Illegal mining took a heavy toll on Richland Resources’ (LON:RLD) tanzanite operation over the past twelve months and has also badly hit the current year, it warned.
Neighbouring miners tunnelling into Richland’s operations put restrictions on where the company could operate as well as leading to the loss of a significant amount of high grade tanzanite.
Revenues in 2012 fell to 20% to US$20.5mln and, alongside a US$4.4mln impairment charge for the illegal mining and US$5.6mln for unpaid South African taxes, meant a net loss for the year of US$13.6mln.
Since the year end, Richland has signed a new licence agreement with the Tanzanian government that will mean the tanzanite operation now being jointly owned with the state mining company, which it hopes will stem the losses from the illegal activity.
But the disruption to mining activities has continued throughout the first half of 2013, leading to a material adverse impact to be reported in interim results, it said.
Richland added it is considering various financing options to address current financial position and working capital requirements.
Bernard Olivier, Richland’s chief executive, said: “A major operation to safeguard existing assets and reclaim significant high grade areas is due to commence shortly and we look forwards to returning the operations to profitably, so both Richland and the Government of Tanzania can receive profits from a highly efficient coloured gemstone mining operation.
“We have made a tax and related charges provision of US$5.6 million for legacy issues dating back between 2004 and 2008, although these issues are under an appeal, which the directors intend to fully pursue.
“Our clear priority is on delivering high grade production from Richland's mines and cutting operations."