SOURCE: VantageWire.com - A thinly veiled attack piece on graphite explorer Zenyatta Ventures [ZEN:CA] did little more than introduce a 24-hour pullback last week. However, swift action on behalf of CEO Aubrey Eveleigh and a plethora of well-researched commenters provided appropriate damage control to rebound with two positive days in a row. Two days later, the author attempted to inflict more damage, and the market decided who to believe.
The initial article's actions did shine a light on the feistiness of the sector. The somewhat petty mud throwing may have actually led to enhanced confidence in the sturdiness of Zenyatta's storyline in the face of nefarious shorters.
Using every FoxNews-esque trick in the book, author/editor Melissa Davis kicked the whole ordeal off by grabbing eyes with the yellow journalism title of "Zenyatta: A Story With More Holes Than Its Celebrated Mine?"
From start to finish of the 5,273-word diatribe, Davis ran the gamut of every logical fallacy she could hurl. But the most telling "fact" given in the entire piece was most likely nestled within the disclaimer, which stated:
"TheStreetSweeper established a short position in Zenyatta ahead of this report and stands to profit on any future declines in its share price."
Talk about burying the lead!
Next, the author begins a parade of her chosen graphite companies (later disclosed in the disclaimer). Though some of the companies she lists are decent in their own right, they are not in fact "competitors" or "rivals" of Zenyatta as she incorrectly labels them. And here's why…
The Zenyatta story has always been about the uniqueness of the Albany deposit and its "freak of nature" purity levels. While much of 2012 consisted of stories surrounding the potential for flake graphite deposits, Zenyatta stuck out in 2013 because of its unique hydrothermal graphite deposit.
How unique is it? There's only one other known graphite deposit of this nature, mined for its ultra-high purity graphite in Sri Lanka.
For flake graphite and lump graphite companies, the competition for their wares is large. Picking the right flake graphite company that's going to "make it" is a choice of 1 in 300; Whereas, Zenyatta stood out because it was 1 of a kind in style and size in a world where 1 mine in Sri Lanka of this type (albeit small) exists.
Zenyatta has proven that it can produce an ultra-high purity graphitic carbon from a relatively easy and inexpensive process. Namely caustic bake (NaOH) without using expensive and aggressive acids and/or thermal treatment. Eveleigh has an important point. If Davis were to more fairly compare Zenyatta with others in its intended marketplace, it would only bring up other companies producing ultra-high-purity, synthetic-grade graphite. It is the only product of the same purity levels as Zenyatta's upgraded hydrothermal deposit, and commands a far larger price point than the flake graphite space can hope for.
What Zenyatta offered investors was a glimpse of synthetic levels of purity, produced by Mother Nature. This unicorn-like deposit can boast less processing, less cost, and less environmental degradation. Synthetic-grade graphite production involves the burning off of large amounts of contaminants in petroleum (needle) coke, thus requiring plenty of energy, and producing a large amount of pollution to go with it.
ZEN - High purity, lower impact, higher price. Seems simple enough to comprehend.
However, the author discounts this pertinent part of the story. They go on to only give credit to 43-101 reports that speak of $1000-$1500 graphite, while dismissing any that talk about $8000 graphite. But natural, synthetic-grade graphite has always been the Zenyatta angle, and should be spoken about outside of flake-graphite focused circles.
The rest of the article uses as much space as the reader can tolerate to talk up the stocks of its owned companies (all flake graphite), while continuously taking jabs at Zenyatta (remember: hydrothermal). In fact, the word "hydrothermal" doesn't appear once in the entire article. This is a very significant fact – Zenyatta's "hydrothermal" (being volcanic and mantle derived) carbon vs flake graphite being sedimentary and organically derived. This maybe be too much science for the author to absorb.
Instead, Davis continuously berates Zenyatta for allegedly not delivering any proof of its claims.
However, Zenyatta has been continually proving their claims, and will likely continue to do so. The big box to check in terms of high quality is that purity number and they have checked that big box.
There are two works in progress that should check more boxes in the minds of investors. First would be their graphite characteristics. The company has already been testing them and should be due to have results later this month. Next will be the announcement of the size of their deposit. That should realistically be out in late October.
Unfortunately for shareholders, the hit piece did ramp up trading activity on Monday, and resulted in a temporary drop in price. Given that the author is forthright in her strategy of shorting the stock, it's a bit comforting for those who hung on to see that the attempt failed.
TheStreetSweeper as an entity has a history of slash and burn. Defensive commenters on the story were quick to point out the stock assassin's track record.
It's a simple formula, that's obvious to pick out. Short the stock, then burn it to the ground.
If picking apart reputations is the game, then one might want to do a quick google search about the source. Hunter Adams, founder of the website is a convicted felon, after his connection with the notorious Gambino crime family of New York. His conviction was for his role in a massive "pump and dump" scheme. Despite still being on federal probation, it seems that his new strategy is now "short and distort."
So, if the credibility of Zenyatta's leadership is in question, it's incredibly hypocritical for The Street Sweeper to lead the questioning.
THE BOTTOM LINE
Instead of giving more attention to the dishonest rantings of a short-driven slander machine, investors should bring their focus back to the company's results themselves.
Zenyatta is a deserving ten-bagger, when contrasting with the same company at this time last year. The past twelve months have been a long series of positive results after positive results.
The true hour of judgement for Zenyatta is set to come with its future customers, not with ham-fisted propagandists. The company has already stated its expectations of more results coming in October. Why muddy the waters ahead of time, unless there's a malicious agenda at foot?
Given the history and reputation of the website in question, it's no surprise that they issued a part two piece on Thursday. The damage they wanted to inflict wasn't sizeable enough to cover their short.
Instead, the track record of Zenyatta is holding up against the tirade. The price remains in the mid $3s. Should the results come out in October as positively as Zenyatta intends, then that short position Street Sweeper is going to be blown out of the water.
G. Joel Chury
For the Bottom Line Report
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