JOHANNESBURG (miningweekly.com) – Aim-listed coloured gem producer Tanzanite One MD Zane Swanepoel said on Monday that the company had seen a “significant” upswing in tanzanite prices and that it would exceed its 1,7-million-carat production target this year.

Tanzanite One posted a loss of $0,58-million in the six months ended June 30, from a profit of $3,5-million in the corresponding period of 2008.

Revenues from ordinary activities for the interim period decreased by 77% to $4,9-million, from $20,9-million in the first half of 2008.

However, it was pointed out that the second sight of 2009, which is normally held within the first half of the year, had only taken place in July, owing to the closure of the South African office and the opening of the new Dubai office. These sales would be reported in the second half results.

Tanzanite One reported that its results were further impacted on by the global economic downturn, however, it had now seen an increase in demand for tanzanite stones.

“In addition to selling stones mined during the period, we are gradually releasing the stockpile of high value stones, which we chose to build up at the worst period for the tanzanite market,” Swanepoel said.

Increases in price at the group’s traditional sight sales had also been augmented by a number of new sales strategies, with $2,23-million in revenue being achieved through new sales channels, such as retail outlets in Tanzania and through direct sales to jewelers.

“Considering constantly improving demand and tanzanite prices, evidenced by the $2,01-million sale at the recent July sight post the reporting period end, we expect a significant improvement in our results for the second half of this year,” he said.

Swanepoel added that the company would be holding two further sights during the second half of the year, through the Dubai marketing office.

In the first half of the year, the marketing strategy was to develop new markets in the Middle and Far East, while concentrating on the distribution and realisation of higher prices for smaller, lighter material, which represented about 70% of production.

Tanzanite One produced 867 381 ct of tanzanite in the first half of the year, from 18 087 t processed at an average recovery of 48 ct/t. This was compared with the 1,1-million carats produced over the corresponding period in 2008.

Cash costs for the period increased 18% to $3,99/ct from $3,38/ct in the first half of 2008, but decreased 45% from $5,80/ct experienced in the second half of 2008. The increase reflected local inflationary pressures, lower volumes of carats recovered and an average 4% increase in local wages awarded during the year.

During the period under review, TanzaniteOne also undertook cost cutting measures, which included the streamlining of mining operations, the suspension of noncore capital projects, the restructuring of the Tanzanite Foundation, the reduction in both expatriate and Tanzanian staff, and the closure of the South African office.

These cost reduction measure resulted in a reduction in the company's operating costs, thereby reducing losses for the period despite the drop in revenue.

Meanwhile, the acquisition of the Lemshuku-Shamberai Tsavorite project through the company’s 75% owned Tanzanian subsidiary TsavoriteOne Mining, has been completed.

The project comprises 12 prospecting licenses covering 100 km2, and is located about 20 km to the southwest of TanzaniteOne’s existing tanzanite operations. The directors believed that the Tsavorite project could potentially represent the largest known single-source of tsavorite.

“Tsavorite currently has a quality-for-quality market-price per carat of approximately two to four times that of tanzanite.”

The company has allocated some $1-million over the next 12-months to the bulk sampling and scoping of the project.

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