PERTH (miningweekly.com) – A mine optimisation study on iron-ore junior Mount Gibson’s Koolan Island operation, in Western Australia, has proven that a staged ramp-up to four-million tons a year, would deliver the greatest value to shareholders.

The miner said on Monday that the optimisation study compared a range of mining schedules and production profiles to determine which delivered the most value accretive outcome, while also reducing financial and technical risks.

The work confirmed that the staged ramp-up to four-million tons a year, equating to a 33% increase on the current yearly production rate, was the best strategy for the project.

CEO Jim Beyer said that the optimised mine plan would deliver the best possible outcome to shareholders by maximizing returns from Koolan Island for the minimum risk in a volatile iron-ore market.

“The optimised Koolan Island mine plan better aligns geotechnical risk management, capital expenditure and cash flow, while also protecting Mount Gibson from undue financial risks associated with increased market volatility.”

He added that, put simply, the plan positioned the mine to maintain positive cash flows and invest in stripping to open up the reserves in the Main pit while prices were higher, and set the operation up to become a low-cost, cash generator.

“This will also better balance the overall performance of Mount Gibson’s existing asset portfolio. The company’s Mid West business is now entering its cash harvesting phase, and the operations as they now stand will be winding down as Koolan Island’s cash generating capacity peaks in the second half of the current decade,” Beyer added.

Under the optimised mine plan, Mount Gibson would achieve a yearly production rate of four-million tons by the end of 2014. The production rate was consistent with the maximum tonnage rate that could be achieved on a consistent basis.

The optimised mine plan would significantly reduce the maximum amount of stripping activity required in any one year, compared with the previous life-of-mine schedule, spreading the stripping investment required over the next three years and reducing indicative maximum waste.

The optimised mine plan would also have the effect of reducing unit cash costs at Koolan Island, and based on current expectations, these efficiencies could reduce total cash costs by between A$8/t and A$10/t moved.

To capitalise on the benefits of the mine plan, the proposed mining changes would be implemented immediately, resulting in up to A$50-million of waste movement that was previously deferred being brought forward, to the current financial year ending June.

The changes would also require the staged addition of around 100 personnel over the next nine months.

It was anticipated that the capital investment in mobile fleet and equipment associated with the planned increase in mining activity would continue to be financed.