This morning, Mustang Resources Ltd [ASX:MUS] was up 19%, to 9.9 cents a share. The small miner is in the business of rubies. They have a ruby project in Mozambique. It’s expected to produce world-class rubies, creating strong cash-flow for the business.
But rubies aren’t the only resource available to MUS. They have exploration licences at the Balama Graphite Project in Mozambique.
Lab results have confirmed high levels of total graphitic carbon at the site. Records have suggested that there could be nearby world-class graphite deposits.
If you ask me, graphite could be the company flagship resource in the future.
MUS announced their findings of high-grade graphite at their Caula Project. This project is along the geological strike of the Balama graphite project.
Each of the last five drill holes at Caula returned exceptional grades of up to 26% total graphitic carbon. Graphite was also identified when drill holes were on an incline of 55 to 60 degrees.
This provides strong evidence that Caula has large graphite deposits at shallow depths. Yet it could be a while until they pull graphite from the ground.
From here, the Cauls core will make its way to SGS, a leading Perth laboratory. There, SGS will assess the core’s metallurgy or make of metals.
These results will then help calculate a maiden JORC Resource estimate — the Australasian Code of Report for Exploration Results, Mineral Resources and Or Reserves. MUS will publish this estimate in the second quarter, followed by an initial scoping study.
If MUS start producing graphite in large quantities, it will be massive. Investors have already inflated the price of lithium stocks. And they’re quickly doing the same to cobalt. Both metals are critical to lithium-ion batteries.
Another critical metal for these batteries is graphite. The future demand for electric vehicles might tempt MUS to focus on graphite instead of rubies. But until MUS carries out feasibility studies, we won’t know how profitable the site could be.
Junior Analyst, Money Morning
PS: We likely won’t see another turnaround in resources like we did in 2016. And if we do, it could be a long time from now. Unless commodity prices suddenly move higher, earnings will likely stagnate.
That’s why some investors prefer the smaller end of the market.
Smaller miners like Mustang are a riskier investment — there’s no running away from it. But they can potentially grow earnings 10-fold in a short space of time. Resource specialist Jason Stevenson is no stranger to explosive resource stocks.
In his advisory service, Resource Speculator, Jason has made gains of 142%, 145% and 242%.
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