A series on
graphite resource development must include Zenyatta Ventures Ltd. (ZEN:
TSX-V), which has zeroed in on a graphite deposit
in northern Ontario Province. Called the
Albany Graphite Deposit, the resource is unusual in its volcanic origins. A preliminary economic assessment was
published in January 2014, citing 25.1 million metric tons of graphite resource
with another 20.1 million metric tons inferred.
Early tests
suggest the graphite is quite high in purity and is particularly suitable to
the company’s proprietary concentration process. Zenyatta plans to deploy a process using
sodium hydroxide instead of environmentally unfriendly acids. Bench tests using this purification method on
graphite from the Albany deposit have achieved carbon purity as high as
99.9%.
Zenyatta has
much work to do to make its graphite plans into reality. Adequate capital is an obstacle. The company recently raised CDN$2.9 million
through a rights offering. Shareholders
subscribed to 3.9 million shares at CDN$0.75 per share, bringing total shares
outstanding to 62.9 million. Management
has a long list of things to do with the proceeds. Top of the list is the production of purified
graphite samples to give potential customers for testing. Of course, there is more work to optimize the
production process at scale.
More capital
will be required to bring graphite ore from the Albany Deposit to market. Based on the success of the rights offering, Zenyatta’s current shareholders clearly believe this
goal can be achieved. It seems likely
management can get additional investors to drink the same kool-aid. The preliminary engineering assessment cited
capital costs near US$411.4 million for construction of the mine and production
infrastructure. The build-out is
expected to take at least two years.
Neither the author of the Small Cap Strategist web
log, Crystal Equity Research nor its affiliates have a beneficial interest in
the companies mentioned herein.
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