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Richland post subdued H1 financials, continues to battle illegal mining

23rd September 2014

By: Natalie Greve

Creamer Media Contributing Editor Online

  

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JOHANNESBURG (miningweekly.com) – Aim-listed Richland Resources has attributed across-the-board slumps in its financial showing for the half-year ended June 30, to the issuance of a joint mining licence to its wholly-owned subsidiary TanzaniteOne Mining (TML) and the State Mining Corporation of Tanzania (Stamico) last year, splitting production and earnings from the joint venture’s (JV’s) Tanzania-based tanzanite mine.

Since the issuance of the licence in June last year, the mine – previously operated solely by TML – had been operated as a 50:50 JV between TML and Stamico.

As a result, only 50% of mine revenue and mine costs from June 20, 2013, onwards were recognised in the accounts of TML.

“Consequently, the results for the half year reflect TML's share of the JV results and are, therefore, not directly comparable to the results for the half year ended June 30, 2013, which reflected TML's sole operation of the mine,” the group said in an interim results statement on Tuesday.

Earnings before interest, taxes, depreciation and amortisation over the period decreased from $200 000 in the first half of the prior year to a loss of $800 000 in the six months under review.

Richland earned revenue of $3.8-million in the first half of this year, compared with revenue of $7.5-million in the first half of 2013, while the company widened its net loss after tax to $1.2-million over the period.

ILLEGAL MINING
Meanwhile, sustained illegal underground mining at the TML tanzanite mining operations, in Tanzania, remained an issue over the period. 

Following the recovery of the Northern part of the licence area, the extent of the damage to the recovered shafts was more significant than expected and rehabilitation of the mining areas was now expected to take longer than initially estimated. 

“Other key producing areas of our licence have not yet been returned to the company and, as a consequence, full access to the high-grade zones was not available, creating an adverse effect on the sales and quality mix during the period,” commented CEO Bernard Olivier.

As a result, the group’s gross margin narrowed from 43% in the first half of 2013, to 36% for the period under review.

Despite limited access to the high-grade zones, the mine recovered more carats from less processed tonnage, lifting production from 1.54-million carats in the first six months of 2013, to 2.35-million carats in the first half of this year, from the processing of 13 169 t of material at an average recovery grade of 178 ct/t.

This included Stamico’s share of the JV’s production and represented a 53% increase in the carats produced, a 21% decrease in the tons processed and a 91% increase in the recovery rate compared with the first half of 2013.

Richland cautioned, however, that illegal mining activities continued to present significant danger to its employees and substantial damage to the mining infrastructure in the Bravo, Delta, Investor and CT shafts, also resulting in the theft of gemstones, especially those of high quality. 

The company was working with the Tanzanian Ministry of Energy and Minerals’ Zonal Mines Office, police and other government officials to mitigate the illegal mining, having filed several police cases.

“We shall continue to monitor the local security situation in Tanzania, as well as government's willingness to make the whole of our licence area safe for workers,” Olivier said.

SAPPHIRE PROJECT
Meanwhile, in June, Richland exercised its option for the full acquisition of the Nardoo sapphire project, subsequently renamed the Capricorn sapphire project, in Australia, acquiring it for $1.1-million and 18-million fully-paid new common shares in Richland, to be issued after a three-month escrow period from the date of the acquisition.

These shares, which represented about 8.3% of Richland's enlarged share capital, were issued by the group this week, bringing the company’s total issued share capital to 217.2-million common shares.

Olivier noted that, while tanzanite production had formed the base of operations for many years, Richland had begun the process of diversifying its portfolio with the Capricorn acquisition.

“Production of sapphire should begin by the first quarter of 2015 and provide a reliable source of gemstones to customers, being situated in a politically stable country with a proven record in sapphire production,” he said.

Capricorn offered a measured Joint Ore Reserves Committee-compliant resource of 109-million carats with an average grade of 20 ct/t.

The project’s existing plant, which Richland would refurbish as part of the mine restart, was capable of treating yearly production of 20-million carats of sapphires.

“Our priority with this project now shifts to mine planning and engagement with regulators and stakeholders to fast track production. Plant and site restoration is progressing well,” the company stated.

Edited by Chanel de Bruyn
Creamer Media Senior Deputy Editor Online

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