LONDON (Alliance News) - Richland Resources Ltd Wednesday said its production and grades improved in the first quarter, but its total sales fell and the effect of illegal mining activities continues to blight its Merelani tanzanite mine.
The gemstone company, with operations in Tanzania, said its production increased 70% to 1.3 million carats of tanzanite for the three months ended March 31 from 788,198 carats the previous year.
It added that its average grade more than doubled during the period to 199 carats per tonne from 97 carats per tonne, but this rate remains low due to lack of high-quality production from its subsidiary TanzaniteOne Mining Ltd (TML).
The company said it achieved total sales of USD2.6 million, with USD1.8 million coming from a deal that covers all rough production from tanzanite mining by a joint venture between TanzaniteOne and STAMICO, the State Mining Corporation of Tanzania.
Richland has continued to be blighted by illegal mining activities and noted that it is extremely disappointed by the lack of support being provided by the Tanzanian authorities to deal with the situation.
Operations at the mine have been plagued by incursions by illegal miners for years, as large areas of the block have been occupied and held through force. The government at the time of the original incursions instructed security employees not to attempt to take back the areas and to await assistance.
After the company signed an agreement for a new mining licence for the block with STAMICO, the government agreed to help curb the tanzanite smuggling and illegal mining at the block. An attempt was made to clear the block, which successfully cleared the northern area of the block, although a TanzaniteOne employee was killed by the illegal miners.
After this incident no further action has been taken to clear the block, and Richland said in April that the other areas continue to be in danger of being occupied by illegal miners.
TanzaniteOne has said that until worker safety can be assured, it cannot continue to operate under its current cost structure and will not attempt to restart mining due to safety concerns.
On Wednesday, Richland said that it continues to provide no further capital to the TanzaniteOne/STAMICO joint venture at Marelani while the situation continues.
The company also noted that a non-binding graphite agreement between the company and Kiberan Resources Ltd signed in February 5 has now been extended by three months to August 5. it said that Kiberan has largely completed its due diligence, and both parties are hoping to finalise the terms of a binding agreement.
In April, Richland said its directors will be taking a 50% pay cut, and it will be undertaking a strategic review of its operations, as profit continued to be hit by the problems at Marelani.
Richland Resources Shares were down 16% to 1.15 pence, putting it among the biggest AIM ALL-Share fallers Wednesday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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