The Chinese aluminium producer was granted the leases in 2007 after Chalco and the state government signed an agreement worth AU$2.9bn on the development of the project.

Conditions attached to the leases involved not only mining but construction of a refinery to turn the bauxite into aluminium.

But a year ago, Chalco informed the state government that it was not viable to proceed on that basis.

Since then, the two have tried to agree on a way forward, but recently a meeting was cancelled at which Chalco and the government were to seek final agreement on a proposal.

The meeting was cancelled at a day’s notice, and instead, Premier Anna Bligh met Chalco management in Beijing, where she said she was cancelling the leases and would throw them open again.

Treasurer Andrew Fraser said the main problem was the global financial crisis, which led to ‘unfavourable market changes in the aluminium industry and Chalco’s feasibility study indicating challenges in delivering the alumina refinery’