Stato,

First, Happy New Year again (in 2 weeks). May the Year of the Horse bring you health and prosperity.

Let me try to give my take on this, in layman term. Since I am investing in both camps, flake graphite and the hydrothermal (lump vein, vein-typed in a comparison with the stuff found in Sri Lanka) I am not going to pitch one against the other. As long as they can make money for us that would be fine. There should be no race since Aubrey already said (in the Corp Presentation) that they are not competing with flake graphite. They are going after the other bigger market (the synthetic one).

The Sri Lanka graphite occurs in small veins (max in approx some 10cm). Since the good stuff was oozing out (in a more orderly fashion) from down below eons ago, this kind of graphite (high grade) is confined in small cracks in the form of high-purity deposit. It's extremely labour intensive to get this out (worker, shirtless following the veins drilling out the high-purity graphite in lumps with a pneumatic drill. The chips from this drilling are sorted out by hand, by women sitting on the tunnel floor. They would put the different kinds lumps (size) into sacks for men to carry them. Note the interesting division of responsibilities between men and women there.

The hydrothermal deposit occurred in a more explosive manner due to the interaction between the hot stuff and liquid (most likely ground water). The explosive force was pushing the mixture into the host rock resulting in a deposit like what we have in Albany. The grade is around say 5%, but once the graphite is separated out of the rock you get graphite with high purity which could fetch high $ figure (ZEN has used $8500/tonne which I would consider as a reasonable number). If they can get better than that from future buyers then it would be gravy on the top for us. Right now, I would not try to "promote" the price of $20,000 to 30,000/tonne, $8500/tonne is good enough to make some decent profit for ZEN. We will see some price in the upcoming PEA.

Similarly, flake graphite (concentrates from the mill, without any additional purification) would sell for $800 - 1500/tonne (at 94-97%C) depending on the flake size. The larger the flake the better the price. Extra large/jumbo flakes would fetch better price, say ~$1800/tonne.

In order to get to battery grade (e.g. those used in Li-ion batteries) flake graphite will need to be processed further. Depending on the flake size the loss during this conversion process would be in the range 30% for large/jumbo flakes and 70% for small flakes...But the price for battery-grade would be much better ($4k/tonne for uncoated spherical graphite, and $6-10k for coated spherical graphite). Note: China has been using low-purity small flakes to make spherical graphite (at a loss of 70%) which would sell for about $4k/tonne (uncoated).

Companies are in this game to make money for them and for us, not to lose money. If they can make some reasonable profits for us then that would be fine with me.

Hope the above would be helpful to you.

goldhunter