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Merlin’s magic strengthens as diamond prices soar

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Lucapa Diamond Company’s aspirations to be Australia’s next diamond producer continue to improve amid buoyant diamond prices.

The company released an updated scoping study for its Merlin diamond project in Northern Territory, factoring in a 42 per cent price increase in natural rough diamonds since the scoping study was initially published in December 2021.

The mine life, production target and capital estimates are unchanged, however Lucapa has outlined three Merlin price scenarios to cater for varying diamond prices.

The ‘low’ price scenario details the same metrics outlined in the December study, comprising a revenue of approximately $1.6 billion across Merlin’s life, with an EBITDA (earnings before interest, taxes, depreciation and amortisation) of circa $702 million across the same timeframe.

Merlin’s pre-tax net present value (NPV) is approximately $343 million as part of the ‘low’ price scenario.

The ‘base’ price scenario suggests a life-of-mine revenue of $2 billion, EBITDA of $1 billion and NPV of $541 million, while the ‘current’ price scenario indicates a life-of-mine revenue of $2.3 billion, EBITDA of $1.2 billion and NPV of $697 million.

The ‘base’ price scenario estimates pre-tax payback after the first year of production.

“The results of the scoping study published on December 17, 2021 already highlighted the great potential for a 2.1 million carat production target at Merlin using Lucapa’s innovative hybrid mining plan,” Lucapa managing director Stephen Wetherall said.

“With rough natural diamond prices increasing by approximately 42 per cent in just three months, the material and positive impact on the financial metrics as shown in the Merlin updated scoping study significantly strengthen the economic potential for a long-life producing mine at Merlin.”

The Merlin project comprises two tenements, including a 24 square-kilometre mineral lease (MLN 1154) and a 283 square-kilometre exploration licence that encompasses the mineral lease.

There are 11 known diamondiferous kimberlite pipes across three kimberlite clusters (north, centre and south) within the project. Two additional diamondiferous kimberlites have also been discovered within the broader exploration licence.

There are more than 70 potentially prospective unresolved anomalies within the project, indicating the exploration upside of Merlin.

MLN 1154 contains a kimberlite diamond mineral resource of 27.8 million tonnes at an average grade of approximately 16 carats per 100 tonnes for 4.4 million contained carats.

Lucapa aims to deliver the Merlin feasibility study this year.

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