Member Info for relephant

You can't decide a share is cheap by just looking at its price or the market cap. All depends upon future profitability. RLD has had so few cut and polished stones for sale on its website, any sales there can't move the dial. Why has this been the case? While the RLD team have done very well to mine cts cheaply, I find it incredible that in all this time, we haven't been told about ANY sales of cut and polished material for decent prices. Shareholders have also not been given a breakdown of production by quality, colour and size. Why? Did RLD overpay for a lemon of a mine (that failed under its previous owner)? So far, this year, the 3.75m cts reported sold in 2017 have just raised $1.66m (44c/ct). Quite a while back I sold 60% of my holding, and am afraid my patience has run out and this morning I got rid of my last shares. There are a number of reasons for my decision, including the continued failure to achieve operational profitability (promised in Q4 as recently as early Sept 2017 - long after illegal mining started in Madagascar), continued significant dilutions caused by failure to sell any high quality material for a decent price, the lack of any new independent directors on the board, questionable capital allocation decisions over the years, and some other things that also concerned me and the late Colin Slinn. I am also able to use my RLD loss to offset capital gains on other successful investments. So far, of the 6.598m cts reported produced to date, 5.488m (83.2%) has been sold, but only for an average price of 57c/ct. 1.111m cts (16.8%) remains unsold, but I would suspect most of these cts are low quality carborundum that can only be sold for cents. I simply have no idea how much high quality cut and polished is stockpiled that could perhaps sell for a decent price. The last highly dilutive capital raising didn't raise much (as sp so low). The company not only has to cover the cost of mining but also its other corporate and sales costs. Without significant sales of quality cut and polished, and given the various reported cost cutting measures presumably further capital raising will be needed sooner rather than later to keep the company afloat. If finally, RLD can successfully build ethical sales channels, and sell some of its cut stockpile for a decent price, then those who have participated in capital raisings or have built up positions recently will have scored. The most recent higher quality sales only fetched $3.11/ct. So much for efforts to develop ethical sales channels which by definition shouldn't be affected by Madagascar. Maybe things are finally about to change with promised sales due later this month to include cut and polished. Anyway good luck and best wishes to all of you still prepared to wait and speculate on a recovery based on developing sufficient quality ethical sales channels or successful development of some new venture.

Yes - It was completely impossible to operate with Tanzania authorities doing nothing to stop illegal mining or smuggling of Tanzanites out of the country which was also trashing the prices.

Thanks for that Gorilla. If you compared their reported sales against cts mined, in the past they had a good proportion of emerald and ruby production that wasn't sold. RLD has the same. However I am not so sure that was such a problem for GEM, as I remember past accounts seemed to indicate that on their own, their mines were nicely profitable. I recall the major financial problem seemed to have been caused by the acquisition of massively loss-making Faberge, and subsequent large expenditure trying to turn this silly project around. If my memory is correct it seems as if this deal was pushed through by Pallinghurst associated shareholders who benefited at the expense of other shareholders by selling Faberge (which Pallinghurst had bought a couple of years earlier) for (I think was for a higher price) to GEM. At the time I read this deal had been funded by issuing of GEM shares that significantly diluted existing other shareholders whilst boosting Pallighurst's holding in the company. In the end, Pallinghurst were ultimately able to take over the whole company, and GEM is no more. I suspect that GEM could have weathered a downturn in gem sales if they hadn't had the Faberge millstone round their neck. Even with declining sales their reported turnover was still pretty substantial when you compare it to RLD. I remember looking at one GEM company report where it was clear that the Faberge acquisition and expenditure was hugely loss making, and was wiping out most of the profits from their gem mining and selling operations.

What a lie. I suppose the poor employee who was shot and killed by invading miners wasn't killed either!

Apologies for repeat of Part2. Got a message saying problem so resent and see initial post was fine.

Costs may of course also continue to come down and management has done really well in this regard.

However for me key will be how much high quality can be produced and what it can be sold for.

Part 3: Ignoring any stockpiled quality material, breakeven at full ramp up would require an average of $1.56 per ct sold and $0.86c/ct mined. Thus, if the company were to get an average of $1.50/ct sold I make it the company should just be close to breaking even rather than making a 150% profit. If you were intending an average price achieved per ct mined rather than just sold this would give a 74.4% PBT. Going forward less capex may be needed, but for this exercise I have assumed that capex requirements in future will be similar. How much of unsold material is potentially saleable in future and for how much? I have no idea. Perhaps with the new sightholders and heat treatment, the unsold proportion can shrink, and that could make quite a difference to profitability going forward. As marketing and production progresses perhaps pricing can improve too. The % that is high quality, how much we have stockpiled that can be sold in future, and how much this material can be sold for are obviously key. Selling good quality for a $100-200+/ct rather than a few $$’s could make a substantial contribution to overall profitability. Only 50,400 cts selling at say $150/ct *.75 (for cutting wastage) would generate significant turnover of $5.67m. This is why I suspect that sales of cut and polished quality could be key to profitability with sales of bulk of heat treated rough helping cover a good portion of costs. Given current numbers of shares (excluding Treasury shares) and a 30% tax rate in order to justify a share price of 1p one would need earnings of between £204,497 ad £272,663 (for PE range of 15-20). This would give a PBT of between £292,139 and £389,519 which at an exchange rate of 1.29 would require a PBT of $376,859 to $502,479. To get to a share price of 5p with PE in range of 15-20 would therefore require PBT of $1.884m to $2.512m. Supposing good quality 1% (50,400 cts) could be sold for $150/ct and there was a 25% cutting loss (turnover of $5.670m) and add 6.16% sold 310,715 cts medium/higher at $2.81/ct (turnover of $0.873m) and 48.09% of production or 2,473,789 cts sold as low/carborundum at $0.59c (turnover of $1.419m) this would give turnover of $7.962m. Less estimated total costs for year of $4.354m would give a PBT of $2.646m or PAT of $1.985 which at exch rate of 1.29 would give Earnings of £1.538m = an EPS of 0.38p which with a PE in range of 15-20 would be equivalent to a share price of 5.64p to 7.52p. By way of comparison if the 1% supposed high quality is only sold at $15/ct average heat treated turnover for this material would only be $0.756 giving estimated total turnover of $3.048m equivalent to a loss of $1.306m. For me maximising margins on the limited highest quality material will be key. If a greater proportion of other material can be sold for a little bit more going forward that can also make a contribution. However for me key will be how much high quality can be pro

Part 2: Following ramp up, and improvements to processes, the operational cost of mining has been reduced to $0.62 per ct in Q2 2017 which is very encouraging. 1H of 2017 produced 1,959,957 cts with what interims termed “project level costs” of $1,427,000 = 1H average of 0.73c/ct mined. However, looking at interim financials, cost of sales (less cost of online goods purchased) comes to $1,240,000 less $98,000 of other income plus finance costs of $2,000 and additional company operating expenses of $900,000 giving total costs for 1H of $2,044,00. This gives an average total cost/ct mined of $1.04/ct. From 2015 to end 1H 2017 the average price/ct sold was $0.84 (average of $0.59/ct for low and carb and $2.81/ct for medium/higher). Sales (excluding website) for 1H 2017 represents an average of $0.81/ct sold and $0.52/ct mined or half of total costs. Comparable figures for average prices in 2016 were $0.81/ct sold and $0.47/ct mined. For 2015 to 2H 2017 I got a total production of 5,534,494 cts at an average grade of 16.06. Most recent 2Q 2017 grade was 17.52. 2Q 2017 had full ramp up production levels and opex costs of 780,000 to produce 1.26m cts. Suppose this can be repeated for next three quarters this would give estimated opex cost of $3.12m to produce 5,040,000 cts. In 1H total costs were 617,000 more than project level opex costs. I have doubled this to get an estimate of other costs for a year of $1.234m. This gives a total estimate of all costs for the year of $4.354m equivalent to estimated costs/ct mined of $0.7867/ct. From 2015 to end 1H 2017, 2,661,596 (low and carb) and 341,200 (medium and higher) cts have been sold for total turnover of $1,557,870 and $958,400 for average prices of $0.59 and $2.81 per ct. or $0.84 average for all cts sold. The problem is that to date 45.74% of material mined has been unsold (or lost in cutting) with 48.09% of production sold as low/carb and 6.16% as medium/higher. Assuming all top quality material has been stockpiled to date and using an early guidance from 2015 that top quality was around 1% of production then have assumed 44.75% of prodn is not sold (although this may be a significant overestimate is a good proportion of this might be sold later following heat treating and development of sales channels) and 1% could be sold as high quality. That would give sales of 2.423m low/carb 310,715 of med/higher and 50,400 cts high and 2.255m cts unsold. If we assumed we could get long term average prices of $0.59 for low/carb and $2.81 for med/higher then excluding high material this would generate turnover of $2,291,477 which compared to estimated total costs of $4.354 leaves a shortfall of $2,062,553. The 1% quality (50,400 cts) would have to sell for $40.92/ct to break even. However, if we have stockpiled 1% of quality from 2015 and 2016 this would give an additional 35,745 cts of quality that could be sold.

Part 2: Following ramp up, and improvements to processes, the operational cost of mining has been reduced to $0.62 per ct in Q2 2017 which is very encouraging. 1H of 2017 produced 1,959,957 cts with what interims termed “project level costs” of $1,427,000 = 1H average of 0.73c/ct mined. However, looking at interim financials, cost of sales (less cost of online goods purchased) comes to $1,240,000 less $98,000 of other income plus finance costs of $2,000 and additional company operating expenses of $900,000 giving total costs for 1H of $2,044,00. This gives an average total cost/ct mined of $1.04/ct. From 2015 to end 1H 2017 the average price/ct sold was $0.84 (average of $0.59/ct for low and carb and $2.81/ct for medium/higher). Sales (excluding website) for 1H 2017 represents an average of $0.81/ct sold and $0.52/ct mined or half of total costs. Comparable figures for average prices in 2016 were $0.81/ct sold and $0.47/ct mined. For 2015 to 2H 2017 I got a total production of 5,534,494 cts at an average grade of 16.06. Most recent 2Q 2017 grade was 17.52. 2Q 2017 had full ramp up production levels and opex costs of 780,000 to produce 1.26m cts. Suppose this can be repeated for next three quarters this would give estimated opex cost of $3.12m to produce 5,040,000 cts. In 1H total costs were 617,000 more than project level opex costs. I have doubled this to get an estimate of other costs for a year of $1.234m. This gives a total estimate of all costs for the year of $4.354m equivalent to estimated costs/ct mined of $0.7867/ct. From 2015 to end 1H 2017, 2,661,596 (low and carb) and 341,200 (medium and higher) cts have been sold for total turnover of $1,557,870 and $958,400 for average prices of $0.59 and $2.81 per ct. or $0.84 average for all cts sold. The problem is that to date 45.74% of material mined has been unsold (or lost in cutting) with 48.09% of production sold as low/carb and 6.16% as medium/higher. Assuming all top quality material has been stockpiled to date and using an early guidance from 2015 that top quality was around 1% of production then have assumed 44.75% of prodn is not sold (although this may be a significant overestimate is a good proportion of this might be sold later following heat treating and development of sales channels) and 1% could be sold as high quality. That would give sales of 2.423m low/carb 310,715 of med/higher and 50,400 cts high and 2.255m cts unsold. If we assumed we could get long term average prices of $0.59 for low/carb and $2.81 for med/higher then excluding high material this would generate turnover of $2,291,477 which compared to estimated total costs of $4.354 leaves a shortfall of $2,062,553. The 1% quality (50,400 cts) would have to sell for $40.92/ct to break even. However, if we have stockpiled 1% of quality from 2015 and 2016 this would give an additional 35,745 cts of quality that could be sold.

Part 1 ..Hi Quindell, I was not trying to suggest that all material be cut and polished. Just that the significantly higher turnover and margins may be realisable if the better-quality material is beneficiated. Some back of the envelope crude calculations. Went through figures in past financial and operational reports. I generally used later figures as correct where there were any differences but sometimes used the most granular (eg would use 1Q production figure if listed to nearest ct in operational update and only given as rounded in 1H report). For the reasons outlined below, I think you may be overestimating the potential profit if average sale price that can be obtained is $1.50/ct , Have explained my workings in case I have made a mistake.as there is a need to factor in additional corporate running costs as well as the currently high proportion of production unsold. Gemfields never has sold all its production either, and I make it that to date RLD currently has 45.74% of sapphire production to date unsold (just over 2.66m cts). I wasn’t clear exactly what project level costs were used to derive the Q2 2017 reduced cost of $0.62/ct mined . Therefore I had look to see how quoted operational costs incl capex stacked up against cost of sales + corporate operating expenses and finance charges less any other income generated. For 2016, operational mining costs incl capex came to $3.04m for the year with a cost of mining of 1.14/ct. Management has been doing really well in lowering operational costs of mining per ct. Looking at the annual accounts for 2016, I get cost of sales less costs of online goods purchased (as I presumed much of this was Tanzanite) of $2,916,999. Subtracting other income of $394,000 (excluding any supposed gains in issuing shares at above their face value) and adding corporate operating expenses of $1,754,000 and finance costs of $46,000 gives (with zero tax) I get a total expense for 2016 of $4,436,765. To break even one would need to have turnover of at least that. That total expense divided by cts produced gives an average total company cost of $1.66 per ct mined in 2016 (higher than then the R1.14/ct just looking at mining operating costs). On average that year 1,536.696 cts of low quality and carborundum were sold at an average price of $0.81c/ct sold. This is equivalent to only $0.47 per ct mined. Think we need to factor in production to date that has not been sold. Much of this may well be low quality and carborundum that would only fetch a few cts/ct anyway? Looking more positively a portion of this unsold stockpiled material might be stockpiled green material which might now sell much better and boost future turnover given new exclusivity deal with sightholder?

Hi Quindell, You note “its not the strategy to sell cut and polished stones”. Yet in June this year, the company released its annual report which again mentioned the Gem Dreams tie up to develop and implement Capricorn Sapphires’ beneficiation processes and its vertical integration strategy. The report included the following.. 1) “As the beneficiation strategy is further developed the Company will be able to provide larger quantities of cut and polished blue and fancy coloured sapphires with full provenance and authenticity” 2) “The review further highlighted the additional margins that can be achieved through additional beneficiation of not only the fancy coloured sapphires, but also in the case of traditional blue sapphires”; 3) The Company … decided it needed to further develop its beneficiation pipeline in order to achieve both higher prices for its product range as well as to enable the development of new sales channels. The report however mention does mention the heat treating “and optional cutting services for batches of Capricorn gemstones”. It goes on to say buyers have the choice between purchasing rough, heat treated rough or partially or fully final product from RLD. As you say, if may be best to sell most of production as heat-treated rough. After all Gemfields sold most of its material as rough. However, the other comments in the annual report do not fit with your assertion it is not the strategy to sell cut and polished stones. Rather this perhaps could be rephrased to say that for the larger and highest quality material it appears to be the intention to beneficiate and sell it heat-treated, cut and polished stones to maximise margins and profits from this material. These few real high-quality stones potentially could really boost turnover and profitability if the Company can get its marketing and selling right. As you say, it may be best to wait till there is sufficient working capital to develop beneficiation and sales channels for the very best material. The question is can we afford to wait? Looked at past results to estimate what might be achieved at projected ramp up levels of production and based on sales records. Will post separately on this and your suggestion of a 150% profit if company gets $1.50 per ct average.

Encouraging article Gorrila - Thanks for posting. I see specifically mentions parti-coloured gaining in popularity. Article also mentions ethically sourced gemstones.

Suspect main reason for the low sp at the moment will be that fundamental investors are waiting for proof that the company is profitable given concerns about the low amount of cash left (and ability to continue as a going concern). With the sp so low, another round of placing (if it were to be required to raise more working capital) would seriously dilute existing holders and allow those subscribing to the placing to buy up a bigger share of the company at a very low price. I suspect there may also be a concern as to why so few quality stones have been available for sale on the company website, and why we have as yet had no reports of any cut and polished quality stones selling for significant amounts (apart from small website turnover but some of that may be Tanzanites). Even if it had just been a few cts of high quality sold (while the company was developing its marketing and sales channels) it would have been nice to have seen reports giving the prices/ct achieved for some of the high quality heat-treated, cut and polished material. High sales lumped with medium - Why? Investors may also have been spooked a bit by failure to provide a more detailed production breakdown by quality/colour. We still don't have a good idea what % of production is quality, how many quality cts have been stockpiled, or indeed what sort of prices might be able to be obtained for them. Some of the latter will be dependent on sales/marketing success (such as for green stones). As for the new JORC - Estimated average grade (ct/t) in the new area is lower than Capricorn is currently producing. Will this lower grade be economic to mine? Will in part depend on quality profile (and JORC says absolutely nothing about this), and prices that can be obtained (which we don't yet know for quality/colour). There may be additional economies of scale adding in more area. Time will tell what the economic potential of the new area is. Let's hope that management's assertion they are about to become profitable is correct and that we are about to see proof that their sales and marketing efforts are starting to generate returns. As discussed previously, many other aspects of the business are certainly moving in the right direction. Bernard Olivier is quoted in the interims RNS as indicating that RLD is on schedule to achieve operational profitability from July onwards, as previously guided. If RLD had had sales of quality material in July that were commensurate with a return to profitability presumably the company would put out a positive RNS confirming this to reassure investors and confirm management's guidance. If we get an RNS soon that indicates a return to operational profitability (as per guidance), sp will rise, a few shareholders will be smiling and management will deserve great credit. Alternatively the longer it goes without positive sales news the more the sp may continue to drift down.

and another ..http://www.proactiveinvestors.co.uk/companies/news/182050/richland-resources-first-half-boosted-by-ongoing-capricorn-sapphire-ramp-up-182050.html

Another summary highlighting the positives: http://www.proactiveinvestors.co.uk/companies/news/182077/interims-give-investors-in-richland-resources-a-sign-of-things-to-come-182077.html

Summary highlighting the positives in main RNS : http://www.lse.co.uk/share-sharecast-news.asp?shareprice=RLD&ArticleCode=26284572&ArticleHeadline=Richland_on_target_to_achieve_operational_profitability_at_Capricorn

Can't see how that can be the case Down to Earth. Based on sales volumes reported to date the majority of the material sold has been carborundum and low quality sapphires that can only sell for a few cents per ct. Just look at all past results. This could have been expected. For example in 2017 1H, 73% of total cts sold were of low quality or carborundum for an average price of 10c/ct. Medium sales can boost average prices per ct. In 1H 2017 medium/high sales of 340,000 cts achieved $2.77/ct. Surely the hope is that that total turnover for low and medium quality can come close to covering much of costs (which are being reduced every quarter). It is the amount of production and sales of the rarer high quality material that will be key to levels of profitability. Unfortunately yet again shareholders have been left in the dark as we have not been given information on either of these metrics. Maybe there is a good marketing reason for this, and the company may prefer to report on such sales only after they have taken place. Perhaps there may be some positive sales news in Q3 as marketing and sales of higher quality progress. The high quality fraction will in all likelihood only make up a small fraction of what is mined; but as yet the company has been very quiet on what proportion this is, or what sort of prices they may hope to be able to get for this. Exactly the same situation (rare quality material providing much of turnover) has prevailed with reported sales of Emeralds and Rubies (and Rubies are in essence just red sapphires) if you look at previous Gemfields' results. How can you put an average price of $5 per ct when the average price for cts sold in 2017 1H was 84c/ct and 81c/ct sold in 2016? Even the medium/high sold for an average of much less than this last Qtr ($2.77/ct). Higher quality cut and polished at a retail level potentially can of course fetch much much more. However as the company will be selling heated rough or cut and polished to others, prices that can be obtained will of course be much lower than retail levels as wholesalers and retails look to add their big mark ups. Sadly RLD's attempts to retail online and capture big margins were pretty limited with only a tiny number of stones put up for sale. I make it that the company so far has mined 5.530m cts and sold 3.003m cts for an overall average price of 84c/ct sold (equivalent to 46c/ct mined). Have made no allowances for any material lost during cutting and polishing. Number of cts reported sold to date represents 54.3% of total cts reported mined.

If we have such high value stockpiles why not give an indication to shareholders this is the case? Also would be nice if they had also indicated that they had recovered so many stones >20cts, so many >30 cts etc. and explicitly have stated they were being kept to sell later. If they have only just started to sell a few higher value stones with the majority stockpiled why not say this?

p13 of 2016 annual report indicates inventory listed as lower of cost and net realisable value.