Member Info for relephant

From reports I make it that total production to date is 3,370,220 cts. So far sales of 2,608,606 cts of low and medium quality material (77.40%) have been at average price of $0.69/Ct. Treated cut and polished sales in Q1 account for 0.02% of production so far. Some of the unsold presumably will be stockpiled higher quality material for sale as treated, cut and polished in future. At current costs (0.74c/Ct) and average prices (0.69 and 35.20) how much of high quality would company need to sell to break even at proposed full production of 4.8m cts per year? This assumes all corporate costs included in production and operating costs. Probably need to add interest, depreciation, tax etc. but left these out for now to keep simple. Hopefully as production increases, costs per Ct will fall further. At current costs and after selling 77.4% of production as low/medium the shortfall left would be $974,712. At 35.20 avg price one would need to be able to sell 27,691 cut and polished cts to break even. This would represent 0.58% of peak production of 4.8m cts/yr. The proportion of stones that will be high quality will be very small (as it is for rubies, emeralds etc.) but if say it is 1% then profitability does seem a possibility. All going to come down to what proportion of production is good quality and can be sold treated cut and polished. A bit of luck and a few big stones could further boost turnover. Not considered web sales but these seem to have dwindled.

Oops- Thanks Swifty and Big Minnow. Been travelling on holiday and somehow only picked up 19th RNS overlooking 18th one. Initial thoughts ...Positives - BO talking about operational profitability in 1H and news to come on resource estimate for exploration area. Also grade continues to go up and production costs/ct down. Negatives very small number of cut and polished sold but hopefully this was just a small start at end of Q1 with much more coming in Q2. Again no specific mention of turnover from web sales.

Good question. While BOD are cutting costs of production they will continue to hemorrhage cash unless they can successfully finally start sell their higher quality material for a decent price. We were promised sales of treated cut and polished in Q1 but still no reports....

Stuff how "the market" responds to cyclone news. Short term sentiment is irrelevant to investors (rather than speculators). What matters is earnings and especially free cash flow. One cannot conclude shares are cheap until profitability has been demonstrated. We are still awaiting news of promised first quarter sales of stockpiled higher quality material. Perhaps company is waiting till after annual report which will be negative. Hopefully they have good news to give us very soon after or as postscript update regarding hoped for good sales of beneficiated quality material at a decent price.

Although would have far rather had an RNS confirming scheduled quality treated cut and polished sales in Q1 had taken place with significant revenue raised.

Nice overview film of operations.

Very well thanks Quindell. Please send me your e-mail - I think I gave mine to you when I was briefly a premium member. I don't have yours.

Not heard from long term poster on this and iii board Big Chef or Sniffer 78 or Bigtimber for a while.

Agree that is a major positive but the time is approaching when quality sales have to start happening (and not just going to happen in future). Lets hope they have succeeded in finding a good market prepared to pay reasonable prices for quality treated cut and polished and we have produced enough of this stuff to be profitable. If cash flow can start to be generated then there are additional options to explore another area the company has obtained rights to enabling furhter scaling up. Going to be interesting one way or the other!

As for selling of placing shares - if you had good reason to expect healthy quality sales and an imminent return to profitabilty (and expected rapid increase in share price in response) after so many years of problems, why would you reduce your stake in the company (unless to also buy back shares at a cheaper price) ? Those involved with placing are major shareholders and presumably they would have to report any trades and changes to their shareholdings. To my knowledge there has been no change in ownership notifications apart from BlackRock. I looked at a previous figure and while they had actually slightly increased their shareholding by a few hundred thousand, the placing diluted their % ownership of the company, and it was this that was reported. I agree with BDI that the fact that individuals presumably in the know were prepared to put money in for the placing does give some room for optimism. Make or break time for the company soon, and all depends on production levels, marketing and sales margins on beneficiated quality material. If management can achieve profitability it will be a great achievement.

Interesting debate this morning and both with fair points. Zooropa is is right that the share price is so low because the company has failed to make a profit yet, has burned through the capital it had, had to raise a little more through a very dilutive placing and grade and production (while these have been increasing) have been lower than expected based on initial JORC, and still we await the first substantial sales of higher quality material and apart from an earlier indication the company has been quiet on the proportion of material being mined that is of higher quality. As BDI states the make or break will be the promised first real sales of treated cut and polished higher quality material. Quantity and price (margins) will be key to profitability of the mine. Management have done well recently increasing production and grade while reducing costs of mining per ct. However it is not correct that the "rubbish" is being sold at close to break even point because not all of it is being sold. To date 65.2% of the reported 2.670,262 cts mined has been sold (Gemfields also don't sell all their ruby production either and perhaps the material not sold is corundum that would fetch very little anyway). The 1,740,806m cts sold to date has raised only $1,492,00 which represents an average price of 86c/ct. Management have managed to bring operating costs of project down to 0.79c/ct (although not sure if this includes all costs including corporate costs) but because roughly a third of material remains unsold (including virtually all higher quality) the company is still running at a loss only selling this material. If production can be ramped up to 4.8m cts/year sales of 65.2% of this at 81c/ct would generate $2.691m against an project operating cost (at 79c/ct) of $3.792m - a shortfall of just over $1m and maybe corporate costs need to be added on top. The placing raised only a little cash due to the low sp, This money will run out too, unless significant higher quality sales can start soon. Whether the company goes under, or turns to profit with a rapidly rising share price will depend upon the all important promised sales of higher quality material. Has the mine produced enough high quality material? and can this be sold at a good margin after beneficiation ? The proportion of production that is high quality and how much it can be sold for will be key. Let's hope management will be proved right for holding out for better prices for quality material and going down the beneficiation route. Time will tell. I still worry about the tiny number of stones for sale on the website and lack of reporting on quality mix. The rubber has to start hitting the road soon with sales of higher quality material. On the positive side being an ethical producer of known origin should be an advantage.

As Granto indicates Colin was a very principled and keen fundamental investor. He did his own research (focused very much on the business and long term shareholder interests). I too will miss his posts and interacting with him on here, and sometimes also by e-mail and Skype. He had gone very quiet and I was just about to get in touch, when I got an e-mail from a son telling me he had died. If you set Posts per Page box to 50 and search near the bottom of page 4 you will find his last post on here (about Reign & Richland) on 30th June 2016. Another post (also about Reign) from the same day can be found towards the top of page 5. For those new to the board if you click on his username (Colins 14) at the top of either of these posts all his past posts will then come up.

Agree - sad news. The board will be poorer without him. He made many useful comments over the years.

Hi Quindell, I am afraid I heard from his son that Colin had died.

Been more sales than buys and widening of spread can happen after hours on such penny shares. However can expect buy/sell spread to narrow again, quite possibly returning to previous values upon market opening unless there is negative news over weekend.

Depends upon what prices we can get for treated cut and polished. Not sure what the % higher quality is - if very low could be say 0.5%, but alternatively could also be higher at say 2-4%. We just don't really know given that company has not provided quality breakdowns of material mined (especially last half year when production has ramped up). The issue is complicated as the odd big quality stone could fetch much higher prices. Maybe there are good marketing reasons for keeping how much quality material you have to sell under wraps. It maybe difficult to get high prices for Australian rough as much of it is low quality (often very dark and can have silk). The corundum component will only sell for very low prices. I would expect management has been trying to sell the lower quality sapphires and corundum to all the obvious potential buyers over the last couple of years. I would rather see this material as usefully helping cover much of operational costs (which are encouragingly coming down per ct mined) with the quality material being the driver of profitability. I still reckon it is going to be the higher quality material that will be key to boosting turnover to profitable levels and hence obviously the more the mine can produce of this the better. For example, 1.43% of Gemfields' ruby production in 2015 was sold as medium/high quality fetching an average price of $504.70/ct with 40.98% of production being sold as low quality ruby and corundum getting an average price of $8.55/ct. This is a price multiple of 59 times more for their better quality material (and that is for rough). The medium and high quality rubies sold generated two thirds of Gemfield's ruby and corundum turnover (67.24%) that year despite only making up 1.43% of production. Gemfields I think have bought into some rights for some Sri Lankan sapphires.

If they can get back to profitability then more cash will become available to possibly also develop the other sapphire area the company got rights to explore a while back. The fact some directors have put so much cash in recently and directors have accepted shares instead of fees, suggests that the mine is probably producing enough quality material and they have seen light at the end of the tunnel in terms of opportunities to finally get to sell their quality material at decent margins. Let us hope this is the case.

Blue as Warren Buffett says remember you are buying a part ownership of a business (rather than a lottery ticket) so good to know and understand as much as you can about how the business works. While human sentiment, and irrationality is responsible for quite a bit of volatility in share prices in the short term, ultimately sp's will track EPS. This share is the odd one out in my portfolio - and my one and only really speculative share. Why buy the mine if it wasn't valuable? Good question. Has the company bought a dud? or has it just taken a bit longer than expected to sort out how best to mine the deposit, and to find suitable markets prepared to pay enough for higher quality material? The mine had failed before under Australis. RLD directors were looking for something to replace their previous operation in Tanzania, and obviously felt they could make a success of it. Early plans for sight sales (as they had done very successfully with Tanzanite) never got off the ground suggesting it has been a lot harder to sell and market the higher quality Australian sapphires than I suspect they imagined. Australia has historically been a very large sapphire producer; but many are fairly dark and some have silky strands in them. Thus many are not top quality and many need to be heat treated. However the very best Australian material can be very beautiful, but historically these top Aussie stones have often been fraudulently passed off as coming from somewhere else like Kashmir and Sri Lanka! The company plan has always been to actively market quality Australian sapphires and also market on the fact they were mined ethically from a known source. Hopefully they can now succeed with this starting with proposed Q1 sales. Grade (cts/tonne) from the mine has also been a bit lower than perhaps was initially expected, but encouragingly this has been streadily increasing. Production levels have also been lower than perhaps were initially envisaged (based on one early analyst report) but have also been increasing. We are a bit in the dark as to the quality profile at the mine but hopefully this is OK. Did the directors do enough due dillgence when they bought the rights to this mine? Time will tell whether they bought a dud, or whether they can successfully create a good market for their best material that will ensure profitability going forward. Let's hope it is the latter. As Granto says, it has not been easy for RLD, and if management can manage to succeed with their upcoming sales of higher quality beneficiated material they will deserve great credit for improving mining operations and finding and successfully plotting a new way forward after initial sales delays and after all looked lost in Tanzania (thanks to actions and failure to enforce the law by Tanzanian authorities made it impossible to continue mining there).

Hi CV7Blue - Thanks for your comments. For my sins, I have been a shareholder since July 2005. However the value of the company now needs to be assessed based on its relatively recent Australian sapphire mining operation (rather than its historical Tanzanite operation in Tanzania). I am afraid I don't have enough information to adequately estimate what the future share price could be with any confidence. Currently too many unknowns. As a fundamental investor, for me the future s.p. will be a function of earnings per share (EPS) times some measure of market sentiment (PE ratio). Earnings in turn will be a function of turnover less operational and corporate costs and taxes due. Currently we know how many cts >3mm have been mined, but don't have a good idea of how many of these are of stockpiled higher quality material suitable fortreating cutting and polishing. An early indication was that around 1% after initial mining appeared to be higher quality. However this was some time back, and the company has not been releasing updates on the quality profile of what they have mined. This % can be expected to be small but as Gemfields has shown for its rubies and emeralds it is the rare high quality material that really drives turnover. If it turns out the be 1.5% this would obviously be much better than 0.5%. We have an idea of how much lower quality rough sapphire/corundum has been sold and for and how much. How much could the unsold balance of this lower quality material be sold for ? If this is largely corundum this will fetch very little, but if there is still a bit of lower quality sapphires as well then this could make a bit more. While the lower quality material is now bringing in some money to help offset quite a bit of operational costs, these sales are not enough on their own for the company to become profitable. The real key to turnover and ultimately EPS and future s.p. will be how much quality beneficiated material can be sold at what price. At this stage we simply don't know. It should be remembered that some material is lost in the cutting process; but this should more than be made up by higher prices and much higher margins. Bit busy right now but when I get a chance I may do some back of the envelope what if calculations to get an idea of possible range under diff. scenarios. The increased efficiency and reducing costs/ct mined is of course to be welcomed. Ramping up further may bring further economies of scale. However the future sales of beneficiated quality material is still going to be key to profitability (and hence future share price). Of course the recent substantial issuance of new shares to raise capital will dilute EPS and hence ultimately the share price, but this has at least bought the company a little time to get its beneficiated higher quality sales up and running. I hope the promised Q1 sales of higher quality material occur and are successful .

As Granto says - it is all down to the quality stones now. Hopefully the mine has been producing and stockpiling enough of them; and once treated, cut and polished the company can following their trial sales manage to successfully sell them at good prices with decent margins. Time will tell, but nice to see CEO mention seeking making a profit for the first time. The recent placing and directors accepting shares in lieu of fees, has also been a vote of confidence by them in the future of the company.