Small Talk: Sparkling Richland plans Australian adventures
Nikhil Kumar is The Independent's New York correspondent. He was formerly assistant editor on the foreign desk and has also done a variety of jobs on the city desk, where he wrote about markets, commodities and other business and economics topics.
Monday 22 August 2011
Investors in Richland Resources are set to receive some good news this morning, with the coloured~gemstone miner, which until very recently was known as TanzaniteOne, due to announce that its net profits rose by nearly 130 per cent in the first half of the year as revenues climbed by 21 per cent.
The jump in profits, to $1.6m, some 146 per cent ahead of the total for last year, is accompanied by an expansion in the gross margin, which widened to 73 per cent in the six months to June, against 66 per cent in the first half of 2010. In keeping with the recent trend in the mining sector, however, operating costs were also up, rising to $5.4m over the period, against $4.9m in the first half of last year.
"The company has once again achieved significant growth inrevenue over the period, reflective of the continued recovery in tanzanite prices," Richland's chief executive, Bernard Olivier, said.
The first half also saw operational progress, with the miner's tanzanite production levels increasing by more than 200,000 carats to 1.25 million carats. Thatcompares well to the 1.05 million carats produced last year. The grades were also better, and the company commissioned a new cutting and polishing facility in Tanzania, where its projects are based.
"The increase in the average grade, total production and sales of tanzanite compared to the parallel period last year is testament to the company's margin enhancement programme," Mr Olivier added.
If you've been keeping track, you'll know that the name changed earlier this month. The reason was the group's decision to diversify and expand beyond its focus on tanzanite. The expansion began with the move into tsavorite, abrilliant green gemstone, last year and, more recently, with the group's decision to enter into an option to buy an established sapphire project in Australia in June.
Under the option, the company has up to six months to conduct due diligence on the project, which has been partially mined in the past. Xcap analyst AustinMcKelvie welcomed the move, nothing that "not only will a successful outcome to the due diligence study and ultimate acquisition result in diversification out of Africa, but critically [it] will position [the company] further up the gemstone value curve" relative to London listed peer Gemfields.
Stratex eyes new Altintepe partner
It is becoming harder and harder to keep up with the rising price of gold. Record highs have regular occurrences as investors search for safe haven amid the economic and market turmoil.
Signs of resource nationalism notwithstanding, this backdrop bodes well for gold prospectors. Take Stratex International, for example. Drawing steam from the growing interest safe-haven commodity, the Turkey and East Africa focused gold explorer has seen its shares rally by more than 150 per cent since the beginning of 2010.
But that figure masks a recent pullback. The surge would have been higher had it not been for a sharp fall in recent days. Part of may well be down to the news last week that its joint venture partner NTF, the Turkish civil engineering company that it helping take Stratex's Incline gold project to production by the first half of next year, was unwilling to commit to a planned feasibility study at theAltintepe project before Incline begins producing next year. (It is important to note here that Stratex is not looking to become a producer – the business is focused on extracting value out of its projects by partnering with companies interested in production, and is focused on remaining an explorer.)
Although Stratex said that it had opened discussions with another Turkish company which in the past had expressed in Altintepe, the market didn't seem best pleased with the news, even if the weakness came amid general turmoil both here and on the other side of the Atlantic.
But if analysts are right, then the reaction, whatever its cause, is likely to have been overdone. First, NTF's move is not believed to be connected to the promise of the project. Indeed, the company recently upped its resource estimate for the Altintepe.
Second, in light of the potential, "Stratex will be able to find another interested party without too much slippage," according to Westhouse Securities. Also reassuring were the comments by the Stratex chief executive Bob Foster, who said that the new company "has indicated that its objective would be to fast track the project into gold production by 2013," subject, of course, to agreement on terms and permitting.
To put it another way, Incline is on track for next year, and the signs are that Altintepe should be on course for production shortly thereafter.
The business has also beenmaking progress in East Africa, according to Westhouse. "Recent work at the Afar project, held in a joint venture with Thani Ashanti, has suggested that the Megenta project is host to widespread gold mineralisation," the broker said. "With a number of projects insimilar geological locations, including 14 kilometres of identifiedveining at the highly prospective 95 per cent-owned Blackrock project, the positive results at Megentacontinue to build excitement around Stratex's numerous East African assets."
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