Companies: TNZ   

Write-offs, restructuring, production falls and lower quality hit turnover and profits at Tanzanite One last year.

Pre-tax profits at the AIM-quoted mining concern dropped from £6.4 million to £1.3 million in 2006 on turnover down from £20.5 million to £18 million, as production from near Mount Kilimanjaro in Tanzania slipped from 1.4 million carats to 1.2 million. Grades improved from 55 to 77 carats a tonne and gross mine revenue per tonne of ore rose 20 per cent to £477, but cash costs surged from £42 to £102 a tonne and productivity declined.

Chief executive officer Ian Harebottle says the market for tanzanite – the rare dark blue-to-violet stones whose only commercial production source is in one district of Tanzania – improved last year, with a nine per cent overall increase in rough stone prices. But Bermuda-domiciled Tanzanite One suffered in the first half year from prolonged power cuts and a temporary decline in the average quality of stones produced.

The company also took financial hits from writing off £900,000 of intangible assets associated with moving its Johannesburg office to Tanzania, £350,000 in non-recurring salaries and £1.3 million closure costs of Tanzanite One's retail jewellery business. Harebottle says this reflects a new strategy of focusing more on exploration and mining, and says the company is busily working to explore and expand its underground reserves, funding this internally.

Harebottle says the company should produce a new resource statement in the fourth quarter of this year, with a big chunk moved from the tentative 'inferred' category to the more confident 'indicated' definition. At 78.5p, down from 280p last year, the shares are a long-term recovery punt.

Tanzanite One	AIM	£27.93m	38.00p	1.00p
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