The sleepy little town of Iron Knob has been given a new lease on life, with the local mine set to reopen next year.

Iron Knob was once referred to as the birthplace of the steel industry in Australia, holding one of the largest deposits of iron ore in the country.

But the mine closed down in the late 1990s, reducing the population from 3,000 to 200.

Arrium has now approved mining again at the site on South Australia's upper Eyre Peninsula, which is said to be one the richest ore bodies in the world.

Bryan Lock, from the Iron Knob Progress Association, says this is great news for the town.

"With the increased activity at the mine, there will be the same interest being shown by the travelling public.

"It's already starting to happen, so from a tourist perspective, which Iron Knob is now relying on, it will make quite a boost."