Mustang Resources (ASX:MUS) has agreed to acquire a 65% stake in a ruby license that borders its flagship Montepuez Ruby Project in Mozambique.
The 35 square kilometre license is located only 3 kilometres from the company’s plant site and Alpha ruby deposit within the Montepuez Ruby Project.
Mustang will fast-track prospecting from this new area to complement the growing bulk sampling program at Montepuez.
To support a further increase in the drilling and bulk sampling campaign and to accelerate its development plans, Mustang has undertaken a $5.88 million, which has been heavily oversubscribed.
Christiaan Jordaan, managing director, commented: "The acquisition of a 65% interest in this strategic and highly exciting new license will help us to capitalise on what we believe is an outstanding opportunity for Mustang and its shareholders."
Acquisition details
The 35 square kilometre license is located between the Montepuez Ruby Project and a key secondary deposit being mined by London-listed Gemfields PLC (LON:GEM).
A recent site visit confirms artisanal miners are currently recovering large gem-quality rubies from the area covered by the new license.
Mustang will issue 30 million shares (escrowed for 24 months) and pay US$100,000 cash as consideration for the 65% interest in the license.
Following completion of environmental permitting, Mustang will immediately commence a prospecting program, including mapping, auger drilling and trenching to determine a preferred location to open a bulk sampling pit.
Mustang will then commence processing gravels from the priority areas identified, further enhancing the current bulk sampling program and ruby sales planned for 2017.
Capital raising
In addition to the acquisition, Mustang has received firm commitments to place 76.4 million shares priced at $0.077 to raise $5.88 million.
Bids were received from a select group of new and existing institutional and sophisticated investors.
Background
Mustang’s flagship project is the Montepuez Ruby Project, where it is currently conducting extensive bulk sampling and exploration.
Montepuez neighbours the Gemfields’ PLC (LON:GEM) ruby concessions, the largest ruby mine globally.
Mustang’s initial bulk sampling has been successful, confirming gem quality rubies, including a number of significantly high carat stones.
An aggressive auger drilling program is underway aimed at delineating a JORC ruby resource in the second half of 2017.
Mustang also holds interests in the Save River Diamond and Balama Graphite projects.
Analysis
The acquisition of the new license represents another important milestone in Mustang’s strategy to become a leading global supplier of premium-quality rubies.
Mustang recently achieved its target of tripling the throughput rate on its bulk sampling and it now beats that target regularly.
Mustang’s ability to go straight into large scale bulk sampling allows for early cash flows to be generated whereas most other mining jurisdictions require mining approvals which often take years to receive.
The first rubies sent to the U.S. earlier this year are well advanced in their preparation by leading cutter and polisher Meg Berry for certification and sale.
These near-term sales will enable Mustang to value its rubies and are a key input into the feasibility study. It will also pave the way for Mustang to record its first sales revenue before the middle of this year.
The global market for rubies is growing rapidly and Mozambique stones are in particularly strong demand, as shown by Gemfields’ success.
The company’s recent success can be evidenced by the strong demand received for the placement, which supplies the company with valuable funding.
Mustang shares are up 390% year to date, currently priced at $0.098.