Plans to re-boot the NT’s Merlin diamond mine has been given a boost with 14-year gas supply deal inked

Australia has no diamond mines but plans to redevelop one in the NT have received a leg-up. Read where the mine has been proposed for.

Plans to re-open Australia’s only diamond mine in the Northern Territory have been boosted with a new gas supply deal to the proposed site.

Australian Natural Diamonds Ltd, a wholly owned subsidiary of the Lucapa Diamond Company which wants to re-open the Merlin Diamond Project at McArthur Basin, has signed a 14-year heads of agreement with Armour Energy Limited to supply gas to power the site.

Lucapa posted on the Australian Stock Exchange in 2021 that the Merlin prospect could be worth $1.6bn during the projected 14-year life-of-mine.

Armour said the agreement reinforces the hydrocarbon potential of the McArthur Basin and the company’s ability to provide gas to the domestic market.

If realised, it will be the first production out of the McArthur Basin, which lies about 20km from the Merlin mine.

Lucapa Diamond Company’s 170 carat pink diamond – dubbed The Lulo Rose – that was discovered at the Lulo mine in Angola's diamond-rich northeast region. AFP PHOTO

Armour Energy chief executive Christian Lange said the agreement is “significant”.

“This heads of agreement with Lucapa represents a significant opportunity to further appraise, develop and commercialise the Glyde gas discovery in the Northern Territory,” he said.

“Recent technical work has validated the producibility of the existing well and plans are underway to reassess the resource potential and development feasibility.

Merlin diamond mine by air.

“The agreement underpins the accelerated pathway to commercialisation of this shallow, conventional gas asset and reinforces the exciting conventional and unconventional hydrocarbon potential of the McArthur Basin in the Northern Territory and our ability to provide this valuable resource to the domestic market and represent first production from the Basin.

“We are looking forward to working closely with the team at Lucapa and providing them

with a reliable and sustainable supply of high-quality gas for the life of the mine.”

Lucapa managing director Stephen Wetherall said the agreement delivers significant project benefits.

Exploration at the Merlin diamond mine

“The prospect of the availability of gas from a source less than 20km from the Merlin

Diamond Project rather than diesel trucked from Darwin, potentially as part of a solargas hybrid power solution, is of significant interest to Lucapa from both an environmental

and project economics point of view,” he said.

“We look forward to working with Armour Energy on this exciting initiative.”

The Merlin mine site, about 700km south east of Darwin, has a colourful history.

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.

Merlin operated between 2000 and 2003, extracting about 100kg of high quality diamonds.

If Lucapa get the project up, it could potentially mean hundreds of jobs and payments of millions of dollars in royalties.

As well as Merlin, Lucapa has diamond mines in Angola and Lestoho in Africa and last month announced discovery of a 150-carat white Type IIa diamond from its Angolan mine.