Scalability and Economics...Yes, albeit I'm not a fan of the Berry's it does seem that Chris wrote up a balanced report from his official site visit as he was after all invited by Zenyatta's CEO Aubrey Eveleigh.
So as some including myself have noted the issue here is not of discovery, as that has happened, but of actual economics, and from what Chris Berry says, and I've agreed from the onset, this needs to move forward from proving purity on a "bench scale" to a larger more commercial stage in pilot plant size testing.
Berry does say that using this cheaper method of Caustic Bake (Sodium Hydroxide) hasn't been proven on a commercial scale by any other producer that he's aware of.
Scalability, until proven otherwise is a concern. All in all, there are strengths and weaknesses, but it does seem that the big money has already been made, and there are real risks at this stage which concern not discover, but economics, as there are in any other venture. JMO
From the report:
Strengths:
Cliffs Natural Resources (CLF: NYSE) is a strategic investor and can provide valuable technical advice and increase sustainability.
Potential for low operating costs - Albany could develop into an open pit deposit which could be less costly than narrow vein mining in Sri Lanka (their apparent competitor)
Infrastructure exists including paved roads and electricity. More work will be required here however
Ontario is a sound geopolitical mining jurisdiction
Caustic bake appears to yield ultra high purity graphite
The October release of a NI 43-101 resource estimate plus optimized metallurgy are potentially positive catalysts
Weaknesses:
We still have a great deal to learn about the Albany deposit including size, grade, and overall costs. No existing NI 43-101 report and no PEA leave us guessing at economics
Caustic bake is unproven on a large scale. More detail on costs is necessary
If ZEN is a takeout target, who would the suitor be at such a high valuation with so many unknowns?
Many of the large end users of graphite such as GrafTech or SGL Carbon have reported lackluster financial results recently bringing into question their appetite for a near-term acquisition
Despite the large size of the synthetic market, can ZEN prove to end users that they can produce a product suitable for highly specific end uses?
Which type(s) of graphite will ZEN be competing against? Primary synthetic? Secondary synthetic? Sri Lankan Vein? Natural Flake? Each of these has their own supply and demand dynamic which must be accounted for
Opportunities:
There is broad consensus that graphite demand is set to increase ahead of supply in coming years
Academic research into the deposit could yield as-yet-unrealized markets
ZEN’s share price is head and shoulders above its peers. The company should raise more money NOW regardless of immediate needs
With the Albany project open at depth, there is room for discovery surprise
Threats:
Sri Lankan expansion
If ZEN is looking to compete with or replace Sri Lankan graphite, this is an extremely small market (5,000 tpy). Will revenue generated in this segment of the market be enough to support an entire operation?
Though manufacturing and industrial production data around the world looks to be increasing, a renewed economic downturn could put downward pressure on graphite prices
Failure to procure an off take or strategic investor could lead to excessive share dilution
In many ways, ZEN is "priced for perfection". With so much success to date, a bad or mis-interpreted press release could harm the share price