All 4 resolutions carried. Allows operations to proceed in earnest in the new license area.
Note - under resolution 3, an existing investor is contractually committed to buy at 7.7c. They are invested for the long term and are one of the biggest participants in the placement. Andium Pty Ltd. They like the long-term growth story.
Then for CJ, the video and the Q&A ...
CJ started by showing drone footage of the plant.
Video will be uploaded to website later this week. Will also add more photos and videos of what is on site.
Video from drone:
front-end loader feeding a feed bin
one conveyer (at the moment) leads to a 250 tonne per hour scrubber ( old scrubber was not sufficiently sized and would not break up all the clay)
new scrubber has been custom-built
very pleased with it
key upgrades now in, including new slurry pumps
new 250 tonne per hour equipment is on par with recently upgraded Gemfields equipment ( 300 tonne per hour )
MUS equipment is more robust than Gemfields ( pulsating jigs instead of Gemfields DMS )
project delivered on time and on budget
about AUD $1M invested into upgrades including the scrubber
relatively low cost compared to USD $10M to $12M for Gemfields upgrades
key is to keep cost low without sacrificing quality
The newly acquired license:
is now approved by shareholders
plant is 3km NW of the new area
there are artisanal workings in the new license area
one of the key target areas we will be going into in the next few weeks
the area is highly, highly prospective and the reason for acquiring the asset
actively being mined and processed by artisanal miners
very shallow ruby mineralisation, very excited to be able to feed this material into the newly upgraded plant
timing couldn’t be better to formally conclude the acquisition
environmental permitting is in place, that was done in quick time as well
at the end of this week we will have local protocols in place to go into this area and start processing that high quality material
this is a focus in the coming months leading up to the planned bulk auction to be scheduled for October
Rough ruby buyers
there are 40 groups in the world that are rough ruby buyers
from discussions with one of these groups in Thailand last week, 10 of these groups account for 80% of the buyers at the rough ruby auctions
a small handful of groups with strong balance sheets that buy rough, pay cash on delivery so ideal for cashflow
through the tender process get very good price competition from buyers
supply in the market is currently severely constrained
Gemfields, Artisinals and now Mustang coming into the market
Artisinals are not a sustainable source - illegal mining has been curbed by the Mozambique government and this is driving demand towards suppliers like Gemfields and Mustang
Rough buyers are encouraging Mustang into and will be pleased to see Mustang in the market
Tender/Auction sales:
Mustang working towards two tender sales per year ( March and October )
Scheduled to not clash with Gemfields sales held in June and December
Rough ruby buyers currently have problem of only have two buying windows, which can create a supply gap for them for product they need to feed their customers
Rough ruby buyers keen for improved availability and consistency of supply to meet growing demand
Big brands are pushing coloured gemstones more and more and this demand is driving into the rough ruby supply chain
Shifts:
At the moment 250 tonnes per hour for 7 hour shift
Constraint is not on the plant, there is a great deal of potential to ramp up
Immediate focus is prioritising the deposits to mine, guided by artisanal workings. With confidence established in deposits will then ramp up mining / processing.
How soon into new license:
The access road has already been built.
Environmental permitting has been done.
Getting community engaged, so from next week will be able to start “trucking in materials” (CJs words).
By starting with the high-grade area and with the upgraded plant, will really be able to get strong growth in inventory ahead of the bulk auction in October. This is the key milestone in the coming months.
Gemfields grading system has 157 categories ( do not have splits yet since grading system has not been completed yet )
What about the existing lease?
Further drilling and fieldwork has been done in the existing lease
Good potential throughout lease 4143, a number of targets
Now have about 10 or 11 deposits for ranking and testing of mineralisation
Many other areas available to explore with more to be done in the next few months
CJ is confident they are on track for 200,000 carats by October but will confirm in coming months.
Forward sales?
focus is on the Auction, will consider a forward sales as an option on the table ( but this would be at a discount so risk is impacting the prices at auction )
Enough cash to run to October? Would you do it as a rights issue ?
we do not intend to do a capital raise as this would dilute existing shareholders
may look at mezzanine financing
another option they are looking at is a share placement plan to support existing shareholders
may ask existing sophisticated investors to convert their existing options, this would be non-dilutive
(in response to a suggestion) board could also consider offering options to existing shareholders to raise capital, this would be non-dilutive
Takeover risk?
keeps CJ awake at night, does not want to see a corporate raider
with the resolution approved today there is a 10% holding that can be used towards blocking such a move
will continue to drive operations on the ground to get things going and get results for shareholders to lift share price
Communications? Postive Communications?
it’s an education process and CJ takes full responsibility as MD
company has realised they need to communicate more frequently and in more detail
videos like this and better explanations of processes since the industry is not well understood
will ask the team on the ground to take more photos of inventory
will work to improve communications to regain investor and shareholder trust
intend to educated shareholders and customers on grading system works
What will make the markets suddenly realise it’s not worth 4c but 40c?
highly successful auction ( emphasised important of proper grading system, importance of engaging with and marketing to customers )
Price for commercial rubies?
gemfields are getting $2 to $4 a carat for commercial rubies
gemfields gem quality rubies varied from $50 / carat to $680 / carat ( from a gemfields report july 2015 )
Buyers
Thai buyers prefer to do the buying outside of Thailand ( for tax reasons ). Hence consideration of locations such as Dubai, Singapore, Hong Kong, etc
Another big buying group are North Indians from Jaipur
Security
a safe / a room for storage of inventory, limited to access by expatriate managers, electric fence with access control
will minimise amount of stock kept in Mozambique
Insurance
will be looked at as part of setup of final storage facility, can’t insure in Mozambique
Artisanal miners
get a base salary as employees of company, with a bonus for production / recovery
government are very supportive to prevent tax loss from smuggling ( has been a big problem until recently )
government has cracked down on illegal miners and smugglers, stopped giving visas to buyers
focus is on feeding their families
provide training opportunities and some have moved “through the ranks”
looking for more to employ
Weather
rainy season mid-december to mid-march
will build stockpiles for processing in the rainy season ( allows processing to continue in the rainy season )
normal mining operations suspended in the rainy season to focus on processing from stockpiles
Very small board
looking at growing board, very cognisant of cost
envisage two additional non-executive directors with experience in mining engineering / geology
Graphite
market is undervaluing the graphite
intend to rectify by not spending much capital
metallurgy shows it to be a very high grade deposit
results expected from SGS Perth in weeks and then a JORC will follow shortly after and then an initial scoping study ( all within the next 2-3 months )
strategy is to get a partner in, determine the appropriate niche, start small scale and modular
MUS Price at posting:
4.2¢ Sentiment: Buy Disclosure: Held