KOOLAN COMEBACK
Five years on from a seawall collapse that stopped mining at Mount Gibson’s Koolan Island mine in WA, the two-year, $100m rebuild is complete.
“The high grade and quality of Koolan Island’s direct-shipping hematite iron ore products means that they are well suited to China’s increasing focus on steel manufacturing productivity and environmental impacts.”
Five years on from a seawall collapse that stopped mining at Mount Gibson’s Koolan Island mine, the two-year, $100m rebuild is complete and iron sales have resumed from the operation, placing the company back on the leaderboard as Australia’s highest grade hematite exporter.
CONFIDENCE in the integrity and safety of the new seawall design for Koolan Island, off WA’s Kimberley coast, was crucial to ensure a collapse would not happen again, according to Mount Gibson Iron chief executive Peter Kerr.
“The new design has a higher factor of safety and is fundamentally different to the original seawall, incorporating an impermeable cement-bentonite seepage barrier within the embankment,” he said.
“This in-ground barrier, which is more than 430m long, 1.2m thick, and extends down to bedrock (over 40m at its deepest point), was installed by a specialist contractor (Keller) and protects the pit from tidal water flows, ensuring the structural integrity of the seawall embankment.
“The structure also incorporates extensive monitoring instrumentation, including more than 150 sensors that enable constant real time monitoring of the wall’s performance.”
The new design was a culmination of more than two years of comprehensive technical study, led and overseen by three of the world’s leading engineering firms (Coffey, Golders and Fugro), all of which maintain an ongoing supervisory role.
The restart of Koolan Island operations coincided with the end of mining at Mount Gibson’s Extension Hill and Iron Hill deposits, which Mr Kerr said the company had prepared and planned for.
“This dovetailed fairly neatly with the development and restart schedule at Koolan Island, where ore sales commenced in April, less than two months after we completed the final shipment of direct shipping ore (DSO) from the Mid West,” he said.
“This has obviously enabled sales and revenue continuity and helped to minimise cash draw while production transitioned from the Mid West to the Kimberley.”
The significant recent lift in iron ore prices and reduction in discounts for lower grade material has also enabled the company to monetise some remnant stockpiles of these materials (grading 51-54pc Fe) at Extension Hill that had previously been considered uneconomic.
“We hope to sell as much as 1mt over the next six months or so, depending on pricing,” Mr Kerr said.
“While the cashflow benefits of this to Mount Gibson are quite modest, these sales will help offset closure and rehabilitation costs and will provide a welcome extension of employment and economic activity in the region.”
High grade ore
Mount Gibson is now Australia’s highest grade exporter of direct-shipping hematite iron ore, based on ore reserves in the Koolan Main Pit of 21mt grading 65.5pc Fe, scheduled to be mined over the next 5.5 years.
In April, the company loaded about 72,000 wet metric tonnes of high grade hematite iron ore, aboard the bulk carrier MV S’Hail Al Mafyar for delivery to customers in China – a key market for Mount Gibson Iron.
“The successful recommencement of ore sales from Koolan Island has established Mount Gibson as the supplier of Australia’s highest grade direct shipping hematite iron ore at a time of strong pricing for high grade products,” Mr Kerr said.
“We are excited by the significant value-creation opportunity this presents for the company.”
Mr Kerr said that looking beyond the current supply constraints resulting from the recent tragedy in Brazil, demand for iron ore in general continues to grow, in large part due to constant strong demand from Chinese steel mills.
“However, higher grade ores in particular have become of greater importance as China’s steel industry seeks to become more efficient and to reduce its environmental impacts to meet tougher regulations,” he said.
“Higher grade ores enable steel mills to be both more productive and reduce their emissions intensity per tonne of steel produced, which has been a fundamental contributor to this trend.”
This places Mount Gibson, as the only Australian supplier producing DSO hematite of such high purity, in a unique position to benefit from this trend.
“The high grade and quality of Koolan Island’s direct-shipping hematite iron ore products means that they are well suited to China’s increasing focus on steel manufacturing productivity and environmental impacts, and will provide Mount Gibson with a solid platform from which to generate value well into the next decade,” Mr Kerr said.
The next step for Mount Gibson Iron is to affirm Koolan’s place in the market and explore potential new operations.
“Obviously our current focus is on ramping up production at Koolan Island to planned levels, which we expect will generate strong cashflows over the mine life,” Mr Kerr said.
“That, together with our existing cash reserves and debt-free balance sheet, gives us an excellent platform from which to grow the company.
“Ideally we would like to have at least one other mining operation in production and generating cashflow by the time Koolan reaches the end of its life and we are actively seeking attractive opportunities to achieve this, primarily in bulk materials and base metals.”
Mr Kerr is confident that the next three to five years hold great developments for the company.
“Mount Gibson is entering an exciting stage of our evolution as we seek the next opportunity to create further long term value for our shareholders well beyond the life of our current operations,” he said.