Cape Alumina Ltd is now in a review mode following the abandonment of its $400 million Pisolite Hills project on Cape York when the Queensland government announced last week that Wenlock River would be declared as a wild river.

Under the declaration, special environment protection would cover a 500 metre buffer area around the river's tributaries and would effectively discourage any mining activities within the protected area, thus jeopardising Cape Alumina's planned bauxite mining site.

The company said that it is now reviewing the future direction of the business and the possibility of raising a legal challenge to the government's decision and "a case for compensation for the value that has been destroyed by the government's actions and options for resurrecting the project as originally planned."

Cape Alumina went public in January 2009 for the Pisolite Hills project and its scrapping has raised some doubts on the future of the company as chairman George Lloyd lamented that the government's new policy had rendered the project unviable as "this decision has had a serious impact on the mineral resources available to Cape Alumina's Pisolite Hills bauxite deposit."

He said that the decision was purely political and discarded any considerations for the economic future of Queensland as he scored the government for going ahead with its plan despite scientific findings countering its wild river declaration.

Also, Mr Lloyd said that the government failed to consider "the welfare of the Aboriginal people of Mapoon and traditional land owners, or the implications for sovereign risk."

Mr Lloyd said that Cape Alumina has envisioned the Pisolite Hills project to boost Queensland's economic activity by up to $1.2 billion, with projections of creating more than 1700 jobs over the site's expected 15 years operation.

On its part, Matilda Zircon Ltd said that the government's decision would only mean that any bauxite mining activity in the Pisolite Hills area would have to be discarded, which is estimated to hold a resource base of about 132 million tonnes of bauxite.