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July 2, 2019

There’s potential for diamond mining in Australia, despite imminent Argyle mine closure

Diamond mine in the Kimberley region of Western Australia near the Ord River.

By GlobalData

Australia’s rough diamond output will decline to just 134.7 thousand carats following the expected closure of Western Australia’s Argyle mine in 2021, from the current level of 14.2 million carats (Mct).

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Outlook for diamond mining

The country’s supply of rough diamonds had begun to rely entirely on the output from Argyle after the suspension of Ellendale mine in 2015, which produced gem and industrial-quality diamonds, including fancy yellow diamonds, following the collapse of Kimberley Diamond Company in the same year.

The Western Australian government, which has conducted rehabilitation work at the Ellendale mine, is now seeking a new operator to re-start mining activities. However, with no immediate potential to replacing even part of the output of the Argyle mine, the country’s production of rough diamonds will fall to less than 1% of current levels from 2021, with all output solely from Merlin Diamonds Ltd’s Merlin mine, which achieved full production during the third quarter of 2018.

The country’s rough diamond production, after increasing for three consecutive years, declined by 17.3%, to 14.2Mct in 2018, due to depleting ore reserves at the Argyle mine, and output is further expected to fall to 10.7Mct in 2019 and 7.5Mct in 2020.

Brooking project shows promise

In the near term, there are no projects lined up that could replace even part of the output from the Argyle mine, with exploration activities far more limited compared with other diamond-producing countries. However, there are positive signs that the Australian diamond industry could be revived. Several mining companies, including Lucapa Diamond Company Ltd, Merlin Diamonds, Auteco Minerals, GeoCrystal and Legend International, are currently conducting exploration activities to identify potential deposits. For example, exploration at Lucapa’s Brooking project, which is in close proximity to the abandoned Ellendale mine, has demonstrated outstanding results. The initial drilling resulted in the recovery of over 1,200 micro-and macro-diamonds from a collective 265kg sample collected from two different holes drilled.

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