Mt Gibson to restart Koolan Island

Mount Gibson Iron will spend nearly $100 million on the redevelopment of its Koolan Island iron ore mine, with the company’s board giving the green light to bring the operation out of care and maintenance.

Perth-based Mt Gibson said today it would redevelop and restart operations at Koolan Island at a cost of $97 million, which includes construction of a new seawall in the main pit and dewatering.

Koolan Island suffered a seawall failure in late 2014, which led the company to put the mine on care and maintenance.

Mining continued at the Acacia East pit until February last year, at which point the entire operation was mothballed.

Today, Mt Gibson said it would spend two years bringing Koolan Island back into operation, with first sales targeted for early 2019.

In a feasibility study released today, the company projected all-in cash costs of $53 per wet metric tonne, with an initial mine life of 3.5 years.

There is also potential for a pit extension operation at the eastern end of the main pit.

The mine will retain an existing mining fleet, crusher, shiploader, accommodation camp, workshops and administration facilities on site.

“After two years of extensive work to identify and confirm a safe and effective design and construction method for rebuilding the main pit seawall at Koolan Island, it is extremely pleasing to commence construction on what is undoubtedly one of the world’s premier and most compelling high grade iron ore investment opportunities,” chief executive Jim Beyer said.

“Coming shortly after extending the life of our Mid West operations, the redevelopment of Koolan Island also re-establishes Mt Gibson’s status as one of Australia’s premier high-grade producers at a time of rapidly growing demand for premium quality iron ore products.

“Importantly, it also provides a long term platform for further value creation.

“Our substantial cash reserves and cashflow from existing operations give us the capacity to undertake this investment without any need to take on debt for the project and still pursue other attractive opportunities which may arise in the months and years ahead.”

Mt Gibson engaged engineering group Coffey to design the new seawall.

The design has also been reviewed by Golder Associates and Fugro’s GeoConsulting practice in Perth.

The cost of the project is higher than the $86 million property damage insurance payout Mt Gibson received last year as a result of the seawall collapse.

The company is still awaiting on compensation for the 'business interruption' component of its insurance claim.

Since the seawall collapse, Mt Gibson had been touting other plans for the operation, including the establishment of a logistics base on the island to service the offshore oil and gas industry.

The company engaged QUBE Holdings in 2015 to provide a framework for the development of helicopter refuelling and maintenance facilities, air search and rescue facilities, an airstrip, and a deepwater marine terminal.

Shares in Mt Gibson were 2.1 per cent lower to 35.7 cents each at 11:30am.