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Richland Resources now established as sapphire producer

Published: 13:41 24 May 2016 BST

Richland---sapphires
Richland's sapphire production continues to ramp up

Once-upon-a-time Richland Resources (LON:RLD) used to mine tanzanite stones in Tanzania. But no more. The company is now busy establishing itself as a producer of sapphire and corundum in Queensland, Australia.

This transformation was largely completed in 2015 and 2016 accordingly has been the year of implementation.

The latest quarterly results for the period to end March 2016 showed revenues of just shy of US$232,000 from the sale of approximately 332,333 carats of lower quality sapphire and corundum.

Richland actually produced more than that during the quarter, but the ramp up process is being managed carefully to allow for production and processing shutdowns that will enable plant upgrades to be installed on a piecemeal basis.

 

THE BUSINESS

 

Richland’s Capricorn sapphire mine is situated in the well-known Queensland Sapphire Gemfields, a region that has historically been one of the biggest sapphire fields in the world, but has seen little development in terms of modern gemstone mining practices.

During the first quarter of 2015 Richland re-commissioned a purpose-built alluvial sapphire processing plant. The plant processes mined material from a measured JORC resource of approximately 21.6 million grams (109million carats) of sapphires. The project consists of two mining leases comprising about 490 hectares of potential sapphire-rich alluvial placers and contains large quantities of blue-coloured sapphires.

It has also produced yellow, green, and parti-colour material, which is likely to be of interest to the growing fancy colour industry.

Sapphires make up a significant part of the global coloured gemstone market. Extraction tends to be artisanal and small scale, and supply is consequently fractured. The opportunity to establish stable supply channels is likely to be of interest to both the Chinese and US markets, with the additional benefit of a clear, established and uncontroversial provenance.

 

FROM THE BOSS

 

Chairman Ed Nealon called the first quarter of 2016 the “breakthrough period” for Richland, as production got underway in earnest and the ramp-up continued.

Chief executive Bernard Olivier adds: “We continue to ramp up operations at the Capricorn sapphire mine as we establish a cost effective, advanced mining and sorting operation.”

 

WHAT THE BROKER SAYS

Broker Shore Capital notes with approval the habit of Richland’s directors of supporting the company with share purchases and, which is the other side of the same coin, by taking substantial salary sacrifice including a 50% reduction and significant deferral.

Shore provides the additional commentary: “Shore Capital visited the Capricorn operations in early September 2015. We were encouraged by Richland’s drive to better understand the geology and distribution of the sapphire-bearing gravels (‘wash’), and the company’s systematic approach to ‘de-bugging’ the existing on-site processing plant (which came into the company’s possession as part of the project acquisition transaction).

Looking ahead, we are expecting sales of higher-quality stones to occur in Q2 2016. We look forward to the results with great interest, as we expect prices to be similar to (or even exceed) the US$14.30 per carat achieved in September 2015’s inaugural ‘customer specific’ parcel of ‘eye clean’ stones.”  

 

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