Lucapa Diamond Company Unveils Two-Phase Plan to Re-Start Merlin Diamond Mine Production
LOM (LOM) Share Update November 2024 Sunday 24th
Lucapa Diamond Company Announces Production Re-Start Plan for Merlin Diamond Mine
Lucapa Diamond Company Limited has announced a detailed plan to re-start production at its Merlin Diamond Mine in the Northern Territory, Australia. The plan involves a two-phase approach aimed at optimizing diamond recovery and extending the mine's operational life.
Instant Summary:
- Two-phase production re-start plan for Merlin Diamond Mine.
- Phase 1 involves excavator dredging and requires A$15 million in funding.
- Phase 2 will use Vertical Pit Mining with a funding requirement of A$10 million.
- Expected total revenue of A$246 million from the project.
- Forecast Pre-tax NPV of A$40 million and Pre-tax IRR of 75%.
Overview of the Production Plan
The Lucapa Diamond Company has outlined a comprehensive plan to re-initiate operations at the Merlin Diamond Mine, which it fully owns. The plan is divided into two distinct phases designed to maximize the mine's output and extend its operational life.
Phase 1 will focus on excavator dredging to mine to a depth of 15 meters from the base of five existing open pits. This phase is expected to last 18 months and requires a funding of A$15 million. It aims to extract 213,000 tonnes of ore, yielding an estimated 67,000 carats of diamonds.
Phase 2 will employ Vertical Pit Mining to extract ore from the Gawain pit over a period of 27 months. This phase requires an additional A$10 million in funding and is projected to yield 773,000 tonnes of ore, resulting in 247,000 carats of diamonds.
Financial Projections and Funding
The total expected revenue from the project is A$246 million, with a forecast Pre-tax Net Present Value (NPV) of A$40 million and a Pre-tax Internal Rate of Return (IRR) of 75%. The company is currently in discussions with several parties regarding project-level funding through various channels, including offtake agreements and project equity.
Lucapa aims to increase the current Merlin JORC compliant Mineral Resource through further exploration, given the potential for additional kimberlites and base metal deposits in the area.
Historical Context and Geological Insights
The Merlin Kimberlite Field was initially discovered by Ashton Mining between 1985 and 1995. The field comprises 13 diamondiferous pipes, eight of which were mined by Ashton and Rio Tinto between 1999 and 2003. The mine was acquired by Lucapa in 2021 for $8.5 million.
The project highlights include 100% ownership, a tier 1 jurisdiction, and substantial exploration potential. The mine is known for its high proportion of gem-quality diamonds, with 75% of historical production falling into this category.
The announcement of the production re-start plan is likely to have a positive impact on Lucapa's stock, given the potential for significant revenue generation and the high-quality nature of the diamonds expected to be recovered. The successful execution of the plan could enhance investor confidence and attract further investment into the company.
Investor Reaction:
Analysts may view the re-start plan as a strategic move to capitalize on the high-quality diamond resources at Merlin. However, they will likely monitor the company's ability to secure the necessary funding and execute the plan effectively.
Conclusion:
Investors should keep an eye on Lucapa's progress in securing funding and executing its production plan. The potential for high returns and the quality of the diamonds make this a noteworthy development in the mining sector.