Miner and explorer Lucapa Diamond Company has announced plans to restart operations at the Merlin diamond mine in Australia’s Northern Territory, with a A$25-million, two-phase project aimed at reviving the mine.

The restart is expected to recover about 314 000 ct, yielding an estimated A$246-million in revenue.

The first phase of the restart plan will involve excavator dredging and mining to a depth of 15 m from the base of five existing openpits. This phase is expected to take 18 months to complete.

The second phase will involve vertical pit mining at the Gawain pit, one of the main diamond-bearing kimberlite pipes on the Merlin site. This phase will take about 27 months to complete and is expected to significantly increase the mine’s production capacity.

Lucapa has also revealed it is in discussions with multiple potential funding partners for project-level financing to support the restart.

The Merlin kimberlite field, discovered by Ashton Mining in the mid-1980s, has a rich history of diamond production. Of the 13 diamondiferous pipes identified in the field, eight were mined by Ashton and later by Rio Tinto between 1999 and 2003. Over 2.2-million tonnes of ore were treated during this period, resulting in the recovery of more than 500 000 ct of predominantly gemstone-quality diamonds.

Among the significant finds at the Merlin mine were a 104-ct Type IIa diamond – the largest ever found in Australia – along with other notable stones such as 43-ct, 32-ct, and 28-ct diamonds. The mine is particularly known for its high proportion of gem-quality stones, with 75% of historical production falling into the gem and near-gem categories.

Rio Tinto eventually closed the mine after completing the initial openpit cuts, as the project no longer met its investment thresholds at the time. The asset was subsequently sold to Striker Resources, which later rebranded as Merlin Diamonds.

In 2021, Lucapa acquired the Merlin mine for A$8.5-million, a price that translates to about A$2/ct based on the current Joint Ore Reserve Committee-compliant resource of 4.4-million carats.

Lucapa’s initial plans for the Merlin mine included a larger-scale operation, with a scoping study in March 2022 proposing the treatment of 14-million tonnes of ore over a 14-year mine life. This would require an estimated pre-production capital investment of A$96-million. However, by November 2023, escalating capital costs, a softening diamond market, and tightening financial conditions led Lucapa to pause the feasibility study. The company pivoted to focus on more cost-effective, lower-capital options for restarting the mine.