London South East | The UK's favourite investor portal.

The Gemfields 2015 report on p12 ( http://gemfields-corporate.s3.amazonaws.com/documents/documents/238/original/21372_Gemfields_AR14_AW.pdf?1444206670 ) has two graphs based on data credited to Gem World International that suggests that per/ct top quality 2/ct sapphires are very much more valuable (eyeballing two graphs - about 10x more for best quality) than smaller 0.3ct material is per ct. Thus clearly it is much more profitable to sell larger material. At this stage (for the Capricorn mine) we don't know what fraction of production is above and below 4mm in size. I presume all material mined irrespective of size is included in the JORC resource estimate of 109m cts. Not clear how much a planned for 1m cts/year >4mm level (at 250,000cts/qtr) translates to in total carats mined (including possible uneconomic smaller material) and hence how much room there is for a production ramp up in future compared to current production levels. According to RNS, cost calculations and production are based on larger material (>4mm). The $3/ct >4mm cost figure presumably includes the costs of producing other smaller material currently being stockpiled as the alluvium dug up and processed will contain both smaller and larger material. However I suspect to reach profit territory additional costs (eg of administration, marketing and financing) will also need to be recovered (as these are probably not included in the $3/ct cost of production figure). Initial emphasis on start up will have been to get production up and running. However selling and marketing is going to be key going forward, and sales are just starting. I look forward to further reports of sales promised in the weeks ahead with interest. In due course cutting and polishing some of the material can hopefully increase overall margins achieved in time. Interested to see the link to the old Australis production over 11 months showed how grade achieved varied substantially over time. I expect that the 14.3/ct average price/ct obtained for the 1,200 ct parcel will have been higher than average that could be obtained for run of the mill material >4mm. At this stage without more sales data, and an indication of how much of the larger material mined is saleable, we don't know what the average price per ct of larger material mined we can expect to get is.

Thanks bigtimber. Being a long time holder I have a file with all of the company's 12 interim and 11 final reports going back to June 2004 (the first interim report only covered one month since listing). These past reports are interesting from a historical perspective, and highlight some serious past mistakes with capital allocation (under different CEO's). These included buying the Tsavorite project and excessive dividend payments that necessitated very dilutive capital raisings to keep the company afloat to the detriment of existing shareholders. As the company is no longer operating in Tanzania and we have just started mining and selling Australian sapphires these past reports will be of little interest to Shore Capital. They will be focusing on assessing the current and potential profitability of the new sapphire mine and sales going forward. They will be interested in how ramp up is proceeding, results to date (cts produced, quality mix, cts sold, average prices achieved, costs to mine/ct etc.) as well as future prospects and potential future production and sales. We still have to see results of initial mining and sales, but I hope much of this information will be in the next quarterly operational update I would refer to the data as “Fundamentals” not “Technicals”. The latter term usually refers to where traders look at historical share price levels and movements (often without any consideration of underlying business fundamentals) to find patterns and regularities in order to forecast future price movements. Descriptive names for supposed patterns in the data like “double bottoms”, “head and shoulders” and “resistance levels” are used. However, as discussed by John Price in his book "The Conscious Investor" scientific assessments of such methods have invariably concluded that none of these simple technical patterns when examined have showed a profit above what could be expected by chance. John Price does however note there is some indication that much more sophisticated data mining approaches that use artificial intelligence methods (like neural network analysis) can profitably predict share price moves. Such methods may build very complex predictive models based on share price movements, transaction volumes and market indices together with other fundamental data. Very complex relationships in the data can be found that are far beyond anything that can be picked up by scanning a graph of share prices by eye or using standard more elementary classical technical approaches that are available in some computer share trading programs. Some therefore consider simple technical analysis akin to fortune telling by looking at random patterns of tea leaves in a cup! I prefer to invest for the longer term, and consider buying shares as buying part of the business. I am more concerned about fundamentals of the business, its economic moat and prospects for EPS growth,

Agree Sniffer. Like you, and other shareholders I too await the next operational update and news on first sight sales with great interest. While still early days (in terms of production and sales) this will at least provide us with first indications as to possible profitability. With each operational update and sale, as production ramps up, our ability to estimate company value will be enhanced. Very pleased to see from interim report that mine development is also being done keeping costs in check. When Gemfields started, they got lower prices but they have been able to build prices up over time with Ian Harebottle claiming recently the company was now a "price-maker" and not just a "price-taker". Hopefully RLD can do the same. As discussed below, being able to provide a reliable and significant supply of stones is likely to be important for RLD as it has been for Gemfields. The sightholder system developed and used by the company generated good profits from sales of rough Tanzanites in its early years of operation (until the failure of Tanzanian authorities to enforce the country's laws over many years made it impossible to operate profitably there). As regular readers of this BB will know, the problem is that in the past most Aussie sapphires were sold to Thailand (with best stones often later being passed off as coming from somewhere else). The Thai's were also very much price-takers (often offering so little it was barely economic at times to mine in Australia). Times have changed with the US requirement now for proof of origin. A significant and reliable supply of Capricorn sapphires will allow RLD to build up relationships with a group of significant sightholders (as was done with Tanzanite in the past). The company will then not be at the mercy of Thai buyers and prices achieved hopefully will be higher, allowing larger scale sapphire mining to be profitable. If RLD succeeds with developing its Capricorn sapphire sightholder and online sales model; presumably other small Australian producers will notice and might then wish to, in future, also sell to or through Richland with the expectation of getting better prices. If so this could only improve supply to market and hopefully further boost prices further increase potential profitability. Still early days of mining ramp up and we can expect more in the year ahead as ramp up of production continues; but exciting times to be a shareholder.

Latest Share Chat

Member Info for relephant

Followers

Following

Posts (Last 30 Days)

Posts (All Time)

Last Post

Member Since

Share Chat Post Distribution (Last 30 Days)

Activity Log (Last 30 Days)