(A Montepeuz ruby before it is cut and polished)
With a market capitalisation of $41 million AUD, Mustang Resources in one of just two listed ruby mining companies in the world. Their main rival and African mining neighbour, Gemfields PLC, has a market cap of $433 million US, and some are pointing to the potential future growth of Mustang Resources to this scale in the foreseeable future. Their flagship Montepeuz project sits cheek by jowl with Gemfields’ ruby mining operation in the significant East African gem producing nation of Mozambique. Mustang have identified multiple ruby deposits within their 195 square kilometre parcel and in early 2017 they sent the first parcel of rubies, comprising 6,221 carats, to the USA. These are the fruits of what the company has referred to as an “aggressive drilling campaign,” designed to win rubies from the ground with triple the throughput rate previously achieved at the site, as a result of “successful plant relocation.” They are now forecast to produce their first sales revenues during the second quarter of 2017 and have just agreed to purchase a 65% stake in an adjacent site situated 3KM to the south east, in which gem quality rubies are currently being produced by local independent miners. Graphite is an interesting by-product of the gem mining industry in Mozambique and this has proved to be a reliable additional source of income in the form of the Balama Graphite Project.
(The Montepeuz mine is situated amidst some spectacular scenery on in the plains of Mozambique)
Alongside the Colombian emerald and their sister corundum stone, sapphire, rubies are among the most valuable coloured gems on the planet. Prior to the discovery of the Montepeuz deposits in 2009, the global ruby supply chain was highly fragmented and not well organised, characterised by the political instability and civil unrest in the principle ruby mining nations of Myanmar, Afghanistan and Madagascar. It is the consistency of supply from Montepeuz that has made it so successful. The importance of the ruby to the global gem market is emphasised by the fact that its $2 billion of annual revenue constitutes more than one third of the total $5.9 billion yearly sales of coloured gemstones. Severe restrictions in the supply of rubies to the worldwide market, which are often exacerbated by poor logistics and communications in the producing regions, coupled with steadily growing demand has accounted for a 63% price increase over the past 8 years. In 2015 the coloured gemstone market as a whole (including rubies, sapphires & emeralds) grew by 13% in revenue, versus a 17% decline in global diamond sales that same year. The USA now imports more than $1.2 billion of coloured gemstones per year, representing around 5% of the value of their diamond imports, and this figure has been growing steadily. Indeed it is to this key US market that Mustang have devoted the bulk of their attention.
(Coloured gems are now the fastest growing segment of the gemstone market)
The Montepeuz region is extremely well located to facilitate a rapid exploitation of its deposits and their onward distribution to US and worldwide markets. Another key indicator of the potential for this project is the fact that its neighbouring site has been successfully exploited by Gemfields PLC, the world’s biggest coloured gemstone producer, who achieved over $225 million in ruby sales from the adjacent land during its exploration period alone. Montepeuz rubies are now establishing a status akin to that of their Burma Mogok cousins in Myanmar and the geological surveys that have been carried out hitherto suggest that the deposits at Montepeuz far exceed those of the Asian mines. This is most aptly demonstrated by the fact that 5 carat, unheated, “Extra-Fine” Montepeuz rubies are selling at a wholesale price in excess of $40,000 per carat in the US and at a quality that rivals the best ‘Pigeon-Blood’ Burma rubies. Montepeuz also produces a wide spectrum of stone qualities, enabling the gems that are mined here to satisfy multiple market niches and segments. The Montepeuz fields are also very extensive and easy to mine, with the majority of the rubies found within 15 metres of the surface. This enables overheads to be kept to a minimum and maximises margin by exploiting free-digging techniques, without the need for costly shafts and the employment of deep mining practices.
(The location and terrain of the Montepeuz mining region facilitates the easy extraction of rubies)
Production commenced at the site in January 2017, after the heavy equipment was manoeuvred into position in late 2016. Included in the 6,221 carats of rubies produced so far is a parcel of 5 special stones, totalling 75 carats in all, which contains two extremely rare 24 carat stones, all of which are totally untreated. These special rubies have been certified by the GIA and are due to be released for sale to high end jewellers in the second quarter of 2017. Mustang resources are forecast to be at full scale production by the end of the first quarter of 2018, by which time they will be processing over 300 tonnes of material per hour in the pursuit of these highly prized gemstones. The onsite management team in the region consists of a number of highly qualified individuals who have between them over a century of experience in winning precious gems from the ground in Africa. Overall it is clear that numerous factors have conspired to make the Montepeuz project a very exciting development in the coloured gem mining industry. It is also evident that the recently won monopoly in waiting of Gemfields is now being challenged by new entrants into this sector. This is apparent not only in Africa but also in South America where new challengers, such as Hexa Resources, are starting to develop tantalising new opportunities in the coloured gem business.
(A rare Pigeon’s blood ruby from Mozambique, flanked with two white diamonds & set into a ring)
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