Too big to fail?

During the last few years one could witness the failure of several projects that once were thought to be too big to fail.

It all started with TanzaniteOne. The largest producer of tanzanite dominated the market for many years. Their marketing concept of "vertical integration" was to sell tanzanite rough to only a handful of carefully selected companies, called sightholders. TanzaniteOne guaranteed a steady supply and in return the sightholders agreed to buy whatever TanzaniteOne decided to sell, with no chance to select e.g for size or quality grade.

The concept worked rather well for many years. The trouble started, when in 2009, with the beginning of the financial crisis, tanzanite sales in the USA, by far the largest market, went into free fall.

In 2011 TanzaniteOne was taken over by Richland Resources, who also own a sapphire mine in Australia. To get sales back on track, the new owner in an unprecedented move entered the retail market. In 2013 a webshop was launched, followed by retail shops in Tansania and South Africa. Obviously those measures were not overly successful because in February 2015 the retail shops were closed down and in September 2015 Richland Resources announced the sale of TanzaniteOne to it´s current owner, Sky Associates.

However, the troubles are not over, yet. Following a parlamentary investigation in Tanzania, in September two directors of Sky Associates were arrested and questioned about accusations of corruption, illegal exports and tax evasion.

In February 2018 we will meet with one of the sightholders and hopefully be able to report on how insiders see the future of tanzanite.

Another company that ran aground is Gemfields, former owner of the Kagem Emerald Mine in Zambia as well as the Montepuez Ruby Mine in Mocambique. Like TanzaniteOne, Gemfields tried to control the business with a mine-to-market concept. To this end they even bought world-renowned jeweller Fabergé. However, Gemfields was not able to keep emerald production profitable.

When losses accumulated, production declined and share value went down by almost 50%, Gemfields was taken over by Pallinghurst, who had already owned about 75% of the company and now took full control. The new owners promise to re-structure emerald mining and restore profitability.

Last but not least we have to report the bankruptcy of True North Gems Greenland. The company wanted to exploit greenlandic ruby deposits but never got out of the starting blocks. As long ago as 2012 TNGG claimed to be only a short time away from getting operative but fact is, they never got beyond taking some promising samples. Now, it seems they could not raise any more money to take the final step and filed for bankruptcy in September 2017.