The target is more than 50% higher than the $0.055 last traded price. The following is an extract from the report.
Montepuez rubies set fire to gem markets
Mozambican rubies first appeared in quantity on world markets in 2009.
The worldwide ruby trade has since been revitalised by the quantities and qualities of Mozambican rubies mined in the Montepuez district.
The best Montepuez rubies are often compared to the highest value Mogok stones from Myanmar that have long been in scarce supply in the rough.
Gemfields Plc produced and sold rough Montepuez rubies for US$280M revenue from 2014 to 2017.
At least an equivalent amount of informal production may also have come out of Montepuez in the same period.
Ruby bearing gravels present, bulk sampling underway
The main commercial sources of high value rubies at Montepuez are laterally extensive gravel beds with varying ruby content up to 3ct/t and average ruby values of US$50-700/ct.
Mustang Resources Limited (Mustang) established the presence of ruby bearing gravels on its Montepuez licences in 2016 and the first half of CY2017 through production of 8,400 carats.
Mustang’s best bulk sampling grades of 50 ct/100t were returned in June 2017 from a shallow objective gravel within a newly acquired licence.
The Company’s test pits and previous artisanal mining have recovered rubies over a 2km trend at the site.
Mustang’s most recent bulk sampling is a significant advance towards understanding the geology at Montepuez and opening up the commercial potential of its licences.
Ramp-up expected from July 2017
The Company has installed capacity to bulk sample 1,500 tonnes of gravel per day, equivalent to about half of Gemfields’ recent average throughput rate.
Mustang’s ramp up to full capacity of 380ktpa began in July 2017.
Inaugural ruby auction due in October 2017
MUS expects to sell its first rubies by auction and tender in October 2017.
The Company anticipates offering 200,000 carats of rubies at the auction, a large proportion of which will be inventory acquired for US$2-10/ct from contracted local prospectors.
Hartleys estimates MUS could receive about US$10M in revenue from the auction.
The Company plans to extend its arrangements with prospecting teams into 2018.
Field potential drives Speculative Buy
Mustang is the only pure listed exposure to the Montepuez gem field.
The Company has a promising bulk sampling program coming up that would convert seamlessly to commercial operation if successful.
Hartleys recommends Mustang as a Speculative Buy to risk tolerant and patient investors as the Company builds up a production and sales record in 2017 and 2018.
We set a 12 month target price of 8.5 cps.