--ADDS BROKER COMMENT--
As Richland Resources (LON:RLD) updated on its operations fourth quarter the company said it is focussing on bringing high value areas of the mine back into production.
The gemstone miner is getting back on track in Tanzania after illegal mining had led to the closing off of large sections of the mine as the operation became too unsafe to continue.
In the fourth quarter tanzanite production totalled 1.095mln carats, up from 795,162 carats in the same period of the year before. Grades also improved to 166.05 carats per tonne, from 102 carats in Q4 2012.
Richland achieved sales of US$2.7mln in the quarter.
Importantly during the quarter a ten year deal was agreed with state owned mining company STAMICO, which is helping clear the illegal mining.
"The fourth quarter of 2013 saw us complete a number of key tasks that will allow Richland to move production and sales forward,” chief executiveBernard Olivier said.
“An agreement has been reached over tanzanite mining with the Government of Tanzania, previously producing areas in the northern part of Block C have been re-entered by our workers and complementary revenue streams to rough tanzanite sales are now well established.
“We are now focused on bringing high value gemstone areas of the mine back into the tanzanite production profile. Our work increasing value in the company from new revenue lines, such as graphite, will also continue."
Charlie Long, analyst at broker Sanlam Securities, said: “This is a new era for Richland and restricted illegal mining should help profitability at the mine (through high grade ore) as well as reduce the supply of illegal stones to the open market (which hitherto suppressed the tanzanite price).”
Similarly, RFC Ambrian analyst Craig Foggo said the future is starting to look more promising for Richland.
The broker gives the share a ‘speculative buy’ rating. Although Foggo says he’d still like a “clearer picture” of the group’s funding requirements, though a recent capital injection removed “significant uncertainty” over its near-term needs.
“On the back of the injection of capital following the closing of the open offer in mid-January and the clearance of illegal miners from northern areas of the licence, Richland will now be able to focus its efforts on underground development rather than production.
“In executing this Richland is targeting the establishment of access to high-value tanzanite zones in order to increase the volume of high-quality gems produced.
“The recapitalisation will allow Richland to invest in its future; to execute this, we anticipate weak numbers until at least 2H14.”