It is located closest to the swamp and mainland.
The Lone Mountain is an island which contains Coal, Copper, Iron and Stone. This island is just a mountain surrounded by sand and contains no trees nor food. This is not an ideal island to live on as it has no food. However, it is the best island to mine on as it contains just about everything you need before going to one of the 3 Mithril locations to get your final set of tools.