JOHANNESBURG (miningweekly.com) – A day after announcing that it had gained some control over illegal mining activities at its Tanzanian operations, Aim-listed Richland Resources has agreed to sell the embattled TanzaniteOne Mining Limited (TML) to Sky Associates for $5.1-million.

The gemstone producer and developer, following a comprehensive review of the strategic options available, would shed its tanzanite mining, exploration and cutting and beneficiation operations and its licence interests in the East African country to focus on its Australian assets.

“Given the continuing operational uncertainties in relation to the tanzanite mining operations of TML, including the sustained period that it has not been possible to operate profitability, and the need for funding to be provided, the board of directors strongly believe that this deal is in the best interest of the company's shareholders,” Richland CEO Bernard Olivier explained on Wednesday.

Following an increase in illegal mining activities, which threatened the safety of the company’s mineworkers, in addition to liabilities and changes in legislation relating to gemstone production, tanzanite mining had become “extremely challenging” in Tanzania.

TML output declined from 810 347ct of tanzanite in the third quarter of last year to 622 551ct in the third quarter of this year, as illegal mining continued to impact the quality of the tanzanite recovered and limited the available high-quality production areas accessible for mining.

“The proposed sale allows Richland to focus on sapphire production in Queensland [Australia] and use our mining and marketing experience to rapidly build revenues and profits,” Olivier said.

Richland would use the proceeds from the sale to fund the ongoing work programme and further development of its Capricorn Sapphire project, in Australia, which was set for first production in the first quarter of 2015, and for general working capital purposes.

The sale remained subject to approval by shareholders, the Minister of Energy and Minerals of the Republic of Tanzania and the South African Reserve Bank.

Richland would host a special general meeting on December 22 to obtain shareholder approval.