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Subject: Size (or grade) is not everything for a graphite company.

Companies tend to be biased (us too) in the description of their deposits. Some would say “the largest deposit”, other would go for “highest ore grade” (or one of the highest on Earth). But, there are many other things to consider.

A good starting point for doing a DD is company website. A first place to go to would be the Corporate Presentation. As an example, take a simple case for a comparison between ZEN and NGC deposits.

1. NGC Presentation

- Slide 24: Plan view of Bissett Creek Deposit, pit outlines

- Slide 25: Cross section of deposit, deposit near surface

Note: NGC has NI-43-101 compliant technical report available based on the results of many drill holes.

2. ZEN Presentation

- Slide 8: Plan view of potential deposit (the pink blob from the airborne EM)

- Slide 10: Conceptual model (the 8 zones/stripes). Zone #2 (based on the first drill hole results) seems to be the most promising one if similar results/grades are found by more drill results­­. Also, the pink blob of 800 m x 1400 m gives an impression of a huge deposit compared to the “footprint” of NGC deposit.

Note: Currently, ZEN has only the lab results for the first (discovery) drill hole.

Assuming that ZEN deposit is proven to be very large following extensively drilling. But, may be no need for so much graphite resource. Size is not everything (same thing with grade) in the comparison of the economic viability between the two deposits. To build an mine that can make profit for 20-30-40 years there would be no need to prove that the deposit could last for 100 years. It would be more productive and cost effective for their exploration to focus on specific rich zones (currently zone #2 and #5, according to the initial results as shown in their conceptual model). Note that this is a hypothetical model and the widths of those bands have not been verified with actual data, except for one location, hole Z114F1. Similarly, the actual contours of those bands will not be straight (nature does not make a perfect straight line). It would be safe to assume that the contours will be curvy, twisting and turning and and could even be interrupted by natural events (e.g. faulting). Perhaps, ZEN could do some in-fill drilling between hole Z114F1 and Z114F3 to determine the size of zone #2 which could be large enough for a 20-30 year operation?

Going deep for a graphite open pit mine may not be economical (e.g. compared to Cu which sells by the pound or Au by the oz, while the price for graphite is by the tonne). Another point to keep in mind is that overburden and waste rock will have to be removed to get at the deposits. The thicker the overburden and the deeper the pit will cost more money. NGC deposit is not as thick, (but their technical report indicates that there is enough graphite to support a mine for many years). In addition, the deposits at NGC are very near the surface compared to some 50m for ZEN. On the other hand, ZEN deposit appears to be much larger and to host lump-typed graphite (like the one in Sri Lanka) which is quite rare and could fetch top dollars, and higher ore grade (4.2% for zone #2).

It would appear that ZEN deposit is open-pitable, but they would need to position the pit in such a way that they can scoop up the best zone (say #2 as indicated by current results) without going through too much overburden and waste rock. In other words, ZEN may not need to go too deep to get at all 8 zones with a huge 500 m deep pit. Instead, ZEN may opt for a series of shallow (say within 100-200m deep) open pits to reach the rich zones near the surface, e.g. zone #2 and zone #5 if they are found thick enough just under the overburden.

All this of course must be fleshed out by a lot more drilling (and not by just a few holes) to support the conceptual model (Slide 10).

ZEN certainly has some potential, but the reality is that it’s a speculative stock (just like going to Las Vegas and sometimes one gets lucky with the slot machines), compared to NGC which has advanced through many required steps leading to a production in 2013. Even NGC is a speculative play, but to a lesser degree.

There are other important factors such as purity, flake size, extraction process, upgrading requirement, ability to produce high quality product such as spherical graphite (which are required for Li-ion batteries/power storage systems, etc.) that would have to be examined in a DD exercise. But, these are topics for future discussions.

Always do your own DD before plunging in (NGC or ZEN with your hard-earned money which you can afford to lose…and of course, not with the grocery money.

Just my musings in a rainy Saturday.

Goldhunter