By ADAM IHUCHA -- A dark cloud
is hanging over the Richland Resources’ sudden decision to sale its stake in
TanzaniteOne Mining Ltd, as its partner - Tanzania government- says that the
deal can’t be closed without its consent.
In December 2013, Richland Resources
and Tanzanian government through State Mining Corporation (STAMICO) signed a
10-years joint venture (JV) agreement over TanzaniteOne.
Idea was for the company to comply
with a provision of new Mining Act of 2010, which requires the foreign
gemstone-mining firms to transfer their 50 percent stakes to locals.
But in unanticipated development, a
year later, the London Stock Exchange listed company announced to sell its 50
percent shares in the embattled TanzaniteOne Mining Limited (TML) to Sky
Associates for $5.1 million, apparently without consulting its partner, Stamico.
Commissioner for Minerals, Paul
Masanja says that the state was unaware on the issue, and under the joint
venture terms, neither Richland Resources nor Stamico can sell the shareholding
without permission or right-of-first refusal.
“Under the joint venture agreement,
Richland must seek the Tanzania approval and so far there’s no application of
that kind”, Mr. Masanja underlined.
Acting Director General of the
Stamico, Edwin Ngonyani was also caught off-guard by the development, saying
that the state enterprise wasn’t aware over the plan by its partner, Richland
Resources, to sell its interests.
“We haven’t received any letter yet
with regard to Richland idea to sale its stake in TanzaniteOne Company and as a
business partner, Stamico must be consulted” Mr. Ngonyani explained.
However, Richland CEO Bernard
Olivier says that, following a comprehensive review of the strategic options
available, his firm would shed its tanzanite mining, exploration and cutting
and beneficiation operations and its license interests in Tanzania to focus on
its Australian assets.
“Given the continuing operational
uncertainties in relation to the tanzanite mining operations of TanzaniteOne,
including the sustained period that it has not been possible to operate
profitability, and the need for funding to be provided, the board of directors
strongly believes that this deal is in the best interest of the company's shareholders,”
Olivier explained.
Following an increase in illegal
mining activities, which threatened the safety of the company’s mineworkers, in
addition to liabilities and changes in legislation relating to gemstone
production, tanzanite mining had become “extremely challenging” in Tanzania, he
says.
TanzaniteOne Mining Ltd output
declined from 810 347carat of tanzanite in the third quarter of last year to
622 551carat in the third quarter of this year, as illegal mining continued to
impact the quality of the tanzanite recovered and limited the available
high-quality production areas accessible for mining.
For instance,
TanzaniteOne in the year ended in December 2012 claimed to have been recorded a
net loss of $13.6 million, in contrast to a net profit of $ 0.7 million
realized in 2011.
As if that was not
enough, in the first six months to June 30, 2013, TanzaniteOne has posted a net
loss amounting to $0.56 million, attributing the loss to impairment of assets
as a result of the illegal mining activities.
“The proposed sale allows Richland
to focus on sapphire production in Queensland [Australia] and use our mining
and marketing experience to rapidly build revenues and profits,” Olivier said.
Richland would use the proceeds from
the sale to fund the ongoing work programme and further development of its
Capricorn Sapphire project, in Australia, which was set for first production in
the first quarter of 2015, and for general working capital purposes.
Tanzania Mineral Dealers Association
(TAMIDA) Chairman, Sammy Mollel believes that the so-called shares sale was a
game to fool the government.
“Why Richland decided to shed its
stake only one year since it entered into joint venture with Stamico? This is a
game to fool the government. They are likely to change a name, but the same
people” Mr. Mollel says.
Under the JV agreement, Stamico, in
real terms, agreed to reimburse TML a sum of $4 million in recognition of the
expenditure incurred by the later in developing mine infrastructures.
“The reimbursement would have been
paid by Stamico utilizing 40 percent of its share of the net residual profit
until the amount is paid in full” the JV agreement seen by this reporter
reads in part.
The
$4 million was agreed by the parties as representing a fair and reasonable
amount taking into account the investment made by TML in developing the mine
infrastructures from which both parties will benefit.
The TML extracting Tanzanite at
Mererani hills, nearly 40km southeast of Arusha in northern Tanzania, had
invested over $100 million in state-of-the art mining technologies over the
years.
William Ole Nasha, a
renowned lawyer and natural resources analyst has faulted the deal saying that
the agreement in itself is technically flawed, disputing the good intension of
the new mining law of 2010.
Mr Ole Nasha says
that the law clearly stipulates that foreign company should offer 50 percent
shares to individual Tanzanians and not the state-run-corporation.
“Idea of changing the
mining Act was to create opportunities for Tanzanian population to have a stake
into a lucrative mineral trade. Now let reason together, how Tanzanians at
individual level will benefit from Stamico to own the 50 percent shares from
the TanzaniteOne shares” he queried.
With regard to the
TanzaniteOne loss, Ole Nasha, said that it defeats common sense of any right
thinking member of the society to believe that the company has been making
loss.
“Profits and loss of
company, is a matter of how management prepare their accounts. I doubt this is
smart way of escaping to paint the true picture of the firm’s returns” he
stressed, adding that if it was true the company is making loss it could have
left a long ago.
An eight square km
Block ‘C’ Tanzanite site, which TanzaniteOne purchased its operations from the
giant South African mining company-African Gem Resources (AFGEM) way back in
2004, had been an epicenter of an endless standoff between the firm and small
scale miners.
Majority of
local miners, who were evicted to pave the way for the flamboyant foreign mining
firm two decades ago, still believe that they were robbed of the top
rich-deposits slot at Mererani hills.
As a result,
struggle by the small scale miners have been on going with an eye to ensure
that the company is relocated away from the particular spot, but in vain.
The sale of its stake
is therefore viewed by many as a’ dream come true for small-scale miners.
Chairman for a
spirited Manyara Regional Miners Association (MAREMA), Zephania Mgaya says that
indeed they were happy with the end of the era and now demands their area back.
"To accept a new
company to take over the TanzaniteOne operations will amount to a deliberate
infringement of the law. A new mining Act is very clear that the gemstone
mining is reserved for locals” Mr Mgaya said.
James Ole
Millya, an outspoken opposition politician-cum lawyer, has gone extra mileage
by asking President Jakaya Kikwete to grant the local miners block 'C' occupied
by Tanzanite One.
“This is an opportune
moment for President Kikwete to redistribute the area formerly occupied by
TanzaniteOne to local miners as the law says” Mr. Millya says.
Bloc 'C' is believed
to have abundant tanzanite deposits, the ornamental gemstone found only in
Tanzania.
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