"Sense guess what Ballard pays today for synthetic $15,000 per Tonne? Can they pay $10,000 per tonne to Zen and still gain a competitive advantage?"
No.
The correct answer is no... which has (almost) nothing at all to do with the relative qualities of ZEN's material in the application that Ballard has... and everything to do with honest arithmetic in determining the economic viability of mine development costs in context of the reality the rocks prove. (My parenthetical "almost" also pointing out that ZEN is still quite a long way from proving the currently assumed reality in the rocks... in terms of solid numbers in quantity/quality and costs of production: feasibility studies still need to be done.)
ZEN's graphite has features which mean that it "works" for Ballard... which is fine.
But, the issues that result then occur BECAUSE of the fact that ZEN's graphite does work for Ballard... which, intrinsically means it DOESN'T and CAN'T be made work economically in most of the other applications they've touted... because of those same features that make it work for Ballard. The things that make ZEN's graphite work for Ballard... ensure that it CANNOT be similarly economic in those other high value applications ZEN has touted.
ZEN's current economic projections depend on selling X % for this market, W % for that market, at Y cost of production... with Z CAPEX... which current economic projections are based on a prior assumption... now known to be incorrect... that assumed ZEN's graphite is easily capable of being produced economically for use in multiple other high value applications that will get high dollar pricing, even in spite of having not proven it can be. Reality is that the stuff that makes the graphite work for Ballard... makes it NOT work (economically) for those other applications. It will cost a lot more than it is worth to get that graphite into condition to be useful to others. That means the hoped for $10K/tonne price point for Ballard... probably won't happen... because the X$ per tonne for the other stuff to be sold for use in other high value applications won't happen.
What happens to all of those numbers in the PEA... both in the $ numbers and volumes... if Ballard is the only customer ? What happens if all the other product they "expect" will be sold at a profit to other users, in the PEA... can't be made useful for those users... or if it can't be made to happen at costs versus prices that make any sense economically ? Consider that in current context... where the market prices of graphite are continuing to decline... as more and more is being made available, and is more cheaply produced, by existing producers and by other new producers and explorers?
So, if Ballard is the ONLY CUSTOMER... or, the only profitable customer... what does that do to the RELATIVE economics of enabling production of the Albany deposit... and the price that Ballard will have to pay to make the project economic enough to enable the production to occur ?
If Ballard is the only customer... and they're going to pay all the costs of development to generate supply for use in that single market... what will Ballard have to pay for the naturally sourced material to enable funding for the development of a mine ? Will it be $10,000 per tonne ? Will it be $15,000 per tonne ? Of course, if it is going to cost more to develop a mine than it costs to manufacture the synthetic they use now... there wouldn't be a point in doing it ? So, there's a fairly narrow window of "doability" that the project has to pass through to make it likely to happen. And, given the knowns, it's not that hard to calculate what the limits are going to be...
That's where ZEN is right now. The graphite they have "works" for Ballard... but, that same fact means that it will not work economically for other high value applications... which leaves the question of what Ballard would have to pay to enable producing JUST for the stuff they can use... to make a ZEN mine worth the costs of building it ?
Go ahead and calculate that $ figure for yourself... and then let us know what you come up with ?
And, then, another issue in yours... the core of competition that matters, that people far too often overlook...
What Ballard is paying for synthetic graphite right now doesn't really matter at all in the calculus. What does matter in the calculus re a competition with synthetic graphite suppliers isn't what Ballard is paying for it now... but what it costs to produce it now, and how that compares to what it would cost to produce any suitable natural alternative. Competition in commodities almost always occurs on the basis of the COSTS... and not prices. And then, it ALSO matters how the costs to produce (either natural or synthetic) are likely to change... within the time frame in which you are expecting Ballard to be willing to fund the development and sustain the operations of a mine... to produce graphite competitively for a single application... at a cost which doesn't have much potential to decrease based on innovation (or, any ability to compete with reductions in synthetic producers costs or margins)... while requiring a WHOLE LOT of money being spent on sunk costs up front.
A lot of issues there that are probably too complex to go into... including how the current versus future cost of fuel will affect synthetic production versus mining costs, etc. Ballard, of course, isn't going to risk their business on a mining project the costs of which were calculated wrongly. ZEN is already starting out behind the 8 ball there... because their recent efforts in calculation of costs are... ah... um.... "not very credible".
For Ballard... or, for whoever is going to fund development... it isn't a linear issue, to build a mine or not to build a mine... with a bias in favor based on what some clueless ZEN shareholders think would be good for them. It is instead a question of how expected future demand will be met... in a way that best meets Ballard's future needs... while optimizing the economics of the investments required to meet the current and future needs. So, Ballard might also be considering funding development of their own synthetic production ? Perhaps the cost of doing that... would lower their costs more... and be a lot less risky in the long term than funding the development of a mine ?
ZEN might have more potential value in the chance they could "help" with that effort than ZEN has tied up in or is likely to realize from the Albany property... which isn't going to be wowing anyone with the economics of production. But, I don't know what sort of non-compete limits ZEN's tech heads have, that might prevent that.
FWIW, I don't think ZEN has "won" Ballard, yet... even in terms of the fairly good probability that a bit of effort in looking around a bit more might still reveal other natural sources that are equal to or better than ZEN's graphite for their use... that might not have all the same issues with needing to spend money digging holes for two years just to get to it...
That's not just throwing rocks at ZEN and their current situation... although that is well enough deserved, as ZEN's problematic situation now is largely self-induced. ZEN's reality is at odds with the ZEN market story... which is built on a couple of disconnects that simply cannot be sustained. And, things that can''t be sustained... won't be. ZEN's assumptions... that the graphite they have can be made useful in multiple high value applications... and that a large and costly open pit mine will be required to develop the potential... have already failed. The PEA they produced shows that the plan they have... is not economic...
Amazing to me that ZEN owners are incapable of recognizing that... because they don't want it to be true. Reality is that the economics apparent in the current ZEN PEA... ensure that mine will not ever happen... unless and until they can rework the assumptions, the costs and the prices to make it economically viable... which it is not, currently.
So, you're going to have to see an effort made in reworking many assumptions. It might be possible to meet Ballard's needs for quantity with something other than a massive open pit. Underground mining is a lot more costly, typically... but, that might not be true in the instance where you have a more limited focus, and the narrower focus means the resulting effort is going to be a lot less wasteful. They're clearly going to have to rethink the plan they have now... in ways that can work to make it economic, which it isn't now. That likely means they're going to have to consider underground mining as a means to reduce CAPEX... while shrinking the market potential to focus more on the smaller, known in the one market they CAN address practically... but haven't yet shown they can address profitably.
Current investors won't like that. The total costs might well be less... and the total production will be a lot less... and the total value of the production will be less... but, it might actually make economic sense to mine on a smaller scale from underground in a situation where bulk mining a massive open pit just doesn't compute...
It is good for ZEN to have Ballard nibbling, if not on the hook...
But, the odds against ZEN succeeding in reeling Ballard in are still pretty long... and, I'd say... it's probably not going to be doable based on the current plan... which is NOT ECONOMIC.
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