Overview
Zeni Resources (TSXV:ZENI) is aiming to become a mid-tier miner focused on the production of critical minerals and metals. The company plans to develop projects that generate cash flows and aspires to be a dividend-paying company.
The company’s flagship project is an ultra-high-grade surface silica mine located in Mongolia and offers near-term production potential (less than 12 months).
Mongolia as a jurisdiction has several benefits. First, the mining sector contributes around 25 percent of the country’s GDP and accounts for 84 percent of the exports. These numbers highlight the importance of the role played by Mongolia’s mining industry in the country’s economy. Second, Mongolia’s proximity to major demand sources such as China, Japan and Korea, provide its resource sector a lucrative end market for critical minerals. Third is the availability of quality infrastructure in terms of transportation and electricity, which are essential for the development of mining activity. Fourth, the Mongolian government’s commitment to mining sector reforms has resulted in a relatively quick permitting process, which helps in fast-tracking the projects. Lastly, there are several leading mining companies operational in the country, such as Rio Tinto, that provide comfort for newly established companies.
Zeni is focused on its silica project. While silica or silicon dioxide is available abundantly, high-grade silica is very rare. It is processed into pure silicon which has several applications. Silicon is a key ingredient required to make semiconductor chips that are the backbone of everything from computers to smartphones, and has diverse applications ranging from military to healthcare. Moreover, silicon is the key input for fiber optic cables and solar panels, and is critical for EV applications.
Silicon is the primary ingredient in semiconductor chips, which power everything from computers and smartphones to military and healthcare systems.
The investment in silica projects is lucrative from both demand and supply perspectives. The global silica market is expected to grow by approximately 9 percent annually to reach about $12 billion by 2029. The strong demand is underpinned by new technologies such as cloud, 5G and EVs. It is estimated that a single EV car will require around 2,000 chips. As such, it is a key input for various chipmakers. The European Union has declared silicon a critical raw material as a wide range of modern industrial and consumer products depend on it. This should further increase interest in companies that already own silica assets.
On the other hand, the supply dynamics are also favorable. The COVID-19 pandemic resulted in several production cuts in China, the world’s biggest producer. Moreover, global supply chain constraints resulting from sanctions around labor concerns in China and Russia’s ongoing war with Ukraine, have limited access to previous leading producers. As a result, many major firms have seen production losses due to supply shortages and consumers are faced with high prices for end products.
Against this backdrop, Zeni Resources is well-positioned with a high-grade silica project that is ready to start production in less than a year. The company has the competitive advantage of high-purity silica that can be sold as is with little to no processing, saving significant capital costs. This, coupled with pre-negotiated offtake agreements could lay the pathway for Zeni to become cash flow positive right from the start of production.
Company Highlights
Newly listed on the TSXV exchange, Zeni Resources is focused on developing an ultra-high-grade surface silica mine in Mongolia.The company’s flagship Grand Samsara project is a high-grade silica property in Mongolia that has near-term production potential (less than a year). The project jurisdiction in Mongolia has several benefits including excellent infrastructure (power, roads), proximity to major demand markets (China, Japan, South Korea), and supportive regulation with a fast permitting process.The Grand Samsara project boasts of high-grade silica at the surface. There are 21 veins visible on the surface, of which six veins have been trenched and assayed. Silica grades recovered so far have been exceptional with a mean grade of 98.5 percent. High-grade silica is exceedingly rare and is essential for the production of pure silicon that has several critical applications including for making semiconductor chips. Zeni Resources, with ownership of a high-grade silica mine, is well-positioned for long-term success. High-grade silica with at least 98 percent purity can be sold as is without further processing. This saves capital costs and is a big competitive advantage for Zeni.
Key Project
The Grand Samsara Project
The Grand Samsara Project is the company’s flagship project. It is a high-grade silica property located in Mongolia. The project holds the potential to start production in less than a year.
The project benefits from several strategic advantages. It has access to excellent infrastructure, such as roads and electricity. Highways and railroads are available within 80 kilometers of the project location. Its proximity to major markets, such as China, Japan and Korea, offers a significant market advantage. Lastly, the project is an open pit, which means huge potential for low-cost production.
Grand Samsara comprises high-grade silica resources at the surface level. There are 21 veins visible on the surface, of which six veins have been trenched and assayed. The silica grades recovered so far are exceptionally high-grade, with some grades having more than 99 percent purity and an overall mean of 98.5 percent.
The project has multiple quartz veins of significant thickness and length. The quartz veins have favorable geological features associated with Paleozoic sediments. Grand Samsara is on track to begin production within the next six to eight months. Zeni is aiming to submit a mining license by March 2024 and receive approval by April/May 2024. Following that, it is targeting to start production in August/September 2024.
Zeni is already negotiating offtake agreements, and given the company will not need to put in any capital upfront for the processing of silica, we could see it being cash flow positive right from the start. This will attract investors particularly as Zeni could grow organically using internal cash flow without much dilution or debt burden.
Management Team
Antonios Maragakis – CEO
Antonios Maragakis has a long track record in the mining sector and has served in various roles at Barrick, Freeport and Eldorado. He has contributed to developing junior mining companies resulting in strong shareholder returns.
Kim Kirkland – COO
Kim Kirkland is a well-experienced production geologist and has worked with several leading companies in the mining sector, including Barrick, Rio Tinto, MMG, AMEC and others.
Branimir Romic – CFO
Branimir Romic has rich experience in the finance domain and has served leading mining companies both in finance and contractual dealings.
Ioannis Tsitos – Executive Chairman
Ioannis Tsitos is an experienced geoscientist with over 30 years of experience and has served in senior leadership roles at BHP, Billiton and several junior mining companies. During his tenure, he has negotiated over 50 mining transactions and has been part of two major global discoveries.
Ariun Ganbaatar – Country Director
Ariun Ganbaatar has more than 15 years of experience developing public and private companies in Mongolia.
Bold Batsukh – Director
Bold Batsukh has worked with both Canadian and Mongolian companies. He has worked as the CEO of a Mongolian merchant bank and has experience dealing with Mongolian government agencies.
Vivian Katsuris – Director
Vivian Katsuris has over two decades of capital market experience and has served in senior management roles at various Canadian companies.
Harry Katevatis – Director
Harry Katevatis has a rich experience spanning over four decades as a senior executive with publicly listed companies. He has served as a director on the boards of several public companies and was among the first power brokers at Canaccord.
This article was written in collaboration with Couloir Capital.