Having completed the commissioning of its relocated processing plant, miner Mustang Resources reports that it continues to focus on secondary deposits as part of its strategy to ramp up production at the Montepuez ruby project, in Mozambique.

In August last year, Mustang announced that it had discovered secondary ruby deposits while conducting a reconnaissance pitting programme on its existing Montepuez concession.

The company, which released its quarterly activities report for the three months ending March 31, 2017, in April, noted that first-quarter production ramped up to the targeted rate of 525 t/d and reached as much as 1 000 t/d, a move which is expected to result in a substantial increase in Mustang’s ruby production.

Subsequent to the end of the first quarter, production has risen to 1 500 t/d, as key plant upgrades were installed. Mustang finished the quarter with a ruby inventory of 69 989 ct. Since the end of the quarter, this has grown to about 73 500 ct. Mustang noted that it aims to increase this to 200 000 ct by October, at which time it intends to sell the entire inventory at an auction.

Mustang’s October auction represents a shift in its formative strategy, which involved the sale of cut and polished rubies, as well as rough stones. However, after the end of the last quarter, the company adopted a revised strategy under which it would sell all its rubies as rough stones.

“This new strategy has two key objectives. First, it will ensure Mustang does not compete with its rough-stone customers for sales of cut and polished stones and, second, it will generate more cash flow in the medium term [owing] to faster payment terms for rough stones and a much simpler sales process.”

The revised strategy follows extensive consultation with prospective customers and a market study, which was completed last quarter. “The strategy is the same as that used by leading ruby miner Gemfields, which generated $225-million in seven auctions, totalling 8.6-million carats over 3.5 years,” Mustang reports.

Further, the company notes that “the five ‘special’ stones” sent to the US for cutting and polishing by internationally renowned gemstone cutter and polisher Meg Berry will now be sent to Thailand for inclusion in the overall inventory that will be auctioned later this year.

“These five stones (77ct) were never intended to generate material cash flow and only represent 0.1% of the current gem ruby inventory. They were to provide an insight into the value of Mustang’s cut and polished stones for testing and marketing purposes only and to assist in defining the best sales strategy over the medium to long term.”

The remaining parcel of rubies sent to the US (about 6 148 ct) will be sold as part of the auction in October.

During the quarter under review, Mustang also agreed to acquire a 65% interest in a new highly strategic ruby licence (licence 8245L), which borders its existing Montepuez project. A site visit undertaken by Mustang consultant Paul Allan confirmed that artisanal miners are recovering large, high-quality rubies from this licence area, which also borders one of the key ruby deposits being mined by Gemfields.

Importantly, Mustang’s new licence is only 3 km directly south-east of the company’s plant site and Alpha ruby deposit and lies along the south-east, north-west ruby mineralisation trend, which also transects the adjacent Gemfields licences.

Following completion of environmental permitting, Mustang will immediately start a prospecting programme, including mapping, auger drilling and trenching to determine a preferred location to open a bulk sampling pit. Mustang will then start processing gravels from the priority areas identified, further enhancing the current bulk sampling programme and ruby sales planned for 2017.

Graphite Play
Mustang also made a “spectacular” high-grade graphite discovery during the quarter at its 80%-owned Caula project along the geological strike of Mozambique-focused miner Syrah Resources’ flagship Balama graphite project.

“Each of the first five diamond drill holes at Caula returned exceptionally high grades of up to 26% total graphitic carbon in multiple 1 m samples,” states Mustang.

Further, it notes that graphite was also intersected over extensive widths of 14 m to 87 m (downhole based on an incline of between 55º and 60º), providing strong evidence that “Caula is both a large and extremely high-grade deposit, with graphite mineralisation starting at a shallow depth in the oxidised zone near surface”.

The Caula core is being assayed at Perth-based minerals laboratory SGS, which will assess its metallurgical characteristics. “These results, combined with the assays from the holes referred to above, will be used to calculate a maiden Joint Ore Reserves Committee-compliant resource estimate.” Mustang expects to publish this estimate in the June quarter, followed by an initial scoping study.

Mustang concluded that it also intends to undertake comprehensive analysis of flake-size distribution and preliminary flow sheets for high-quality graphite concentrate products to confirm field observations that suggest the Caula graphite deposit contains large flake sizes.