Hi Q*bert,

The numbers I used were either directly from the PEA or meant to achieve certain results ie producing 60k tons per year. When Hoov pointed out the numbers were made up, I went over it again and corrected the numbers the best that I could without spending days on it. As I explained and showed, some of the corrected numbers affected the NPV in one direction, some in the other direction, there was no agenda to paint a rosy picture here. There was a difference in the end but not a large one in the big picture. Whether the NPV is $3.8B USD or $4.8B USD when we are sitting at $55M CAN, we remain seriously undervalued with great upside.

Hoov is applying a bearish approach to ZEN while I am applying a bullish approach to ZEN, I think that is quite obvious for all to see.

Let's dissect Hoov's post:

His first paragraph:

There's a simple test for your spreadsheet model. Plug in $7500 tonne product value and 10% discount rate, and you should get RPA's numbers for NPV and IRR, more or less. I can guarantee that you won't.

Ok, well, that guarantee did not last at all since I had already done that work on SI and it showed that I was actually under estimating the NPV.

His second paragraph of relevance:

And your spreadsheet isn't even internally consistent. Your CAPEX in the summary doesn't match your CAPEX in the calculations section. The real issue is that your life of mine CAPEX is only about 40% of RPA's, and it specifically excluded a number of costs that are not yet known.

If those costs are not known, how can I make them part of this spreadsheet? I made the best guess with the info I have. I think the total CAPEX for mine start up was $408M with an $84M contingency fund. Discussions with management and prudent attitude at the PEA stage support that the $408M Capex is artificially high ie a 24% contingency is very high, CCB used 12% in theirs. So I used $325M. I think that is fair, if others have a different opinion, that is their right.

His third paragraph of relevance:

How do you expect to get 20 years times 60,000 tonnes/year out of a pit that doesn't even have a resource large enough for that? And that ignores the 75% recovery concept.

To get 60k per year for 20 years you need 1.2M tons and at a 75% recovery, you need 1.6M tons. The RE was 1.4M tons based on $8,500 per ton and was open at depth. I believe the recovery will increase before we get to actual production and that will help my case as well. However, even if we run out of material, this would be in the later years 15-20 and those years have very little bearing on NPV or IRR.

His 4th paragraph of relevance:

And just from eyeballing your numbers in the spreadsheet, there are embedded equations that are simply wrong. For example, why does your "Remaining recoerable graphite" go down by the net production per year, rather than by the gross amount of the ore required to produce it? Whatever. This is GIGO, in my opinion.

OK, missed that one but again, if we run out of graphite, it will be in the latter years which will have very little effect on NPV and IRR. Calling this GIGO here serves his campaign of attacking the author and it is only his opinion as he points out.

His last paragraph:

So, going back to my first comment, your should test your model by inserting $7500/tonne and 10% for the NPV. If you don't land in the right ballpark (close to RPA's numbers) you should report that to us.

I did and it did.

Now, as I said before there are $368M USD in tax credit that are not factored in the spreadsheet but would affect NPV and IRR in a very positive manner. There is the potential also for signicant carbon credits that can be sold. This is an unknown that could significantly impact positively the NPV and IRR. The fact both levels of government are so pro green tech is a big plus for ZEN.

In the end, this exercise was to calculate if ZEN was a good investment. Showing that we are trading at less than 2% of a realistic NPV demonstrates that it is. I am very happy to own ZEN even after the BS which all ZEN shareholders have had to endure. I know I will get paid for my patience and I am not going anywhere!

Choo Choo!

Glorieux