Shares in Mount Gibson Iron have jumped on news the iron ore miner received an $86m property damage insurance payout for the collapse of a seawall at its Koolan Island mine in 2014, according to BusinessNews Western Australia.
The catastrophic failure of the seawall on 25 November 2014 resulted in the pit being flooded with sea water. Consequently, Mount Gibson Iron ceased its iron ore mining operations from its main pit at Koolan Island, recording a $946m impairment on the asset.
Colin Todhunter, Arthur J. Gallagher’s General Manager Mining and Construction (incorporating Strathearn Insurance Brokers), has led the Koolan Island seawall failure claim process and describes the announcement as a fair and reasonable outcome for Mount Gibson Iron.
In Gallagher’s statement welcoming the announcement, Mr Todhunter explained,“This is one of the most technically challenging and complex claims in Australian history, involving a panel of more than a dozen specialist insurance underwriting companies from Australia, Europe and Asia. Thankfully, we were able to draw on our significant experience in this space, including one of the world’s largest contingent business interruption claims associated with the Varanus Island gas explosion in 2008.”
“Mount Gibson have been a longstanding client of our mining team, initially as part of Strathearn Insurance Brokers, and continuing their association with us following our acquisition by Arthur J. Gallagher in December 2015.” Mr Todhunter said.
Mount Gibson Iron evaluates resource investment opportunities
Proceeds from the settlement will further strengthen the Company’s cash position as it continues to evaluate resource investment opportunities, including the potential to rebuild the Main Pit seawall at Koolan Island.
Ongoing business interruption component
According to its media release, the Perth-based company is still waiting on compensation for the ‘business interruption’ component of its insurance claim.
Mount Gibson Chief Executive Officer Jim Beyer said: “This significant property damage insurance settlement is a welcome outcome for Mount Gibson and all shareholders in the wake of the failure of the Main Pit seawall at Koolan Island. We thank our insurance brokers and advisors for their assistance in our claim preparation and negotiation, and we appreciate the diligent and systematic engagement of our insurers to achieve a timely resolution. We look forward to continuing our discussions relating to the business interruption component of our claim in a similarly constructive fashion.”