NT’s Merlin Mine plan hits snag as diamonds lose their sparkle
Plans to develop Australia’s only diamond mine in the Territory have hit a snag. Read what’s caused the change of direction.
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Plans to develop Australia’s only diamond mine in the Northern Territory have been changed following a slump in the price of the resource.
Lucapa Diamond Company had hoped to reactivate the old Merlin diamond mine into a 14-year, $1.7bn dollar operation but the Perth-based company recently announced a change in direction.
Chief executive Nick Selby said the company had suspended plans for a full-blown feasibility study into the Merlin prospect in favour of a smaller, staged approach to restarting the mine.
The cost to reactivate the Merlin mine had blown out to in excess of $100m.
Instead it will explore a smaller scale, lower cost alternative to revive the old mine.
If it goes ahead, the mine’s new life expectancy would be 20 years.
Mr Selby said the company is still hoping to commence mining in 2025.
In a statement to the Australian Stock Exchange, the company said the current capital market environment and softening of diamond prices this year contributed to the decision.
“Against the current capital market environment and softening of diamond prices in 2023, (Lucapa) believes it is prudent to place the large-scale Merlin feasibility study on pause in favour of a study which considers lower production and capital cost options,” the statement said.
“The alternate study will examine, among other things, using existing resources such as the trial mining plant and front-end scrubber to get Merlin into production.”
No time frames have yet been released around the revised works schedule.
“Lucapa is in the fortunate position to be debt free and have two profitable producing mines,” Mr Selby said.
“For the next 12 months we will focus on further strengthening our balance sheet.
“Rather than raise capital to fund the original Merlin development, we will focus on a lower cost pathway to development using existing resources. We believe that this is in the best interests of shareholders.”
A final decision on the capital and operating estimates for the revised project are expected to be finalised in 2024.
The company said work on the smaller development option was well advanced.
Mr Selby is adamant Lucapa is committed to Merlin.
“There’s no way we’re walking away from it,” he said.
“Our plan now is for a slower start with a smaller capital injection to get up and running. We’ll start smaller and go organically. We’ll get there with a slower start so it’s not such a big hit from the beginning.”
About 80km south of Borroloola and 700km from Darwin, Merlin has a colourful history. First opened in 2000 the prospect generated about 100kg of diamonds before shutting down in 2003.
It was previously owned by Rio Tinto and Ashton between 1999 and 2003 before being bought by Melbourne magnate Joe Gutnick in 2008. Mr Gutnick declared bankruptcy in 2016 and Lucapa paid $8.5m for Merlin in 2021.
It was hoped Merlin would revive a diamond industry in Australia after the closure of the Argyle diamond mine in West Australia’s East Kimberley in 2020.
A Lucapa spokesman said the change of plan was unrelated to Merlin project partner Armour Energy being placed in voluntary administration in November.
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