Chalco, a Chinese owned mining firm, has put its plans to develop a Cape York bauxite mine worth $3 billion on hold.

Chalco and the state government will permit their 2007 contract to lapse.

This development has disappointed Cape York residents the most, for they have been waiting for more than three decades for the bauxite mine to be developed.

Chalco was given two years to accomplish a feasibility study for the bauxite project, and that deadline was on Wednesday.

The mining firm was granted the mining permit for the bauxite project on the condition that it constructs a refinery at Abbot Point worth $2.2 billion.

Chalco has also pledged to shell out $30 million on the employment of Aurukun indigents, which is a disadvantaged region.

Around a month ago, media reports say that Chalco had been lobbying for amendments to the lease terms of the Aukrun project to Premier Anna Bligh, following the announcement of the federal government regarding the 40 per cent mining profits tax.

However, Premier Bligh upheld the provision in parliament.

In a recent statement, Chalco put the blame to stop the project on the recent drop on aluminum prices, which dipped to below $US2,000, from the $US3,000 price when the agreement was made.

Chalco denied that the canning of the project was due to the super profits tax proposition.

The mining firm has already spent $100 million on feasibility studies alone.

Stirling Hinchliffe, planning minister of Queensland, said the two sides would resume negotiations.

"Both parties recognise that global conditions in the aluminium industry have deteriorated significantly since the original development agreement was signed in March 2007," Mr Hinchliffe remarked.

Xiong Weiping, Chalco's CEO, said they are seriously studying their options.

"We look forward to discussing new development and investment options for Chalco with respect to the Aurukun resources," Mr. Weiping said in a statement.