Carbonate factories on insular oceanic islands in active volcanic settings are poorly explored. This case study illuminates marginal limestone deposits on a steep volcanic flank and their recurring interruption by deposits linked to volcaniclastic processes. Historically known as Ilhéu da Cal (Lime Island), Ilhéu de Baixo was separated from Porto Santo, in the Madeira Archipelago, during the course of the Quaternary. Here, extensive mines were tunnelled in the Miocene carbonate strata for the production of slaked lime. Approximately 10 000 m3 of calcarenite (−1 to 1ø) was removed by hand labour from the Blandy Brothers mine at the south end of the islet. Investigations of two stratigraphic sections at opposite ends of the mine reveal that the quarried material represents an incipient carbonate ramp developed from east to west and embanked against the flank of a volcanic island. A petrographic analysis of limestones from the mine shows that coralline red algae from crushed rhodoliths account for 51% of all identifiable bioclasts. This material was transported shoreward and deposited on the ramp between normal wave base and storm wave base at moderate depths. The mine's roof rocks are formed by Surtseyan deposits from a subsequent volcanic eruption. Volcaniclastic density flows also are a prevalent factor interrupting renewed carbonate deposition. These flows arrived downslope from the north and gradually steepened the debris apron westwards. Slope instability is further shown by a coral rudstone density flow that followed from growth of a coral reef dominated by Pocillopora madreporacea (Lamarck), partial reef collapse, and transport from a more easterly direction into a fore‐reef setting. The uppermost facies represents a soft bottom at moderate depths in a quiet, but shore‐proximal setting. Application of this study to a broader understanding of the relationship between carbonate and volcaniclastic deposition on oceanic islands emphasizes the susceptibility of carbonates to dilution and complete removal by density flows of various kinds, in contrast to the potential for preservation beneath less‐disruptive Surtseyan deposits. Copyright © 2013 John Wiley & Sons, Ltd.