State laws designed to protect the catchment areas of pristine rivers in Australia's Queensland state have made a planned bauxite mine in the country's remote far north unviable, Cape Alumina Ltd. (CBX.AU) said Monday.

The miner, which wants to produce 7 million tons a year from its Pisolite Hills project close to the tip of Cape York, said that 45% of the resource at the site "has been directly locked up or indirectly rendered uneconomic to mine" due to protection rules and buffer zones designed to prevent run-off entering the nearby Wenlock River.

The case has pitted miners against Queensland's state government, but left Aboriginal owners of the site divided.

The Cape York Institute, an Aboriginal-led think tank committed to finding economic solutions to the deprivation of Australia's indigenous people, has backed the project and garnered the support of many local landowners, who argue that the project will create much-needed jobs.

In a statement to the Australian Securities Exchange, Cape Alumina said the declaration of the Wenlock Basin as a "wild river" under the terms of a 2005 act has rendered the project "unviable under forecast economic conditions".

The miner said the project would only work if a 500-meter buffer zone was reduced to 200 meters.

Rio Tinto Ltd.'s (RTP) Weipa bauxite mine on Cape York is one of the world's biggest sources of the aluminum ore, with output in excess of 20,000 tons a year.

 
   -By David Fickling, Dow Jones Newswires; +61 2 8272 4689; david.fickling@dowjones.com
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