Lucapa Diamond Company has initiated the acquisition of the Merlin diamond project in the Northern Territory from Merlin Operations.
The $8.5 million deal will see Lucapa receive a mining lease for 24 square kilometres, tenements of 283 square kilometres, and all associated mining equipment and assets.
Beneath the Operations is believed to be a 4.4 million carat JORC compliant resource, giving Lucapa a price of around $2 per carat of diamond.
Lucapa will make the acquisition under its wholly-owned subsidiary, Australian Natural Diamonds.
Lucapa managing director Stephen Wetherall said the deal complements the company’s existing portfolio across two operations in Africa.
“This is a strategic acquisition for Lucapa which represents a value-accretive and logical step in Lucapa’s production strategy,” he said.
“The project is well known for being Australia’s large stone producer and is a strong complementary fit with the company’s two existing niche productions in Africa that are set to produce solid returns for Lucapa in 2021.”
The Merlin project was previously operated between 1999 and 2003 by Rio Tinto and Ashton Diamonds, producing the largest rough diamond Australia had ever seen.
It’s possible the project could become Australia’s only operational diamond mine after Rio Tinto’s historic Argyle mine closed last year.
Lucapa also released its full year guidance forecasts for 2021, which predicted total production of 40,400 – 42,600 carats of diamond from the Lulo (Angola) and Mothae (Lesotho) mines in Africa.
The company’s exploration and development budget should range between $6 million and $9 million.
This will be spent mostly around Lulo and Merlin, the latter reportedly still with over 70 unresolved anomalies to be explored.
The Merlin acquisition is subject to Lucapa paying its $8.5 million within three months, or by the end of 2021 if the deadline is extended.
Wetherall said the deal couldn’t have been initiated without the help of the company’s highly interested investors.
“The success of the Placement element of the capital raising, and the high level of interest received from existing and new institutional investors, demonstrates the quality of our existing assets and the strategic nature of the Merlin Diamond Project acquisition and our future,” Wetherall said.
“We look forward to getting on the ground, completing the work to deliver the various studies and bringing Merlin into production as soon as possible.”