Mustang Resources (ASX: MUS) stands out from the regular pack of ASX-listed mining companies, simply due to its choice of focus commodity…rubies.
Mustang Resources is developing the Montepuez ruby project in Mozambique, which is producing world-class rubies expected to generate strong cashflow through rough ruby sales.
Mustang recently ramped up ruby recoveries at Montepuez, increasing the project’s ruby inventory by over 70 per cent to approximately 120,000 carats.
Mustang is confident the enlarged ruby inventory will enable it to achieve a 200,000- carat inventory, which the company expects to demonstrate the cashflow potential of the Montepuez ruby project.
This confidence allowed Mustang to revise its sales strategy for the Montepuez gem-ruby inventory, and to announce plans to complete an auction/tender to bulk rough buyers of the anticipated 200,000 carats targeted for October 2017.
The change in strategy resulted from discussions Mustang held with key ruby buyers, and was inspired by the success enjoyed by its neighbour, AIM-listed ruby market leader Gemfields (AIM: GEM).
Gemfields’ Mozambique rough ruby auctions have set a benchmark yielding total sales of US$280 million from eight auctions over three years, which Mustang is eager to replicate.
The decision is a notable strategic shift, as it maneuvers the company from selling its rubies in both the cut and polished and rough forms to selling them all as rough stones.
Mustang believes the new strategy will not only generate substantial cashflow, it, importantly, can ensure the company avoids entering into any competition with their rough ruby customers who will most likely have high-profiles in the cut and polished ruby market.
A contributing factor to the recent ruby recovery ramp up was the recent commissioning of the upgraded Montepuez processing plant.=
The upgraded plant is designed to achieve a feed/throughput rate of 250 tonnes per hour and Mustang’s initial plans are to operate the plant for one seven-hour shift a day.
This would be sufficient for the company to achieve or exceed its daily total processing target, which represents a 580 per cent increase in the throughput rates recorded before the $1 million plant upgrade was undertaken.
It also demonstrates scope for further substantial increases in processing rates by operating additional shifts in the future.
Mustang’s ramp up in ruby inventory was boosted by the acquisition of a 65 per cent interest in Mining Licence 8245L from Regius Resources Group, located three kilometres from the Montepuez plant.
The processing of gravels from initial bulk sampling at the new licence is already yielding high-quality secondary rubies.
Initial manual test pitting by Mustang across a broader area of 8245L generated strong results, with 11.75 carats (9.45ct ruby and 2.3ct corundum) recovered from 2,726 kilograms of gravel.
“Licence 8245L is highly strategic because it borders our existing Montepuez licence areas on one side, and Gemfields’ lucrative ruby project on the other,” Mustang Resources managing director Christiaan Jordaan told The Resources Roadhouse.
“Just as importantly, it lies along the south-east, north-west ruby mineralisation trend, which also transects the adjacent Gemfields licences.”
In the recently-completed June quarter, Mustang processed, 5,692 cubic metres (8,823 tonnes) from an initial bulk sample from its current focus area to the south east of the processing plant, delivering 4,445.3cts of rubies, including consistent recovery of high-quality stones larger than 3cts – classified as Special/Premium Stones.
Processing of 4.5 tonnes of gravel from test pits through Bushman Jigs yielded 10.7cts of rubies.
Mustang is mapping the full size of the secondary ruby deposit/s in this key target area and beyond.
From its 80 per cent-owned Caula graphite project, along strike from Syrah Resources’ (ASX: SYR) Balama project in Mozambique, Mustang received strong results from initial beneficiation testwork conducted on both oxide and fresh samples.
Mustang interpreted the results to confirm Caula as a Tier 1 graphite project.
“Caula hosts extensive high-grade graphite mineralisation and our preliminary metallurgical testing demonstrates it also has over 55 per cent large and jumbo Flakes in the fresh ore,” Jordaan said.
“These results highlight Caula’s potential to be a low-cost graphite supplier to the lithium battery and expandable graphite industries.”
Caula’s high head grade indicates a smaller process plant (lower CAPEX) could generate similar products to other lower grade deposits in the region.