Throughout 2021, Lucapa undertook an extensive scoping study to assess the potential of the site, which covers two tenements, a 24km2 mineral lease and a 283km2 exploration licence.
The mineral lease includes 11 known diamondiferous kimberlite pipes, grouped in three clusters. These have a mineral resource of 27.8 million tonnes of diamonds, at an average grade of around 16 carats per one hundred tonnes for 4.4 million contained carats, according to the scoping study.
Lucapa managing director Stephen Wetherall said that the scoping study confirmed the site’s “great potential”, with the company planning to use an “innovative hybrid open pit and vertical pit mining methodology to establish a mining operation at Merlin".
He continued: "the scoping study sets out strong economics for a long-life mine with a production target of 2.1 million carats, A$1.6bn ($1.1bn) in revenues and substantial earnings and cashflows to Lucapa over a 14-year life. 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.”
An initial capital expenditure of A$96m (US68m) is expected to be needed for the proposed development of the Merlin mine, but once up and running Lucapa expects it to generate an average earnings before interest, taxes, depreciation, and amortisation of around A$50m ($35.8m) per annum.
One of the attractive elements of the site is the low acquisition cost, which averages out at around A$2 ($1.4) per resource carat. The average life-of-mine diamond price is expected to be A$715 ($511) per carat.