Mustang Resources Ltd (ASX: MUS) has determined that its Caula Graphite Project in Mozambique is well on track for first production by the middle of next year.
An important development that has just emerged is the prospect of producing vanadium concentrate as part of the graphite production process.
This appears to be behind the 40% surge in the company’s share price on Thursday morning.
Caula offers a combination of high-grade and large flake graphite
The Caula project represents a unique combination of both high grade and large flake size graphite that distinguishes the project from its peers.
Caula has a maiden JORC inferred resource of 5.4 million tonnes at an average grade of 13% total graphitic carbon (6% cut-off) for more than 700,000 tonnes of contained graphite.
A concept study is on track for completion in the June quarter, paving the way for Mustang to commence the definitive feasibility study.
READ: Mustang Resources targeting June quarter DFS at Caula graphite project
The Caula ores are considered to be broadly similar to ore at the nearby Balama Project of Syrah Resources (ASX:SYR).
Vanadium provides substantial upside
A strategic review also established that Stage I of the Caula project will produce vanadium concentrate which can be either sold or stockpiled.
This is an important development as it could provide the opportunity for further processing which would yield high purity vanadium products as part of Stage II.
Kirby brings experience in vanadium
The review was conducted alongside the concept study, which is set for completion in the June 2018 quarter.
Doctor Evan Kirby, who recently joined the Mustang board as a non-executive director and consultant has significant graphite and vanadium experience.
Incorporating vanadium into the economic metrics would be beneficial as it would provide additional cash flow, particularly given the structural shift in the vanadium market.
Stage I production targeting 100,000 tonnes per annum
The stage I development strategy comprises a robust, low-cost mining operation producing about 100,000 tonnes per annum of ore.
This is expected to yield between 10,000 tonnes per annum and 15,000 tonnes per annum of high-grade graphite concentrate, as well as producing a vanadium concentrate.
Sale of graphite and vanadium products produced in Stage I will be used to secure binding off-take agreements and associated finance required for Stage II development.
Stage I of the project is expected to be completed and producing saleable products in the first half of 2019.
Production increases substantially in stage II
Stage II should see processing increase to between 300,000 tonnes per annum and 600,000 tonnes per annum of ore.
Construction of a full-scale processing plant should deliver between 50,000 tonnes per annum and 75,000 tonnes per annum of high-grade graphite concentrate.