The company said its iron ore reserves had been cut by 84 per cent to 7.1 million tonnes as of the end of the financial year.

That is down from 44.3 million tonnes last year, after reserves at Koolan Island, in Western Australia, were discounted following the failure of a seawall at its main pit.

Chief executive Jim Beyer said the removal of the Koolan Island reserves was disappointing, but not surprising, while resolving insurance claims and completing an evaluation of a possible redevelopment of the mine would take an "extended period".

“Nonetheless, Koolan Island’s main pit deposit remains a high quality, high-grade hematite asset that will continue to provide the company with significant future opportunity value," Mr Beyer said.

Mount Gibson acquired the West Australian Koolan Island mine through the takeover of Aztec Resources in 2007.

Operations at the project have been suspended since November 2014, after a seawall failure led to the flooding of the main pit.

The mine's viability is being reviewed to determine if the seawall can be rebuilt, However, the price of iron ore is hovering above a 10-year low.

The Perth-based company's total iron ore resources increased to 94.9 million tonnes at the end of the 2015 financial year, up from 83.3 million tonnes last year, thanks to the addition of the Iron Hill deposit at the miner's Extension Hill project and an increase in the group's Shine deposit.

Mount Gibson said it expects to start mining at Iron Hill after it exhausts the deposit at the current Extension Hill pit in 2016 to 2017.