New plan to revive the shuttered Northern Territory Merlin diamond mine

The owners of a Territory diamond mine have unveiled an ambitious production plan for the treasured gem. Read what they’re doing.

Northern Territory-sourced diamonds could be back in production as soon as next year if a plan to revive the shuttered Merlin mine is successful.

Perth-based Lucapa has unveiled a two-phase plan to rejuvenate Merlin, about 950km east of Darwin, which produced Australia’s largest ever diamond.

The company is anticipating revenue up to $246m over little more than two years.

Underpinning the plan is the first advanced electromagnetic survey at Merlin in more than 25 years.

Wendy Wood from MAGNT in 2003 with Australia's largest diamond from the Merlin mine. Picture: PATRINA MALONE

Lucapa’s plan, announced via the stock exchange this week, is based on small-scale, low-cost development with the company targeting first diamond production as early as next year.

Phase one would use excavator dredging to mine to a depth of 15m from the base of five existing open pits, with phase two using vertical pit mining to extract ore from the Gawain pit.

Phase one is expected to occur over 18 months, with Lucapa saying phase two would follow over a period of 27 months.

The ASX statement said Lucapa is in discussions with several parties for project level funding, with $25m required to bankroll both project phases with net operating cashflow tipped at $110m.

“These funding sources are through offtake agreements, project level debt, project equity and government facilities,” Lucapa’s statement said.

Merlin diamond mine.

“Lucapa will focus on increasing the current Merlin (mineral resource) through further exploration in the near term, due to the prospectivity for further kimberlites and base metal deposits given the proximity to the McArthur River Mine.”

One of only three Australian diamond mines, Merlin was first identified in the mid-1980s before being acquired by Rio Tinto in the early 2000s and developing a reputation for producing high-quality gems.

Merlin mine camp with airstrip in the background.

In excess of 500,000 carats of predominantly gemstone-grade diamonds were extracted including the 104 carat type IIa diamond, the largest diamond ever found in Australia.

Other gemstones recovered included 43ct, 32ct and 28ct diamonds as well as a number of yellow, pink and blue-covered diamonds.

Lucapa said in its ASX statement that the mine “has an unusually high proportion of gem and near-gem quality diamonds, with 75 per cent of historical production falling into these categories”.

Lucapa acquired the mine in 2021 for $8.5m and the following year published its updated scoping study based on treating 14m tonnes over a 14-year mine life, which required pre-production capital of $96m.

The plan was shelved last year when a feasibility study identified escalating capital costs, softening diamond prices and tightening capital markets pivoted the company to identify a lower cost capital option.

Originally published as New plan to revive the shuttered Northern Territory Merlin diamond mine