Up until recently Sri Lanka was the only place you could get Vein type graphite at high purity levels. Sri Lankan Vein type graphite comes in very thin veins only centimeters wide.
A small company by the name of Zenyatta ventures had optioned a large plot of land from Cliffs Natural Resources (NYSE:CLF). They over flew the property and found a number of anomalies of interest. One was of particular interest because it was 1400meters long and about 800 meters wide. They were sure they were in Nickel or Gold country so set out to drill the property.
What they got, astounded them, and many others. They started pulling Graphite in huge lengths from their cores. The cores were analyzed and it was confirmed it was Vein Type and about 5% density.
They then asked SGS a world renown assayer with impeccable credentials to determine purity levels using a number of simple techniques. A simple technique yielded 97.2% on their first try.
Zenyatta had already spent $10million on the property and so was entitled to own 70% of the entire land plot that had been oiptioned to them from Cliffs. Instead, the CEO of Zenyatta swung a deal for a large area around the existing Anomaly and acquired 100% of this chunk. At the same time they reduced their buy in to the rest of the property to 50% if they spent $10million more. Cliffs had 90 days expiring Nov 15th 2012 to make a decision. Cliffs decided to go with the proposed ZENYATTA deal. Zenyatta now own 100% of this property.
Zenyatta then went back to SGS and said keep trying to improve purity. After trying a number of different ways to clean out the impurities, they found another rather simple process that got Zenyatta Graphite to an astounding 99.96% pure.
Please refer to Zenyatta's last News Release where they state, and I quote......
"One process yielded 99.7% C while another different and cheaper process yielded an exceptional purity of 99.96% C. This is further confirmation of earlier mineralogical studies that showed the Albany 'vein-type' graphite material to be of high quality and containing minor amounts of impurities. The ability to produce a natural graphite product equivalent in purity to the highest grade synthetic graphite using low-cost conventional processing techniques will allow Zenyatta to target the growing market in high value-added graphite applications. "
What this does is it takes Zenyatta from one of many graphite companies attempting to get into better markets, too Zenyatta being in a single exclusive market. That is the world of synthetics! Synthetic graphite sells for a premium above all other graphite's.
I will again quote from the News Release
"Natural graphite material has varying levels of quality depending on the type (vein, flake or amorphous). The degree of purity can vary greatly, which heavily influences the use of the material in applications and its pricing. Carbon purity of natural graphite can generally range from 70.0% all the way to 99.0%, whereas synthetic graphite is usually greater than 99.0%. Given the ultra-high purity at Zenyatta's Albany project, the Company will be positioning the material to compete in the $13 billion (1.5 million tons annually) synthetic market.
Synthetic graphite is significantly more expensive to make but commands the highest market prices due to its purity. It can cost $4000 - $5000 per ton (99.5% purity) to produce but can be sold for $7000 - $9000 per ton. Ultra-high purity (99.9%) graphite can demand a price of $20,000 - $30,000 per ton. Processing and purification of natural graphite has improved greatly in recent years and projects with initial high purity graphite, like the Albany vein-type, require less purification and therefore lower cost to produce. "
Costs to refine to 99.96% purity for Zenyatta have been quoted at $2500 and with this last NR, it appears to be less then that. So we presume about $2000 a ton. That is not out of the realm of possibility because the normal impurities of sulfides were literally non-existent and ash was not of any concern either.
The cheapest from of synthetic graphite above 99% is $7000 a ton.
The most expensive is at 99.9% and it can range from $15000 to $30000 a ton depending on the market.
We believe that Zenyatta has already identified about 10,000,000 tons at about 5-6% and this years drill program has yet to begin.
What Zenyatta also has on this property that they now own 100% is 2 more pipes of "almost the same size" as the pipe they are drilling now!
The synthetic market is about $1.5million tons for 99.0% or greater.
The synthetic market is about 250,000 tons for 99.5% or greater
The synthetic market is about 40,000 tons for 99.9% or greater
All of these markets can now be supplied by Zenyatta directly with no middle man.
Now, I could sit here and ramble on about numbers and what share price would be worth, but quite frankly they will scare you off.
There are 56,000,000 shares fully diluted. If the 11million warrants are exercised (exercise price of $1.00) then Zenyatta will have $13,000,000 in the bank (they have about $2million now) and 56million shares fully diluted,
The $13million will easily take them through their drilling program up to and including the 43-101 and a PEA.
The thing to remember at this point is the synthetic producers produce synthetic from a derivative of coal. The cost to make it depends on purity required but 99.9% costs them $10,000 to make. That's why we get their entire market!!
If you want to scare yourself on possible share price, click here
Disclosure: I am long OTCQX:ZENYF.
Additional disclosure: I actually own ZEN-Vancouver Exchange