| A More Even Keel...

20th May '09 by MrT

2 comments 1342 reads

TNZ has just raised GBP3.49 million (at 15p per share). http://www.stockopedia.com/news/announcement/TNZ/090520tnz000531.htm.
This follows quite a shaky trading statement from the gemstone miner at the beginning of the month (http://www.stockopedia.com/news/announcement/TNZ/090505tnz001450.htm) where it indicated that it had postponed 3 million carat production ramp-up plans until 2012 as demand fell, and that it was in talks with trade unions to cut 28 percent jobs in Tanzania to reduce costs.
These proceeds will be used to "provide funds for the acquisition of gem quality tanzanite in the local market, fund the bulk sampling of the Company's tsavorite assets, fund further development work on the Company's tanzanite assets and provide general working capital for the group".

Bernard Olivier, Head of Development commented today: "I am extremely pleased that TanzaniteOne has been able to raise this additional capital at a time of such turbulence in world markets. This placing will enable us to follow our strategy; to concentrate on supporting the tanzanite prices by purchasing gem quality tanzanite via our trading operation in Arusha and fund further development work on our tanzanite assets as well as developing our tsavorite projects. We are encouraged by the recent signs of improvement in the tanzanite market particularly the sales and demand increases which was evident in our
recent upturn in total sales; US$ 4.64 million tanzanite sales in the four months up to until 30 April 2009."

http://uk.reuters.com/article/companyOutlooksNews/idUKBNG6354120090505

Unlock with Email

Unlock with Google

Already have an account?
Login here

Betasurfer

20th May '09

Well, it doesn't surprise me that the market for rare luxury gemstones isn't exactly booming right now. I'd never even heard of Tanzanite.... Here's what I found on it. I quite like that comment about there only being enough for one generation - pure marketing spin, probably, but has a nice ring to it...

Tanzanite, with its multi-dimensional hues of blue that captures the shades of lilac, violet, periwinkle and burgundy shades, has become quite the sought-after birthstone for young women and, depending on the setting, young men. Surprisingly, though, tanzanite is also in very limited supply, possibly only enough for one generation. Tanzanite, named by Henry Platt, a former president and chairman of Tiffany and Co. was discovered in 1967 in the foothills of Mount Kilimanjaro in Tanzania, the only place that the stone can be found making it a thousand times rarer than diamonds. Named after its country of origin, the blue gemstone is sacred to the Maasai tribe of Tanzania who consider its color “sacred and spiritual.” When first discovered, Henry Platt stated that tanzanite was undoubtedly “the most beautiful blue stone to be discovered in the last 200 years.” When Tiffany and Co. first launched the tanzanite advertising campaign in 1968, they boasted that this precious and rare gemstone can only be found in two places in the world: Tanzania and Tiffany’s. Tanzanite was introduced to the Philippines through expert jewelry designer Hans Brumann who previewed his collection “Azure and Amber” late last year. The pieces used tanzanite and tsavorite (green garnet) set in yellow and white gold, mother of pearl, white coral and kamagong wood. The collection and the show was made in cooperation with Tanzanite One, engaged in mining and selling rough tanzanite, and the Tanzanite Foundation, a nonprofit organization that promotes and provides education training on the rare gemstone and to provide community projects for the people who live near the mines. Its limited supply makes the stone such a must-have. It’s becoming more and more valuable as an heirloom. A tanzanite, taking from the traditions of the Maasai tribe is to be given from parent to child, as a gift far rarer, far more special than a diamond".

emptyend

I was quite attracted to TNZ at one point and had them on my watchlist (albeit rather "higher up" than they now are!). Mrs ee was also attracted to Tanzanite, though I didn't actually buy her any in the end! ;-)

AIUI Tanzanite is a pure gemstone (ie there are no other uses, unlike gold, platinum, diamonds etc). Accordingly demand relies on attractiveness and perceived rarity. AFAICT the marketing operation globally has become pretty extensive over the last few years (I first saw a stone in 2004) and, from an investment standpoint, it seems to me that the retail prices are pretty high relative to other stones, including others in East Africa which are similar "single source" stones (tsavorite being one).

In sum, it may well be a buy down at these sort of levels, but I'd guess that stocks remain fairly high in the distribution system and may have to be run down further before decent prices can be obtained. Perhaps needs a bit of a sustained uptick in the economy too? I'm not sure there's a rush just yet. Is £19mn market cap cheap when a company has sales of $27mn and a gross margin of 36%?? It doesn't quite feel like it, especially if margins remain under pressure.

FWIW

A more even keel...

Unlock the rest of this article with a 14 day trial

About the Author

MrT

2 comments

Unlock the metrics for all these stocks and more...

Unlock the metrics for all these stocks and more...