Two weeks ago, we told you how U.S. investment newsletter The Street Sweeper established a large short position in
Zenyatta Ventures Inc. (
TSX: V.ZEN,
Stock Forum) ahead of publishing a series of recent reports on the company and said it stands to profit from any future declines in Zenyatta’s stock price.
As we said, this development was duly noted by Zenyatta, which responded by vowing that the StreetSweeper’s short position will be “blown out of the water” should results from a northern Ontario graphite discovery come out in October as positively as the company intends.
Well.....the results are out and the winner is……The Street Sweeper, at least for now.
Far from blowing anyone’s short position out of the water, Zenyatta tumbled 12% to $2.50 Thursday as the market reacted to electrical resistivity tests on random samples taken from its Albany property.
In a press release, the company said it was very encouraged by the test results, which indicate that Zenyatta’s “high purity” graphite should be competitive with the best graphite available for a wide range of applications such as electrical components and batteries.
The company also said further results on Zenyatta’s graphite crystallinity with associated scanning electron microscope photographs are nearing completion and will be released next week from work being carried out at a Canadian university.
Still, Zenyatta has not been a stellar investment for people who bought in when the stock was trading near $5 in July, 2013.
Critics point out that the project’s remote location, 30 kilometres north of the Trans-Canada highway, (beside the Nagagami River) means that Zenyatta has a lot of work to do to justify a stock price which enjoyed a steady rise from under 50 cents in October 2012.
While the market cap is currently $137.6 million, based on 55 million shares outstanding, the company has yet to release a NI 43-101-compliant resource estimate, critics say.
A preliminary economic assessment for the project is not expected until the first quarter of 2014,
the company said Thursday in a press release.
Meanwhile, the StreetSweeper recently acquired shares in three other graphite sector companies, including
Alabama Graphite Corp. (
CNQ: AlP,
Stock Forum) ,
Big North Graphite Corp. (
TSX: V.NRT,
Stock Forum), and
Northern Graphite Corp. (
TSX: V.NGC,
Stock Forum).
The U.S. investment newsletter, which specializes in lengthy investigative articles, said it therefore stands to profit from any future increases in the prices of those shares.
For the sake of comparison, Northern Graphite has already released a bankable feasibility study for its Bissett Creek graphite project in eastern Ontario. Yet the company has seen its stock price fall to 76 cents from $1.40 in January, 2013, leaving a market cap of $37.3 million, based on 49 million shares outstanding.
The 52-week range is $1.52 and 58 cents.
Graphite is an industrial mineral that is normally associated with steel production, lead pencils and golf clubs.
Export restrictions in China and speculation about new applications that may increase demand, sparked a flurry of interest in graphite and
graphite stocks in early 2012. However, that interest appears to have waned.
As Northern Graphite noted in a recent press release, after more than tripling between 2005 and 2012, graphite prices have fallen back 50% or more due to the slowdown in China and a lack of growth in the United States, Europe and Japan.