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Zenyatta Ventures’ stock price plunged 38.6 percent Tuesday morning following the release of an update on metallurgical process work on Albany graphite. Here’s a look at what sent investors running.
Zenyatta Ventures’ (TSXV:ZEN) Albany hydrothermal graphite deposit, located in Northeastern Ontario, is always a contentious topic.
Just think back to 2013. That summer, drill results from the East Pipe at Albany impressed the market, and prompted various other graphite hopefuls to set up shop near the deposit. Zenyatta was also in the spotlight following comments from geologist Mickey Fulp of MercenaryGeologist.com and a snafu regarding an article published by TheStreetSweeper.
2014 has been markedly quieter. Though the company established the first geological model for Albany in February and completed pilot plant and metallurgical testing in September, for the most part it’s remained under the radar.
That changed Tuesday after Zenyatta released an update on the metallurgical process work that’s taking place at SGS Canada’s Lakefield facility. The company’s share price rapidly plunged from Monday’s close of $1.71 to $1.05, a drop of 38.6 percent. It’s improved a little since then and was able to close Tuesday at $1.21, but that’s still a drop of 29.24 percent from end of day Monday.
Commenting on the sell off, Peter Epstein of consultancy Mockingjay said that while he doesn’t follow Zenyatta closely, his sense is that investors were disappointed by two main issues. First, they had been expecting a preliminary economic assessment (PEA) for Albany by the end of the year, and “now that looks to be unlikely” — though Tuesday’s release doesn’t say it won’t arrive by that time, it also doesn’t give a timeline for its publication.
Second, investors were disappointed by the flotation concentrate grade announced by the company. It’s up to 92.5 percent graphitic carbon (Cg) from the previous figure of 78.3 percent Cg, but for many that was not high enough.
At time of publication, Zenyatta had not returned a request for comment on investors’ reaction to the news, but perhaps anticipating the backlash, the company’s release spends a fair amount of time reminding investors to be patient.
For instance, President and CEO Aubrey Eveleigh is quoted as saying, “[w]hile SGS has made significant progress on the metallurgical work, designing an innovative new process takes time and the timelines for completion are difficult to forecast accurately. Our priority is on defining the best possible process and meeting customer expectations on product quality for a broad range of applications with demanding specifications. The engineering work completed to date has been much more detailed than is normal for a project at the [PEA] stage.”
Meanwhile, Alex Mezei, director, technical services at SGS Canada, said, “[n]othing scales in a linear fashion in the mining industry. Many factors affect a final scaled up process, including reagent regime, temperature, residence time, mixing, separation and handling.”
Some, however, remain unconvinced of the deposit’s merits. For Fulp, Tuesday’s news was nothing but confirmation of his skepticism regarding Zenyatta. “In my opinion, the Zenyatta press release reinforces what has been previously documented regarding the potential viability of this project: it is a low-grade graphite deposit buried under substantial overburden in a remote, climate-challen
Investors will have to decide for themselves what to believe, and will certainly be waiting anxiously for the release of the Albany PEA.
As mentioned, at close of day Thursday, shares of Zenyatta were selling for $1.21 each, down 29.24 percent. Year-to-date the company’s share price is down 46.93 percent.
Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Related reading:
Mickey Fulp on What Makes a Good Graphite Deposit
Zenyatta Clarifies Geology, Metallurgy of Graphite Discovery
