Member Info for relephant

Of course if the company can finally start generating a profit from what it is mining then having a bigger resource that could be exploited over a longer period or that could help generate bigger profits if production can be increased further should increase the valuation as the profits the company can make over its lifetime will increase. There may be economies of scale if there are additional resources that can be exploited at the same time, further reducing costs /ct and increasing margins and profits, further increasing value. Management will have done well if this is the outcome. However the company has limited cash and in order to ensure it doesn't go under or shareholders are diluted further by yet another placing it is essential that we don't just keep getting stories as to how things will be better in the future, but we get news that the company has finally started making some decent sales of some of the stockpiled beneficiated material. We also have no idea what kind of resource estimate may come. Insufficient cts and or low grade may not be economic to mine. On the other hand news of a sizeable additional resource at decent grade would be great news provided what is dug up can be sold at a profit (covering not just mining but also corporated and marketing and sales costs. I still worry about the lack of information being provided to shareholders about what quality material has been mined and beneficiated to date, and on sales of it, as well as to why there have been so few sapphires for sale on the company sales website. Hopefully we will get some positive sales news soon.

Maybe, but doesn't matter how much gets dug out of the ground if it can't be sold at a profit. There have been positive recent comments from management and more publicity for ethical Aussie sapphires with treating,cutting and polishing, ramp up in production and reduced costs of mining/Ct, increasing grade, and now first sightholders (one with TV channel links) and exclusivity agreement for treated green. All good but what we need is news to confirm the rubber is finally hitting the road with news of significant turnover raised from sales of some of the stockpiled beneficiated material. Let's hope management can back up their optimistic comments with sales data in the not too distant future.

Mkt cap = share price * shares outstanding with share price = EPS * sentiment measure (PE ratio). The PE will to some extent reflect prospects for growth with people prepared to pay more when expected growth in EPS is higher given that the intrinsic value of a company is usually defined as the sum of all future profits discounted to present value. In RLD's case the current resource that can be mined is limited. Thus any market cap estimate should consider the size of EPS, potential growth rates in EPS and the finite nature of current estimated mineable resource.

Agree - however a bit rich of the Tanzanian president wanting companies to list on local stock exchange. Richland tried to do that so locals could buy shares but this never happened. I think there was something crazy about not wanting to recognise AIM as the primary listing, when the Tanzanian stock market by comparison is tiny! They ended up stealing half the company anyway, and Govt rules and failures to implement its own laws to stop the illegal mining and smuggling made it impossible to operate. I fully supported Bernard Olivier's position at the time of putting his workers first and stopping mining in invaded mine shafts. While there clearly have been significant problems in getting marketing and sales organised of Capricorn sapphires (which it seems they are finally getting on top of) I am sure management must be delighted with the relative ease and predictability of working in Australia.

As another long term shareholder I agree with Martyn it is much better to be operating in Oz rather than in a place where rule of law can breakdown and governments can cause havoc. I think Gemfields were getting problems with illegal miners in Mozambique. I too got TNZ dividends but IMO it was completely crazy to spend so much of our then substantial capital reserves on this (and the ill-fated Tsavorite project). Not only have we had massive dilutions since to raise working capital what has been raised is much less. Also at the time the GFC troubles hit the company (but before Bernard O became CEO), because of these poor historical capital allocation decisions, the company didn't have the cash on hand at the time to go and buy up as much of the other quality material as they could at the much lower prices at that time (for stockpiling and selling later once prices had recovered). The company had initially done this to great effect. I still would like to see proof of sales at decent prices but certainly the marketing and sales news has been moving in the right direction in recent months. News has been much more positive with news of beneficiation, increasing production and lower cost/ct, arrangements for treating, cutting and polishing, better information on Twitter, as well as the appointment of first sightholders. Martyn not sure if you remember but there was a time in the early days of the company when one piece of good news was followed by more and the share price rocketed. Maybe just maybe we are entering such a phase again. Await sales update news with interest.

Agree the news in the RNS is encouraging. Link up to TV sales not easy to get. If can be arranged TV would presumably provide a good outlet to sell cheaper material. All we need now is confirmation of significant sales (or at least a decent start) of the stockpiled cut and polished quality material. I worry that only having two sight holders is not good for pricing which may be higher if more bidders. However may be good to have exclusivity arrangement for heated green to provide enough regular supply to justify Royal Touch spending money on marketing. Gemfields' Ian Harebottle in the past indicated regular significant supply boosted prices.

Some old history for newer investors.. The Tanzanite One dividends represented a terrible use of capital. The company used to be cash rich but blew much of it paying excessive dividends ($21.176m in total till end 2008 with dividends per share 8c, 10c and 4c in 2006,07&08 respectively. The dividend payment of $7.733m in 2008 was especially questionable given that year the company posted an after tax loss of -$9.661m!!. However at this time I think hostile Gemfields takeover effort occurred. More money was spent on the ill-fated Tsavorite acquisition. Troubles started soon after, and as there was insufficient capital left there were a number of very dilutive placings soon after and again a couple of times more recently. The company could have weathered the storm it faced in Tanzania post GFC and Tanzanian Govt issues much better without need for the dilutive placings had it made better capital allocation decisions way back then. At the end of 2008 there were only 74.476,691 shares so there has been a big dilution since that yielded far less cash than spent on dividends and Tsavorite.

Above all else what is needed is news on sales and marketing of stockpiled cut and polished material to confirm management's optimism regarding their prediction of a return to operational profitability soon. A new resource estimate would be nice, but something for the future, and would still need capital to develop if there is positive news. First and foremost the business has to start generating a profit soon to provide all important cashflow to fund operations and possible expansion going forward.

Thanks for that info no name. I read Pallinghurst was not offering other shareholders any premium but I think they own or control a majority of shares. Is there some form of protection for minority shareholders ?

The GEM "takeover" was by its major shareholder Pallinhurst who previously screwed over other shareholders with a disastrous deal for Faberge which boosted their share of the company and Faberge has been heavily loss making stuffing up earnings and hence negatively affecting the so - a double negative whammy. RLD's turnover currently is tiny and has not yet demonstrated profitability. As for current intrinsic value. Page 41 of annual report (bottom) gives projected annual production of 4.183m cts (equivalent to proposed ramp up to 1.2m cts per Qtr. Company gives estimated operational costs for 2017 of 66c per Ct. At average 2016 selling price of 77c per Ct and at exchange rate of 1.27 would give PBT of £416,950. Even with no tax (as currently there is a carry forward loss but tax normally 30% I think)!this only translates to an EPS of 0.1016p which with a P/E range of 15-20 would give a sp of 1.52p to 2.03p. This also assumes all cts are sold. Thus any substantial jump in sp to say 5p would require increased turnover in future from sales of beneficiated material. The latter should sell for much more per Ct. Again beneficiated sales will be key here. Need to bring average sale price way above 77c to get above 1.5 to 2p range.

I looked at the TMR site a while back and while I found an abstract and link to their sapphire report, it costs over $5,000. Thus I wasn't able to check the number of cut and polished that Knowledgebank quotes from TMR report . I also looked up Beaufort site and while they have a report for Bezant Resources (other company Bernard Olivier is CEO of) I couldn't find any reports on RLD. Beaufort site typical of sell side analyst site with majority of recommendations being for buys and speculative buys ! Would have still liked to have read it if it had been available.

If one assumes a PE ratio of about 15-20 and using current £:$ exchange rates then to get a share price of 5p with current number of shares would require a PAT in the region of ~$1.30m to $1.74m equivalent to an EPS in the range of ~ 0.32c to 0.42c. Supposing ramp up achieves projected 1.2m cts per Qtr and 1% to 1.5% of production is high quality (42,000 to 63,000 cts annually) and that cutting loss rate is 50% (= 21,000 to 31,500 cts cut and polished quality produced per year). If one keeps things simple and assumes all corporate and mining costs could be covered by sales of low and medium quality material (probably would fall a little short of this in reality) then to achieve the kind of profits needed to justify a 5p share price assuming a 25% tax rate, would require sales of all 21,00 0- 31,500 cut quality cts to get average prices from ~$55 to ~$83 per ct (if PE is 20) and ~$74 to ~$110 per ct (if PE is 15). These back of the envelope figures could of course be way off if a much higher proportion of production can be cut and polished (as suggested by Knowledgebank's reference to a TMR report. We also could sell the best quality cut and polished high quality stones at very much higher prices (especially if sold on Richland's website). EPS and potential viability and profitability all hinges on the quality distribution of production and how much of the quality cut and polished can be sold and at what prices. However we really have no idea at the moment as to how much cut and polished can be sold and for what prices. Thus for me, one cannot value the share right now with any degree of confidence. Let's hope the next operational and sales update has more and positive information.

Increases in sp are of course nice. I agree limited availability of shares is leading to sp movement on smallish turnover (in £). However, we don't at this stage know who is buying and on what grounds. Are buyers just speculating and bullish about future prospects based on the "story"? Or are we dealing with a potential sapphire buyer or two in the industry who have seen/know about Capricorn cut and polished stock levels and quality? As a long term shareholder, I can remember that in the early days of Tanzanite One, there was a period where one piece of good news followed soon after another, and the company was nicely profitable and and the share took off. Should the company finally release some good news about significant cut and polished sales, then just maybe this could just be the first of a series of positive news RNS's which could see the share price re-rate further. In Capricorn's case maybe there could be additional positive news about resources in the additional area, continuing increasing grade, ramp up continuing to progress as planned, possible future TV sales deals, news of sales (or more recovery) of some special large stones, evidence of increasing acceptance of and demand for Aussie sapphires, increasing prices paid/ct, continuing increases in mining efficiency (getting closer to breaking even just with low and medium quality material), indications of capacity for regular and significant production of cut an polished (boosting pricing power) , recognition for successful environmental rehabilitation, great marketing pictures highlighting the product etc.. Interesting times - but we still need news of significant turnover from beneficiated quality material to confirm the "sizzle" is real and to generate the cash flow to keep the business afloat and to ensure there are no more placings and heavy dilutions. If the positive projections from company officers about an imminent return to profitability and cash generation are realistic we hopefully should get the confirmation soon. If Bernard Olivier and his team can pull this off they will have done brilliantly to extract the company from a hopeless situation in Tanzania, and to successfully develop (a previously failed) mine as well as marketing channels.

Wildebeest don't migrate across the Serengeti for fun - they are seeking out good grass (real returns). Similarly the fundamental (as opposed to speculative) "herd" will only really arrive en masse to seek out profits once there is some hard evidence of a sustained return to profitability on the cards from reported quality sales. Ultimately share price will reflect EPS x some sentiment measure (PE). Knowledgebank referenced estimates provided by Transparency Market Research that he indicated claimed Richland holds a ‘ready to sell’ sapphire stockpile of 326,000 carats of heated, cut and polished sapphires. If this is true, and this material can be sold for a reasonable price the "herd" will be coming as very soon once updates confirm sales of some of this material that indicate sufficient turnover can be generated from sales of this beneficiated higher quality material for a return to profitability. This would justify management's confidence of returning to profitability very soon. However, if one were to assume a cutting loss of say 50% (taking the oft quoted 80% loss as a way for cutters to protect themselves so they don't under-deliver to their customers), this would suggest a stockpiled production of in the region of ~0.65m cts rough that was of high enough quality to beneficiate. Using slightly higher 2017 production figures from the annual report and Q1 update the mine so far has produced 4.274m cts. The estimated cut and treated 326,000 cts would (given 50% cutting loss assumption) represent ~15% of total production to date. Could there have been a typo (extra 0 added on by mistake) and the treated cut and polished stockpiled is actually 32,600 cts? 1.5% of production being high quality seems more reasonable and more in line with sort of levels obtained by Gemfields. Perhaps quite a few medium quality have also been beneficiated? Can't comment as not seen the TMR report that Knowledgebank quotes. Any comments from Knowledgebank to clarify the situation would be welcomed.

Recall they had rights to explore a new area. Depending on what is found may boost the business. Will take time to build up the message of quality ethical sapphire brand with regular supply and the more successful this is the better.

Low medium may cover much of the costs but presumably like RLD and Gemfields to date not all production will be sold. I suspect more likely to continue to be loss making on non-higher quality material albeit much closer to covering costs. Key to really moving the dial IMO will still be high quality sales. How much has been stockpiled and is currently being produced and how much of this quality can they sell at what price?

If this is true and they can sell this for a decent price then the share price will rocket as the mine will have demonstrated it is profitable and cash generative

They haven't done that yet. I think the low and medium quality stuff was covering about 80%of costs so it seems as if it can cover most but not all costs. As with Gemfieds' Emeralds and Rubies the key to profitability will be the higher quality material. Much of Australian material can be quite dark inky blue with some greyish but clearly from some of the photos the Capricorn mine has pulled out some very nicely coloured bright blue, red, green, yellow and parti-coloured stones. As yet we don't know how much they have mined is really nice quality. Await news of first proper sales of the higher quality material with interest. It took the company a long time to persuade a TV channel to sell their Tanzanites in the past, and it therefore may take some time to achieve; but if the company at some stage in the future can manage to persuade one to come on board to sell some of its sapphire production that would also be good news. Problem is that we don't currently know how much quality material has been produced or how much can be sold and for what price. Why are there so few sapphires for sale on richlandgemstones. There are currently only 19!.

N902 - Spot on with your assessment. As you have noticed turnover to date has been low, and sales of quality will be key to profitability (and hence future sp and business viability). While costs have been coming down and grade and production and turnover have all been going up (well done to Bernard Olivier and his team), the company is still loss making. Going forward, it seems as if much of the cost of production can be covered by sales of corundum and low and medium quality stones. Profitabilty will be dependent upon sales of higher quality material that will have been stockpiled (as to date there have been very little reported sales of the higher quality material). Hopefully the heat treated and cut and polished can sell for decent prices. Gemfields found in the past that having a consistent reliable supply helped boost prices. Let's hope the same will apply here. So the real questions are how much quality material has been mined and is being pulled out of the ground currently, and how much of this can be sold and at what price? The twitter and facebook links for Australian Sapphires have been showing some nice big stones the mine has produced. The nice thing about sapphires is that unlike Tanzanites the price/ct increases for these bigger stones. Margins should also be better selling treated cut and polished quality. The more the quality ethical Aussie Sapphire brand can be built the better. The Chairman sums the challenge up nicely at the end of his statement in the annual report "As your management team, our task is not just to realise first operational profit during 2017, but also to build margins and a solid cash business again." . If they can achieve this long suffering shareholders will be smiling.

RNS said report available on company website. While there are links to previous years reports I can't see a link to 2016 report. Anyone found it yet ?