Richland Resources (LON:RLD) today said it “strongly disputes” the validity of claims made by the Tanzanian government that it owes an additional US$1.73 mln in royalties.
The gemstones producer and developer said the claim from a representative at the country’s Ministry of Energy and Minerals dates back to the period from 2004 to 2008.
The company said the historic royalties relate to revenues generated through subsidiaries outside and independent of Tanzania, including for example sales of finished jewellery from its South African and Mauritian registered subsidiaries.
The Ministry also told the company it will not provide any more support to the mining activities of its wholly-owned subsidiary TanzaniteOne Mining (TML) until the retrospective royalties have been paid.
This effectively bars TML from exporting gemstones produced or processed in Tanzania, which means it is “potentially severely restricted” in its ability to generate revenues.
“The company is urgently seeking clarification from the Ministry and the Minister of Energy and Minerals as to the enforceability of this prohibition on exports,” said Richland in a statement.
“The company is also investigating measures it can take to continue sales and exports via its other Tanzanian subsidiaries although it is not certain if this will be possible and any alternative arrangements may be at significantly reduced margins.”
It added that it does not expect to be able to clarify these matters until later this week.
Richland will request a third party review of its legal case and the evidence before paying any claim for unpaid royalties.
“The company believes that it has a strong legal case and will accept the ruling of a legal tribunal where all the evidence is reviewed,” it added.
Richland’s shares – which were suspended this morning – will remain so until the matters are clarified.
In a side note, the company said that it has submitted a new application for a mining licence for gemstones and is waiting to hear back from the Ministry.