MONTREAL – It has been a source of persistent frustration for Quebec’s aluminum producers for decades.

While a vast deposit of aluminous clay sits on their doorstep under the Gaspé peninsula, a proven resource capable of yielding the raw alumina they need to make their metal, the companies are forced to import the material by ship instead from Brazil and Jamaica. No one has figured out how to mine the local stuff cheaply.

Until now.

Richard Boudreault has spent the last six years developing a technology to extract alumina from the rich clay located in the Grand Vallée, a stretch of the Gaspé northeast of Murdochville. The junior he leads, Montreal-based Orbite VSPA Inc., owns the mineral rights to 3,500 hectares of land in the area. He believes he can make alumina for much less than it costs traditional alumina-from-bauxite producers now, which is an estimated $287 per metric ton. If he’s right, he’ll save his customers millions a year in transport costs.

Institutional investors are betting the Cornell University physicist can deliver, backing Orbite with $12-million in capital last fall. The company’s shares have soared from 50¢ three months ago to nearly $2 now on the Toronto Venture Exchange. Its market value has ballooned to $233-million.

Things could get even more heated in the coming days. Orbite is set to announce on Wednesday its $7.4-million pilot plant at Cap Chat on the St. Lawrence River’s south shore will start producing alumina on a test basis – a key step towards commercialization.

If results are positive, a full-scale alumina factory will follow. And then more factories. Ten years out, Mr. Boudreault expects to be producing all of Quebec’s alumina needs and employing more than 2,000 people.

To understand the scope of what that means, consider this: Rio Tinto Alcan and the other companies running Quebec’s 10 aluminum smelters currently import about $2-billion to $3-billion of alumina per year. Orbite estimates sourcing it domestically would boost Quebec’s gross domestic product by up to 3%, twice the projected impact of shale gas development in the province.

“This is going to have a fairly big impact,” Mr. Boudreault said in an interview Tuesday. “It’s a bit of a revolution.”

It is also, for the moment at least, still largely a show-me story. The company has proven that its processes work on a laboratory scale with a small pilot project. Now it has to demonstrate that capability on a much larger commercial level, producing a consistent volume of product at a stable cost for a significant length of time.

The Cap Chat plant will crank out one metric ton per day of metallurgical alumina during its six-month test phase.

Potential customers are divided on the potential, Mr. Boudreault acknowledges. Some are ready to move forward and sign preliminary sourcing agreements with Orbite. Others are saying ‘prove it.’

Alcoa reported a 13% growth in demand for aluminum in 2010 and forecasts 12% growth this year, fuelled by Asia’s growing economies. That demand, combined with a move to spot pricing for alumina, is expected to boost alumina pricing.

Unlike alumina-making with bauxite, Orbite produces alumina with a method that starts by crushing the clay and then acid-leaching it. The company plans to split its output, making alumina for use in aluminum and also supplying a higher-premium, ultra-pure alumina used to manufacture specialized components like LED lighting systems.

“Five years ago we had no process. We had a deposit of six square kilometres and we had no money,” Mr. Boudreault said. “We’ve been able to get money, develop the process, do one pilot plant, do a second pilot plant, go to the next step. One step at a time.”

Financial Post