State acquires 50% stake in TanzaniteOne

The government has finally reached an agreement for taking 50 per cent stake in TanzaniteOne, after marathon negotiations that took almost a year.

The talks took long as the government was striving to establish the best modalities for acquisition of 50 per cent shareholding in the largest tanzanite mining firm in the world in line with the new Mining Act of 2010.

The Minister for Energy and Minerals, Prof Sospeter Muhongo, told the ‘Daily News’ that the deal has already been concluded and it was no longer news.

“We have reached an agreement on shareholding takeover,” Prof Muhongo said. 

Under the deal, the State Mining Corporation (STAMICO) would be the caretaker of the 50 per cent shares for the government and the remaining will be in the hands of TanzaniteOne. It’s a 50:50 pact.

TanzaniteOne is a subsidiary of a gemstone producer and developer Richland Resources listed on the London Stock Exchange (LSE) alternative investment-market (AIM) window. 

The two, Richland and STAMICO, signed a letter of intent setting out the terms of a new mining licence for the LSE’s Aimlisted group’s Tanzania-based tanzanite deposits.

The parties aimed to enter into a formal binding agreement cementing the terms of how the operations would be undertaken, as well as the division of costs and revenue, under the 50:50 mining licence, would be issued in the next few days.

“We are pleased to have reached mutually acceptable terms in principle for a partnership with the government of Tanzania that recognises the company’s investment, under its former licence in full compliance with the local participation requirement of the 2010 Mining Act and provides a commercially acceptable framework for the continuation of its mining operations in Tanzania,” Richland CEO Bernard Olivier said in a statement.

The parties were in the process of determining a “fair and reasonable sum” to be paid by STAMICO - either in full or using 40 per cent of the yearly profit due to it from the mining of tanzanite - to TanzaniteOne in exchange for a 50 per cent stake in the new mining licence. 

However, Richland pointed out that “all revenue and profits earned” from activities other than mining by TanzaniteOne were excluded from the profit sharing arrangements.

Also, they agreed that all current assets, including buildings, machinery, plant and equipment, remained under the ownership of TanzaniteOne. Under the agreed terms, neither TanzaniteOne nor STAMICO could sell the shareholding without permission or right-of-first refusal.

Late last year, the government refused to renew the mining firm’s licence, which expired last August. The firm was required to disposed of 50 per cent of its stake to the government and sort out other management issues. 

But then, TanzaniteOne Executive Chairman, Amb. Ami Mpungwe said: “This is a listed company; you cannot just get a free-hold of shares without thinking of the shareholders.

“Some of our shareholders are institutional (like pension funds). You cannot just take their interest by simple announcement.” The new Mining Act stipulates that gemstone mining will be carried out exclusively by Tanzanians, except when it requires heavy investment and sophisticated technology.

The Act also provides an opportunity for existing firms to list on the Dar es Salaam Stock Exchange (DSE) by floating 50 per cent of their shares to locals in order for their gemstone mining licences to be renewed.

“We wanted to offload (20 per cent) our shares at DSE since 2004, but we could not sail through. We tried again last year, but capital market (and securities authority) failed us,” Mr Mpungwe said. The plan was announced last April.

To strengthen security at the mining area, STAMICO would further facilitate and liaise with the local government authorities to ensure that necessary regulatory and law enforcement actions are taken efficiently, as the two companies work to curb tanzanite smuggling and illegal mining operations in the area.
Source: The Daily News, reported by Abduel Elinaza in Dar es Salaam
Share on Google Plus

About Abduel Elinaza

This is a short description in the author block about the author. You edit it by entering text in the "Biographical Info" field in the user admin panel.