This sale by Mustang Resources is expected to total approximately 200 000 carats and has the potential to generate substantial cash flow.
Mustang Resources’ decision reflects a significant strategic shift from selling its rubies in both the cut and polished and rough forms to selling them all as rough stones. As part of this revised strategy, the cutting, polishing and direct sale of the five “special” stones exported to the US earlier this year has been suspended.
[quote]The revised strategy, which was adopted after recent in-depth discussions with key ruby buyers, is in line with the highly successful sales strategy employed by ruby market leader and project neighbour Gemfields.
Gemfields’ Mozambique rough ruby auctions have yielded total sales of US$225 million from seven auctions over three years with its first auction held 18 months after the commencement of bulk sampling.
The move will accelerate the generation of substantial cash flow for Mustang Resources from the Montepuez ruby project in Mozambique and will also ensure that the company does not compete with its customers in the sale of cut and polished rubies, an essential pre-requisite for establishing a sustainable sales channel.
Following key upgrades to the bulk sample processing plant at its Montepuez project, Mustang Resources’ processing rates will be able to rise sharply when the plant is re-started on 8 May 2017. An inventory of 73 531 carats has been accumulated and this is expected to rise to 200 000 carats in coming months.
Mustang Resources then intends to continue building substantial inventories of rough rubies for sale in bulk through auction and tender. A third parcel of rubies totalling more than 40 000 carats (which includes rubies recovered by Mustang Resources from its bulk sampling activities and those recovered through the artisanal miner development program) is scheduled for export to Thailand in the week commencing 15 May 2017.
Mustang MD Christiaan Jordaan says the company has formulated its sales strategy following extensive market research and discussions with key prospective customers.
“Mustang’s recently completed comprehensive market study showed that selling its rubies in bulk through an auction/tender process in their rough state is the most effective way to maximise the average price per carat and avoid the deferral of sales revenues inherent from cutting and polishing activities,” says Jordaan.
“The evidence suggests that this approach is likely to realise higher returns for our ruby inventory and not involve the company in its formative years in the complexities of cutting and polishing activities. This approach is also much more in tune with the current exploration and development skills sets in the company.
“Generating early stage cash flow from the sale of these rough rubies will transform Mustang Resources, especially as we continue to accelerate and expand our prospecting program through continued bulk sampling, auger drilling and fieldwork across our soon to be expanded licence areas.”
Upgrade of processing plant and prospecting programme
Mustang Resources has successfully installed a new wet-front end for its bulk sampling plant and concluded key plant upgrades. The recommissioning process is expected to be concluded in early May 2017. These improvements will result in the company having up to 1 500 tpd processing capacity at the bulk sampling plant for the remainder of the year, with expected higher efficiency and ruby recoveries.
All conveyor belts have also been replaced by jet pumps and the plant is now an automated hands-free plant, with increased security and safety. Although the rainy season has adversely affected excavation, significant progress has been made in the delineation of ruby-bearing gravel-beds across the Montepuez project with numerous ruby deposits identified for further follow-up and sampling.
Material is currently being trucked to the plant from the extended Alpha deposit as well as new Pit 224 and Pit FNB, both of which are secondary deposits. Furthermore, the environmental licence has been issued for licence 8245L with imminent excavation and processing of near-surface secondary ruby deposits currently being prospected by Mustang Resources’ teams active in the new area, 3 km to the southeast of the upgraded processing plant.