Lucapa Diamond Company, owner of NT's Merlin mine, goes into administration
The Merlin mine produced Australia's largest rough diamond. (Supplied: Lucapa Diamonds)
In short:
The company behind one of Australia's most advanced diamond projects has gone into voluntary administration.
It comes as the global market for diamonds has dropped significantly in recent years.
What's next?
Competition from lab-grown gems could spell the end of Australia's diamond industry.
Australia's diamond industry faces an unlikely future as the company behind one of the few remaining projects in the country announces it has gone into voluntary administration.
The company that owns the Merlin diamond mine in the Northern Territory on Friday said administrators were now in control of operations.
In 2021, the ASX-listed Lucapa Diamond Company took over the Merlin project, 720 kilometres south-east of Darwin, but was yet to resume production.
While the Merlin site is famous for producing Australia's largest rough diamond, operators have not produced commercial quantities for more than 20 years.
Australian diamonds flail
There are no operating commercial diamond mines in Australia, veteran diamond specialist John Chapman says.
Rio Tinto's Argyle mine, which produced most of the world's pink diamonds, closed in 2020.
While there are several diamond projects in the exploratory stage, Mr Chapman said the Merlin site was the most advanced.
John Chapman at his office in Perth. ( ABC News: Rachel Pupazzoni )
"It had been mined at some stage — in fact, it has the honour of producing Australia's largest rough diamond at 104 carats," he said.
"It does have the production, but clearly, it's just not economic, probably because of the depth of it.
"Trying to make any diamond mine economic in the current climate is rather difficult."
Rise of synthetic diamonds
When Perth-based Lucapa bought the Merlin diamond mine for $8.5 million, the company was optimistic about taking over the historic, large-stone producer.
"There are some 4 million carats in a resource that we have analysed and believe that we can extract economically for many, many years to come," managing director Stephen Wetherall said in 2021.
Seeds for lab grown diamonds, which can be produced for a fraction of the price of mined diamonds. (Supplied: De Beers)
But since hitting a peak in 2022, the market for the gems has plummeted.
Lab-grown diamonds can be produced for a fraction of the asking price of their mined counterparts.
And while diamonds have uses beyond jewellery, the post-COVID global economic downturn has hit markets for luxury items.
"Globally, the diamond market is a bit depressed, prices for rough diamonds have gone down,"Mr Chapman said.
"And that's not good news for any explorers trying to make a commercial venture out of any findings."
Diamond industry under pressure
Richard Tucker from administrators KordaMentha said Lucapa's assets in the Merlin diamond project and a shareholding in an alluvial mine in Angola had "significant upside potential".
"Lucapa's management have developed a suitable pathway to development at Merlin … further upside exists through an exciting base metals opportunity on the Merlin tenements," he said in a statement.
But with such strong competition from synthetic gem producers, does Australia's diamond industry have a future?
"Probably the short answer would be no," said Mr Chapman, who has been in the diamond business for 35 years.
"It would be a long shot to say the diamond industry has a future in Australia – but you never know.
"Explorers are out there, you never know what they might stumble across, just like they did with Argyle 30 to 40 years ago."