Mount Gibson digs for gold as iron ore runs dry

Iron ore miner Mount Gibson has struck a deal with Northern Star to forge a future in gold and base metals from its Koolan Island operations in WA which has reached a tipping point.

BHP was the original operator of mining operations on Cockatoo Island, off the WA coast.

One of the highest-grade iron ore deposits in Australia has been mined to within an inch of its life and its owner is accelerating efforts to forge a future in gold and base metals.

Amid the heavy focus on declining iron ore grades in the Pilbara and Australia’s capacity to be part of a transition to green steel making during Prime Minister Anthony Albanese’s visit to China, Mount Gibson Iron is changing course.

The miner has struck a deal to buy tenements in the Northern Territory from gold heavyweight Northern Star. The move comes with just 12-18 months of life left in its Koolan Island iron ore operations off the Kimberley coast in WA. By the time Mount Gibson finishes mining the pit at the eastern end of Koolan Island deposit will be about 200m below sea level.

BHP was the original operator of Koolan Island and nearby Cockatoo Island, which are part of the same high-grade deposit.

A number of companies remain interested in mining Cockatoo some 40 years after BHP pulled out when the operations reached sea level. Businessman Alan Bond and his wife Eileen, whose funeral was held in Fremantle on Monday, acquired the mining camp and tried to turn it into a five-star resort. Some of the villas painted pink by the Bonds can still be seen on the island.

Milking the low volume, high-grade mine on Koolan Island left Mount Gibson with $460m in cash and investments at the end of the March quarter, and capacity to pursue a future beyond iron ore.

The company registered Gibson Gold as a business name last month when it also emerged as a substantial shareholder in Queensland copper producer AIC Mines. It has shareholdings below 5 per cent in other ASX-listed base metals companies.

The deal with Northern Star gives Mount Gibson a half share in the undeveloped Central Tanami gold project – plus exploration tenements covering about 3600sq km. square kilometres. The other party in the Central Tanami gold project is ASX-listed Tanami Gold. Mount Gibson and Tanami Gold share a common major shareholder in Hong Kong-listed resources investment group APAC Resources Limited.

APAC owns 38.4 per cent of Mount Gibson and holds a 46.3 per cent stake in Tanami Gold.

Mount Gibson’s recently appointed chairman Brett Smith is also a non-executive director of Tanami Gold. Mount Gibson said Mr Smith had abstained from board decisions in relation to the deal.

Mount Gibson’s journey at Koolan Island started in 2007 with production interrupted for five years between 2014-2019 after a sea wall collapse flooded the main pit.

Mount Gibson CEO Peter Kerr on Wednesday foreshadowed a number of new investments as the Koolan Island operations, which employ about 600 people including contractors, wind down.

“For some time now, Mount Gibson has been seeking to diversify into other conventional commodities which have both positive long-term fundamentals and which are not largely dependent on a single country market,” he said.