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Gemstone producer Richland Resource (LON:RLD) has been granted a mining licence from the Tanzania Ministry of Energy and Minerals for its tanzanite mining operations.
The licence is held on a 50:50 basis between Richland and state mining company STAMICO (State Mining Corporation of Tanzania).
It added that the government tie-up should result in a clampdown in tanzanite smuggling, which is having a negative effect on tanzanite prices.
“Following granting of the new mining licence, the Government of Tanzania has re-confirmed it will now be working with Richland to ensure security for workers at existing operations and reclaim mining areas lost to artisanal workers in the area,” the company said in a stock exchange statement.
The company had previously flagged the impact of such illegal mining, which it said had been “severely affecting” its operational and financial performance for more than a year.
Today, Richland warned that these activities have had a negative impact on the company’s 2012 financial results, as well as its current financial position. As a result, the directors are currently weighing up various financing options.
RFC Ambrian said it was mixed news for the company.
“While the deal with the government should be a huge benefit to its profitability going forward, it has come too late to avoid re-financing,” said analyst Craig Foggo.
His valuation of Richland is now under review until more information is available on the finances.
“As long as the government sticks to its side of the bargain and Richland can find the funding it needs, production volumes, high value stone production and longer term global tanzanite prices should increase from here,” added Charlie Long, an analyst at Sanlam Securities.
Richland shares fell 8% to 4p each.