A positive preliminary economic assessment (PEA) on Zenyatta Ventures’ (TSXV: ZEN; US-OTC: ZENYF) Albany hydrothermal graphite project in northern Ontario shows the deposit could be a viable long-life, low-cost graphite producer.
Given graphite’s ability to resist chemical corrosion and stay intact under temperatures of above 3,000°C, its uses include making components of energy storage devices for electric vehicles, computers and smart phones.
The study shows Albany can produce 30,000 tonnes of high-purity (99.9%) graphite annually for 22 years, based on less than half of the deposit’s indicated and inferred resources.
The project, envisaged as an open-pit operation, has 977,000 indicated tonnes of graphite from 25.1 million tonnes grading 3.9% graphitic carbon, and 441,000 inferred tonnes of graphite from 20.1 million tonnes at 2.2% graphitic carbon.
Initial costs to build the proposed mine are US$412 million, a hefty sum for any junior to raise. But, what stands out about the Albany project is its potentially large returns.
Assuming a long-term price for purified graphite of US$7,500 per tonne, Zenyatta estimates operating costs at the Albany project of US$2,046 per tonne, giving it a 73% margin, or US$5,454 per tonne.
The study shows the project generating strong gross revenues of US$4.8 billion over the mine’s life, and an after-tax cash flow of US$110 million a year.
Albany’s economics are appealing. Using a 10% discount rate, it has an after-tax net present value of US$438 million and a 24% after-tax internal rate of return. Payback would occur within four years.
Given the robust PEA results, Zenyatta’s CEO Aubrey Eveleigh says the junior will push Albany to a prefeasibility stage, where it will define and optimize the project, and update the resources to show economic viability.
He says the firm will use the PEA to support its discussions with potential partners and financiers.
The outlook for the high-purity graphite market “is very promising, with demand growing rapidly from new applications,” the company says. It projects that high-purity graphite demand in 2017 will total 426,000 tonnes. If Albany comes online and produces 30,000 tonnes a year, it could satisfy 7% of that demand.
Zenyatta anticipates the graphite produced from Albany will go towards different market application segments, including 25–30% for lithium-ion batteries, 25-30% for high-purity graphite in powder metallurgy, 20–25% for fuel cell products and the rest in other applications.
The Albany project is 30 km north of the Trans-Canada Highway and near the communities of Constance Lake and Hearst. Along with being near a major highway, it is 20 km from an all-season logging road and 70 km from a rail line.
Despite the robust PEA released on June 1, the company’s shares have fallen 33%, or 76¢, to close June 3 at $1.54.