Race to revive Ellendale mine brings sparkle back to diamond industry following Argyle closure

Diamantaires across the world are a step closer to having a new source of coloured diamonds in Western Australia's Kimberley region, with two companies in the race to revive a mothballed mine which once produced half the world's supply of "fancy yellows".

Since the closure of the iconic Argyle diamond mine last November, one of the few known sources of pink diamonds, all eyes have been on the nearby shuttered Ellendale project, 100 kilometres east of Derby.

Australian company India Bore Diamond Holdings was one of two companies awarded tenements at Ellendale by the West Australian government in late 2019.

Only last year the company revealed it had unearthed a large alluvial deposit of rare diamonds, which they sent to Antwerp for valuation.

Following the completion of a Heritage Impact Assessment survey with traditional owners last month, it has paved the way for the state government to grant approval for the start of small-scale commercial mining in the coming weeks.

Managing director Peter McNally said if the company successfully restarted production, it would be Australia's first operational diamond mine since Argyle's closure last year.

"We've got a fairly extensive gravel channel there to mine and in a few weeks' time we should have approval to commence commercial mining where those good diamonds are.

"I'm fairly confident that it will be approved, and we hope to be mining in September."

Bringing fancy yellows to the world

The junior miner is targeting an ancient, buried river system, known as the L-Channel, that formed some 22 million years ago and is estimated to contain at least 1.3 million carats of gem-quality diamonds.

Mr McNally said Ellendale yellows had been popular with Australian consumers previously, and international brands like Tiffany & Co jewellery had brought the product to a global market.

"They're not as rare as the pinks, the reds or the blues [but] the yellow diamonds are probably still the most popular of the coloured diamonds," he said.

Typically, fancy yellow diamonds are valued at two to four times the price of a white diamond of a similar size and quality.

Mr McNally said he was encouraged by the results of an independent study of the diamonds recovered last year, which revealed many of the stones displayed a purple fluorescence under ultraviolet light.

The ongoing study, by Perth-based Delta Diamond Laboratory, is looking at the relationship between their fluorescence and the origins of the Ellendale signature yellow colour, which may help them add value to the product.

The race is on to restart Ellendale

India Bore Diamond Holdings is not alone in its ambition to mine and market these exquisite fancy yellow diamonds to the world.

Only months after a deal to acquire part of the old Ellendale diamond project, a newly formed Perth-based company also announced it planned to start commercial mining next year.

Earlier this year, Burgundy Diamond Mines signed a multi-million-dollar deal with Gibb River Diamonds to acquire its tenements around the mothballed mine.

The acquisition included the adjacent Blina diamond project, north-east of Ellendale, which is already fully permitted and ready for trial mining to begin.

Managing director Peter Ravenscroft said they were in the process of building a bulk sampling plant and he was confident they would be in production by the fourth quarter of 2022.

"We're not going to get back to the same levels of production as it was before — we're going in smaller and more mobile," he said.

"But there's a very welcome market there waiting for them.

"And we will be looking at rebranding them, potentially even changing the name of the Ellendale diamonds and taking them to market ourselves."

Is yellow the new pink?

The former Rio Tinto executive said he hoped to be able to replicate the success of the Argyle Pink Diamonds brand and seize an opportunity left by the closure of the East Kimberley mine.

"I'd hate to be accused of copying Argyle Pink diamonds, but there's definitely a template," he said.

"Argyle were able to do that with a select quantity of pink diamonds and we're going to do the same."

A restart of Ellendale would mark a new chapter in the mine's chequered history and represent a new beginning for the Kimberley diamond industry.

Previous operator Kimberley Diamond Company went into administration in 2015, relinquishing its lease and environmental liabilities — reportedly up to $40 million — back to the state government.

The WA government has spent about $230,000 on rehabilitating the Ellendale mining lease and making it ready for new operations.

New chapter for Kimberley diamond industry

Mr Ravenscroft said despite the mine's past, he was confident Ellendale was going to be a success, with a healthy balance sheet behind the company after raising $50 million capital this month.

"Since the last quarter of 2020, prices have been on the rise and the fundamentals of the diamond industry are such that there is a shortfall in supply forecast over the next 10 years or so. 

"I think we're starting to see activity accelerating in other countries as well … and we're happy to be a part of it."

Meanwhile, a former Kimberley explorer with mining interests in Angola and Lesotho is trying to restart a diamond mine in the Northern Territory.

In May, Lucapa Diamonds struck a deal to buy Merlin for $8.5 million, with hopes of filling the hole left by the closure of the once-in-a-generation Argyle diamond mine.

The remote mine, 720km south-east of Darwin, holds the record for producing Australia's largest rough diamond but has not been commercially operational on any significant scale since 2003.

Lucapa plans to start production within two years and is likely to employ "a few hundred people" when in full operation.