Open Letter to the Board of Tanzanite One

    RNS Number : 2644E
  Gemfields Resources PLC
  25 September 2008
   

    On the letterhead of Gemfields Resources plc

    Open letter to:

    The Directors
    TanzaniteOne Limited
    Clarendon House
    2 Church Street
    Hamilton, HM 11
    Bermuda

    25th September 2008

    Gentlemen,

    Recent announcements by Tanzanite One


    As you are aware, Gemfields Resources plc ("Gemfields") is now a significant shareholder in Tanzanite One Limited ("T1"). I attended
your Financial Results Conference Call on Wednesday morning, but regret that the moderator did not accept my request to ask questions; given
our concerns we feel it necessary to publish an open letter to the board of T1.


    1. Provision of Information

    Following the announcement by Gemfields on 12 September 2008 regarding a possible offer for T1 we have noted in your recent statements
that you have advised T1 shareholders not to take any action "until the T1 Board has had an opportunity to obtain further information from
Gemfields".

    We record that we have offered to meet with you on several previous occasions and answer any questions you might have. We now reiterate
that offer. We have also proposed reciprocal site visits to the respective mines of T1 and Gemfields. This would, inter alia, allow you to
witness Gemfield's open-cast mining skills first hand; skills which we feel would be particularly valuable in relation to your tsavorite
transaction. 

    We understand that you presently have a team in London and we would be happy to meet with them to answer their questions and outline the
benefits we envisage would arise from bringing Gemfields and T1 together. 

    2. The Tsavorite Transaction

    The second last paragraph of T1's announcement dated 15 September 2008 states: 

    "The T1 Board would also like to advise T1 shareholders that the conditions of the transaction announced in October 2007 with
TsavoriteOne have been met and the company intends on [sic] issuing to the vendor [sic] share consideration of 7.45 million shares in
TanzaniteOne."

    We are concerned about certain aspects of this announcement including:

    *     The decision not to disclose the directors' interests in the tsavorite assets and their resultant increased holding in T1

    Both the announcement and the call yesterday failed to point out to T1 shareholders that three of T1's directors have beneficial
interests in one of the two vendors of the tsavorite assets and that the transaction is deemed to be a related party transaction. Whilst
this was disclosed in T1's October 2007 announcement, we feel it would have been appropriate to remind T1 shareholders of this fact and to
provide details of the nature and extent of the T1 directors' interests.

    Completion of the tsavorite transaction (entailing the issue of 7.45 million T1 shares representing more than 10% of T1's current issued
share capital) will serve to dilute existing T1 shareholders (including Gemfields) whilst the three directors increase their beneficial
ownership in T1. We will expect any such increase in directors' holding to be announced in accordance with the AIM Rules. 

    *     Timing of the tsavorite announcement 

    We are concerned by the motivations behind the timing of the implementation of the tsavorite transaction, which comes after almost a
year of silence regarding tsavorite, and falls within three days of Gemfield's announcement of its proposed offer for T1.  

    *     Conditions precedent and tsavorite progress  

    The original announcement in October 2007 noted that TsavoriteOne would acquire 12 prospecting licenses covering 100 square kilometres
from Kirkwood Resources (Tanzania) Limited and Green Hill Mining Company Limited. 

    In this regard, Gemfields believes it would be appropriate for the Board of T1 to: 
    1. confirm that you are in possession of the written consent to the transfer of all 12 prospecting licences from the Commissioner for
Minerals in Tanzania (this was a condition precedent to the transaction and TsavoriteOne could terminate or renegotiate the agreements if
prior to completion any licences were allowed to lapse, expire or could not be transferred); and

    2. provide further information on the valuation of the tsavorite transaction and give an update on activities. The October 2007
announcement noted that work was underway to upgrade the tsavorite resource to JORC compliant indicated resource status. Although the same
non-compliant indicated resource was presented in your September 2008 announcement as it was in the original October 2007 announcement, the
grade of tsavorite per tonne remains unknown. It would therefore be beneficial to understand how Evolution Securities ascribed a value to
the project given that the grade remains unknown and the tonnages are not-compliant. 

    Gemfields continues to reserve the right to revisit the pricing of any proposed offer to T1 shareholders in the event that the tsavorite
transaction is completed without adequate confirmation of satisfaction of the relevant conditions precedent. 

    3. Dividend Announcement and Funding for Growth

    Gemfields notes with concern that, against a background of declining tanzanite grades (down 31%), declining tanzanite per carat prices
(down 25%) and increased production costs (up 29%), the board of T1 has announced a dividend which appears to leave T1 with approximately
USD 1.3 million of cash after payment of the dividend and receipt of the proceeds of the June tanzanite sight. 

    Given the above, we would question T1's ability to fund the USD 8 million capex estimated to be required to construct the tsavorite
mining and processing facilities. In addition, we believe there is a risk that this could leave T1 with insufficient cash resources to
endure potentially difficult times ahead and to pursue the T1 board's stated strategy of acquiring other projects and diversifying into
other coloured gemstones.

    We also note that the increased shareholding of the three directors arising from the tsavorite transaction will result in them receiving
a greater portion of the increased dividend. 

    4. Opportunistic Timing and value of the Proposed Offer

    We have noted that in your announcement dated 22 September 2008, the T1 board considers Gemfields' Proposed Offer to be
opportunistically timed and to be materially below T1's fundamental value, on the basis of, inter alia, the company's present and expected
operating and financial performance. The T1 board indicated that the Proposed Offer is at a 19% discount to the average mid-close share
price of T1 over the twelve months up to and including 29 August 2008, being the last dealing day before Gemfields' recent acquisition of T1
shares. 

    We would like to point out that prior to 29 August 2008, the T1 share price was on a continuous downward trend which we believe
indicates a negative market view of T1 and its prospects in its current form. Over a 12 month, 6 month and 3 month period (taking 29 August
2008 as a reference date and using closing prices), the T1 share price declined by 72%, 49% and 47%, respectively. As a result, we believe
comparing the Proposed Offer price to the 12 month average is irrelevant and not indicative of the market's valuation of T1. In addition,
the board of T1 was unable to provide an NPV valuation of T1 when asked to do so during the Financial Results Conference Call yesterday.

    We raise these concerns regarding the current direction of T1 in the interests of all shareholders and would appreciate a response by
Monday, 29 September 2008.

    Yours sincerely,


    Sean Gilbertson
    Chief Executive Officer
    Gemfields Resources plc
    [e-mail] 

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