Following its acquisition of the Lemshuku-Shamberai Tsavorite project, coloured gemstone mining company Tanzanite One has initiated a bulk sampling project on the eluvia component of the resource, and is also considering diamond drilling in terms of the available underground resource.
Results of the bulk sampling will determine the scale and style of commercial production that is planned for implementation by 2009. Processing of the bulk samples will take place at Tanzanite One’s Merelani processing plant, which has spare capacity available to accommodate the sampling tons.
Tanzanite One CEO Ian Harebottle says that the company has set up a subsidiary company, Tsavorite One Mining, to acquire the tsavorite licences from Kirkwood Resources and Green Hill Mining. The initial evaluation of the tsavorite project at Lemshuku-Shamberai was started by the latter two companies, some two years ago.
“Although the agreements were signed and the deal was announced on October 22, 2007, it will only be finalised once all of the associated licences have been transferred into the name of Tsavorite One Mining. The company expects this to happen shortly. Currently, our market share in the tsavorite market is zero, as Tsavorite One still has to formalise the resource and establish the mine. That said, the licences acquired potentially represent a very significant portion of the world’s known tsavorite mineralisation,” Harebottle explains.
The tsavorite project comprises 12 prospecting licences covering 100 km2, and is located about 20 km to the south-west of Tanzanite One’s existing tanzanite operations. The total consider-ation for the tsavorite project is about £5,9-million, comprising fully paid common shares in Tanzanite One, and $350 000 in cash. Harebottle says that the acquisition forms part of Tanzanite One’s strategy to grow its market share and competence as a focused and diversified premium coloured-gemstone-mining company.
“We are increasingly being recognised as the leading coloured-gemstone- mining company. Currently, the com- pany has significant resources avail- able and it is expected that the company will grow beyond what its existing resource is delivering. Before the acquisition exercise, Tanzanite One was seen as a vertically integrated tanzanite company, which means that it explored, mined, beneficiated, branded and marketed the mineral tanzanite. The company has since divested from the downstream components of the business and has progressed its mining and exploration competencies to the extent that it is now a focused coloured- gemstone-mining company. This provides an opportunity to expand the company’s business model into other premium coloured gems, thereby creating additional shareholder value and earnings diversification,” Harebottle points out.
Currently, Tanzanite One is involved in phase 2 of the tsavorite project resource evaluation, which will include the mine plan, as well as a resource estimation that will be Joint Ore Reserve Committee-compliant. This is expected to take about 18 months to complete, and will only have a small impact on the company’s bottom line.
“Although Tanzanite One is currently funding the tsavorite project, the company will look to ensure that each project carries its own weight, and will thus expect the tsavorite project to become self-funding in the near term, paying back the initial expenses incurred in the longer term,” Harebottle says.
Tsavorite currently enjoys significant interest and respect within the formal gemstone market, with the gem being well recognised in the industry as a premium product. Demand is currently exceeding supply and tsavorite has a quality-for-quality price for each carat of about three times that of tanzanite. Harebottle says that the interest generated in tsavorite has been on the back of very little formal marketing and promotion, and, as such, a number of oppor- tunities exist to further enhance its position through formal and targeted marketing and promotion.
“Once Tsavorite One comes into operation, the anticipated increase in supply could change the existing supply and demand curve somewhat; however, if managed correctly, the increased supply should result in an increase in the level of demand as the gem becomes more accessible to a broader base of retailers and consumers. Tanzanite One is well aware of this and will be using the next 18 months to ensure that the market is well positioned to absorb the production,” Harebottle states.
To date the supply of tsavorite has been extremely fragmented and artisanal in nature. No official figures of companies mining tsavorite exist, although Harebottle estimates the number at 50 operators, most of whom are operating on a very small scale.
Tanzanite One currently has the opportunity to develop a stable supply from a single source and take the stones to the consumer using its proven mine to market infrastructure. This will capture the value that exists in this rare gemstone and provide a new and diversified earnings stream for TanzaniteOne.
“Tanzanite One is a focused premium coloured-gem- (PCG-) mining company that will look to increasing its footprint in terms of the mining, and promotion of PCGs, or gems that are globally recognised in terms of their rarity, colour, legacy and brilliance, ideally where we could have a reasonable market share or where the gem can be relatively easily differentiated,” Harebottle concludes.