Mustang Resources Ltd
(ASX: MUS)
October 12, 2016
|
Price (as of October 11, 2016): AUD $0.037 Beta: 3.10
Price/Book: 0.5x
Debt/Equity Ratio: N/A
Listed Exchange: ASX
|
Emerging Gemstone Prospect
Mustang Resources Ltd. (ASX: MUS) ("Mustang" or the "Company") is a gemstone explorer and development company headquartered in Sydney, Australia. The Company's shares are traded on the Australian stock exchange. Mustang is presently focused on developing its flagship project, namely the Montepuez Ruby Project, which is located in Northern Mozambique in Africa. In addition, the Company holds ownership interests in the Balama Graphite Project and the Save River Diamond Project, both located in Mozambique. The Company's flagship Montepuez Ruby Project is situated just eight kilometers' northwest of Gemfields PLC (LN: GEM), the world's largest ruby deposit holder. The Montepuez Ruby Project remains on schedule with the bulk sampling and wet-commissioning currently in progress. The Company expects to commence commercialization of rubies recovered from the Montepuez Ruby Project by early 2017.
Investment Rationale
Success of bulk sampling program may boost revenue growth
Mustang's main focus has been to explore and develop its highly prospective flagship project, namely the Montepuez Ruby Project, located in Mozambique and subsequently commercialize the recovered ruby parcels. As of date, the Company had already recovered 29 high quality rubies from its initial reconnaissance pitting program. In order to expand its operations, the Company has planned to carry out a bulk sampling program in the Montepuez ruby project region. Bulk sampling is expected to commence and should aid Mustang in shortly recovering a significant number of marketable rubies. Subsequently, the Company has targeted commercialization of the recovered rubies by early 2017. Hence, the Company is well positioned to generate a tremendous revenue stream from its Montepuez Ruby Project upon the successful completion of its bulk sampling program. Positive ruby commercialization achieved by neighboring gemstone developers such as Gemfields PLC (AIM: GEM) provides a successful pathway for Mustang to follow in the years to come. We note that Gemfields PLC has already completed its bulk sampling program and has sold the recovered uncut rubies in six auctions for approximately US$195.1 million.
High grade graphite exploration can enhance shareholder value
Mustang has also successfully confirmed the presence of high grade graphite deposits in Mozambique. The Company's graphite licenses, namely 5873L, 6678L and 4661L, have high grades of graphite mineralization with Total Graphitic Carbon (TGC) grades varying from 6.8% to 18.8%. Mustang has also discovered significant amounts of large and super jumbo graphite flakes during its field assessment program. This has prompted the Company to start an initial shallow exploration program at 6678L and 5873L areas respectively. Additionally, the Reverse Drilling (RC) program in license area 6678L has proved the presence of high grade mineralization of up to 22% TGC from surface to just 45 meters below the surface. Subsequently, Mustang has planned to start a low-cost resource definition program and expects to achieve JORC compliance in 2017.
|
|
|
|
$0.25 14,000,000
12,000,000
$0.20
10,000,000
$0.15 8,000,000
$0.10 6,000,000
4,000,000
$0.05
2,000,000
$0.00 0
Adj Close Volume
Source: Yahoo finance
|
|
|
|
Recent News
19-Sep-16: Mustang Resources Ltd completed required civil works and is well positioned to commence a bulk sampling program shortly at the Montepuez Ruby Project in Mozambique
18-Aug-16: Appointed Price Waterhouse Coopers (PWC) as its external auditor
11-Aug-16: The Company's ongoing reconnaissance pitting program confirmed secondary ruby deposits and also recovered 19 rubies from the Montepuez Ruby Project in Mozambique
05-Aug-16: Raised $1.0 million by issuing 25 million shares at $0.04 per share to professional investors
21-June-16: Received $1.2 million from its previously announced Share Purchase Plan (SPP) and subsequently closed the SPP
23-May-16: Commenced on-site activities for the initiation of drilling and trenching at the Montepuez Ruby Project in Mozambique
28-Apr-16: Raised $3 million by issuing shares to professional investors
04-Mar-16: Appointed Mr. Robert Marusco as the Chief Financial Officer and Company Secretary
03-Mar-16: Shareholders approved to acquire 80% ownership interest in Montepuez Minerals Pty Ltd.
25-Feb-16: Finished close-spacing helicopter survey and identified prospective ruby deposits at the Montepuez Ruby Project in Mozambique
|
|
|
|
Shares Outstanding: 323,749,913
Market Cap: $13.92 million
52 Week High: $0.25
52 Week Low: $0.03
Note: All $ symbols represent Australian dollars (AUD) unless otherwise specified.
|
|
www.RBMILESTONE.com
|
Mozambique's lower geopolitical risk should support Mustang's operations
The Company's three projects are strategically located in Mozambique, Southeast Africa. Mozambique enjoys a stable government with multi-party democracy ensuring transparency in governance. The mining and exploration companies operating in Mozambique also incur lower exploration costs and higher operating margins, when compared to other countries such as Canada and Australia. Mozambique's comprehensive business environment characterized by significantly lower political interference, coupled with lower taxes marks them as a favorable mining destination for mining companies worldwide. Mustang's flagship Montepuez Ruby Project is located in Northern Mozambique, which is characterized by extensive ruby deposits. Favorable ruby mineralization has also been confirmed by Gemfields PLC, the world's leading gemstone developer operating adjacent to Mustang Resources. The Company's Balama Graphite Project is also situated near world-class deposits of Syrah Resources (ASX: SYR) and Metals of Africa (ASX: MTA), in Mozambique. The Company's graphite mineralization has been confirmed to be in conjunction with high grade deposits of the nearby miners. Finally, the Company's Save River Diamond Project is well positioned along the confluence bed of the Save & Runde Rivers. The confluence bed is characterized by significant alluvial diamond deposits benefitting Mustang.
Experienced and qualified management team
Mustang's senior management and mining team have collective experience of more than 100 years in the mining and exploration industry. The experienced and knowledgeable management team supports the Company's business operations and viable expansions. Mustang's Managing Director, Mr. Christiaan Jordaan's extensive knowledge in the mining and exploration segment, coupled with local experience, gained by working in Mozambique. Further, Mr. Cobus van Wyk, Operations Director of Mustang has more than 23 years of experience in financial and capital markets with more than 10 years' experience in exploration ventures in Mozambique. This should help the Company improve its financial health through efficient financing and investment activities. In addition, Mr. Paul Allan, the Company's Consulting Geologist, heads and supports the geological field team with more than 25 years of experience in the gemstone industry most recently for Gemfields PLC where he was instrumental in their initial discovery and exploration program. Finally, the Company's mining team and the logistics operation team have collective experience of more than 100 years and 70 years respectively, which enables them to carry out successful operations.
Global Ruby market conditions favor Mustang's revenue prospects
Sourcing of high quality rubies was once unreliable in the aftermath of the US embargo imposition on importing goods from Myanmar, leading to the subsequent slowdown in Myanmar's ruby production. Significant mining development in the Montepuez region of Mozambique has, in turn, rekindled the ruby market segment. Mozambique has now taken over Myanmar as the largest producer of ruby in the world. Mozambique mining development is also well complemented by efforts of companies such as Gemfields, in creating industry friendly mining and market policies, in order to ensure ethical sourcing of marketable rubies. This, in turn, has created a transparent market place for rubies, where producers can have entire control over sourcing, grading and auctioning. Reliable supply has also increased demand for rubies across the world, which is evident from increase in ruby prices over recent years. Ruby prices have increased by more than 63% in the last eight years. Recent auctions of Mozambique alluvial rubies have returned significant margins for producers by selling at premium prices of up to US$680 per carat. Hence, Mozambique ruby producers such as Mustang Resources are well poised to play a significant role in the coming years.
Company Overview
Business & Key Projects
Mustang Resources Limited is an Australian based mineral exploration and development company currently focused on developing gemstone projects in Mozambique. At present, the Company has ownership interests in three projects in Mozambique namely the, Montepuez Ruby Project, Balama Graphite Project and Save River Diamond Project. The Company's near term focus is to develop the Montepuez Ruby Project, located in Northern Mozambique. The Company has already identified high quality ruby parcels in the Montepuez Ruby Project region and has subsequently planned to commence a bulk sampling program shortly. All the required procedures needed for the undertaking of the bulk sampling process have been well planned in advance. Exhibit 1 presents the Company's project locations in Mozambique.
Exhibit 1: Map of Mustang's three projects located in Mozambique
Source: Company presentation
The ownership status of Mustang in each of their projects is shown in Exhibit 2, and it can be seen that the Company holds substantial interest in all three projects.
Exhibit 2: Mustang's ownership interests
|
Projects
|
Ownership Interest %
|
|
Montepuez Ruby Project (Flagship)
|
52% to 60% - covering three licenses
|
|
Balama Graphite Project
|
60% to 95% - covering eight licenses
|
|
Save River Diamond Project
|
51.8% - License 4525L
|
Source: Company Presentation
Montepuez Ruby Project (Flagship Project)
Location and Geology
The Montepuez Ruby Project is located in the Cabo Delgado Province of Northern Mozambique in Africa, which is known for the presence of high quality ruby deposits. The Montepuez Ruby Project is situated just eight kilometers' northeast of Gemfields PLC's (LSE:GEM), where the world's currently largest ruby deposits are located. Gemfields is also the world's largest gemstone producer and has undertaken numerous efforts in order to streamline ruby exploration operations in Mozambique. Gemfields's mine location has high grade primary ruby mineralization of up to 300ct/ton and 7 to 22ct/ton in the secondary mineralization categories, just adjacent to the Montepuez Ruby Project. The presence of nearby high grade ruby mineralization shows a high probability of success for Mustang. Exhibit 3 shows the Montepuez Ruby Project location near the Gemfields project in Mozambique.
Exhibit 3: The Montepuez Ruby Project geographic location
Source: Company Presentation
Montepuez Ruby Project - Background
Mustang acquired the Montepuez Ruby Project's exploration licenses from Montepuez Minerals Pty Ltd (MM), a subsidiary of Regius Resources Group Limited. MM owned rights to three license areas namely 4143L, 4258L and 5030L, adjacent to Gemfields's Montepuez ruby deposits. MM's license areas remain attractive, due to occurrence of deposits along the same geological strike as that of Gemfields high quality ruby deposits. On September 28, 2015, Mr. Paul Allan, then an independent geological consultant, conducted a study of ruby mineralization in the three license areas and confirmed the presence of high quality ruby deposits. Mr. Paul had worked with Gemfields PLC from 2012 - 2014 in managing their exploration activities. Later, he joined Mustang as their geological consultant. The presence of high quality rubies then prompted Mustang to acquire a 75% interest in MM as displayed in Exhibit 4.
Montepuez Ruby Project - Ownership interests and Agreement
Mustang currently holds ownership interests in three ruby exploration licenses 4143L, 4258L, and 5030L spreading over 158 km2 in Mozambique. Mustang's shareholders approved the Company's acquisition of a 75% interest in Montepuez Minerals Pty Ltd on October 2015. The details of Mustang's ownership interest in each of the licenses, including interest/right to earn ratio as
shown in Exhibit 4 below.
Exhibit 4: Mustang's ownership interests in the Montepuez Ruby Project licenses
|
License No.
|
Area (Km2)
|
Issue Date
|
Valid Until
|
Interest/Right to Earn
|
|
4143L
|
19.2
|
14/12/2011
|
14/12/2016*
|
60%
|
|
4258L
|
4.8
|
21/07/2011
|
21/07/2016*
|
56.25% to 60%
|
|
5030L
|
134
|
3/9/2013
|
3/9/2018
|
52.5%
|
Source: Company presentation
*3-year extension in progress per June 30, 2016 Financial Statement notes