UK-listed Gemfields (LN: GEM), also a dominant player in the global emerald and amethyst markets, has continued to build annual sales of rubies from the Montepuez field in Mozambique’s north-eastern Cabo Delgado Province.

Its market capitalisation has climbed to GBP265.5 million (US$329 million) as total ruby sales, including the inaugural 2014 auction return of US$33.5 million, have surged past $225 million.

One staggering element of that story is that the Montepuez field only came to international prominence four years ago. Another is that Gemfields is still not in ‘commercial production’.

Having built and now commissioned a similar-sized process plant to Gemfields’ at its own Montepuez property (at a fraction of the cost), and dispatched this month its first rubies to the estimated US$400 million-a-year US market for grading and possible sale, Mustang Resources is starting to get the traction among key investors for the emerging story that managing director Christiaan Jordaan and his team have worked hard for over the past 12 months.

The investors include US and Australian institutions that backed its December, 2016, equity raising.

Mustang’s share price has not been overly responsive during the year just gone, but that corner may also now have been turned with the stock gaining ground in the wake of its announcement of a 6,221-carat parcel of rubies and corundum being sent to US gemstone cutters and jewellers. The shipment included a parcel of five special stones weighing a total of 76.65 carats to be cut by renowned stone faceter Meg Berry.

That batch has two rare 24-carat high-quality rubies that could help shape future Mustang branding and pricing.

“This is a key milestone for Mustang – the first commercial shipment of rubies recovered through bulk sampling and via our highly successful prospecting teams that form part of our local community engagement and employment programme,” Jordaan says. He says the company remains on track to record its first sales revenues in the current half.

“The shipment will play a vital part in helping us to place market values on our rubies as well as growing awareness and understanding of our world-class stones among customers.

“So we will be better placed to estimate the revenue we can generate from our rapidly growing production profile.”

Relocation of its plant closer to its key Alpha ruby deposit and important water sources is allowing Mustang to ramp up throughput to a targeted 525 tonnes per day – three times levels achieved previously. Meanwhile, bulk sampling has yielded nearly 16,000 cubic metres of ruby-bearing gravel from Alpha and Mustang is also accelerating efforts to open up new sources on its 160sq.km of ground.

Jordaan (left) says an auger drilling programme will help map ruby-bearing zones in the project area, and outline a maiden JORC resource. Mustang’s exploration programme is guided by former Gemfields head consulting geologist Paul Allan, who knows more about the field that has reshaped the global ruby supply landscape than just about anyone.

Stones recovered by prospecting teams will continue to be excluded from any official resource estimates, though recovered gems are expected to weigh positively on sales results.

Rather than employ a massive security complement to ward off artisanal miners, Mustang will build its salaried workforce from local people and aims to equip its prospecting teams with the right tools and skills to work safely. It is currently running one shift a day as its plant ramps up to 11,000t/month, but could in future expand to two or three.

“The local communities just want to make a living, and we want to help them do it safely. There is lots of poverty in these areas,” Jordaan says.

“I see it as an important engagement initiative but we also don’t want rubies being sold through illicit channels - smuggled out of the country, not documented and bypassing the royalty regime and so on.”

Even though he’s currently head of a sub-$20 million enterprise, Jordaan sees a very big picture emerging at Montepuez.

“We are all just scratching the surface here,” he says.

“Montepuez is proven now to be the single largest current ruby deposit in the world. The difference between this and other deposits that have been flash-in-the-pans is this will be going for 50 years at least.”

Mustang, like Gemfields, knows it’s got to preserve the ‘purity’ of the product brand in an era of transparent ethical and responsible sourcing. Traditional supply giant Myanmar’s (Burma’s) centuries-old ruby fields are tarnished in most first-world markets, only increasing the focus on Mozambique’s capacity to feed a coloured gemstone market Gemfields says has grown 213% in six years into one with an import value of US$5.9 billion a year (for rubies, sapphires and emeralds).

Jordaan says untreated 4-to-4.99 carat Mozambique rubies are fetching US$18,000-$42,000/ct in the US at a wholesale level, with wholesale reference prices for cut gems larger than 5ct typically negotiated between buyers and sellers due to their rarity. Prices can rise exponentially as rubies get bigger.

“Gemfields has really shown the way, recording upwards of $220 million of sales during exploration,” Jordaan says. “They’re only going into commercial production now. They’ve really been the beacon that we’re following.

“But I think there are opportunities for us to carve our own niche, initially at least by focussing on the sources of material that produce about 70% of the value of Gemfields’ output.

“Our first ruby sales will be transformational for us.

“Gemfields’ first ruby auction netted US$34 million. I’m not saying we’re going to do that. Even half of that number is still larger than our market cap.

“Even if we do $2 million of sales, it’s a good chunk of our market cap.

“What we’re very focussed on now - and we have engaged the services of a leading US gemmologist and his team to this end, and other market experts around the world - is building the market for the product, getting the confidence of customers, and establishing sales channels.”