Member Info for relephant

Quite a few positives with increased sales of lower quality/corundum, another Q of higher production and planned further 50% ramp up, reducing operational costs/ct (in absence of significant sales of higher quality beneficiation material only with shortfall of $125,000 cf operating costs) and planned start of sale of treated, cut and polished material in Q1. As has been said before this is critical to profitability. Like Bernard Olivier's focus on developing sales and developing margins with a view to achieving first profit. If the company can successfully sell its treated cut and polished higher quality material at good margins, and are mining enough of this quality material then a return to profitability is likely.

Am still a shareholder Quindell.

The website has clearly not been good for selling cut and polished sapphires and there are only a few shown (which will not be enough on their own to generate sufficient turnover). Hopefully the new sales channels described in an earlier RNS will allow the company to finally sell its stockpiled higher quality material at a sufficient price to enable the company to return to profitability. The shares are currently cheap for a reason, and primarily due to the company burning through its capital while getting the new mine up and running. As yet it has not generated enough turnover to cover cost of production and company running costs. In order to get a little more working capital and stay afloat, the company has had to issue a significant number of new shares diluting existing holders, However things can change should the company start selling its cut and polished stockpiled higher quality material through new sales channels it says are being tested and showing promise. Perhaps management has been waiting to sell this higher material for a decent price rather than accepting the first low ball offers they may have got. If so, there is a real possibility to return to profitability, and the share price could then be expected to respond positively should they finally get turnover up. A big positive is that a number of directors have bought many of the recent placing shares giving a big vote of confidence in the future of the company. Also the company has significantly increased the efficiency of its operations substantially cutting the costs of mining per ct as well as securing a cheap deal for cutting and polishing its better quality material. Hopefully selling the cut and polished material can generate good margins. Geological understanding of the deposit is also improving, and production continues to ramp up. Thus from the technical side of mining, the company is making significant progress. However it needs to make some significant sales of the rare higher quality material soon to turn the corner. As yet we don't really know what proportion of mined material is high quality (although an early update suggested high quality may make up around 1% of production). Just selling some of the bulk of lower quality sapphire/corundum at close to mining cost (what has been happening) is not going the make the company profitable. Going forward marketing and sales of sufficient cts of higher quality material at good prices will be the key to profitability. Interesting times - If they can get marketing and sales right and get these higher quality cut and polished sales going for reasonable prices then the share price will no doubt jump. Thus there is potential good upside, but if these sales of quality material at decent prices don't materialise the company will remain in trouble.

I see there is an RNS indicating Blackrock now own <5% of the company shares. However I also note that on the company website there is still a very old (March 2015) list of major shareholders and since then Blackrock have increased their holding slightly (by 500,000). Thus presumably it is the significant dilution caused by the recent large placement (in number of shares) that caused this.

Let's hope so; but shareholders will be happier when they see evidence of the first significant sales of higher quality material. If sufficient quality material has been stockpiled and when treated, cut and polished can now be sold for decent margins the future will look much brighter. Interesting times.

While I agree that Directors investing is a positive vote in the future, there is very little cash in the bank. Due to inadequate turnover from sales of material mined during ramp up, and mine and marketing development to date, the company has burnt through the capital it had following the sale of its Tanzanian assets. The result has been the need for a $500,000 loan, and more recently an additional GBP1m placing. Both capital raisings have effectively been paid for by issuing new shares. This has resulted in a significant dilution of existing shareholders, but probably was a cost effective way of raising such a limited amount of capital (presumably avoiding the probable much higher costs of a full placing offer to shareholders). The bottom line is that If the company can't sell what it produces for more than it costs to mine it (+ cover all the additional corporate admin and management costs as well) it cannot make a profit. Just selling some of production as rough low grade sapphires and corundum at a relatively low average price per ct (what has been happening to date apart from a tiny sale of a very very few higher quality stones at a low price/ct) is not covering these costs - Hence the need now for additional finance. Granted, with increased mining efficiency and resultant reduced costs of mining per ct (well done management here) ,and seemingly higher rates of sales of rough low quality sapphires and corundum more recently, the cash burn going forward should be lower than it has been. However if higher quality cut and polished material cannot be sold for a reasonable price, then it is hard to see how the company can be profitable. However management may have been holding out selling their better quality material until they could find buyers at the right price. The RNS indicated that reasonable margins now seem possible for the cut and polished material (based on trial sales) which is greatood if this can be achieved in practice. Geological understanding of the deposit can help guide mining in future and hopefully boost results; but right now the critical thing is for management to finally start to sell their better quality material. Presumably they have been stockpiling this while they have tried out various sales options. Let us hope that finally with the Thai link up and beneficiation and marketing work that they have started to find buyers finally prepared to pay a decent price. What we need to see is not just more talk about developing markets but some concrete results of sales of higher quality material at a decent price. With treating, cutting and polishing, based on recent RNS comments it hopefully is going to be possible to get good margins on quality material going forward. If so this will bode well. Let's also hope that the mine is not a dud, and actually has produced, and can produce a reasonable amount of quality material. The sapphire operation could possibly be about to come good if this happens.

Let's hope this is the case, and the mine is 1) producing enough higher quality material to cut and polish, and 2) can now sell this at a high enough price to return to profitability.

And presumably has just taken time to try out other sales channels that didn't pan out before making arrangements in Thailand to cut and polish to hopefully get better prices for beneficiated higher quality material. Let's hope the new marketing efforts to sell cut and polished will finally be successful with a return to profitability to come. Directors may have put money in as a result of prices obtained on recent test sale of treated, cut and polished.

£1m is not much funding though if sales of higher value cut and polished don't come through as hoped for, and cash burn continues (albeit at a slower rate). Better understanding of the geology is to be welcomed. However the failure so far to sell higher quality for a decent price has primarily been responsible for cash burn. The company has to start selling high quality for a decent price to become profitable. Seeing as Directors have put more money in, presumably they are hopefull this can be done.

Unfortunately placing highly dilutive for shareholders but company at least still afloat. Some directors putting more funds in which is a positive, albeit with them getting a big proportion of the company for a little. Would they have put more funds in if the future prognosis was bleak? However one wonders why it has taken so long to get news of any substantial sales of higher quality material (still awaiting news of first substantive sales of high quality material) given that capital was being drained, increased turnover was urgently needed, and for some time has been pretty clear that sales of higher quality material will likely be the key to profitability or not. Recent Thai developments may prove to be a step in the right direction. At the moment, apart from one approx 1% higher quality figure provided ages ago, we have no idea what proportion of production after heat treating is of sufficient quality to cut and polish, or for what sort of prices beneficiated material from the mine can be sold. Hopefully we will get some information on this in future reports. Let us hope grade continues to increase and costs of production remain low (credit to management for achieving this) and sales of lower quality rough sapphires and corundum also increase. Above all let's hope the mine is producing sufficient higher quality material, and marketing, beneficiation and sales efforts succeed in finally enabling sale of enough higher quality material at high enough prices to become profitable as intimated in recent RNS's.

Perhaps no surprise. The Directors involved have certainly put in some cash to provide some time but get a big share of company in return. Rate of cash burn however may now be lower than it was given slightly higher grade, much lower costs of production and seemingly a little more of the lower quality sapphire and corundum being sold. However still essential they can start selling enough better quality cut and polished if the company is to return to profitability.

Much better news in the last RNS. However given the low proportion of material mined that is high quality (an earlier RNS or report indicated around 1% with no news since) and that to date a significant proportion of material mined remains unsold with lower quality sapphire and corundum sales fetching lowish average prices, it seems essential to profitability that the company beneficiate their best material (heat treat, cut and polish) to increase margins enough to bring average turnover per ct mined above the level needed to become profitable. To this end it is encouraging that they have found a way to heat, cut and polish cheaply in Thailand. Also very good to see costs of production and beneficiation coming right down with production volumes continuing to increase (and likely to continue to do so in the near future). While the grade still is well below 20cts/t (indicated by original JORC resource estimate), there has been a trend of increasing grade being reported over successive updates which is encouraging. Hopefully the geological research to better understand the deposit can further help improve mining success in the months ahead. Turnover also seems to be increasing a little bit recently; but we still await news of the first substantial sales of better quality material (at hopefully good prices). Perhaps part of the poor sales figures to date is due to management holding out selling their best material until they can find a way and market to get decent prices for it rather than selling it too cheap. Once again the RNS disappoints in some ways by what it doesn’t tell us. There still are no references to what proportion of the cts mined are of good quality, and no indications were given as to prices obtained per ct for the better quality treated, cut and polished gems sold in the recent trial sales. Perhaps for marketing and sales reasons they want to keep this information under wraps until they have made some substantial sales and can report on these. Australis in the past reported mining a few large stones, but so far not seen any news of Richland being able to repeat this.There still are only a very few stones on the website sales portal, and no mention has been made about sales from this. As others have said the company financially is not in a good place as it has been burning through its limited capital with expenses > sales. Sooner rather than later it needs to demonstrate that 1) it is mining a sufficient proportion of higher quality material (and they haven’t bought a lemon of a mine) and 2) the rarer higher quality material can be sold at a decent enough price (after beneficiation) to start generating an overall profit. I await the next sales reports and updates with interest. Let’s hope there finally is good news around the corner with suitable markets finally being found and established where sufficient higher quality material can be sold at a high enough price to return to profitability.

I agree with you that the plant tweaking, geological research to better understand the deposits and directors loans (rather than very dilutive placing at low sp) are nice positives. Let's hope the geological work can translate into higher grades going forward as initial grades so far seem a little below initial expectations; although we may have to wait for Q3 and Q4 results and beyond to see any possible benefits of this research . We were told production was being temporarily scaled back during plant and process tweaking and so Q3 and Q4 production results may be of greater interest. However the area I most want to see some progress in, is in developing sales channels, and in particular for the higher value material that will be critical for overall profitability. Taking a longer term view, delays in achieving this will be OK, provided profitable sales channels can eventually be established, and there is enough cash flow to keep the company afloat till this happens. The best news for investors would be news of significant sales of higher quality material at a good price. Getting lucky and finding a few large stones of good quality would be a nice bonus. Is significant value being added through cutting and polishing - makes sense if the (beautiful) stones can be sold? Are online sales (including Tanzanite) still only contributing a limited amount to turnover and what is the trend in sales? I am also interested in any further news that can help indicate what proportion of the lower quality material that is being produced can be sold for what average price? I suspect the local Gemfest event may be something of greater importance for smaller scale individual local producers. Like others I too await the rest of the year's operational updates with interest,

Wrote a more detailed post with my initial comments on the revamped website on 1 June (on the previous page of comments). I think the revamped sales site is a definite improvement with sapphires now getting pride of place. At the time I wrote the post it still had a few links that weren't working. I haven't seen any note of a formal launch of the site yet, and so the site may still be work in progress ahead of its relaunch. Having a sales website is one thing, but potential customers also need to be able to find it. Once launched, the company will hopefully then work to try to get the website up Google search listings. There are some very nice stones, but the number of sapphires on the site currently is disappointingly small. Maybe more will be added before re-launch. Regarding the sp - in addition to some sales I see there has also been some topping up today. Don't forget this a relatively illiquid share, and small buys and sells have historically often moved the price a bit (both up and down). Presumably the seller(s) had concerns about the lower than initially expected production, and the lack of any significant reported sales of higher quality material to date. As a result, turnover to date has been limited, and despite BO's efforts to mine cost effectively at only around $1/ct, the company has been burning through more cash than it is earning (e.g.see accounts in Annual report) depleting its available capital reserves. Some cash burn at start up of course is to be expected with a new mining venture, and it still is relatively early days. Perhaps management may simply be being patient, and taking time to find the right buyers and appropriate ways to sell better quality stones to ensure better prices and hopefully profitability. If good news about sales in Q2 or Q3 comes, and especially if this points to a potential return to profitability, then one could expect the sp to shoot back up. Maybe the recent seller(s) was/were just concerned about what might happen should hoped for sales of higher quality material disappoint , and as a result the company eventually runs out of cash. At the current sp any further placing to raise additional working capital would be very dilutive for existing shareholders. If the BOD need to raise more cash hopefully they can find other ways to do it. It certainly is going to be an interesting time for shareholders ahead, and let's hope we get some good sales news sooner rather than later. On the other hands buyers will be more optimistic and expecting that future sales will pick up and with it the share price. The sp sure is very low at the moment.

Thanks for the link Bigtimber. "Strand Hanson act primarily for corporate and financial sponsors / private equity, but also act for institutional investors, entrepreneurs and activist shareholders. As a firm we undertake a broad range of M&A, ECM, DCM and restructuring mandates for our clients, who value our bespoke creative and unconflicted advice." "Strand Hanson is able to advise clients on all aspects of their fundraising activities, including assistance with sourcing and structure of both debt and equity financing". "Companies that are considering the disposal of certain subsidiaries, assets, or the entire company benefit from Strand Hanson's experience in disposals, which may include sales and auctions in both strategic and distressed situations." Pure speculation - but could management be looking into capital raising as graham-wales suggests or possibly even a sale of the company to Private Equity ?

I perhaps should have mentioned that I live in South Africa and not UK. The Rand is not one of the currencies listed top right, and prices here are shown in US$ and thus I presume the US$ is the general default currency for countries whose local currency is not listed. However I see top right that other currencies you can select (in addition to the US$) are Pound, Aussie$, New Zealand$, and Euro. "It is illegal to export polished tanzanite from Tanzania over 1 gramme" should change to read "rough" rather than "polished". May also be good to have a section on selecting the right size of ring. Good they are also making more of past Tanzanite mining and selling experience.

Default prices here are shown in US$ and I see you can change the currency top right.

Thanks for the heads up Cactusman. http://www.richlandgemstones.com/ Some initial thoughts... A marked improvement on the previous website, as you can find material for sale easily now; and there is plenty of additional educational material to give customers confidence. Sapphires now take pride of place in the centre of the page. A couple of links still to make, and minor typos like Richlands instead of Richland's; but most of website at a quick squiz appears operational. Maybe in time could add some more photos showing models displaying jewellery and perhaps some scenic shots of the the mine area/local wildlife to try to help create more desire for the Australian sapphires. I think it would be better if certificates included photos of actual individual stones being bought. Currently showing 23 sapphires for sale totalling 74.78cts and $58,900. Not sure what % of the top 1% higher quality material will be cut and polished for the site. Supposing for now we asssume it is all of it, then with 3.2m cts/year this would come to 32,000 high quality cts. If on average you lose 80% of rough during the cutting process then this would give 6,400 cts/year cut and polished. If say 75% of this (4,800 cut and polished cts) could be sold for the average price of material currently on the website ($787.64) then this would generate a very healthy turnover of $3.78m which would put the operation into profit. This would be equivalent to an average turnover of $118 generated per top 1% rough ct mined. All very crude back of the envelope stuff as I have no idea what proportion of the top 1% will be saleable at these sorts of prices if cut and polished, or indeed how well this material and the different colours will sell. May be necessary to sell some to the trade at lower margins. However if a decent number of cut and polished higher quality stones can be cut and polished and sold for these kinds of prices, then it seems possible that the mine will be profitable. Grade so far at 12cts/tonne is lower than originally expected and lower than surrounding adjacent areas. However grade when mining an alluvial deposit will vary over time (as it did for Australis). With some luck grade may be much better than this in other areas. If so this would further boost production, turnover and hence future profits. Interesting that they have changed to refer to them as Australian rather than Capricorn Sapphires, just mentioning the Capricorn mine. As Granto and I have suggested in previous posts would also be nice if they were to sell stones and jewellery in nice branded coloured high quality boxes (which Tiffany's, Natural Sapphire Company, Apple etc. do). If un-treated parti-coloured stones are really limited to Australia perhaps a special effort could be made to market these as really special rare stones which might help boost pricing power on these (making them more likely to be a Veblen good and if so increasing both profits and demand for them)

Just had a look at last years annual report and that puts cost of sales as 997,000 which for reported 870,000 cts mined comes to $1.146c/ct mined. This is slightly above the approximate $1/ct cost of mining and $1.07 average price for lower quality material sold to date. Supposing we can produce say 3.2m cts per year. With no inflation cost of sales would be estimated for year at $3,667,200. Last year's other operational costs came to an additional $1,961,000 which when added would bring total estimated costs for the year up to $5,628,000. At 99:1 ratio of lower to higher quality this would give 3,168,000 lower quality cts and 32,000 higher quality cts. If we could sell the same 61.33% of lower quality material at average $1.07 this would generate turnover of $2,078,939. To break even under this scenario, all the higher quality material would have to sell for $110.91/ct. Supposing it was possible to sell all lower quality material at $1.07/ct, then to break even one would have to sell all the higher quality material for $88.34/ct. For me this points to it being essential to sell cut and polished (and possibly heat treated) higher quality at much higher prices than has been achieved so far for two rough parcels. Even if we could sell all production for $1.07/ lower quality ct and $15.00/ higher quality ct this would only generate a turnover of $,3,869,760 giving an estimated loss of $1,758,240. Luck can play a part as the recovery of some large quality stones could yield significant revenue as for sapphires prices/ct rise for larger stones. If the company could say sell three quarters of its high quality material online and directly to trade retail partners for say an average of $200/ct (after deducting addition treatment and cutting and polishing costs) then this would yield an estimated profit of $1.25m (selling only 61.33% of lower quality). Profit would obviously increase further if proportions of lower quality and higher quality sold were to rise and or production can be increased over 3.2m cts/year. Once again as Colins and I have suggested in previous posts the key to profitability will be sales of high quality material. Clearly $15/ct for higher quality rough isn't going to cut it. However if much higher prices for cut and polished higher quality could be achieved profitability is possible.

Prices of lower quality sapphires and corundum will vary depending on what is being sold as can be seen by very different average prices for Q1 and Q2 so far (and also last year's sales). Corundum for example will probably sell per kg for a few cents/ct with other lower quality sapphires pulling average prices for all lower quality material up to around the $1 to $1.10 mark. If you add sales of lower quality reported to date this year it comes to 382,398 cts sold so far in 2016 at an average price of $1.02/ct which is around about previously indicated cost of mining of around $1 per ct. Last year 406,000 cts of lower quality were sold for an average price of $1.11. To date sales of lower quality and corundum have averaged $1.07/ct. What will be important to determine is what proportion of the lower quality material mined can be sold ? There will be lags between production and sales but so far sales of low quality represent 61.33% of total cts reported mined up to the end of Q1 this year. Thus at this stage the sale of lower quality is not covering the cost of total production and to do this just with lower quality material would require almost all of it to be sold. The RNS does however state that increased sales of material already mined, sorted and graded is planned for the remainder of Q2. Will be important to see how much of material mined can be sold, and for what prices. The make up of material sold to date may differ from what has still to be sold. The prices achieved for the small number of higher quality cts sold are a little disappointing. However perhaps they just show that to get decent prices for the higher quality material will require cutting and polishing (and possible heat treating for some stones). So far to date only 2,124 cts of higher quality material have been sold for just $31,680 at an average price of $15.00 per ct. If as has been indicated around 1% of material mined is higher quality, then this would leave about 83.5% mined up to end Q1 unsold (10,731 cts). At only $15/ct selling all of this would only yield another $160,962 which isn't going to go very far. In order to cover costs (including corporate costs) and to be able to start making a profit, the company is going to have to sell this higher quality material for a much higher average price/ct. I would imagine this is going to require cutting and polishing and in some cases heat treating in order to get much bigger margins. Marketing and selling (especially the higher quality material is going to be key). I also note talk is now about increasing production above the $3.2m cts/yr mark but there is no indication how much more.