Zenyatta gains 24% for the week and almost 700% for the year
Graphite Week in Review: The ProEdgeWire Graphite and Graphene Sponsor index rose 8.9% for the week ending on July 12, 2013. This is a significant rise, which along with favorable results from the potash and rare earths sectors, confirm an overall more optimistic outlook for commodities. Three graphite companies, in particular, showed significant gains last week; Flinders Resources (‘Flinders’, TSXV: FDR) rose 35.71%, Focus Graphite (‘Focus’, TSXV: FMS | OTCQX: FCSMF) rose 8.89% and Zenyatta Ventures (‘Zenyatta’, TSXV: ZEN | OTCQX: ZENYF) rose 24.29% in Toronto trading.
Flinders’ significant rise was likely motivated by the fact that the Company has resumed production of graphite at its Woxna mine in Sweden. Last week, Flinders announced that it shipped a truckload of graphite to Germany. Flinders resumed operations at the Kringel processing plant in 2012 and after a brief winter closure, it started to produce graphite from stockpiled material that has been accumulating from the Woxna mine since 2001. Flinders considers the resumption of commercial graphite deliveries to customers in Sweden and Germany as an important signal of the mine’s capacity for reliable supply and of its brand value, which should contribute to expansion in other European markets.
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Focus announced the final results of the second phase of metallurgical tests as conducted by SGS Canada Inc. in Lakefield, confirming the high grade of the its Lac Knife graphite deposit near Fermont, Quebec, which showed an average carbon concentration grade of 96.4% and a high average flake graphite recovery of 92.5%.
Zenyatta, meanwhile, has had nothing short of a meteoric year so far thanks to its very rare and extremely pure graphite Albany deposit in Ontario. The occurrence is unique and very large and similar only to deposits in Sri Lanka, currently being developed by the German Graphit Kropfmuhl AG. The degree of purity available at the Albany deposit will enable Zenyatta to compete with the synthetic graphite producers (a USD 13 billion market), currently the only ones able to achieve the levels of graphitic carbon content needed to match high technology applications. However, Zenyatta will have the advantage in the long term, because it will be able to produce high grade graphite using a cheap and reliable method, the company targets the high-quality synthetic graphite market, which sells anywhere from USD$ 7000 to USD$ 30,000/ton, depending on use. This is the market driven by clean technology prospects and the related Li-ion and vanadium batteries to mention some.
Zenyatta also features very good infrastructure, which will contribute to keeping project costs low. A preliminary economic assessment is expected to be issued within the first quarter of 2014; this will be a significant milestone for the company, whose market value has almost quadrupled in 2013. Not surprisingly, Zenyatta received the Toronto Stock Exchange as the best performing Resource Company. Zenyatta’s share value has gained almost 700% since a year ago and it should become a darling of analysts once the 43-101 resource report is issued – probably in the fall. Zenyatta is also well financed to proceed with the Preliminary Economic Assessment and the next phase of the project, leading to production.
The successes of this week’s biggest gainers in the graphite sector go beyond the individual company level. Indeed, there is a general strong market support for the industry as a whole. About 70% of global graphite production comes from China. Thanks to new technologies in the field of lithium-ion batteries, this mineral is increasingly needed by the high-tech industry. Emerging juniors are preparing to challenge China’s graphite dominance, especially as some of the stricter quotas affecting rare earths are likely to be extended to the graphite sector. Global demand for graphite began in the second half of 2009, started to increase, and this trend continued steadily in 2010 and 2011. Market blips aside, graphite juniors appear ready to experience the same rebound seen in other critical metal sectors in the past few weeks. This is certainly the case considering that current worldwide demand for graphite is about 1.14 million tons, evenly distributed between flake and amorphous graphite. In 2020, some estimates suggest that graphite demand will be 1.6 million tons.