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Sunset in Australia’s Northern Territories, home of the Merlin Mine.

REMOTE MINE IN AUSTRALIA’S NORTHERN TERRITORY HOPES TO PUT COUNTRY BACK ON DIAMOND MAP

 

The closure in 2020 of Western Australia’s Argyle Diamond Mine, which for many years was one of the world’s largest sources of rough stones in terms of volume, albeit not in value, appeared to draw a curtain over the country’s diamond industry, and remove from the market most probably its most prolific supplier of coveted fancy-pink diamonds.

Another Western Australian diamond mine, Ellendale, had earlier been mothballed, although in August of last year a junior explorer reported that it had unearthed a large alluvial deposit at the site, giving some hope that its lease of life may eventually be extended.

That left Australia’s third diamond producing mine, Merlin, which unlike the other two is not located in Western Australia. With a resource that was considered to be second only to Argyle, it can be found in the vast Northern Territories, 720 kilometers southeast of Darwin and about 80 kilometers south of the dusty town of Borroloola.

Discovered more than 25 years ago, first went on stream in 2000. Shortly afterwards, it produced what was then said to Australia’s largest diamond, a 104.73-carat stone, back then valued at more than half-a-million U.S. dollar. In 2017, it produced a 35.26-carat rough brown diamond, the fifth largest stone discovered in the country.

They were not the only fancy-colored stones to be mined at Merlin. A 14-carat champagne-hued stone was recovered, and also a small blue diamond.

“Although only a small diamond at 0.124 carats (the blue diamond) does demonstrate the potential for valuable colored diamonds at Merlin,” the mine’s owners noted in a 2017 statement to the Australian stock exchange.

DRAGGED DOWN BY PROBLEMATIC MANAGEMENT

Merlin’s difficulty to live up to its potential was in some respects a result of its problematic management. With its previous owners including Ashton Mining, Rio Tinto and North Australian Diamonds, it only was properly mined during the first few years of its life, with total production never reaching the targets set.

Of the 11 known kimberlites at the site, eight were mined by Ashton Diamonds and Rio Tinto between 1999 and 2003, producing over 500,000 carats of diamonds from 2.2 million tons of kimberlite.

The mine was bought in 2004 by Melbourne businessman Joseph Gutnick, who established the company called Merlin Diamonds, but over the years only did a very small amount of processing.

In 2016, Gutnick declared bankruptcy and in May 2020, a Federal Court appointed liquidators to wind up the company.

The Merlin Mine, likely to be Australia’s only natural diamond producing facility.

In October 2019, it was reported that Australian legal authorities had begun an into a $13 million-loan from the mining group to a private company associated to the diamond producer’s owner. Gutnick, it was reported, had completed a number of such loans, which it later transpired that he was unwilling or incapable of repaying.

The investigation came after an arbitration procedure was started in Western Australia and the Northern Territory by former contractors and employees of Merlin Diamonds, who claimed that they are owed more than Aus. $1.2 million in back payments.

Shares of Merlin Diamonds were later suspended from trading after its management failed to file a quarterly report with the Australian Securities Exchange.

The 104.73-carat stone that, when discovered, was claimed to be the largest ever rough diamond mined in Australia.

LUCAPA HOPEFUL OF FILLING HOLE LEFT BY ARGYLE

In late May 2021, the Australia-based miner Lucapa Diamond Company announced that it had finalized an agreement according to which it would buy the Merlin diamond mine for U.S. $17.8 million, which it intended to fund with private and public sales of its shares.

“This is a strategic acquisition for Lucapa which represents a value-accretive and logical step in Lucapa’s production strategy,” said Lucapa Managing Director Stephen Wetherall. “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,” he added.

Lucapa’s better known diamond mining facilities include the Lulo Diamond Project in Angola and the Mothae mine in Lesotho, in which it has a 70 percent share, with the Lesotho government holding a 30 percent share.

.Located only 5 kilometers from the Letseng diamond mine, which has yielded some of the largest diamonds ever discovered.

Lucapa plans to start production at Merlin within 24 months and the company is said that it is likely that a few hundred people will be employed at the site when it goes into production.

Wetherall said he was hopeful that Merlin could start to fill the hole left after the closure of Argyle.

“For Australia to go from [a place] in the top five or six diamond producers in the world when Argyle was in production, to producing no diamonds, is not a good statistic,” he said. “So hopefully within the next couple of years we are going to turn that around and put Australian diamonds back on the map.”

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