Zenyatta: Selling a Story with More Holes Than Its Celebrated Mine

by Melissa Davis - 9/9/2013 11:46:29 AM

CORRECTION: TheStreetSweeper has elected to remove the second story in this series after discovering on Friday morning that the CEO of Zenyatta actually worked with a different Don Sheldon than the promoter identified in the article. While TheStreetSweeper continues to stand by the other revelations included in that report, including the doubts expressed by notable industry experts about the validity of the story that the company itself has told, we have nevertheless chosen to withdraw the entire article to address the situation and compensate for this accidental oversight. We regret this error and apologize for any confusion that it might have caused.

Give Zenyatta Ventures (TSXV:ZEN.V; OTC: ZENYF) credit for this much. While that highflying junior miner has yet to deliver the most preliminary report that investors need to even begin judging the value of its celebrated graphite deposit, let alone produce any concrete evidence that its graphite rivals the best in the world, the company has managed to establish one thing for sure. As a standout performer in a crowd of junior miners that have tanked along with the underlying price of graphite – and now sports a hefty $175 million market capitalization that eclipses the market values assigned to a number of its more advanced rivals combined – Zenyatta has clearly proven that, if nothing else, the company knows how to sell a tantalizing story.

Granted, by the time that Zenyatta CEO Aubrey Eveleigh launched the company as a junior miner originally scouting for overlooked copper and nickel deposits, he had already mastered a similar pitch while steering the exploration program for another Canadian junior that obediently responded with some rather amazing – if fleeting – gains of its own. Like Zenyatta itself, MetalCorp (TSXV: MTC.V; OTC:MTLCF) looked hopelessly stuck in penny-stock land until the obscure resource player suddenly exploded to record highs after the company reported that it had basically stumbled upon a valuable discovery by complete accident. Indeed, with Eveleigh routinely surfacing as the official voice of that doomed company, MetalCorp literally spent years trumpeting a series of “lucky breaks” that kept hope alive (and the bleeding miner afloat) long enough to deplete most of its funds and finally prompt the board to kick the future chief of Zenyatta out of its own executive suite.

Four years after MetalCorp severed its ties with Eveleigh -- later credited for raising the mountain of cash that the battered miner spent -- the company now sports a total market of value of less than $1 million and trades for a mere penny a share

While initially forced to settle for a similar post at an obscure miner that looked similarly worthless, Eveleigh soon negotiated a handy deal that would allow him to overcome the fresh stain on his record (since erased with the helpful passage of time) and provide him with the material to produce his recent encore. After securing minority rights to some remote mining claims through a consulting firm that he owns – terminated by wrecked MetalCorp, along with the executive himself, earlier that same year – Eveleigh orchestrated a lucrative related-party deal that supplied that discarded asset to a “numbered” company that could then go public with that swampy land as its flagship property and the disgraced executive in charge of the entire show.

When Zenyatta filed the official paperwork for its stock offereing the following year, of course, the company dutifully portrayed Eveleigh as a successful corporate executive with an impressive background in geology and a proven track record in the mining field. Notably, however, Zenyatta also referred to Eveleigh as an outright “promoter” throughout its prospectus and further underscored that disturbing role in a so-called “certificate of the promoter – signed by the CEO himself – at the end of that crucial document.

To be sure, with Eveleigh overseeing its business and handling its publicity, Zenyatta has followed a rather familiar path on its amazing journey to record-breaking highs. After debuting as just another obscure miner and languishing in penny-stock territory for a couple of years -- providing early investors with little incentive to exercise pricier warrants that would inject millions into its bank account -- Zenyatta suddenly rushed to capitalize on its own accidental discovery of a particularly hot resource that had spiked in price to generate plenty of helpful buzz. With the company trumpeting its graphite deposit as both extraordinarily rare and extremely valuablewhile forecasting massive production rates of top-quality graphite that commands a steep premium, Zenyatta finally began to gather steam about a year ago and soon blew right past the former hotshots in its peer group to emerge with the most breathtaking gains in that fading sector by far.  

A stock that fetched as little as 15 cents a share last summer, threatening to render a mountain of $1 warrants effectively worthless by the end of the year, Zenyatta has since rocketed all the way to a record high of $5 a share and continues to trade near the top of that gigantic range. Indeed, even after shedding 25% of its peak value since late July, Zenyatta still commands more than an entire group of noteworthy competitors – with both its stock and its overall market cap exceeding those of Northern Graphite (TSVX: NGC.V; OTC: NGPHF), Focus Graphite (TSVX: FMS.V; (OTC:FSCMF), Big North Graphite (TSVX: NRT.V; OTC: BNCIF) and Alabama Graphite (CN: ALP.CN; OTC: ABGPF) combined – despite the head-starts that position those miners to enter the market long before their pricier rival ever gets its own chance.

Since Zenyatta has never presented any documented evidence to validate its claims about either the abundance or the quality of its graphite deposits – and still needs to provide the first in a series of formal reviews that will likely take years to complete – the company strikes some of the most prominent veterans in the industry as a worthless promotion at worst and the riskiest name in the group at the absolute best.

“Zenyatta hasn’t done one thing to prove that they have material that can be used in the applications that they claim,” declared Asbury Carbons CEO Stephen Riddlethe fourth-generation leader of a company that has operated in the graphite space for more than a century. “Whenever it comes out that whatever they promoted isn’t going to work, the stock will collapse … Personally, I think that they’re going to put a big black eye on the entire industry.”

At this point, its own spokesman confessed when TheStreetSweeper directly asked, even Zenyatta itself has no idea whether its product will actually perform well enough in those applications to compete against the pricey synthetic graphite that it hopes to replace. Despite all of the internal purity results that management has trumpeted since announcing its big discovery a couple of years ago, Zenyatta never even sought to confirm the potential value of its graphite until a few weeks ago – after safely restocking its bank account – when the company finally agreed to release its very first samples to a handful of end-users and give them a chance to see if it actually works. Zenyatta better hope for some truly dazzling results, the spokesman indicated, since management practically counts on a generous buyout offer (or at least an attractive joint-venture deal) to follow and -- with its own plans limited in both scope and duration to those that it can presently afford -- provide the company with its most likely vehicle for any future success.

“Remember, this is all speculation,” that Zenyatta spokesman bluntly allowed (before asking to withdraw most of the comments that he shared). “That’s why we’re getting such a hefty market cap. Investors think that we have a good chance.

"We want to make sure that we know that for ourselves," he added. "You really don't know that it's validated until the product is sold ... If you owned this (stock), you would know it works when somebody makes a bid to buy your company."

With that interview only furthering the convictions already reached by conducting the extensive research for this detailed article (the first in a three-part series), TheStreetSweeper placed a confident bet against Zenyatta that will allow it to profit if that bloated stock indeed undergoes the sharp correction that so many expect. At the same time, however, TheStreetSweeper actually felt tempted enough by a select group of rivals in that risky space to take its chances on a few speculative names for a change. Executing its first so-called “pair trade” in history, TheStreetSweeper has chosen to not only short Zenyatta itself but also buy stock in three competitors that it regards as compelling alternatives – Alabama Graphite, Big North Graphite and Northern Graphite – since they look almost safe in comparison and seem like an outright steal, selling for a combined total of barely a buck a share, besides.

Trampled by Underdogs

Although Zenyatta has spent close to three full years trading on the public stock exchangewhile touting its graphite deposit throughout much of that period, the company just retained an independent firm this summer to prepare a standard NI 43-101 resource report that will merely serve as a general overview of its celebrated mining project. In contrast, despite its status as a relative newcomer that arrived on the scene barely a year ago, Alabama Graphite managed to complete its own 43-101 study by this summer and just released the formal report – a critical document for junior miners seeking to establish credibility – less than two weeks ago. By capitalizing on the favorable regulatory environment in its home base of Alabama, in fact, the company expects to fly through the entire process with remarkable speed and launch actual production in late 2015 as the only domestic supplier of graphite in the entire country.

With Alabama Graphite focusing all of its attention on advancing its project and waiting for any publicity about its progress to naturally follow, however, the young junior miner has largely flown under the radar up to now. Even after its stock suddenly doubled last month ahead of the looming publication of its official 43-101 report -- a crucial milestone that could finally prompt analysts to start taking notice -- Alabama still trades for barely a quarter a share. At that level, Alabama features a total market capitalization of $10 million that pales in comparison to the value represented by a recent gain that Zenyatta itself recorded in a single day.

 “We’re not very promotional,” Alabama Graphite Vice President of Exploration Douglas Oliver practically apologized during a recent interview (prominently featured in an upcoming story) that sold TheStreetSweeper on the company as its favorite pick in the entire group. “We’re trying to show that we’re actually serious about doing the work, with the real intention of advancing this project.

“Once our 43-101 report is published,” he said just ahead of its release, “analysts can read it and see what our plans are. They’ll see that we’re serious and that our primary goal is not to make a bunch of money … We’re not interested in just doing a stock promotion.”

While Zenyatta has managed to stage a tremendous rally without any help from a 43-101 report of its own, the company has also remained completely neglected by professional analysts who prefer to wait around for that sort of evidence. Indeed, even though a Zenyatta director actually serves as vice chairman of its mining group, Mackie Research has not only ignored the remarkable winner but also treated a popular rival as its favorite graphite miner instead.

Mackie began recommending Northern Graphite as a “very unique resource development opportunity” two full years ago, back when overlooked Zenyatta still languished deep in penny-stock territory at just 30 cents a share, and has followed up with even stronger endorsements of the graphite miner in the string of bullish reports that it has issued on the company since that time. Notably, in one of its most glowing reports on Northern to date (published right after the company landed an attractive financing deal with giant Caterpillar earlier this year), Mackie actually based its growing confidence in the junior minor on several key advantages that Zenyatta itself obviously lacks.

“NGC continues to offer investors leading exposure in the graphite space, as its advanced status will allow it to beat almost every other junior graphite company to production,” Mackie gushed at the time. “The most advanced and transparent graphite play, NGC is the only junior graphite (miner) that we know of with a 43-101-compliant bankable feasibility study.

“Given the many inherent advantages that NGC has to the other graphite companies – including a favorable location, more advanced development and engineering progress, greater large flake and purities – we view NGC’s approximate 20% discount on an enterprise value/total resources basis as too wide,” Mackie decided, without even bothering to throw rising Zenyatta into that equation. “While we view Northern Graphite’s relative valuation as offering the most attractive value in the space and are most impressed with the leading progress the company has made in terms of milestones and providing investors with transparency on various aspects of its project, there are several remaining catalysts on the horizon. (Thus), we maintain our speculative buy rating and increase our target price on the company.”

Far from alone, Mackey simply ranks as perhaps the most notable in a crowd of research firms that have basically snubbed Zenyatta and warmly embraced its nearby competitor instead. Shortly after Northern cleared an important hurdle by completing its bankable feasibility study last summer, for example, Union Securities confidently predicted that the company would soon become “the leading graphite producer” in the very Canadian province where Zenyatta itself operates. When Northern spiraled well below $1 a share on eroding graphite prices in the months that followed, Industrial Alliance Securities then stepped forward to respond with an even bolder call of its own.

“NGC looks better than ever,” the firm declared. Currently “trading at its 52-week low, NGC should be on the top of the list of every investor looking at graphite. Based on that, we reiterate our 12-month target price of $2.45 (calling for the stock to literally triple within a year) and our speculative buy rating” on the shares.

Zenyatta obviously needs more than a sexy story and a pretty stock chart to impress mining experts who follow the graphite space. By staging such a dramatic rally, in fact, Zenyatta has started to raise some eyebrows while its far cheaper rivals have managed to keep on turning heads instead.

Take Big North Graphite, for example, a junior miner valued at less than $3 million, even though it has already launched actual production – a unique distinction that automatically sets it apart from the crowd – and recently followed up by completing its first official graphite sale. Despite that paltry valuation and the meager price of its stock, currently stuck below a dime a share, Big North has managed to catch the attention of at least two industry experts who basically just shunned Zenyatta itself.

The data manager for Industrial Mineralsa key source of market intelligence for the mining industry, Simon Moores recently pointed to Big North as one of the few “serious” players in a graphite sector crowded with juniors simply “riding the resource wave” Although he included several other companies in that select group – including Northern Graphite, Focus Graphite and Energizer Resources (Toronto: EGZ.TO; OTC: ENZR) – Moores skipped right past Zenyatta itself whenever he presented his exclusive list.

Big North actually scored an even more coveted endorsement just few days earlier, when the neglected miner found itself singled out by the former manager of a multibillion-dollar hedge fund who has since made a name for himself by discovering future winners in the mining space. Now an independent analyst who specializes in hunting down bargains in the resource sector, Peter Epstein predicted that Big North “could really take off once meaningful production begins” and effectively presented that graphite miner as his favorite pick in a popular niche crowded with a vast selection of names.  

In fairness, since Epstein deliberately tries to avoid risky highfliers that have already racked up enormous gains, Zenyatta itself never stood a chance of winning that contest, anyway.

“Peter Epstein, independent analyst and founder of MockingJay Inc., argues that market darlings won’t reward latecomers,” The Energy Report noted this summer, when introducing the respected expert and the overlooked stocks that he favored instead. “That’s why he spends his time finding undervalued, underfollowed junior resource companies. (After all), big gains are rarely found by jumping on the bandwagon.”

The Growth Spurt of a Giant Runt

Regardless, with the help of an aggressive publicity campaign and bullish “research coverage” from a promotional newsletter that spent more than a year pushing the stock as a great bargain right through the staggering surge in its price, Zenyatta has managed to draw speculative investors to its swollen stock with the force of a powerful magnet. Arguably priced beyond perfection at current levels – with its lofty valuation reflecting outsized promise but limited risk (at best) – Zenyatta could easily lose its appeal, however, once those investors take a closer look at the well-timed rally that transformed its stock into such an amazing winner in the first place.

Go back in time a few years for some telling clues. Before Zenyatta carried out its initial public offering in late 2010, the company issued a huge pile of warrants that would allow early investors to purchase 11.74 million shares of its stock at $1 a share within two years of its official debut on a public stock exchange. Zenyatta spent most of that period actually trading well below its original IPO price of 60 cents a share, however, with its stock never once touching (and rarely even approaching) the $1 mark ahead of that crucial deadline.

Since Zenyatta had obviously banked on the proceeds from those warrants to replenish its dwindling bank account, however, the company simply bought itself an extra six months by rushing to postpone that looming deadline. Thanks to that convenient adjustment, a last-minute concession presented by management just weeks in advance and apparently approved by regulators with little (if any) time to spare, Zenyatta managed to prevent all of those warrants from expiring essentially worthless and depriving the company of a handy source of cash.

Even after dramatically expanding its publicity budget and successfully boosting its share price toward the high end of its historical range, after all, Zenyatta still traded at a 23% discount to the price of its warrants when that original deadline swiftly arrived. With Zenyatta selling at a price considerably below the price of outstanding warrants exercisable into its far cheaper shares -- basically guaranteeing an automatic haircut rather than promising any immediate gains – the company   would have risked its shot at an easy fortune that it clearly needed, given its modest cash balance, by honoring the inconvenient schedule that it had previously arranged.

Thanks to the flexible nature of its rules and its casual approach to changing them, however, Zenyatta managed to escape a potential disaster that could have literally wrecked the company and would have certainly crushed both its stock price and any hope for the breakout that eventually followed. In a lucky reversal of fortune, however, Zenyatta instead found itself blessed with a wonderful second chance. Taking full advantage of that fresh opportunity, Zenyatta soon launched a major publicity campaign that would allow the company to both heighten its exposure and intensify its gains

With its budget for investor relations and stock promotion already doubling over the course of the previous year (even as its investments in actual exploration zoomed in the opposite direction), Zenyatta decided to further splurge by hiring a professional I.R. firm to orchestrate its “aggressive” publicity drive, shelling out thousands of dollars a month – and throwing in a handsome pile of stock options to really sweeten the deal – as a reward for those valuable services. Clearly eager to capitalize on that expert guidance, Zenyatta soon followed up by issuing a string of rosy updates (dramatically halting its stock for several of those announcements) that finally ignited a powerful rally in its shares.

After spending its first two years as a listless penny stock that largely traded at a steep discount to its warrant price (and sometimes never traded at all), Zenyatta managed to rapidly transform itself into a miraculous highflier bursting with urgent momentum by the time that handy extension period came to an end. A stock that fetched just 77 cents a share six months earlier, Zenyatta had rocketed all the way to $2.50 a share since that time – magically tripling the value of the company  – to provide early investors with a lucrative opportunity too compelling to ignore. They pounced, of course, happy to pay Zenyatta a mere buck for stock that fetched 2.5 times that amount on the open market, and effectively freed the stock to soar even higher still. With the weighty threat of dilution lifted from its shares by the $12.6 million that suddenly flooded into its bank account – providing the company with an even larger war chest than the $10 million that it had actually raised through its official IPO (and largely depleted since that time) – Zenyatta instantly blasted to a new series of record-breaking highs, briefly reaching the $5 mark at its peak, on a fresh burst of momentum strong enough to resist the natural forces of gravity.

Zenyatta managed to stage that breathtaking rally without a single recommendation from the Canadian analysts who actually specialize in following junior miners, too. Instead, Zenyatta has so far relied on an American firm with a long history of embracing all sorts of risky stocks – and hired by the miner to accommodate the U.S. investors that it hoped to attract by listing its shares on a glorified version of the OTC penny-stock exchange – for the only coverage that it has garnered from a mainstream analyst to this day.

Despite that overwhelming silence, however, Zenyatta has enjoyed some powerful bursts of applause from at least one rather vocal fan. Throughout its breathtaking rally, Zenyatta attracted routine praise from a promotional newsletter that started gushing about the obscure miner as a lowly penny stock and -- "pounding the table" for investors to buy more whenever the stock came under pressure -- kept right on pushing the company (in some rather well-timed endorsementsas a loyal, if lonely, cheerleader for more than a year.

After first “discovering” Zenyatta back in March of 2012 -- the very month that the company happened to launch its expensive publicity campaign -- the Gold Investment Letter repeatedly urged investors to buy the stock as its rich premium steepened and, with the extended deadline on those warrants suddenly looming, practically ridiculed those who chose to book their handsome gains by selling the pricey shares instead.

“I believe most investors want to lose money and act accordingly,” the newsletter taunted after Zenyatta reversed courseslipping below the $2 mark, just weeks before that tower of warrants would expire under the extended deadline. “Don’t believe me? Well, you would be shocked to learn how many people ‘had’ to sell Zenyatta and take profits just because it went up!

“Some people can’t handle making massive amounts of money,” the tout sheet further needled. “Well, what can I say? People are free to do what they wish! But I hope most of you have held and/or bought more before the next leg up occurs. (Zenyatta) has been/remains our top pick.”

While clearly aimed at gullible retail investors instead, that newsletter theoretically managed to scold the most prominent Zenyatta shareholder of all when it delivered that condescending lecture. After inheriting a massive stake in Zenyatta by supplying the company with its flagship property – and then spending the next two years parked on millions of warrants for stock that sold at far cheaper prices on the open market – Cliffs Natural Resources (NYSE: CLF) jumped at the chance to finally “monetize” a big chunk of that investment once the opportunity presented itself. In a private transaction just halfway through the six-month extension period, with Zenyatta barely topping the $2 mark and fighting just to stay there, Cliffs quietly sold almost half of its gigantic stash of warrants -- representing the equivalent of 3% of the entire company -- priced at $1.50 a share, content to safely book the difference as surefire profits, instead of holding out for the possibility of even more generous gains that would in fact materialize.

While Zenyatta actually drifted lower in the two months that followed, the stock rebounded nicely after the Gold Investment Letter blasted cautious investors for selling the shares and – with all of those warrants set to expire just five weeks later -- urged speculative traders to buy even more. Suddenly regaining its energy, Zenyatta soon marched right past its former highs to record a 40% gain by the time that crucial deadline arrived. Eager to celebrate that rapid turn of events, Zenyatta proudly announced that its early investors had (understandably) exercised all of their warrants and provided the company with enough cash to cover its expenses “for the foreseeable future without a need for a capital raise.”

In a rather striking coincidence, the Gold Investment Letter had just promised to deliver another big winner – introduced as the “new Zenyatta” a few days earlier – after somehow managing to “discover” yet another junior miner that suddenly looked like a great bargain with its own mountain of warrants set to expire. An obscure company with a total market value of just $11.5 million at the time, Medallion Resources (TSVX: MDL.V; OTC: MLLOF) had by then labored for more than a year just to claw its way to a measly quarter a share, simply matching the price tag on its warrants, but still needed to cover plenty of ground – and at record speed – in order to actually deliver any decent upside. Rising to meet that formidable challenge with a sudden burst of determined energy that it clearly lacked ahead of that last-minute rescue, Medallion plowed its way high enough to achieve a 30% gain that convinced investors to exercise their warrants and replenish its own bank account as well.

Even though its bullish calls on Zenyatta and (to a lesser extent) Medallion might look impressive at the moment, the Gold Investment Letter issued at least one noteworthy prediction that has so far fallen just shy of proving dead wrong. While the newsletter assured its followers that it would probably not remain a “lone voice in the wilderness much longer” when it issued a glowing report on Zenyatta early this year (actually identifying the company as a “sponsor” of its publication on that particular occasion), the tout sheet still sounds more like a soloist – accompanied by a single backup vocalist and the deafening sound of silence – than the inaugural member of any group even remotely close to the size of an actual choir. Indeed, with its own loud endorsements of the junior miner apparently fading in recent months from full-blown reports to occasional tweets, even that vocal Zenyatta bull has toned down the volume when singing its praises of the company.

The last time that the Gold Investment Letter publicized Zenyatta on its actual website, in fact, it actually linked to Bloomberg article packed with questions from skeptical analysts who clearly plan to remain on the sidelines until the highflying miner can produce documented evidence to back up its claims and -- after rocketing 1,500% in the past year alone – find a credible way to justify its steep valuation by finally proving itself for a change.

Once Bitten, Twice Shy

Until Zenyatta establishes that sort of credibility, those probing questions suggest, the company will likely remained snubbed by professional analysts who generally limit their coverage to junior miners with verified resources and recognize the chances that they would take – and the disasters that could unfold – if they bend those rules.

Look what happened to Mackie Research Vice Chairman Barry Allan, a veteran mining analyst who serves on the Zenyatta board, when he relaxed his own standards by falling in love with a notorious junior miner that exploded into a multibillion-dollar company based on bogus hype and powerful momentum alone. A former penny stock that rocketed all the way into triple-digit territory, Bre-X managed to fool Allan and other gullible analysts by claiming that it had discovered the largest gold deposit in the world – with the future Zenyatta director characterizing a visit to that celebrated mine as a religious experience that practically allowed him to “see God” – even though the company never provided a shred of concrete evidence to support that fairy tale. When Bre-X ultimately collapsed, exposed as the biggest gold-mining fraud in history, Allan openly portrayed his own coverage of the company as careless and pledged to exercise far more caution when analyzing junior miners on down the road.

“Analysts got slapped in the face,” Allan confessed to The Globe and Mail at the time, clearly including himself in that humbled group, as Bre-X raced toward oblivion. “This forces them to sit back down in a chair and say, ‘What are the basics here, and did I get carried away here? Did I do my homework? That is a very useful process.”

While that infamous miner blew up more than a decade-and-a-half ago, long enough (by Wall Street standards) for even a total fiasco to fade away as ancient history, Allan sure acts as if he keenly remembers the lessons that he learned from that disaster and the precautions that he promised to take in an effort to prevent similar catastrophes. After all, despite his status as a Zenyatta director with a major financial interest in the company (unless he totally cashed out), Allan has exercised just as much patience as his fellow analysts – without millions at stake – by waiting years for the junior miner to provide the kind of documentation necessary to even decide on a proper judgment call.

Of course, Zenyatta might wind up missing the silent treatment, if those analysts reach the same harsh conclusions as those arrived at by some noteworthy mining experts who have taken a close look at the company and already made up their minds. A respected industry veteran with decades of experience as both a professional geologist and a junior mining analyst, the “Mercenary Geologist” Mickey Fulp delivered such a disturbing assessment of Zenyatta this June – when he openly challenged the very claims that make the graphite miner look special in the first place – that he created a big enough stir to prompt a direct rebuttal from the CEO two weeks later in a clear act of damage control.

With Zenyatta basically trumpeting its graphite discovery as a far grander version of the extremely rare and valuable “vein” deposit found in a single Sri Lanka mine, Fulp countered by exposing a major distinction between the two properties that threatened to destroy that popular comparison. While Zenyatta has always bragged about its discovery of a treasured vein deposit, inherently blessed with ultra-high purity, Fulp responded by simply presenting the modest 5% purity rate of the actual graphite drilled from that mine – and contrasting it with the 90%-plus purity rate of the graphite produced by the famous vein deposit in Sri Lanka – as compelling evidence to the contrary. Even though Zenyatta prefers to focus on the 99% purity rate that it can deliver by processing its graphite, Fulp noted that other companies (including Northern Graphite) have already mastered that trick and shrugged off the achievement as virtually routine.

After discounting the key distinctions that Zenyatta presents to make its graphite deposit look so rare and valuable, Fulp then proceeded to highlight some pesky hurdles that the company prefers to ignore. Although Zenyatta has casually assured the market that it will enjoy ready access to outstanding infrastructure when it actually develops its celebrated graphite project, Fulp merely recited the mileage that will separate the company from the nearest highways and power sources to establish the remote nature of that swampy mining property.

Openly suspicious of Zenyatta and clearly leery of its highflying stock, Fulp then concluded his blunt review of the company with an outright warning.

“I really question what is going on in the market,” he said. “Personally, I would not invest in a graphite play that has those characteristics. I think that people should be really cautious with that company right now.”


* Important Disclosure: TheStreetSweeper established a short position in Zenyatta ahead of this report and stands to profit on any future declines in its share price. It also purchased stock in three other players in that same group -- Alabama Graphite, Big North Graphite and Northern Graphite -- and stands to profit on any future increases in the prices of those shares.

* Editor's Note: As a matter of policy, TheStreetSweeper prohibits members of its editorial team from taking any financial positions in the stocks of the companies they cover. To contact Melissa Davis, the senior editor of this website and the author of this story, please send an email to editor@thestreetsweeper.org.




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