The mine will cease operations in mid-May due to the rapid fall in the iron ore price, delays in approvals and a recent reinterpretation of royalties payable.

Blue Hills, 60km east of Koolanooka, comprises two open pits producing around 1.4 million tonnes of hematite per annum.

Operations started in August 2013, but an application to WA's Environmental Protection Authority last year for an expansion was deemed "environmentally unacceptable", a decision still being appealed by SMC.

SMC general manager Phil Allsopp said the company was disappointed it had to make the decision to suspend Blue Hills, but was left with no viable alternatives.

"Just like other banded iron formation (BIF) miners in the Mid West and Yilgarn, SMC has been disappointed by the EPA's decision to not assess the proposal to extend the operations," he said.

"We had hoped that this approval would add at least another two to three years of production at Blue Hills, however it has become clear that this approval will not be timely."

The company also cited changes in the way mine-gate royalties were calculated in December as a contributing factor, leading to higher costs.

SMC operations and corporate staff will be progressively made redundant in line with operational requirements.

Major contractors MACA and B&J Catalano have also been informed.

MACA's mining and crushing contract was due to run until October and was worth $3.5 million a month in revenue.

It comes after the company lost the Wodgina contract yesterday when Atlas Iron was forced to suspend the operation.

MACA said although its work in hand position would reduce by around $30 million, expected full-year revenue was still $600 million and it still expected to better its 2014 profit of $55.4 million.

Meanwhile, Allsopp said SMC remained committed to its WA projects, which also include the flagship Weld Range project and Koolanooka mine.

The $2 billion Weld Range project is currently shelved due to the lack of progress on the Oakajee port and rail project, while Koolanooka was put on care and maintenance in June 2013.

"We will continue to honour our community commitments and those made in the recently signed Weld Range Mining Agreement, including the $100,000 per annum training fund," Allsopp said.

"SMC itself will remain a functioning entity with ongoing work to maintain our significant exploration assets in the Mid West."

MACA shares dropped 6% to 79c.