LONDON (Alliance News) - Richland Resources Ltd Wednesday said its cost reduction and restructuring programme at the Marelani tanzanite mine, being carried out by its Tanzanian operating company, TanzaniteOne Mining Ltd, to offset illegal mining, has already led to an increase in revenues and overheads.
The gemstone company, with operations in Tanzania, said the major efficiency drive was set up to compensate for the on-going occupation of key parts of its licence by illegal miners, with body scanner machines being approved by the government of Tanzania to be operational at the site during the fourth quarter.
In the meantime, Richland has identified 229 out of its 670 employees that could be let go, depending on how current negotiations with the government move forward, and it also has already suspended 41 employees for serious employment breaches.
The company said the government has sent notices to small scale-miners adjacent to the site during May instructing them to stop mining the company's Block C site.
Richland said it is currently reviewing further potential cost savings opportunities, including evaluating interest from third parties in the nearby Tsavorite project and reducing contributions to its Tanzanite Foundation programme.
However, the firm noted that the ongoing cost reduction and efficency programme has already led to an increase in revenues and some improvements in the overheads levels at the Marelani tanzanite mine compared with the first quarter.
"We are pleased to see the government of Tanzania has issued court orders against illegal miners, but until Block C is made totally safe it is inevitable that the TML and STAMICO joint venture cannot sustain full employee levels and costs," Chief Executive Bernard Olivier said in a statement. "Merelani has the potential to be very profitable for TML and STAMICO, and the restructuring and efficiency programme are yielding immediate results."
In May, the company said its production and grades improved in the first quarter, but its total sales fell and the effect of illegal mining activities continued to blight its Merelani tanzanite mine.
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.
However, at the time TanzaniteOne 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, while Richland said that it continues to provide no further capital to the TanzaniteOne/STAMICO joint venture at Marelani while the situation continues.
Richland Resources shares were up 3.1% to 8.25 pence during early trading on Wednesday.
By Tom McIvor; tommcivor@alliancenews.com; @TomMcIvor1
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