PERTH (miningweekly.com) – Iron-ore miner Mount Gibson has reported a more than 50% increase in the ore reserves at its Koolan Island project, off the coast of Western Australia.

The ASX-listed company on Friday said that the main deposit ore reserve had increased to 21-million tonnes, grading 65.5% iron, extending the mine life to over five years, up from its previous three-and-a-half years.

“It is a great outcome that the team can confirm such a significant increase in ore reserves and mine life of one of the world’s premier high-grade iron-ore production opportunities,” said Mount Gibson CEO Jim Beyer.

“This upgrade dramatically increases the value of the project to Mount Gibson’s shareholders on even the most conservative pricing and exchange rate assumptions.”

Beyer noted that the new ore reserve estimate has also increased Koolan Island’s pre-tax net present value by around 137%, to A$252-million, with an estimated pre-tax internal rate of return of 37%.

“The expected average grade of Koolan iron-ore of 65.5% iron provides significant upside to prices above those used in our base case assumptions. For example, at the current spot price of around $65/t and high-grade premium, the pre-tax net present value increases to over A$500-million.

“This highlights the value that comes from re-establishing Mount Gibson as one of the world’s premier producers of high-grade hematite at a time of rapidly growing demand for premium quality iron-ores that is driving substantial premiums for high-grade ores.”

Beyer said that the upgrade also provided a strong platform for further value creation.

“Our substantial cash reserves and anticipated cashflow from Koolan Island will give us the capacity to undertake this investment without any need to take on debt for the project and be well positioned for other opportunities which may arise.”

Work on the Koolan Island restart project has now been completed, and first ore sale is scheduled to start in the March quarter of next year.