Good Morning,

After a long wait Zenyatta Ventures (ZEN.V/ZENYF) announced their PEA (Preliminary Economic Assessment) this morning:

On first blush, I am very pleased with the report. RPA is quite a conservative firm and we see that in a few of their assumptions but they confirmed several of my own estimates. Most importantly, we see 30,000 tonnes per year sold at $7,500 per tonne with operating costs under $2,100 (I assumed $2,500). This is a more than a $150,000,000 annual pre tax cash flow business....minimum! The entire market value of ZEN is below $150MM currently.

I'm not sure why RPA used only half of the resource to conclude a 22 year mine life which is more likely to be a 40-50 year mine life in actuality. Considering they have more than double indicated and inferred resources, and the deposit is open at depth, in feasibility I'm confident that the life of mine will be much greater. I also think the use of a 10% discount rate is extremely conservative and should be 8% now moving to 5% into feasibility. An 8% discount rate gives Albany a NPV of over $1 Billion with a much higher internal rate of return (IRR---I think it will end up being well over 40%, maybe over 50%), however 27% pre tax for 22 years is nothing to sneeze at.

Lastly, the CAPEX assumption is greater than we assumed. However, they baked in quite significant contingency costs which seems high to me. In any event, a very robust PEA from Zenyatta. I will dig through the details and model on my plane ride back to Chicago today and will elaborate in the next day or so (maybe tonight).

I still believe ZEN will be acquired as they move this project forward. The economics and product are stellar. I'll run new numbers but the PEA only confirms to me that the company is worth minimum $500MM in a sale, which is nearly a $10 share price. Much more to come on Zenyatta so stay tuned!

Disclaimer: Eric owns shares in Zenyatta Ventures and may buy more or sell anytime without timely notice