FA discussions

Mustang Resource - Ruby, Graphite & Diamond

Neighbors Ruby (GEM:$410m) + Graphite (Neighbours: $44m-$810m)

Share price: 10.5c
Market cap: $48m


Cash estimated: $2.4m (cash on 31/12/2016: $0.7m + cash raised 25/01/2017: $1.78m)
The Company is well-funded to ramp up production volumes rapidly and achieve first ruby sales in H1-2017.


1. RUBY:
Mustang's licences lie along the established NW-SE ruby mineralisation trend which also transects the Gemfields (GEM:LSE, market cap $410m) licences. Extensive ruby mineralisation can also be found immediately to the Southeast of the Mustang licences, close to the village of Namahaka, where it is mined by local artisanals ("garimpeiros").

MUS has one Primary deposit target (high grade 5.3km lineament) and Two secondary deposit targets.

Mustang currently mines only secondary deposits as sources of higher % gem quality rubies.

Mustang’s research and fieldwork show that ruby mineralisation in the Montepuez Complex can be found along these structural lineaments & contacts (both primary and secondary deposits). Encouragingly, Mustang has identified a 5.3km lineament that transects license 4143L - a very strong target for the planned trenching & bulk sampling program. Starting in June 2016, Mustang will focus on the processing of alluvial material as a source of higher quality rubies during its bulk-sampling program.



Paul Allan, MUS's Independent Consulting Geologist, Former Project Geologist for Gemfields PLC, where he played a key role in the initial development of the Montepuez Ruby Project .






From my research, GEM has found three large rare rubies over last four years:
- Rihno Ruby 40.23ct in 2014
- Two matching rubies of total 45ct in June 2015

MUS recently found two 24ct rare rubies and other three smaller special rare rubies.




2. GRAPHITE
MUS' exploration graphite target from one license area is matching our neighbour,BAT/MTA's resource. MUS has large graphite tenements, which could be worthy much more.

MUS' graphite neighbours' market cap:
BAT/MTA: $44m
TON: $52m
SYR: $810m





3. SUBSTANTIAL HOLDERS/TRADE DATA:

Lanstead (UK): 40.8m
Directors/Regius: 29m
P. Towell of Queenscliff Partners LP/Andium pty ltd (US): 23m




4. SPECIAL RUBIES:
Gemfield (GEM.Lon) found Three special rubies over last Four years,
- 40.23ct, auctioned together with other 62,896 ct rubies, realised sales US$43.3m, yield US$688/ct
- two matching of total 45ct, auctioned together with other 47,406 ct rubies, realised sales US$29.3m, , yield US$617/ct

Both quarters were exceptional as involved special rubies, bringing up average yield significantly higher than other quarters. Without special rubies, highest average sale price is US$317/ct for other quarters.

MUS has found Seven special rubies over last few months,
- 24.11ct
- 23.84ct
- 13.99ct
- 11ct
- 9.14ct
- 5.57ct
- (>5ct)

For Size, MUS top two special rubies (48ct) are slightly exceeding GEM's two matching rubies of total 45ct.


I've done some guessestimates on our neighbour GEM sales for their three special rubies.

- One 40.23ct, my estimated realised sale, is between US$11.8m - US$23.3m
- Two 22.5ct matching, my estimated realised sale, is between US$5.6m - US$14.2m
Assumptions:
I've applied US$317/ct, US$400/ct & US$500/ct for other high quality rubies (excluding three special rubies), then calculated estimated revenue for the three special rubies.
PLEASE note this is ONLY my exercise.





MD:

Mustang, like Gemfields, knows it’s got to preserve the ‘purity’ of the product brand in an era of transparent ethical and responsible sourcing. Traditional supply giant Myanmar’s (Burma’s) centuries-old ruby fields are tarnished in most first-world markets, only increasing the focus on Mozambique’s capacity to feed a coloured gemstone market Gemfields says has grown 213% in six years into one with an import value of US$5.9 billion a year (for rubies, sapphires and emeralds).

Jordaan says untreated 4-to-4.99 carat Mozambique rubies are fetching US$18,000-$42,000/ct in the US at a wholesale level, with wholesale reference prices for cut gems larger than 5ct typically negotiated between buyers and sellers due to their rarity. Prices can rise exponentially as rubies get bigger.

“Gemfields has really shown the way, recording upwards of $220 million of sales during exploration,” Jordaan says. “They’re only going into commercial production now. They’ve really been the beacon that we’re following.

“But I think there are opportunities for us to carve our own niche, initially at least by focussing on the sources of material that produce about 70% of the value of Gemfields’ output.

“Our first ruby sales will be transformational for us.
“Gemfields’ first ruby auction netted US$34 million. I’m not saying we’re going to do that. Even half of that number is still larger than our market cap.

“Even if we do $2 million of sales, it’s a good chunk of our market cap.

“What we’re very focussed on now – and we have engaged the services of a leading US gemmologist and his team to this end, and other market experts around the world – is building the market for the product, getting the confidence of customers, and establishing sales channels.”

http://www.miningnews.net/resource-stocks/company-profiles/mozambique-gem-sparkles-anew/

Anyone noticed Meg Berry won 12 time AGTA gem cutting champion and is GIA colored stone specialist.

Thanks @orionwoo for sharing a conversation with MD, Meg did confirm our special rubies do not require any treatment.




I think Meg is close to finish cutting for seven special rubies, only weeks away from first commercial sales.


5. UPCOMING ACTIVITIES/NEWS:

- Seven speical rubies are being cut by Meg Berry
- First ruby sales revenue expected March 2017.
- Auger drilling underway to map ruby-bearing ore across the project area
- Graphite: Discussions have commenced with potential strategic partners and will continue during the first half of 2017
- Graphite: Metallurgical testing results and process flowsheet expected in Q2-2017
- Ruby Maiden JORC Resource 1H 2017
- Graphite Maiden JORC Resource 1H 2017.


DYOR.