An announcement today by the Queensland government aiming to overhaul environmental rules in the state’s Cape York area has also put pressure on the planned merger of Cape Alumina and Metrocoal, which had planned to make development of Pisolite Hills an immediate priority.

Both Cape Alumina and Metrocoal went into a trading halt on the ASX today to review the implications of the decision.

The Queensland government specifically targeted the development of surface mining operations on Cape York’s Steve Irwin Reserve today when it said it would scrap the Labor party’s Wild Rivers legislation in favour a scheme known as the Cape York Regional Plan.

“When finalised, this declaration will protect these unique areas from open cut and strip mining, and other activities that risk widespread impacts to their ecological integrity,” Premier Campbell Newman said.

“Despite all its green grandstanding, Labor’s Wild Rivers legislation would have allowed mining to occur on the majority of the Irwin’s property, but under the draft Cape York regional plan, the entire reserve will be protected.

“We plan to offer similar protections to environmentally important areas across Queensland under legislation to be introduced into State Parliament today.”

The initiative has been interpreted by the Queensland Resources Council as a major roadblock for Pisolite Hills, “seemingly killing” the project.

“Less than 24 hours after a commitment from the Premier to work with the resources sector in developing a long-term plan for the state, we see the rug pulled unilaterally from under a proposal with the potential to deliver local jobs generated by largely local investment,’ QRC chief executive Roche said.

“In 2010, Cape Alumina’s scientifically robust environmental management plan for mining the Pisolite Hills bauxite resource was rejected under the guise of Wild Rivers legislation and roundly condemned from several quarters as a disaster for local aboriginal communities.

“In 2013, the Queensland government is seemingly killing the project with legislation that once more does not appear to have been developed in consultation with Cape York communities.”

In September, Cape Alumina and Metrocoal agreed to establish an enlarged Queensland-focused multi-bulk commodity company that would initially focus on Pisolite Hills in the western Cape York Peninsula.

With a cash injection from Metrocoal helping to fund development of the project, this plan was expected to allow the merged company to capitalise on strong growing global demand for bauxite and generate a positive cash flow for the company.

The deal was anticipated to be effective by late December, resulting in a combined company with resources of 202.4 million tonnes of export-grade bauxite and 4.2 billion tonnes of thermal coal.

Pisolite Hills has been estimated to produce 7.5Mt per annum (dry product) from a 134Mt bauxite resource over a 14-year mine life.

Queensland Minister for Development, Infrastructure and Planning Jeff Seeney said the Cape York Regional Plan would be made possible under the proposed Regional Planning Interests Bill 2013 to be introduced into State Parliament this afternoon.

“Today’s announcement is the first planned use of a new regional planning instrument that will allow us to protect not only these significant environmental areas on the Cape, but sensitive environmental areas in other parts of Queensland,” Seeney said.

“Labor’s Wild Rivers Act excluded almost all development from around the rivers and tributaries within four basis of the Cape York region, restricting the rights of local Cape communities to plan a sound economic future based on jobs and self-determination.”

Roche emphasised the local community effect of blocking Pisolite Hills development.

“Investor support was literally collected on the streets corners of Weipa and Cairns, so this decision is going to shock many small investors and the region’s traditional owners who have supported Cape Alumina’s plans from day one,” he said.

“A day after the announcement of ResourcesQ and on the same day the QRC is holding a forum on boosting indigenous employment opportunities, a major potential job generator on the Cape has been effectively shut down for a second time.

“What we now need to hear from the Queensland government is how they intend to facilitate an alternative to the high wage jobs that would have flowed to Cape York communities as a result of Pisolite Hills’ development.”

Shares in Cape Alumina and Metrocoal were untraded at A5.2c and 3.2c, respectively.