By:Mining

The two-staged approach is based on a small-scale, low-cost development with the first diamonds to be produced next year. Phase two follows for 27 months. 

Stage one requires $15 million in funding with $9 million as pre-production capital. The first stage will use excavator dredging to mine to 15m from the base of five existing open pits. Stage two requires $10 million in funding for a proposed five-year mine life with the potential to extend. The second stage will use vertical pit mining to extract ore from the Gawain pit. 

In 2021, Lucapa acquired Merlin for $8.5 million and in 2022 published an updated Scoping Study based on treating 14 million tonnes over a 14-year mine life, which required an estimated pre-production capital of $96 million. 

A Feasibility Study on this scenario ended in November 2023, due to escalating capital costs, softening diamond prices, and a tightening of capital markets. As a result, the company paused the full Feasibility Study to pivot to a study focused on lower capital cost options.

Lucapa, which has a market capitalisation of $11.89 million, says the Merlin Mine has a forecasted pre-tax net present value of $40 million and pre-tax internal rate of return of 75%. 

Lucapa is in discussions with several parties for project level funding, which are being sourced through offtake agreements, project level debt, project equity and government facilities. 

The company has entered into a short-term loan facility agreement with New Azilian, an entity associated with previous Lucapa director and current major shareholder Ross Stanley.

Under the agreement, the lender has provided the company with a $1 million secured loan facility. Funds drawn down from the facility will be used to conduct an airborne electromagnetic survey of the highly prospective Merlin tenement area and assist with general working capital requirements.

The company is focusing on increasing Merlin’s mineral resource estimate through exploration in the near term, due to the prospectivity for further kimberlites and base metal deposits given the proximity to the McArthur River Mine. 

Lucapa has also begun the first extensive airborne survey program for 25 years at Merlin, with the aim to grow the resources through the discovery of more diamondiferous kimberlites and potentially other minerals across the tenements. 

Managing Director Alex Kidman says the facility allows the company to conduct the program at Merlin, which otherwise would have been delayed until after the upcoming wet season. 

“This program will give the company a much better understanding of the kimberlite and base metal potential that might have been missed by the less sensitive electromagnetic surveys of 25 years ago,” Kidman says. 

Kidman adds that the company believes the landholding is prospective for more premium quality diamond deposits and may also host other minerals including base metals. 

“This modern, more sensitive Xcite survey will enable us to identify potential targets on our tenements that previous surveys would have missed and we look forward to announcing the results of this survey in Q1 2025,” Kidman says. 

Lucapa Diamonds is a miner and explorer focused on assets in Angola and Australia, including the Lulo, Merlin, and Brooking projects.