TORONTO (miningweekly.com) – Quebec-based specialist alumina producer Orbite Aluminae has inked an offtake agreement that would see commodity-trading giant Glencore Xstrata subsidiary Glencore International buy all the smelter-grade alumina (SGA) to be produced by Orbite at its proposed SGA plant in the province.

The offtake agreement, which has an initial term of ten years from the start of commercial production, also provided for the two parties to enter into negotiations relating to Glencore's potential financial participation in the ownership and operation of the proposed SGA plant. However, the parties had not set any timetable to start or conclude such negotiations.

All other terms of the agreement, including pricing and renewal rights, were kept under wraps for competitive reasons.

"We are definitely pleased to be executing our first offtake agreement with a company of Glencore's stature and experience in the alumina industry," Orbite COO Glenn Kelly said.

"The critical value of this firm offtake agreement is the length of time it is for, and secondly, with who it is with. Glencore is the pre-eminent player in the alumina market, and to have them on board is a great vote of confidence in the project," Kelly added telephonically from Montreal.

He told Mining Weekly Online that the SGA plant feasibility study, which had entered the detailed engineering and subsystem integration phase, was expected to be completed during the year, with construction of the $600-million first phase of the first SGA plant expected to begin late in the year, or early in 2014, with completion by late in 2014.

He said discussions with Glencore about its potential involvement in the SGA plant project would probably take place during 2014.

Meanwhile, earlier this month, Orbite said it would cost $20.9-million more to complete the 3 t/d second phase of its high-purity alumina (HPA) plant, in Cap-Chat, Quebec.

In its management discussion and analysis of December 2012, the company said the plant was expected to cost $85-million and, as at March 31, the company had already spent $74.9-million. Orbite obtained independent cost estimates to complete the project, which put the cost at $105.9-million, including $6.7-million for contingency and for critical spare parts.

The updated capital cost estimate represented the investment required to achieve the Phase 2 production capacity of 3 t/d. Orbite said a large portion of the HPA plant had been designed at a 5 t/d capacity and, as such, the requisite engineering analysis to increase the total plant throughput to 5 t/d, as well as to add a scandium and gallium separation facility, was expected to be completed during the second half of the year. The incremental capital cost estimate was expected to be reported during the first quarter of 2014.

The company extended the expected project timeline by six months to the end of the second quarter of 2014.

Kelly said the recent timeline and cost adjustments were merely the result of the company moving from being a technology developer, to being an alumina producer, and that the change in focus resulted in new staff appointments. He said Orbite was looking at a number of options to fund the expected funding shortfall, and was confident the company would be able to raise the cash.

On Tuesday morning, Orbite’s TSX-listed stock jumped 28.5%, or C$0.20 a share, to C$0.90 apiece, having shed about 74% of its value since the start of the year.