The news sent Cape Alumina shares tumbling 25% on Friday morning.
An agreement signed by Cape Alumina and Metrocoal in September to form an enlarged company initially focusing on development of Pisolite Hills has been nullified in the wake of a government announcement earlier this week aiming to ban open pit mining in the project area.
Cape Alumina said it would also undertake a comprehensive review of all its other operations in Queensland, citing the broader effect of the government decision on the state’s mining industry.
“We were completely surprised by this decision and expected that the future of the project would be determined through a genuine and rigorous environmental assessment process,” Cape Alumina managing director Graeme Sherlock said.
The government initiative included a draft Cape York regional plan aimed at banning mining on the Steve Irwin Reserve that overlaps the Pisolite Hills resource.
The move was proposed as a replacement of the Wild Rivers legislation, which would have allowed mining to occur on most of the Irwin reserve.
Sherlock said his company’s confidence in environmental proceedings had previously been bolstered after the government declared Pisolite Hills a coordinated project, which led to Cape Alumina increasing project expenditure and planning a start to production in 2015.
“This decision will have enormous ramifications for the mining and investment communities and has certainly elevated the sovereign and political risk profile of Queensland,” he said.
“The company has spent in excess of $20 million on this project, including several million dollars since we reactivated the project last year.”
Metrocoal echoed the sense of surprise, saying the company’s due diligence consultations with the state government led to assurances that Wild Rivers would be replaced by an alternative plan that would allow mining.
“The new legislation bans any mining activities from ever occurring in the Pisolite Hills project area,” Metrocoal chairman Stephen Everett said.
“Despite declaring Pisolite Hills a significant project in October 2012 and making regular assurances over many months that the project’s assessment would be determined by due process, the state government unexpectedly announced on Wednesday that mining would not be allowed in the most valuable part of the Pisolite Hills project area.
“Metrocoal and Cape Alumina were given no prior warning of the government’s intentions and are bitterly disappointed with this outcome, which is confusing, frustrating in the extreme and goes against all prior indications and consultation.”
Cape Alumina said it would review its legal rights and possible avenues to challenge the government decision.
Sherlock said the company had requested urgent meetings with Premier Campbell Newman and Deputy Premier Jeff Seeney to discuss the Cape York plan.
“This is a draft document and the company will actively work with the Queensland Resources Council and other resource companies affected to secure significant amendments to the draft plan,” Sherlock said.
“We believe that the government needs to reduce the extent of the so-called strategic environmental areas in this plan, which currently designates open cut mining as an unacceptable land use.”
