Changing outlook on a positive note: Gemstone developer, Mustang Resources Limited (ASX: MUS) lately released its Quarterly Activities Report for the period ending 31 March 2018 wherein the group indicated to aim for first phase production of vanadium and graphite from its Caula project in Mozambique in the first half of 2019. During the quarter, Mustang made strong progress on the Montepuez Ruby Project located in Mozambique. After the quarter end, Mustang achieved ruby sales totalling of $230,953 in the first month (up to 10 April 2018) since opening the new marketing and sales office in Chanthaburi. The company has generated total sales of $1,231,449 since September 2017 to date from the sale of 100,184 carats (includes all categories) at an average price of $12.29 per carat. Total cash receipts during the period (including insurance claim monies) are $1,655,099. Besides this, near-surface, high-grade vanadium adds to economic prospects of Caula Graphite Project in Mozambique. Following initial work on Caula’s graphite, the recent laboratory analysis also tested for V2O5 (vanadium pentoxide) which led to the discovery of high-grade vanadium mineralisation within the Caula-ore. Considering these results, Mustang expects to complete a maiden JORC-compliant vanadium resource in coming weeks followed by feasibility studies. It aims to undertake a fast-track development to stage 1 vanadium and graphite cashflow from trial mining in the first half of next calendar year. We believe that Caula can yield promising results, which continue to go from strength to strength with every step of the Scoping Study.


Mustang’s Caula Vanadium & Graphite Project (Source: Company Reports)

On the other hand, Caula is flagged to be emerging as an outstanding graphite project with both high grades up to 26% TGC and in excess of 55% large to super jumbo flakes. The combination of high-grade vanadium (i.e., TGC and Super Jumbo flakes) and attractive graphite metallurgical results with significant intersections and grades obtained close to surface, highlight the potential for low operating costs. This is based on the production of two commodities which are enjoying robust prices and strong growth prospects.

MUS has now announced for placement of Shortfall Securities. MUS placed 21.74 million fully paid ordinary shares at 2.3 cents to raise $500,000 before costs under the recently completed Entitlement Offer, wherein the placement was supported by sophisticated and professional investors in Australia and overseas. It is worth noting that one Chinese investor subscribed for about 50% of the placement.

Meanwhile, the stock has fallen 36.6% in last six months and rose up by 5% in last five days, and is currently trading near its 52-week low levels. Hence, we maintain our “Hold” recommendation on the stock at the current price of $ 0.022, considering some revival of the momentum post the downfall seen after the lower than expected ruby offerings and other challenges of 2017.

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