Member Info for relephant

Yes I agree Granto. While it is good they are now going to wait for profits before issuing options, given that earnings can more easily be manipulated over short time periods, I would imagine most institutional investors would far prefer to see the bar set a bit higher (waiting to see profits over a full year or even better two consecutive years of profits). Ideally incentives for management should be aligned with shareholders longer term interests.

When he visited it was still very early days in mine start up.

Bernard Olivier appears briefly in the film and there are some photos of the Capricorn mine in the article. This was presumably the trip by Vincent Pardieu a while back.

Here's hoping RLD's new sales website (when it comes) will be an improvement.

"if RLD can find partners to buy significant amounts of stock that will be good provided RLD can still get decent margins on what they sell." However as Colin says Reign are planning to do what was supposed to be part of what RLD was going to do. First prize would have been for RLD to have set up such marketing arms so they could maximise profits from each gem. Will be interesting to see how this develops. Another interesting site is http://www.thenaturalsapphirecompany.com/. Unlike RLD which at times uses stock shots (i.e. doesn't always show pictures of actual stones being sold) this site has 3D wire models and photos of each individual stone sold. This must give more confidence to buyers. Perhaps RLD doesn't have the cash to do things this professionally (although natural sapphire could learn to spell measurements!).

To save you looking here is the link that Bigtimber posted with the discussion on Gemfields' Sri Lankan sapphire efforts and the film on policing of their Montepuez Ruby mine in Mozambique is further down the page. http://www.lankatruth.com/home/index.php?option=com_content&view=article&id=9462:video-british-company-that-ignited-gem-war-to-ratnapura-&catid=36:top-stories&Itemid=124

That is interesting bunion - and thanks Bigtimber for originally alerting us to Reign - thanks to you both for sharing. Like Gemfields if RLD can find partners to buy significant amounts of stock that will be good provided RLD can still get decent margins on what they sell. Also worth watching the link to the film on Gemfields ruby mining and issues surrounding policing there to secure their mines (towards bottom of link on bigtimber's post relating to Gemfields' Sri Lankan sapphire efforts). I wonder how the Sri Lankan sapphire project of theirs is going. From the link Bigtimber posted, it seems as if there is quite a bit of opposition to foreigners being involved in gem mining in the country. A positive for RLD is that they are currently operating in a more investor friendly country where they can show gems ethically produced.

While the RLD plan has been to market and sell branded Aussie sapphires the difference seems to be that Reign is focused on just that and is not a miner. So similar but not exactly what RLD are attempting to do,

Welcome back! As other posts indicate the good news is that BO and team have managed to get the mine operational and producing at a very limited cost dealing with some inevitable teething problems along the way. They have made some sales of lower quality sapphires and corundum which according to recent company information appear to make up 99% of production with an average price/ct sold reported so far of $1.11/ct. This is just slightly above the around $1/ct cost of mining. Given a time lag between production and sales it remains to be seen what proportion of this lower quality material can be sold, and whether $1.11 is a good reflection of long term average prices that can be obtained. This material will range significantly in price/ct. If they can manage to sell all or almost all of this lower quality material for around $1.11/ct average price, then this should pretty much cover cost of mining leaving sales of remaining 1% higher quality material to hopefully cover other management costs and start producing a profit. However only 1,200 cts of higher quality material has been reported sold to date, and proposed sight sales haven't taken place. I suspect it may be more profitable to instead beneficiate the higher quality material (heat treating as needed and cutting and polishing) to hopefully sell it for higher margins. As with Gemfields I would expect the high quality material to be the key to likely profitability or not. The negative side, is that for some of us, insufficient information and detail has been provided to shareholders on some issues in recent company reports.These reports have also not set out management's proposed revised road map towards profitability. Concerns have also been raised about aspects of the purchase of the sapphire mine and disposal of Tanzanite experience operation. Above all, the talk is now about ramping up to only ~3.2m cts/year. This is well below the 12.5m cts/yr we were expecting to build up to based on JORC. There has been no explanation for this discrepancy yet. Lack of sight sales of higher quality material is OK, if cut and polished quality material can be sold at decent prices. The problem is that ~1% of only 3.2m cts = only 32,000 higher quality cts per year. To become profitable will require selling this material for substantially more/ct than the first 1,200 cts of higher quality material sold rough/ct. Building up stock is fine if the company can eventually sell it for higher prices later AND has sufficient cash reserves to do this. As Colins points out cash is the lifeblood of any business. Without working capital, businesses fold unless they can raise additional cash. With the current share price so low, any placing would be very dilutive and not raise much money. As Granto says this is a risky investment. If turnover can be substantially increased cash raising won't be needed, and if profits return so will sp. Await 1H sales info with interest.

Granto has hit the nail on the head. Key to profitability will be quantity and quality of higher quality stones and the degree of success of RLD's marketing and higher quality sales efforts. As yet, RLD have only reported the sale of 1,200 cts of higher quality material in a single parcel sale. There have been no indications yet in RNS's or Annual Report of the quantity of higher quality material that has been produced and stockpiled for sale (apart from p7 in Annual report that indicated higher grade material represented approximately 1% of production). As granto indicates it is still early days of mine ramp up, and information on production and sales should be forthcoming as the year progresses. The problem is that cash is being used up and sales of higher quality material will be key to determining whether the mine is profitable or not. Another problem is that the production levels currently envisaged (ramping up to 3.2m ct/yr level from 2H 2016) are substantially lower than initially expected ¬8m/yr ramping up to ¬12.5m cts/year (based largely on interpretation of original JORC done on total estimated resource of 109m cts, and conservatively recovering 100m over 8 year life of mine).

This was public knowledge released by the company in its RNS dated 12 April 2016 and titled Final Results for the Year ended 31 December 2015 and Availability of Annual Report as well as p7 of the Annual Report itself...... "It enabled us to identify various areas for modification and improvement which will allow us to achieve our initial sustainable production target of 800,000 carats of sapphire per quarter by H2 2016. Production and tonnes processed in the first half of 2016 has therefore been scaled down to allow improvement and further infrastructure work to be conducted."

Lucky see http://www.lse.co.uk/share-regulatory-news.asp?shareprice=RLD&ArticleCode=3xs62dka&ArticleHeadline=Directors_Dealings This explains that these shares were granted to Directors in lieu of fees rather than them buying them out of their own pockets with their own cash. However it is a positive that they accepted these in lieu of payment to 1) help conserve limited company cash and 2) presumably they must have a reasonable expectation that better sales and mining results will follow in time and the sp will increase in future (as they were granted at a higher than market price).

I am not clear how the sellers of the mine obtained the plant and water pipeline (the replacement value of which would be a few million $). These assets presumably were part of the deal and mining couldn't have happened without them so not just a question of getting the licenses. While the business is relatively simple there is the challenge of determining which dirt to dig up and I suspect the geology of alluvial sapphire deposits will be more complex and challenging than we might think. Grade will be variable and maybe we have been unlucky to start with. Fortunately we have a CEO with a geology PhD and with experience in searching for pockets of valuable material. Also building the new Capricorn Aussie sapphire brand and developing sales channels and finding suitable buyers will also pose its challenges.

Bigtimber sorry to read your comments but if you read my posts you will see I did acknowledge that it was still early days and getting the mine up and running quickly and for so little was a good achievement. I also noted that should sufficient numbers of decent sized stones of good quality have been recovered these could generate some decent turnover. The sales of the higher quality material are going to be key and hence the hope for some positive news on sales in H1. I appreciate it will time to build up stocks of rarer high quality material as well as developing sales channels and marketing. Will be important management thoroughly investigate sales options to ensure we can maximize returns from high quality material. However, as investors we need to be aware of and try to avoid behavioral biases such as cognitive dissonance and confirmatory biases (Eg see James Montier' The little book oh behavioral investing -how not to be your worst enemy).and we should not simply disregard or think up reasons to explain away information (or lack of information) we don't like or that conflicts with our current viewpoint and hopes. I too would love to see results improving but in the recent reports there was little positive comment except from some of the Chairman's early comments (which in the interest of balance I also mentioned). Don't forget about the importance of cash - businesses need it to operate. Unless Rld can start increasing sales soon cash burn will continue and we are going to exhaust current cash reserves and then have to raise more. If cash raising is not done via a loan this could be dilutive to us shareholders. Hopefully good news is on the way regarding sales of both low quality sapphires and corundum and especially the high quality material. The recent report was however very quiet on a road map to profitability. The lack of information on certain transactions has raised questions. If detailed information had been provided much speculation could have been avoided. If we have been led to expect A and we instead see B this will raise questions if this is not adequately discussed or explained in reports. Let's hope for more positive Q1 and H1 reports and that further cash raising won't be needed.

Bit surprised how it was possible to enter into an option with Gregcarbil at the time when the licences were only granted later in 2014 following settling of compensation action by local landowners. Not sure how they came to own the plant and water pipeline which is worth quite a bit. Maybe Gregcarbil had secured ownership of these assets first. I would also like to have seen more transparency in reporting on who exactly got paid and who got the shares as part of the deal. I am also a bit concerned that the current proposed ramped up production levels are well short of what was intitally expected to be achievable based on the JORC resource and expected grade. Here's hoping we start to get some more reassuring news in Qtr1 update. To be fair it still is early days of production and things often take longer than you think and teething problems will surface. However, as you say we need to start generating cash soon. Marketing and sales of higher quality material is going to key here. Hopefully a reasonable number of larger high quality stones have been recovered as these could make quite a difference to turnover. I would hope going forward we will get more clarity of what the plan is to achieve profitability.

Thanks Quindell

1/2... Thus maybe just unlucky and grade will improve in future. 2/2.. I do feel there should have been some comment on why production levels (expected in H2 2016) are so far below the levels initially hoped for based on JORC resource estimate and expected grade. As granto has noted it is still early days in mine development. Still impressive to have got the mine up and running in such a short time and for so little. Let's hope news improves going forward and we see evidence that the mine is capable of being profitable. Development of sales and marketing is going to be key.

Negatives (cont) - Trade and other receivables put at $202,000. This is equivalent to 28.7% of turnover. 25,000 of this was for trade receivables still within 90 days which is fine but not clear at all what is meant by 110,000 other receivables (TTE?) and 67,000 of prepayments? - Gemstone inventory at year end put at only $230,000 for balance of 695,890 cts mined but unsold by year end. This would value material mined but not sold during the year at only 33c/ct. However the account notes indicate inventory is measured as the lower of cost (of mining and cutting and polishing) or net realisable value (estimated sale value less cost of mining and sales). Why use this measure that could undervalue stocks of higher quality stones? We have only sold 22.7% of production and even after excluding dep and amort expenses the cost of mining the unsold cts is 604,651 which is way above the amount given even without any additional cutting and polishing costs. - Only now are we being told The Tanzanite Experience (TTE) brand was sold for $110,000 (which seems a very low valuation for a business generating a turnover of $2.9m in 2013 even considering RLD would no longer have access to getting stones direct from the mine) and that Sky (we are told) did not want to buy it. I notice it re-opened its doors under new management very shortly after it was disposed of. What we have been told is also at odds with the Tanzanian Daily News which said the TTE’s Arusha Museum is "yet another arm for the Tanzanite-One Limited operations” serving “to transform the Tanzanite Experience into a unique tourist destination.” The RLD final results RNS say operating TTE leases were transferred to the new owner but without specifying exactly who the new owners are. I don't see a line item for $110,000 sale of TTE in accounting note on proceeds from disposal of group. - Substantial decline in online sales. Part of the problem here will have been the website where for much of the year it was difficult to find material for sale. Trying to sell some of material online from stockshots rather than photos of actual specific stones won’t have inspired consumer confidence either. - $1.007m cost for professional and other services (not including auditors) – Could have done with more of an explanation here considering this exceeded the total cost of mining incl dep and amort. Hopefully the Qtr1 2016 update will have much more positive news and especially information about plans to sell the higher quality material. To date the indications of the quantity that can be mined and the % of this that is higher quality have been a disappointment. Let's hope that sufficient large high quality stones have been found that will help boost turnover in future. As Colins14 indicates a few high quality sizeable stones that don't need heat treating could be worth a lot. I do feel there should have been some comment on why production levels are

In general a disappointing annual report, although no surprise to see a loss this year given that production ramp up only really occurred in Q4 and 2015 has been a year of mine start up. Some initial thoughts.. Positives - Comments by Ed Nealon that 1) significant amounts of high quality colour sapphires have been recovered offering a marketing and branding opportunity with very positive feedback from industry and 2) sapphire is present in economical quantities (although what is meant by significant and economical is not defined) - Very cost efficient mine start up and ramp up to date. Sanlam analyst report had predicted costs of $4.3m for 2015 whereas actual costs including corporate costs were only $2.3m. Cost of mining including dep. & amort came to only 907,000 or about $1/ct produced. Negatives - Worryingly low unrestricted cash levels ($1.564m) and repeated mentions there may be a need to raise additional capital. - Inadequate discussion about future sales plans for higher quality material – eg proposed first high quality sight sale not mentioned (hopefully will be covered in Q1 update). Mining to date has been loss making, and it would have been helpful to shed some light on any possible future positives that could suggest a return to profitability in future. - No comment at all on what proportion of lower quality production produced might be saleable. - More detail could have been provided on why production is being scaled back in 1H 2016. What “improvement” and “infrastructure work” did Q4 ramp up indicate is required and why? Is this not just to conserve cash? - Ed Nealon discusses hopes of hitting “full production levels” in H2 2016 but this will represent level of only 3.2m cts/year = only 40% of the 8m cts production hoped for initially. This level of production is well short of anticipated levels based on JORC resource estimate of 12.5m cts/year over 8 year life of mine production that was given earlier to shareholders. - Sales to date indicate that only 1,200 cts or 0.59% of cts sold has been of higher quality material (This will of course not be a problem if stockpiled material is sold later for a decent price) - Indication that higher grade material represents only around 1% of production. This is lower than I was expecting. [For comparative purposes 1.43% of Gemfields’ total ruby production (27 months to end 2015) was sold as medium/high quality (generating 67.24% of turnover) with 40.98% of production being sold as low quality ruby and corundum. Only 80.5% of medium/high quality rubies offered for sale were actually sold suggesting the % of total ruby production = high/medium quality was 1.78%]. - Achieved grade of 12cts/t (cf JORC indication of average grade of 20cts/t). However grade is always going to be variable in an alluvial deposit and significant quantities were only recovered in the final Qtr. Thus maybe just unlucky and grade will improve in

Very encouraged to see this. I like the comment "we have an abundance of exceptional quality sapphires". I see a new name for the parti-coloured stones has been trade-marked; calling them Celebration Sapphires. However I note they haven't mentioned that in the past some of the best Australian stones have been fraudulently passed off by dealers as coming from other famous sapphire producing areas. Would be great if the company gets a reasonable number of partner wholesalers and retailers on board to buy RLD's quality sapphires. Margins should be much higher selling cut and polished rather than rough.