PERTH (miningweekly.com) – Iron-ore miner Mount Gibson has reported a massive decline in its iron-ore reserves estimate following a seawall failure at its Koolan Island operation, in December 2014.

The company's ore reserves were now estimated to be 7.1-million tonnes, grading 58.4% iron, compared with the previous reserve estimate of 44.3-million tonnes, at 62% iron.

However, mineral resource estimates increased from the 83.3-million tonnes, at 61.8% iron, reported in June 2014, to 94.9-million tonnes, at 61.2% iron.

CEO Jim Beyer on Monday said the overall increase in the mineral resource was a significant positive step that enhanced the future optionality value within the existing portfolio of assets.

“Obviously the removal of most of our ore reserves at Koolan Island as result of the failure of the main pit seawall is disappointing, but not surprising, given the events there and the extended period we anticipate will be required to resolve our insurance claim and complete technical and economic evaluation of redevelopment options.”

The Koolan Island operation was placed on care and maintenance shortly after the seawall failure, as Mount Gibson took the time to monitor and repair an area of instability in the upper part of the southern pit wall.

The resource estimate increase included an 8.8-million-tonne direct shipping ore resource at the Iron Hill project, which could extend the life of the Extension Hill mine at minimal capital spend.

Beyer said the company would continue with the permitting and development planning process for the Iron Hill deposit to extend its standing in the Mid West region.

Regulatory approvals for the Iron Hill deposit were targeted for consent in the second half of 2016.

Meanwhile, Mount Gibson also reported a 105% increase in the mineral resource estimate for the Shine deposit, which was now estimated to host 15.9-million tonnes, grading 58.1% iron.

The resource estimate included a hematite resource of 10.8-million tonnes and a magnetite resource of 5.1-million tonnes.

Beyer said the substantial increase in the Shine mineral resource was a satisfactory outcome and further confirmed the potential identified by the company at the time of acquisition.

“In light of the uncertain near-term outlook, we have prudently removed Shine’s ore reserves; however, the project remains a valuable asset that provides us with substantial low capital operationality, with a relatively short start-up timeframe. The increase in the Shine mineral resource has significantly added to the inherent future optionality value that the project provides to Mount Gibson,” he added.