Mustang Resources Limited

Positive Project Update: Mustang Resources Limited’s (ASX: MUS) share zoomed up by 20.833% on March 15, 2018 after an initial surge of 50%. The group initially announced an update on its Caula graphite and vanadium project. The company stated that its Caula Graphite project in Mozambique is well on track for first production by mid of 2019. The Caula project represents an exceptional combination of both high-grade and large flakes sizes that differentiate the project from its competitors. The Caula project has delivered a maiden JORC inferred resource of 5.4 Mn tonnes at an average grade of 13% total graphitic carbon (6% cut-off) for more than 700,000 tonnes of contained graphite. Further, the concept study is on track and it will be completed by Q2FY18. Given the development of both graphite and vanadium component of the Caula ore, the company is developing a dual extraction flowsheet that will allow extraction of both graphite and vanadium from the feed ore. Vanadium will be extracted to a concentrate from the inception of the project and vanadium extraction process will be integrated into stage 1 plant. This vanadium concentrate will be sold to vanadium chemicals’ producers or reserved for future production of refined vanadium chemicals.

The group had also provided some hypothetical statements relating to change in supply and demand picture for vanadium during last year. Depending on the vanadium price and graphite basket price, the stage 1 of the development process is estimated to produce more revenue than the total all-in costs of the development plant within the first 12 month of production. Furthermore, the group stated that during Stage 2 with a hypothetical ore grade of 0.4% V₂O₅, a 600,000 tonne per annum mining operation could produce >2,000 tpa of V₂O₅ (98% and 99%+ purity vanadium pentoxide chemicals) with a current market value of >US$60 Mn per annum. However, post a discussion with ASX these estimations were being retracted at the back of the hypothetical nature of the announcement.

While MUS project has potential and the development has given some respite to the shareholders (given the fall of 75% in last six months), the scenario is still to unveil core benefits. Given the foregoing development, we put a “Hold” recommendation on the stock at the current price of $0.029
 

Caula Graphite Project (Source: Company Reports)
 

Altura Mining Limited

Positive Results:Altura Mining Limited’s (ASX: AJM) share soared by 7.595% on March 15, 2018 with the news of AJM confirming that it has been in discussion with China’s Shaanxi J&R Optimum Energy Co. for a potential control transaction. While there is no certainty of the transaction to proceed, the details will be revealed at a later date. Apart from this, the company provided an update on recent exploration program which is taking place on the Southern Ridge area, part of the flagship Altura Lithium Project. The Southern Ridge had been earmarked for infill drilling due to its potential to increase the ore reserve and mineral resource estimate of the Altura Lithium Project, which is currently on track for first lithium concentrate sales scheduled for Q2FY18. The Southern Ridge area adjoins the main Pilgangoora deposit. This program consists of 4,650 Mn of RC drilling with 41 holes and more than 90% of the meterage has been completed to date. The management expects that this is a very positive program for 2018 exploration plan. The Southern Ridge is presenting good response and we expect that it will allow to expand reserve base while boding well for near future prospects.

On financial front, the company posted year on year revenue growth of 57.5% to $408 K in 1HFY18 from $259 K in 1HFY17 on the back of solid sales growth in mining services and royalty income. However, loss for the period 1HFY18 was $4334.5 K (vs $2591.97 K in 1HFY17). This loss in the first half of the year was incurred majorly due to low activity in group’s exploration services sector and foreign exchange loss from a higher Australian dollar during the same period. Currently, the management is focused on construction, commissioning and then the commencement of production and sales of spodumene from its lithium project. Meanwhile, AJM stock has risen 83.7% in last six months and was up by 8.22% in last five days as on March 15, 2018. Further, AJM has been added to S&P/ ASX 300 Index effective March 19, 2018, as per the latest S&P Dow Jones Indices. We give a “Hold” recommendation on the stock at the current price of $0.425


Pilgangoora Lithium Project (Source: Company Reports)

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