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TanzaniteOne Launches New Supply Strategy
February 10 , 2005

Tanzanite, photo © John Parrish.

TanzaniteOne, the Bermuda-registered company that acquired the tanzanite mines formerly controlled by South Africa-based AFGEM, announced at a press conference in Tucson that it was launching two separate ventures aimed at changing the way tanzanite is bought and sold.

Under the Preferred Supply Strategy, TanzaniteOne would sell its entire production to six contracted sightholders, who would be guaranteed three shipments of tanzanite, or sights, per year for the next six years. The identity of the sightholders was not revealed at the conference pending the finalization of their contracts.

"We're looking to work with companies that are looking to develop themselves within the tanzanite industry," TanzaniteOne Chief Executive Michael Nunn said at the conference. "We're looking for people to make the commitment to the tanzanite industry, who have the depth of understanding of where they want to be. We believe that, like the diamond industry, the tanzanite industry should be vertically integrated, and we are looking to our customers to do that where they can."

For sightholders, the advantage of the system will be a steady supply of tanzanite. Tanzanite is only found in one place in the world, the village of Mererani in northern Tanzania. With the exception of a sharp drop in prices following a media scandal in late 2001, tanzanite supply has been steadily decreasing — and prices rising — since the late 1990s. The mine tunnels in claims worked by small-scale Tanzanian miners are getting deeper, to the point where specialized equipment is required to work the mines, and money for investment is scarce.

Still, most of the world's tanzanite is produced by these small-scale miners. Nunn said at the conference that TanzaniteOne's market share is "probably under half at this point," and they supplement their production by buying from other miners.

If that's the case, then why — in the face of an uncertain market — would potential sightholders commit to buying from TanzaniteOne when tanzanite is available elsewhere with no long-term contracts?

Independently from TanzaniteOne, dealers exhibiting in Tucson agreed that the scarcity of tanzanite is hurting the market. Some said they had decided to stop selling tanzanite altogether; there were other stones with a bigger market and steadier supply. To address the marketing issue, and to help support its sightholders, TanzaniteOne introduced another initiative: Tanzanite Foundation.

Conceived as a marketing and promotional body for the tanzanite industry, TanzaniteOne will be run by a London public relations firm.

"We'd like it to be compared to the likes of the Platinum Guild," Nunn said. "It's not independent [from TanzaniteOne]; we're funding it, [and] we're the only company contracted to it financially." But rather than attempting to brand TanzaniteOne's gemstones, Tanzanite Foundation will simply promote tanzanite as a gemstone, for the benefit of anyone who sells it.

"It's not something we are looking to impose on the industry," Nunn continued. "It's something any individual member of the industry, if they feel it's a good cause, can embrace. If it achieves half of its objectives, we will have a much more stable industry."

Those objectives include promoting a grading system for tanzanite, developing public demand for tanzanite through "guerrilla marketing," and putting money back into the local community where tanzanite is mined, including the small-scale miners. TanzaniteOne's initial investment is $3 million, and that may grow if other companies contribute.

Although Tanzanite Foundation and TanzaniteOne will function separately, for Nunn they're two parts of a single strategy: "The essence of it is confidence. Sightholders have a reasonable supply of rought, so we expect them to be in a position to make a commitment to their customers. That confidence will pass on to the retailer. Through that confidence, we develop into a more serious industry."

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January/February 2005 • Style: Gemmys Winners • Style: AGTA spectrum Awards • Selling: In the Pink - Retail Survey • News & Updates • In This Issue