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For me overall ramp up of production (while encouraging) is not the key issue - Starting to finally demonstrate decent sales of the rare higher quality material (that has been treated, cut and polished) is. Despite reducing costs of production/ct the rest of production, after excluding higher quality material, is not currently being sold at an overall profit. Ultimately the share price has to reflect actual earnings per share (* some sentiment PE multiple). It doesn't matter how many cts the company can mine if they can't be sold at a profit. As with emeralds and rubies, the key will be if the company can finally start to demonstrate some decent turnover derived from sales of some of the stockpiled and beneficiated rarer higher quality material. Marketing and selling the treated cut and polished in my view remains key to potential profitability. At this stage we don't have a good idea as to how much quality material has been mined to date. Prices/ct should be very much higher for the treated cut and polished best quality increasing with ct wt (although of course there will be significant wastage during cutting). Encouragingly the company recently seems to have been more active in promoting the quality ethical Aussie sapphire brand and some of the lovely larger coloured stones they have been pulling out of the ground. For the sp to take off, all this needs now is sales news that confirms that the company's beneficiation and marketing attempts are starting to pay off (with some real and significant revenue generation from this beneficiated material) and some sales news that at least confirms the company at least on track for a return to profitability soon if not by the end of 1H 2017. Without sufficient quality sales and reasonable prices, the company will continue to lose money. The relatively recent dilutive placing didn't raise much working capital (given low sp) and so quality sales need to start happening sooner rather than later to provide working capital. Of course it will take time to build up the Aussie sapphire brand and pricing, but we need to see a decent start to sales of this material. Elsewhere mining appears to be progressing very nicely with increasing ramp up, reduced production costs/ct recovered and increasing grade. Bernard O and his team seem to have this in hand. The company has also been reporting a number of finds of bigger stones recently. Like others I too await operational sales updates with interest. CEO Bernard Olivier has been positive in recent RNS comments about possible return to operational profitability in 1H 2007. Let's hope his optimism is borne out over the next few months. Once the market can see the company can provide a significant regular supply of quality material this further should help boost prices/ct as it did for Gemfields in the past.

Pallinghurst (and associated allies) has been the major shareholder of Gemfields for some time. In my view ordinary shareholders got stiffed with the purchase of the loss making Faberge by Gemfields in 2012. This was effectively a related party transaction as Gemfileds bought it from parent company Pallinghurst (Gemfileds' biggest shareholder) in an all share deal worth at the time an estimated $142m. Gemfields increased is share capital by a whopping two thirds to pay for the deal boosting Pallingurst's stake in Gemfields at the time to a reported 49.3%. Only 5 years earlier in 2007 Pallinghurst bough Faberge from Unilever for only $38m. Ostensibly one report indicated investors put in another $60m at the time. However this still meant that Gemfields paid effectively its parent major shareholder company far more than it had paid for a hugely loss-making business. Faberge losses have pretty much wiped out most of the mining and gem sale profits Gemfields has been earning on its rubies and emerald operations (that on their own were nicely profitable). A share price ultimately will reflect growth in earnings and Pallinghurst through its actions effectively stuffed up Gemfields' profit making ability for quite a few years to the significant detriment of ordinary GEM shareholders. In my view the share price of GEM would be markedly higher with ordinary shareholders having a much bigger stake in the company if hadn't been for this Faberge transaction. Not only did the deal screw up profitabilty of the company, but Pallinghurst benefited by getting a bigger share of Gemfields at the expense of other shareholders and also made a significant profit on its resale of the heavy loss making Faberge to Gemfields. I mentioned this history in a post here a couple of years back. This is why I have never wanted to own or keep Gemfields shares (if we had got GEM shares in any future RLD takeover). The major shareholder Pallinghurst (and its associated allies) IMO has not been acting in the best interests of the company and its other non-Pallinghurst-related shareholders. Now I see from Big Minnow's post that Pallinghurst has made an unsolicited bid for the remaining 53% of shares they don't yet own at no premium. Ordinary shareholders are understandably furious. Once again it appears to be all about what is good for Pallinghurst and stuff ordinary GEM shareholders; or have I got this wrong? . http://www.telegraph.co.uk/business/2017/05/19/investors-hit-back-brazen-takeover-bid-faberge-owner-gemfields/

Agree marketing (including building the ethical and quality Australian Sapphire brand) and sales will be work in progress; and we can hope for improvement here over time. However, let's hope that we finally start getting some reports of more significant sales of quality material at higher average prices/ct . Certainly interesting times and I await Q2 and Q3 updates to get a better idea of progress being made and future prospects. As regards the previous Analyst note - were you referring to the Sanlam one from June 2015? This was based on much higher expected production figures (based on original JORC) with a projected ramp up to14.4m cts in FY19 rather than the current ramp up target of 4.8m cts/year. The analyst used a stone value of US$1.20/ct which he indicated was what management was using and which management believed to be on the conservative side.

The % quality may of course be higher than 1% of production. I see from my notes that one year Gemfileds high quality rubies made up 1.29% of production.

Need a geologist to comment but with alluvial deposits would stones not generally be smaller. However, historically the mine when run by Australis produced some larger stones. From @AusSapphire twitter feed there have been some pictures of nice stones recently recovered of 34 and 64 cts.

Thanks very much for your detailed response Quindell. Hope you had a good holiday. Re a) and d) noted - thanks. Re b) I went back to my spreadsheet to check and you are right that reported production is over 4.2m cts. I found a mistake in my totalling cell which for some reason didn't include Q1 2017 production (although I had included this in spreadsheet). I now get a revised corrected total of 4,270,220 cts which is similar to what you had. My mistake - and of course this screws up all the rest of my calculations so please ignore these. Pleased to see you think the wastage may be lower than 80%. That is good news - I had just used 80% as this was the figure I saw on a few internet sites I looked at. The heat treating apart from improving the colour may also de-risk sales of material with quite a bit of silk. The initial plan was to have sight sales, but this doesn't appear to have happened with the company more recently indicating it was pursuing a strategy of treating, cuttinga and polishing quality material. Obviously the BOD are search for the most profitable ways to sell the quality stock. Using above production total, an estimate of 1% higher quality and 30% yield less Q1 sales I get revised possible stockpile of 12,147 cts (similar to yours). You may well be right that stones sold to date may have been smaller. Unlike Tanzanite, Sapphire has the advantage that as gems get larger so price/ct goes up. At retail level these will command much higher prices as you say. However if we are selling to the jewellery trade prices will be less so retailers can make their margins. Let's hope that the $35.20/ct for reated cut and polished is a huge underestimate. I agree with you that this could well be the case. With only 664 quality cts sold in Q4 this is too little to get an accurate idea of what average prices per ct we may get. The few very large stones recovered may also fetch good prices. Bernard Olivier has indicated the company is on track to get to operational profitability in 1H and he will know what sort of prices he hopes to get for the larger stones and how much of quality production is made up of them. I also am pleased with the reported mining progress with production ramping up and grade improving and costs/ct coming down. In time hopefully it will be possible to build up sales channels for smaller lower priced material (perhaps supplying companies like Reign or arranging TV channel deals. These took time to sort out for Tanzanite and so probably something for the future. Good to see the increased promotion of eithically produced quality on @AusSapphire twitter feed. They are showing some nice stones and this can help build the brand. Once again many thanks and apologies for my silly totalling mistake.

Sniffer - that is what I found but no mention of RLD in the Report Digest summary on this page.

Thanks Knowledge Bank .. You wrote that "according to estimates provided by TMR (Transparency Market Research), Richland holds a ‘ready to sell’ sapphire stockpile of 326,000 carats of heated, cut and polished sapphires. At an average price of US$35.20 per carat, this stockpile is worth $11.4m or £8.9m (equivalent to 2.13p per share). This may explain the board of directors’ base valuation of the business at £7.14m (1.74p per share)." Is this from the http://www.transparencymarketresearch.com/sapphire-mining-market.html report on sapphire mining for sale at $5,216? If not is there a link to this information? I searched for Richland Resources on their site but nothing came up but a search on Sapphire produced a link selling their sapphire report. That that stockpile of treated cut and polished is amazing and very good news if the report is accurate. If cutting wastage levels were say 80% this would translate to 163,000 rough pre-cut quality material which would represent a high quality rough proportion of 4.84% of all reported cts mined by end Q1 2-017. This is way above the rough indication of around 1% during early days of mining in 2015. Another reason for directors to increase their shareholding in lieu of salary or as part of a placing they buy into would be to conserve and generate cash to try to keep a company afloat and a going concern (protecting their existing stake) until it can become profitable. However as you intimate you wouldn't be putting in any more money if there wasn't some reasonable expectation of light at the end of the tunnel. However, if the TMR report is accurate, then presumably the BOD will have known for some time they were pulling out a decent amount of quality material. Why was this information not been released to the market and shareholders? The release of such news may have boosted the share price, meaning that the recent placing could perhaps have been smaller and less dilutive (to raise the same amount of working capital) or could have raised more working capital if placing kept the same size. Gemfields also have indicated that having a significant supply of gems assists in boosting prices as buyers/jewellers are then justified in spending on marketing and selling. If Richland has so many cut and polished why are so few (currently 19) for sale on the website where sales will generate high margins? .

Let's hope so.

Yes Sniffer. That has been the case for some time and I hope you are right. If the mine becomes nicely profitable then the BOD will get a payback given they have increased their shareholdings at low prices. In general a good thing for directors to have significant skin in the game with some shares paid for (and not just from options). Clearly there has been continuing progress on the mining front. Let's hope signicant progress can now be reported on quality material marketing and sales front. Bernard Olivier did indicate the company was on track for operational profitability in 1H. Let's hope his optimism is borne out by Q2 sales results.

Of course it comes down to how much the company can sell cut and polished for. Let's hope they can sell at least some of the cut and polished for very much more than $35.20/ct reported for Q1. This could make quite a positive difference. Presumably this quoted price for quality sold in Q1 was per cut and polished ct sold rather than price per ct rough that produced the gems sold cut and polished. Let's hope the proportion of production that is higher quality is higher not lower.

require a profit of 58cents/ct mined.

Quindell writes a) "The last of the placing shares manipulating the price", b) "we have inventory of cut and rough stones which dwarves our current MCAP" c) 1000% plus return from these levels (written at price of 0.85) and d) "had the placing recently". a) and d) Not sure why the few people (mainly insiders) who took up placing shares would want to sell them for less than they paid if there was an expectation the company was to turn a corner and return to profitability. Have I misunderstood you, and you mean that the share price has been adjusting downwards to reflect the huge dilution post-placing ? b) How do you get to the company having an inventory of cut and rough stones that dwarfs our current market cap??? We haven't had any update since 2015 as to what proportion of production is of high quality. I think indications then were that higher quality maybe was around 1% of production. It will be a small %. 1% would give estimated 33,702 cts of high quality rough produced up to end Q1. Problem is there is usually quite a loss in cutting and polishing. A number of internet sites seem to suggest this may be as high as 80-90%. Using the lower figure of 80% wastage this would estimate potential number of cts used up to sell the 664 in Q1 at 3,320 leaving 30,382 unsold. This could produce a cut and polished wt of estimated 6,076cts. If this could be sold for same price/ct as Q1 sales ($35.2/ct) this would generate turnover of $213,891. Assuming 99% of production is low and medium quality we have produced 3,336,518 low/med cts to date. 78.2% of this (2,608,606 cts) has been sold for an average price of 69c/ct. generating turnover of $1.809m. If you look at Gemfields they too don't sell every ct they produce. If we can sell the same proportion of lower/medium quality stocks (and that is a big if as much of stocks may be low quality corundum that would only fetch cents/ct) then 78.2% of unsold balance of 758,294 cts estimated lower quality at 69cents/ct could get a further $411,275. Add this to the estimated value of quality and you get $625,166 value of selling stockpile. Even if the % high quality was high at say 2%, the stockpile would (at current sale prices) only generate $844,151. Current Market Cap at current exchange rates is $4.618m. I'd say it is the other way round - the market cap dwarfs the value of stockpile (unless of course much higher prices can be obtained for stockpiled quality material going forward , cutting wastage levels are less, or a much higher proportion of production has been high quality. c) based on info we have, where do you get to a market cap that is so much higher ? That would translate to a share price of 9.35p. If the PE was to say reach 20 then this would imply an EPS of 0.4675p/share which would be equivalent to earnings after tax and depreciation of $2.776m at current exchange rates. Even with ramp up to 4.8m cts/year this would require a net profit o

The value of a company is usually thought of as the total amount of money that shareholders can get from the company over its lifetime adjusted for inflation back to present value. On this basis the company (and its shares) is only undervalued (at the current share price) if the company is actually on track to become profitable again or its assets less debts are worth more than its current market cap. Becoming profitable is going to require sufficient turnover from sales of beneficiated higher quality material. To date this hasn't happened. Only a tiny amount of quality material has been reported as sold. In Q1 664 cts were sold but this only generated $23,373. We also still only have a few sapphires on the website and RNS's have been quiet on web sales. In the RNS on 18th April CEO Bernard Olivier is quoted as saying that Richland's sales strategy "continues to progress well" and "is on target to achieve operational profitability in the first half of 2017". Let's hope this is the case, and the company can start to provide us with some concrete sales figures that show it is getting the marketing and sales of this higher quality material sorted. Building the brand and demand with sufficient margins and sales may take time. Can the company generate the significant turnover from higher quality sales needed for profitability? Is enough high quality material being produced? I await news of Q2 higher quality sales with interest. Shareholders will be hoping news backs up Bernard Olivier's upbeat statements. If the company can deliver on this then history will judge the current share price as an undervaluation.

Yes, I too recall the bitter Gemfields Tanzanite One take-over battle at the time. Gemfields now has ex Tanzanite One CEO Ian Harebottle as its CEO too! However this was in 2008 at a time when prospects for Tanzanite One were better but declining due to GFC and its impact on tanzanite prices. However the problems of significant illegal invasion of the mines, and possibly also the Tanzanian Govt's decision to stop the export of bigger rough (which led to uncontrolled smuggling to Kenya) and its failure to enforce its own laws (re smuggling and illegal mining) and its effective nationalisation of half the company without proper compensation still had to rear their ugly heads. While longer term shareholders know that staying in Tanzania became untenable; long term shareholders will also know some of the companies problems (albeit before Bernard Olivier became CEO but with some of the current directors on board) have been self inflicted. ) with what now can be seem as some very bad capital allocation decisions in the past (especially the Tsavorite aquisition and paying out so much of the company's capital in big dividends at one stage). However, if the BOD can turn the Capricorn mine into a profitable venture, and succeed in marketing and building the ethically produced Australian quality sapphire brand they will have done very well. Let's hope the Capricorn mine is producing enough higher quality material and the company can finally sell it at decent margins to allow for profitability going forward. Await Q2 operational updates with interest. Given the much bigger turnover from Gemfields' Ruby and Emerald operations, would Gemfields be interested in RLD and Capricorn as turnover is likely to be very much smaller. However they just might in terms of helping consolidate coloured gems (increasing pricing power into the future) and the added benefit of being able to advertise a number of different coloured gems. They would have the resouces to spend significant money marketing as they have done for Emeralds and Rubies. They have shown an interest in sapphires with their feasability examination in Sri Lanka.

That's brave Quindell. In a note at the end of an RNS I think Bernard Olivier indicated he hoped a return to operational profitability this quarter. Let's hope that is the case, and that finally the company reports some significant higher quality beneficiated sales at reasonable prices in Q2. Marketing and selling the material for a decent price has clearly proved to be much more challenging than anyone initially expected. Let's also hope that the proportion of cts mined that is of higher quality is also sufficient for profitability. On a postive note, the pushing of ethical Australian sapphires of known provenance seems to be gaining a bit of momentum. On that score, I think it would be great if some of the very best Australian material could be shown off by beautiful models (as Gemfields has done successfully and the company did in the past when selling Tanzanite). This could help build the association between "beautiful quality" and "Australian sapphires", and help create the desire and demand that can help push up prices for the top quality material. This one could go either way to hero or zero. Has enough quality material been mined and can RLD finally sell it beneficiated for decent prices ? If they can achieve the latter, then margins should hopefully will be much better than otherwise would have been the case, and delays in selling the better quality material will have been justified.

While the mining itself seems to be progressing nicely (with increasing cts produced, increasing grades, reduced costs/Ct and finding some larger stones). However, the company still has to demonstrate it can sell a significant quantity of beneficiated treated cut and polished higher quality material at a reasonable price. Marketing and sales of a sufficient amount of this material is going to be key to profitability and whether company can continue as a going concern. We also haven't had any recent indication as to what proportion of cts mined to date have been of higher quality. Website continues to only have a small number of sapphires for sale. Reporting on website sales could improve too. Hopefully marketing and significant sales of higher quality stones are finally getting off the ground, and that sooner rather than later the company will update the market on Q2 higher quality sales; and that these confirm the company's projected return to profitability is possible/likely.

and more big stones found https://twitter.com/AusSapphire including a 64ct blue

Looking up Facebook Australian Sapphire after todays RNS and found this post from Laurence Read https://twitter.com/AusSapphire/status/857205683737042948/photo/1 and on Twitter link https://twitter.com/AusSapphire . In the latter case at the bottom pleased to see being followed by a shopping channel.

The Company has successfully been increasing grade and production while reducing costs/Ct which is good. Now the challenge for BOD is to market and sell enough of the beneficiated quality material at a reasonable price to be able to return to profitability. Await Q2 update with interest.