The Merlin kimberlite field is situated on the eastern side of the North Australian Craton, ~100km south-west of the coast of the Gulf of Carpentaria. The Merlin kimberlites are Devonian in age (382 million to 352 million years ago) and intrude mid-Proterozoic shales and dolomites of the McArthur Group and the unconformably overlying Cambrian Bukalara Sandstone. Thin deposits of Cretaceous sediments and laterite overlie the pipes.

The Merlin pipes are small, with the diameter of the upper levels varying between 50m–125m. At surface the shapes of the pipes are circular to elliptical and maintain their regular shape and near vertical sides within the Bukalara sandstone. In the softer sediments beneath the Bukalara/ Proterozoic unconformity, some pipes increase in diameter. In the case of Palomides and Sacramore they coalesce into a larger single vent named PalSac.

The kimberlites are strongly weathered to 60m - 80m depth from surface and appear to have sunk back down into the craters, that have been in-filled with Cretaceous sediments that are up to 40m thick. The sagged nature of the infill sediments, the upturned edges with associated slickensides, the presence of a basal non-kimberlitic conglomerate and the thickened iron pisolite profiles, all suggest that the Cretaceous aged sediments have subsided into the pipe structures possibly due to solution weathering of the kimberlite.

The pipes are located within four main clusters over an area of 10km by 5km and are located close to the projected trace of the north-west trending Merlin Fault, which appears to have had a strong influence on the intrusion of the kimberlite volcanoes. The most northerly Emu cluster, consisting of two pipes (on the exploration licence), lies outside the current mineral lease and from the limited sampling data available are currently not known to be economic.

The remaining 11 pipes (contained in three clusters) are all significantly diamondiferous and are situated within the mining lease. They are named Bedevere, Kaye, Ector, Gareth, Ywain, Gawain, Tristram, PalSac, Excalibur, Launfal, and Perceval.

Five broad categories of kimberlite facies have been recognised: these being epiclastic kimberlite, tuffisitic kimberlite, tuffisitic kimberlite breccia, pelletal tuffisitic kimberlite and micaceous tuffisitic kimberlite. The presence of epiclastic kimberlite in the Emu 1 pipe and in Gawain, indicate the pipes are preserved at the upper diatreme level. The Crater facies evident at Merlin would have been present subsequent to emplacement buthave since been eroded and only the diatreme facies are currently evident.

Two different but complementary mining methods for the Merlin kimberlite pipes have been planned. Initially each deposit will be mined by conventional open pit mining. When the open pit has been completed to the planned depth, vertical pit mining (“VPM”) will be used to deepen the mine below the base of the open pit. There is potential for viable underground mining beneath the VPM on certain pipes, however this has not been included in this Scoping Study and is the subject of a separate scoping study currently underway.

Open Pit Mining Method
The Scoping Study has assumed conventional load and haul operations by a mining contractor for the open pit mining of each pipe. Drill and blast will be employed for all waste rock and for kimberlite below the weathered zone. In the weathered zone, kimberlite will be free dig. The use of 120t class excavators and 40t articulated dump trucks (“ADT’s”), mining 2.5m high flitches has been assumed. With a selective mining unit of 5m x 5m x 5m, a 2.5% ore loss factor was applied to the resource model. No dilution factor has been applied as the resource grades are based predominantly on historical recovered grades. In all cases the open pit mining will be extending the depth of existing open pits, except for the Bedevere pipe, which has not been mined previously.

Design parameters assumed for the open pits included batter face angles of 75 degrees, batter height of 20m, berm width of 10m, double ramp widths of 18m and single ramps of 11m for the last vertical 40m in each pit. This results in an inter-ramp slope angle of 52 degrees and an overall slope angle of between 42 degrees and 52 degrees. These slope parameters are similar to those used by Rio Tinto/ Ashton for the existing pits, which have performed well in the sandstone. Minimum mining widths vary for each pit. Most of the pits have been designed around existing excavations and their minimum mining widths range between 20m and 80m. These widths can be practically achieved with the selected mining fleet.

Vertical Pit Mining Method
VPM is well suited to small, near vertical ore bodies such as the Merlin kimberlite pipes. It utilises systematic lateral ground support to maintain the stability of vertical walls as mining progresses. VPM significantly reduces the amount of waste stripping required compared to open pit mining and has a lower capital and operating cost than underground mining. It also reduces the footprint of open pit mining and waste dumps thus providing significant environmental benefits.

SRK have provided the lateral support design for the vertical pit walls. This support will be provided by a combination of cable anchors, grouted dowels, mesh and shotcrete. The cable anchors lengths will range from 12m to 40m long. A minimum 10m wide bench around the vertical pits will be developed at the base of each open pit for installation of the required VPM infrastructure. This infrastructure will include an annular concrete working platform, safety barrier wall, an A-frame headgear and rock bin, hoist, compressor and pumping and ventilation equipment. The headgear and hoist will be utilised to hoist the rock from the based of the pit with a kibble bucket and for delivering equipment and consumables to the pit floor. Each pit will also be fitted with an Alimak hoist to allow for personnel transport.

Allowance has been made in the capital cost estimate for four headgears and hoists to allow for operations to proceed at three pits consecutively whilst another is being prepared. Two 250kVA hoists and two 150kVA hoists have been allowed for to cater for different sized pipes production capacity. These respectively have been estimated to have the capacity to hoist up to 50ktpm and 30ktpm. The vertical pits will be mined to a maximum depth of 125m below the base of the open pits. It has been assumed for the Scoping Study that drilling and blasting will be used for rock breaking and costs and productivities have been estimated accordingly. However the use of mechanical mining equipment such as continuous miners and road headers will be evaluated in the feasibility study as an alternative. Pre-splits and buffer blasts will be used to minimise blasting damage to final walls and support.

Primary Crushing Circuit
The primary crushing section is the first stage of the kimberlite processing plant and receives run-of-mine (“ROM”) material from the mining fleet. This section reduces the size of the incoming material to a size compatible with the scrubber feed inlet and conveying system top size constraints, as well as to start the diamond liberation process. Material particles larger than 600mm are prevented by the static grizzly from entering the feed bin and are rejected for mechanical size reduction before re-entering the processing plant. The primary crushing plant produces a product size smaller than 192mm.

Secondary Crushing Circuit
Secondary crushing is the second stage of diamond liberation. Crushing is performed sequentially to facilitate diamond liberation from the host rock while minimising potential diamond damage. The secondary crusher is operated in a closed loop, with crusher product being conveyed back to primary screening for grits removal and material classification and any oversized material is conveyed back to the crusher.

Re-Crush Circuit
Re-crushing of XRT tailings is achieved by way of a HighPressure Grinding Roll (“HPGR”). Liberation of locked-up diamonds is achieved through inter particle crushing. HPGR product, in the form of compressed briquettes, is conveyed back to the scrubber for disagglomeration before reporting back to primary screening for grits removal and material reclassification.

A new processing plant will be constructed on the existing plant site, with the ability to treat 1.2Mtpa at the planned overall utilisation of 81%.

Scrubbing & Primary Screening Circuits
From primary crushing, material is conveyed to the scrubbing section for washing and clay dis-agglomeration. From the scrubber, washed material gravitates to primary screening for material classification and clay removal. Scrubbing and screening are wet processes. Due to the reduced economics of fine diamond recovery, material smaller than 1.5mm is discarded and pumped to the degritting section, which is the first stage of the water recovery process. Material particles larger than 32 mm are conveyed to secondary crushing for further size reduction. Particles in the -32 +1.5mm size range are conveyed to secondary screening for further classification by size before subsequent beneficiation processes.

Degrit & Water Recovery Circuits
Plant effluent is pumped to the degrit p ........