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Lucapa Predicts $1B in Revenue from Merlin Mine

Dec 19, 2021 7:08 AM   By Rapaport News
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Lucapa Diamond Company is set to generate AUD 1.6 billion ($1.14 billion) in sales from its newly acquired Merlin mine over 14 years, according to a recent study it conducted.

The research showed the mine was capable of producing a total of 2.1 million carats of rough during that time using open-pit and vertical-pit mining techniques, Lucapa said last week. Approximately 71% of expected production will be sourced from indicated diamond resources — those known based on drilled areas — the company explained. The remainder is “inferred,” meaning it is reasonable to assume it exists based on the drilling that has taken place, the company noted. Earnings before interest, taxes, depreciation and amortization (EBITDA) will be AUD 702 million ($500.2 million) for the 14 years, according to projections.

Production will reach 153,000 carats annually, with revenue per year coming to AUD 115 million ($81.9 million), at an average price of $508 per carat, according to the company’s predictions. Lucapa also plans to carry out exploration next year on several kimberlites thought to be diamond bearing. These are not included in the main estimate, it said.

“The scoping study sets out strong economics for a long-life mine,” said managing director Stephen Wetherall. “There is potential to deliver further significant value through the operational opportunities and from mineral resource extensions, underground development and exploration as the kimberlites continue at depth, and there are a significant number of anomalies that have the potential to deliver new source discoveries.”

The mine will take approximately two years to develop, at a cost of AUD 96 million ($68.4 million), and will employ about 200 people. Lucapa believes it will have the means to fund the project itself or to source the funds for it, the miner explained. However, if it fails to secure all the capital it needs, it may pursue other means, such as selling a portion of the mine or creating a joint venture, it noted. It expects the financing used to start the deposit to be repaid by the second year of production.

The Merlin mine was owned and operated by Ashton Diamonds and Rio Tinto until 2009. In 2018, its most recent owner, Merlin Diamonds, was suspended from the Australian Securities Exchange. In 2020, an Australian federal court declared the company insolvent and appointed liquidators to sell off its assets. It is the source of the country’s largest mined rough diamond on record — a 104.73-carat, white, type IIa diamond, Lucapa said.

Image: The Merlin mine. (Merlin Diamonds)
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Tags: Ashton Diamonds, diamonds, lucapa, Lucapa Diamond Company, merlin, Merlin Diamonds, Merlin mine, Rapaport News, Rio Tinto, Stephen Wetherall
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