Hi Larry,

Thanks for your comments below. In generic terms, you are right as usual. However, ZEN as you know is a very unique project that has no comparables. I believe that is one of the reasons the PEA has taken longer than normal.

From the News Release of December 16th:

• For the first time a fully engineered purification process has been completed, providing data for energy requirements, water treatment, reagent consumption and equipment sizing.
• Optimization of sodium hydroxide consumption was achieved such that recycling was eliminated, thereby reducing costs related to introduction of recycling engineering and equipment.
• There was a significant (approximately 86 per cent) reduction in the NaOH reagent dosage.
• A technically feasible and distinctive process flow sheet was developed, and work continues to fully optimize it to meet customer expectations on purity.

Mr, Eveleigh commented:

"Process optimization (cost cutting, simplifying equipment, eliminating caustic recycling) was a success.

The engineering work completed to date has been much more detailed than is normal for a project at the preliminary-economic-assessment stage. We believe that Zenyatta is a leader in developing a new cost-effective process for the production of ultrahigh-purity natural graphite.

Once ready, the complete process flow sheet and associated engineering data will then be fed into the PEA, which is now under way by RPA Inc.

So ZEN, not being able to use comparables has been forced to develop their own project specific engineering work and obtained the real costs related to energy requirements, water treatment, reagent consumption and equipment sizing which will be used in the PEA. From this stand point, the ZEN PEA will be closer to a PFS than a PEA as you point out the differences in both.

For this reason, ZEN's PEA will permit a faster road to the PFS and will be more dependable than a typical PEA when it comes to relying on the data generated.

I maintain that ZEN will trade between 20% to 30% of the NPV generated in the PEA, maybe up to 40% depending how conservative RPA is with the PEA assumptions.

Glorieux

Hoov's post:

Here's my simplification. A PEA is based on finding comparable projects, and assuming similar costs and engineering solutions. It is a hypothetical model of an actual mine, but is not based on data obtained about the project location itself.

A PFS is based on actual engineering data obtained from assessments of the potential mine location itself. These categories of data are detailed in the section under the heading "Modifying Factors". You'll have to read the whole document, including the italicized parts, to get a sense of what those modifying factors are, and how they're assessed. The goal is to assess a specific project, based on its unique economic influences.

Ultimately, a PEA and PFS are as different as apples and oranges. They are each based on different information, and serve different purposes.