TradingChief's  Instablog

I would not concern myself with how much ZEN is up already. There is only one other mine in the world and that is in Sri Lanka. The veins there are centimeters wide. So we will be the largest Vein Graphite property in the world when done. We think they have about 10,000,000 tonnes at 5% now and have just begun drilling. We think this pipe (they have 3 on the property) will hold in excess of 40,000,000 tonnes at 5% when done. It is the purest graphite on the planet at the moment. Refining is very easy and very low cost. I am using $2K but am being told it is way way below that. However, to be safe still using $2K for costs.

At one point the 99.9%+ stuff was selling for as much as $30K a ton. It supposedly is now selling for $20K we are using $7K to $10K in our calculations.

Very little of the Flake Graphite developed to high purity (spherical graphite) will impinge on the synthetic market, so the more graphite that ZEN finds the more they take over from the Synthetic production putting synthetic producers out of business. To give you an example. For a synthetic producer to produce 99.95% costs him over $15K. For ZEN it will cost less then $2K.
At the moment there is demand for 1.5million tons per year of synthetic. Most of that is down at the 99.0% level and sell for far less. (about the $7K I am using for our 99.96% stuff)

If you start using real numbers the upside is somewhat unbelievable. If we can get 40,000,000 at 5% and that is all, then that's a 20 year mine life at 100K tons per year. So this is all doable. If by that time we are at 100,000,000 shares FD then share price is ridiculous. Just using 100K tons per year, you get share price numbers in the double digits, without a problem and that is using the very smallest of figures without giving them credit for any of the high flying prices.

I would compare this stock to ARU of years gone by. It has that kind of potential and to be honest I think anyone ignoring it here, is ignoring it at their peril. I always suggest loading up in 1/3 loads. Get a position, then if it falls , add.

Their is a dead period here, but fortunately for holders, that period will finally get the word out. We were all lumped in with the other flake graphite companies and no one understood the difference between the two.
They are beginning to understand now. Fully diluted there are 57,000,000 shares out. of that almost 11million are warrants exercisable at a $1.00. Those people are either shorting the stock now to lock in a 40% return or are exercising with intent to keep.

That means the company will have about $13million in the bank with 57,000,000 FD.
No need for a PP, that will easily take us through the drilling season, to 43-101 and a PEA.

So right now the company has a market cap of less then $100,000,000 which with this kind of spec, is very very low. We think the stock deserves a $250,000,000 market cap, however, things have changed somewhat since the days of the Saskatchewan Coal comfort letters so have moderated our expectations. At $2.50 its still cheap in our impression and if things go as they should you will be looking at double digits based on what we know now. However we are moving in baby steps. The target is based on solid info, so I can easily justify the target to anyone that challenges it. I am using the following;

1) excessive costs to refine
2) The lowest sale price of inferior purity synthetic
3) The lowest predictions for tonnage
4) middle of the road expectations on production

And, it still works out to double digit share price in the end.

Dennis

Disclosure: I am long ZENYF.PK.

Additional disclosure: I am actually long ZEN-Vancouver Exchange

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 (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

preview.tinyurl.com/b67e5yv

Disclosure: I am long ZENYF.PK.

Additional disclosure: I actually own ZEN-Vancouver Exchange

I always enjoy listening to the one sided narrowminded comments by CNBC people. Don't get me wrong, I like most of them, its how they tend to narrowly focus on subjects and spin them into positives for the US recvovery.

A good example was today when it was asked of a guest, why does Spain bond auction have to do with the US, after all the EU is only 1.9% of all US GDP!!

In this case like many others, the comment is designed to leave the listener with the idea that the EU is irrelevant to the progress of the US. This denies the Global Economy that we all know we belong too!

The reason why CNBC is so one sided is they had to know the Guest was as clueless as the comment itself. His reply seemed to support the idea that the EU is literally irrelevant.

No one realizes, or chooses to address that the EU is one of China's biggest importers. The EU supports a large portion of China exports. So if you look beyond your nose (CNBC Commentators) then you would realize that it is irrelevant that the EU only makes up 1.9% of US GDP.

If China starts to contract because of falling exports, what then? How much is China purchasing of US GDP?

CNBC only ever speaks of the Global economy when talking about who they can export too. They assume that individual continents can be treated separately. Just as when Klyueless Kudlow starts to refer to King Dollar he does not contemplate on how that will impact exports to already struggling countries?

I for one would love to see the Republicans back in power so we can all watch them fall on their sword just as quickly as Democrats. The democrats may have farked up this last 4 years but it was followed by 8 years of mismanagement by the Repubs!

King Dollar? good luck with that :)