Richland Resources (LON:RLD) has completed the deal with the Tanzanian state owned mining company that confirms its tanzanite licence for the next ten years.
STAMICO will own the licences on a 50/50 basis going forward and pay Richland US$4mln out of future profits for all of the work it has put in some far developing the mines.
Richland’s tanzanite business has been dogged by illegal mining and STAMICO said it will liaise with the Tanzanian government to curb both this and smuggling at the Meraleni mine.
TML, Richland’s Tanzanite subsidiary will remain the operator, with net profits shared equally with STAMICO, while its cutting factory has been awarded a three year contract to polish and market the stones produced.
Trading arm TanzaniteOne Trading limited is not part of the agreement, while Richland’s other asset on Tanzania, the Tsavorite Project, is not included.
Bernard Olivier, Richland’s chief executive, said as well as a 10 year mining agreement the deal secured a clear alignment of interests with the Government and people of Tanzania.
Broker RFC Ambrian said the transaction should draw a close to the uncertainty surrounding the commercial terms of the proposed deal, which is in effect a profit share agreement.
The next steps will be the details on how much financing will be needed for the mine’s development, how this wil be raised and progress in re-taking the southern areas of the mine from the illegal miners.
RFC Ambrian also said evidence of a sustained withdrawal of illegal miners from the northern shafts and the underground development is still needed, while outstanding issues such as the royalty claim and the disputed legacy tax claim in South Africa need settling.
The broker added that if it can sort these problems. "Richland will be left with a healthy balance sheet, a 50% interest in the mining licence profits and full ownership of a mine that is operational, thereby effectively monopolising the supply of ethically-produced and polished tanzanite gems to a growing global market.
“The success of this ‘supply monopoly’ comes down to how well the trade of tanzanite on the black market is regulated by the Tanzanian Government. The difference now, compared with RLD’s past, is that the government’s 50% joint ownership in Richland’s licence creates an incentive for it to do something.“
Shares rose 24% to 4.5p.