Appeal to halt mine expansion upheld

Work has halted on the expansion of one the world's largest zinc mines following a landmark Federal Court decision in favour of Aborigines fighting to save a sacred river.

But the Rudd government has left the door open to re-examine an application by Swiss mining giant Xstrata to covert its McArthur River Mine (MRM) to an open-cut operation.

The full bench of the Federal Court on Wednesday upheld an appeal by traditional owners from Borroloola, near the Gulf of Carpentaria, to halt the $110 million project.

They found former federal environment minister Ian Campbell did not follow proper process when he approved an application to expand the mine by diverting a sacred river.

"The approval granted to construct an open-cut lead and zinc mine at McArthur River is invalid," the judgment said.

The court ordered the approval be quashed and said traditional owners should be reimbursed for the cost of their appeal.

Traditional owners are now calling for the McArthur River, controversially diverted 5.5km in a radical feat of environmental engineering, to be restored to its original course.

"All I want is that old river back, back to the same place," Garry Lansen said through tears outside the court.

"We've got to live on that river for a long time, our kids got to live on it ... They put it there, they can put it back."

The Northern Land Council, which mounted the court challenge, said the ruling confirmed there had been a lack of due process and transparency.

The council's chief executive Kim Hill called on federal Environment Minister Peter Garrett to conduct an independent environmental assessment of the project and said MRM needed to "fix the damage".

A spokesman for Mr Garrett said he expected to meet with the traditional owners, and that the government was open to reviewing the company's application.

"Should a fresh decision be required as a result of the court's decision he will ensure that all relevant matters taken are fully taken into account, as they should be," the minister's spokesman said.

Greens Senator Rachel Siewert said the government needed to engage in community consultation an conduct a proper environmental impact statement.

"The ball now lies in Minister Garrett's court," she said.

"This is a project that should never have seen the light of day."

All mining and civil works at MRM ceased on Wednesday afternoon but Xstrata refused to comment on whether it would seek leave to take the matter to the High Court.

"MRM will carefully consider the judgment over the coming days and make no further comment in the interim," Xstrata said in a statement.

It is not the first time elders from the region have taken legal proceedings over the expansion of the mine.

The Supreme Court ruled in their favour in a separate case against the Northern Territory government last year.

But the territory government passed legislation to ensure the project's survival, prompting three of its own indigenous MPs to cross the floor.

There are now concerns about the viability of MRM, which sacked more than 200 workers earlier this month after a drop in demand from the world's zinc smelters pushed prices down 60 per cent.

"Personally mate, it doesn't worry me," said traditional owner Jack Green.

"That's their problems. The Aboriginal people been on that land for a long time and we're just happy if everything is put back into place."