Lucapa to Buy Australia’s Merlin Mine

RAPAPORT… Lucapa Diamond Company has agreed to acquire the Merlin diamond project in Australia for AUD 8.5 million ($6.6 million), planning to fund the deal with private and public sales of its shares.

The acquisition agreement with Merlin Operations complements Lucapa’s existing portfolio, the miner said Monday. 

“This is a strategic acquisition which represents a value-accretive and logical step in Lucapa’s production strategy,” managing director Stephen Wetherall said. The project is “a strong complementary fit” with the company’s two niche productions in Africa that are set to produce “solid returns” in 2021, he added.

Merlin is the source of Australia’s largest mined rough diamond on record — a 104-carat, white, type IIa diamond, Lucapa said. The project offers an existing resource estimate of 4.4 million carats. The deal includes 24 square kilometers of mining lease and a 283-square-kilometer exploration tenement. An asset on tenement is rented to multiple tenants.

The lease contains 11 previously discovered kimberlite pipes. Of those, eight were mined by Ashton Diamonds and Rio Tinto between 1999 and 2003, producing more than 500,000 carats from 2.2 million tonnes of kimberlite.

Lucapa has secured binding commitments from institutional and professional investors to raise AUD 20 million ($15.5 million) via two tranches of 195.3 million and 204.7 million ordinary shares, it said. It also plans to raise AUD 3 million ($2.3 million) from a sale of shares to eligible investors in six countries, including Australia, Germany, and Switzerland.

Separately, the company said it expected to produce between 40,400 carats and 42,600 carats in 2021, compared with 18,890 carats in the previous 12 months. Mothae and Lulo are set to be in full production mode for the remainder of this year at expanded capacities. Last year, Mothae in Lesotho was placed in care and maintenance for six months while Lulo in Angola operated at a reduced capacity due to coronavirus-related restrictions.

The miner anticipates the rough will fetch an average price of $957 to $1,034 this year, versus $745 in 2020. The improvement is due to “strong demand and a far more robust diamond market that has emerged from the pandemic returning diamond prices to levels last seen in 2018,” the company said.

Correction, May 26, 2021: Lucapa acquired the Merlin mine AUD 8.5 million ($6.6 million) and not AUD 23 million ($17.8 million), as previously reported.

Image: The Merlin mine. (Merlin Diamonds)