholders approach the shares with caution, initiating coverage with a “sell” rating and 90¢ price target.

“We believe that the sentiment with respect to Orbite may be overly optimistic given the fact that the low-energy acid regeneration technology chosen by the company may be flawed,” Mr. Hykawy said in the report, adding he did not have a chance to speak with Orbite management before publishing his note.

Orbite shares fell 3.6% to $2.15 in heavy trading Tuesday on the Toronto Stock Exchange.

Mr. Boudreault has developed a patented technology for producing alumina, the fine white powder used to make aluminum, by extracting it from clay. Unlike alumina-making with bauxite, Orbite produces the raw material with a method that starts by crushing the clay and then acid-leaching it.

The company says it has succeeded in pulling alumina from traditionally used bauxite rock as well, leading Mr. Boudreault to believe that his method could become a viable and cheaper substitute for the existing Bayer process. Orbite has a test facility in Cap Chat, Quebec and last month signed a preliminary deal with Rusal that would see the two companies launch a joint venture to develop Orbite’s Grande Vallée clay deposit and build a new alumina refinery in the Gaspé region.

Mr. Boudreault said an independent audit has validated Orbite’s entire technology and energy requirements. Rusal also did its own due diligence, which concluded with the partnership signing, he noted.

“We’re very comfortable with where we’re at now,” the CEO said. “We don’t want to give too much importance to this [note]. The analyst mixed up all his baskets with this.”

Orbite will be issuing a news release on Tuesday to set the record straight, Mr. Boudreault said.