Richland Resources reported last month that it will not put any more money into TanzaniteOne Mining, its joint venture with state-owned mining group Stamico, until it completes a strategic review of its operations as well as boost Block C security at Merelani, in Tanzania.
Illegal tanzanite mining had been affecting TanzaniteOne’s bottom line.
Richland said its revenues eased 20 percent to $20.5 million in 2012.
It recorded a net loss for the year of $13.6 million when considering a $4.4 million impairment charge for the illegal mining and $5.6million for unpaid South African taxes.
Richland noted in July last year that illegal tanzanite mining seriously impacted on its operations for almost a year.
It said at the time that neighbouring miners were tunnelling into its operations and this had resulted in loss of a significant amount of high grade tanzanite.
However, the signing of a joint venture agreement with Stamico last year raised Richland’s hopes that the Tanzanian army would help eject the illegal miners from Block C at Merelani.
“What we have needed is support from the government to assist with our efforts to curtail illegal mining operations and other safety and security issues at the Tanzanite mine,” said Richland chief executive Bernard Oliver in May last year.
"The agreement we have negotiated with STAMICO ensures that Richland and the government of Tanzania are committed to working together to achieve the corporate success of the company going forward.“
At some point, the tanzanite miner, with the assistance of the government, managed to reclaim control over the northern part of the license area mid last year.
Richland also hoped that the removal of illegal miners in the southern part of the licence area would commence thereafter.
However, it appears that this had not taken place as the illegal miners are still occupying a substantial portion of its acreage.
Its workers cannot work safely nor can it make a profit as its cost structure was based on mining the whole of its licence area.
Although the group produced 1.3 million carats in the three months to March, against 788,000 a year earlier, with an average grade of 199 carats per tonne, it said the quality produced remained low due to the continuing lack of access to high-quality areas.
“Richland is working with its Tanzanian operating company TML, to alleviate significant costs at the Merelani tanzanite mine as illegal mining activities are still severely hampering operations and financial performance,“ said Olivier.
Richland recently said that it was now assessing its operations, which included a review of all costs, revenue optimisation and best use of funds available for investment in gemstone projects.
Olivier said the mine at Block C was one of the most advanced gemstone recovery operations in the world, capable of generating highly attractive profits for its joint venture partners and significant royalties and taxation revenues for the government neither of which are paid by the illegal miners.
“However under the present conditions significant productive areas of Block C remain under the control of illegal miners and until these areas are recovered, and a safe working environment for TML staff guaranteed, Richland do not believe it is prudent to invest further funds into TML's operations in Tanzania," he said.
Although the Tanzanian armed forces were willing to see the back of the illegal tanzanite miners, the question that many are now asking was whether they have enough arsenal to stop these criminal activities?
The on-going illegal mining operations do not paint a good picture as it portrays a security force that is so weak to an extent of even failing to protect the interests of the government.
It was high time the Tanzanian government showed that it was not willing to stand arms akimbo while the tanzanite business, which contributes much needed revenue to the Treasury, was being destabilised by wayward, greedy artisanal miners.
Mathew Nyaungwa, Editor in Chief of the African Bureau, Rough&Polished
