Mustang Resources Limited (ASX: MUS), Interview with Christiaan Jordaan, Managing Director: Only Pure-Play Ruby Mining Company, First Sale Planned in October for 200,000 Karats of Medium to High-Quality Rubies.
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By Dr. Allen Alper, PhD Economic Geology and Petrology, Columbia University, NYC, USA
on 7/29/2017
Mustang Resources Limited (ASX: MUS) is an emerging gemstone developer and producer
focused on the near-term development of the highly prospective Montepuez Ruby Project in
northern Mozambique. We learned from Christiaan Jordaan, who is the managing director of
Mustang Resources that they are one of the two companies listed that are mining rubies and
shortly will be the only pure-play ruby mining company. Mustang flagship property is a
very exciting recent discovery in the Montepuez gem field in Northern Mozambique. They
have rapidly grown their ruby inventory to 132 000 carats of rubies on hand and they have
their first sale planned in October this year for 200 000 carats of medium to high-quality
rubies. Arena Investors LP, a major US institutional investor, has just invested in
Mustang, committing $8.5 million of new capital. They are also making progress on their
flake graphite project, which is shaping up to be one of the highest grade flake graphite
projects in the world.
Dr. Allen Alper: This is Dr. Allen Alper, Editor-in-Chief of Metals News,
interviewing Christiaan Jordaan, Managing Director of Mustang Resources Ltd. A lot of
great things are happening with your company, could you give our readers/investors an
overview of the company?
Mr. Christiaan Jordaan: Mustang Resources is currently one of only two companies
listed that are mining rubies. We're mostly mining in Northern Mozambique, in a very
exciting recent discovery in the Montepuez gem field. A recent development in the industry
has seen us being the only company that will be a pure-play, listed ruby mining company by
the end of July. Our neighbor Gemfields is being de-listed following a takeover battle
between Pallinghurst Resources, a JSE-listed private equity firm and their largest
shareholder, and the Chinese conglomerate Fosun International, Fosun Gold, was not
successful in their cash bid to acquire Gemfields.
That has all led to increased awareness of what we are doing in Mozambique,
especially as our company Mustang is now in production. We have rapidly grown our ruby
inventory. We have 132 000 carats of rubies on hand. We are continuing to focus on
secondary deposits, which yield high-quality rubies that come out of Mozambique, and we
have our first sale planned in October this year for 200 000 carats of medium to high-
quality rubies.
Yesterday we announced a milestone transaction with a major US institutional
investor called Arena Investors LP, a company based in New York, managing more than $600
million US. They've invested in Mustang in the mezzanine financing round, committing $8.5
million of new capital that leaves us fully financed to our first revenue in October
through the Convertible Note Deed that we executed with them. That was a major step for us
in the right direction.
We are making rapid advancements in our non-core asset, our Caula Graphite Project, where
work done on that project has already shown it to be one of the highest-grade graphite
projects in the world, and we still intend to unlock value from that project for our
shareholders in the next 6 to 12 months. But focus is fully and squarely on the ruby
project and cashflow from that in October this year.
Dr. Allen Alper: Sounds excellent! Could you tell us a bit more about your
plans going forward with the ruby project? Also a bit more about your plans to move
forward with your graphite project.
Mr. Christiaan Jordaan: Moving forward with our ruby project, since we last
spoke we've had significant developments acquiring a new piece of ground, about 35 square
kilometers, adjacent to our existing three licenses. We've increased our land package,
we've gone on, after an acquisition, to make a major new discovery on that new concession.
We've discovered a major secondary deposit of gem-quality rubies within about three
kilometers south-east of our upgraded processing plant. And that's great because the
quality, the size of the stones coming out of there is phenomenal, the grade of the stones
has picked up substantially as well, indicating around 50 carats per 100 ton ROM. The
mining cost there is extremely cheap as the deposit there is less than two meters from
surface so it's very cheap to extract, and it's already showing itself to be quite
extensive already, more than 2.2 kilometers in strike length that we've identified with
manual test pitting on that area.
To date, we’ve discovered numerous ruby deposits on our concession areas. In June
and leading into July, we have upgraded and commissioned our new processing plant, which
gives us 250 ton per hour feed capacity. On an annualized basis, one operational shift
equates to approximately 400 000 tons per annum, but obviously there's a lot of growth
potential by just implementing a second and third shift in the future. Now that we have
the capital, that becomes a possibility for us to do. On the ruby project, at the moment,
we're also making great inroads into establishing our company amongst the cutters and
polishers, amongst the manufacturers in predominantly Thailand and India and Hong Kong in
the lead-up to our first tender in October.
Mr. Christiaan Jordaan: We've identified all the major rough ruby buyers. We
already have about 92 on our list. Currently, we're focusing on the top 21 buyers,
engaging with them, getting them excited about our project, explaining our rough grading
system. Since we last spoke, we've developed a rough grading system, which is very
important, as we've seen in the diamond industry. Also with Gemfields our neighbor, a big
part of the success of a rough gemstone sale is how you grade and sort the stones before
you take it into a tender where the rough buyers will bid in a competitive process. So
we've implemented that as well, and we're very excited about what lies ahead for the Ruby
Project.
There are a few analysts, who have done reports. Most recently, Hartleys Limited
in Perth, a major broker group over there, released a research publication showing an 8.5
cent price target and expectations of at least $10 million of sales in October, which I
think is quite conservative. Another group, Independent Investment Research, developed a
more comprehensive financial model to get to I think about a 17 cent per share price
target. Their analyst Mark Gordon was on-site a couple of weeks ago, so we expect him to
release updated research over the coming weeks. So yeah, there's a lot happening on that
front.
Dr. Allen Alper: Well, that's just excellent news. It sounds fantastic.
You've made tremendous progress since the last time we talked and the last time we
published a featured article on your company. I'm very impressed with what you and your
team are doing. Could you tell us a bit more? Give our readers, our high-net-worth
investors, more information about yourself and your team?
Mr. Christiaan Jordaan: I'm one of the founders of the projects held by Mustang
Resources Limited. I have privately invested in them together with my business partner,
fellow South African Cobus van Wyk, who's also a director on the board of Mustang.
We've been in Mozambique investing our own capital in developing projects there
for the last 12 years now. We then vended these projects we started into a listed cash
shell in Australia, which is now known as Mustang Resources, paying additional capital to
develop the projects to where they are today. And we are still significant shareholders,
actually the largest shareholders in the company, over 10.3% shareholding. And we are
actively involved, me in the corporate side and my business partner Cobus based in
Mozambique driving the operational front of the business.
So yeah, we have a really entrepreneurial team of guys we've brought in to support
myself and Cobus. We've brought in really great expertise from the board level down to the
ground level. At the board level, we recently appointed Peter Spiers, based in Brisbane,
Australia. He's a former Western Mining Corporation Head of Business Development, a
geologist, he also started a gold company and found a gold deposit in West Africa, which
was then acquired by SEMAFO from Canada for about $170 million in a hostile bid.
Subsequent to that, he took a year or so off and then joined our board. We have Ian
Daymond, our Chairman, very well-experienced executive in African resources, formerly with
Delta Gold in Zimbabwe and Southern Africa.
On the ground level we've put together a top-notch team with experience in
gemstones, a group of South African miners, gemstone miners, who've done this type of
project throughout all of Africa. The geology side of things is led by Paul Allan: 25
years of experience in gemstones, started with De Beers back in the day and he was most
recently responsible for discovering the rubies and the ruby deposit for our neighbors
Gemfields in 2012/2013, before he joined our team in 2015-16.
Dr. Allen Alper: You have put together a great company! I’m impressed.
Could you tell our readers/investors a bit about your capital structure and where your
stock is listed?
Mr. Christiaan Jordaan: Mustang is listed on the Australian Stock Exchange under
the ticker MUS. We have 565 million shares on issue at the moment, trading at about 5.5/6
cents, capitalizing the company around $30 million Australian. We have 130 million options
on issue of various strike prices. There are some 67 million listed options trading on the
Australian Stock Exchange under the ticker MUSOA that has a strike price of 3.5 cents and
still have about two-and-a-half years left on them so they are in the money and long
duration left on them. And then the rest of the options striking between 6 cents and 15
cents, even with some striking at 20 cents.
In terms of capital, we've raised equity capital in March, a replacement for $5.8
million which was used to finance the last remaining upgrades on our processing plant and
to finance working capital on the mining side. Recently we announced the transaction for
Convertible Notes with Arena Investors of 18-month duration. More information on that can
be found on our website and also on the ASX platform.
Dr. Allen Alper: That sounds great, sounds like you're in an excellent
position to move forward with your company. That's very good news for our
readers/investors. What are the primary reasons our high-net-worth readers/investors
should consider investing in Mustang Resources Ltd.?
Mr. Christiaan Jordaan: Take a step back from our operational success, our team
and being near cashflow; all those great things. Look at the market opportunity for
colored gemstones firstly, and then secondly for rubies. It is just phenomenal. We're at a
point in history where, for the first time ever, we have ruby deposits in Mozambique, a
gem field in northern Mozambique, which can deliver rubies, consistently to the market. If
you go back in history rubies are arguably the most sought-after gemstone, from Eastern
royalty through to all the major Eastern cultures, they've been revered for thousands of
years. It's always just been a problem of consistent supply and very unreliable supply up
to date until the discovery in Mozambique was made in 2009.
We also see a phenomenal opportunity for the growth of this market, from the
younger generations leading the change in the trading of how gemstones are bought in
Western markets like the United States, where you now see a divergence away from just
buying diamonds. Younger buyers are looking to get their hands on colored gemstones.
Rubies are right on the top of the list as the most sought-after gemstone.
It's a very rare commodity: if you look at other deposits there's really nothing
else outside of Mozambique. Burma has been mined for 2000 years. It’s basically at the end
of its tenure and won't be able to supply the volumes, required for market growth.
Afghanistan will never be a major supplier. Thailand, Cambodia are basically depleted.
Discoveries in Tanzania in East Africa are of commercial rubies that don't deliver the
quality stones we mine. Madagascar is heavily constrained due to environmental and social
issues that they face mining there. That leaves Mustang in Mozambique, already established
as the dominant supply source of the global ruby market.
And that leaves us in an absolutely fantastic position, and more so if you look at the
investment universe. By the end of this month Mustang will be the only pure-play ruby-
mining company in the world. For investors, who see the potential for rubies to grow and
for colored gemstone markets to grow, they can basically only access that through
investing in Mustang Resources.
We've ticked the right boxes on business details, in terms of the committed
management team that has skin in the game, our near-term cashflow, very conservative
balance sheet, well-financed, a lot of upside growth and more discoveries to be made in
the coming years.
Dr. Allen Alper: Those are excellent reasons for our high-net-worth
readers/investors to consider investing in your company, really excellent.
http://www.mustangresources.com.au
Managing Director:
Christiaan Jordaan
info@mustangresources.com.au
+61 (0) 2 9239 3119
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