SA to compensate Marathon for mining ban

South Australia has paid $5 million to a uranium explorer to maintain its reputation as a mining-friendly state.

Marathon Resources has accepted the compensation after its hopes of mining uranium at Mount Gee were dashed by a proposed ban on mining in the environmentally sensitive Arkaroola wilderness sanctuary in the northern Flinders Ranges.

The mining sector was shocked when the proposal was announced last year, shortly after Marathon had its licence renewed to explore a deposit at Mount Gee, one of Australia's largest undeveloped uranium deposits.

Premier Jay Weatherill told reporters on Monday the state government wasn't legally obliged to pay compensation, but had done so as a gesture of goodwill.

"We wanted to have good reputation in this state for being a good investment climate," Mr Weatherill said.

The minerals explorer is dropping a civil law suit it launched against the SA government over the proposal, still before state parliament, which would exclude the Arkaroola area from SA's Mining Act, provide legislated protection for the sanctuary and have it nominated for world heritage listing.

Marathon chairman Peter Williams said he would have preferred to have had the opportunity to realise the mineral potential of Mount Gee and surrounding prospects but the settlement went some way to recognising the shareholder value lost as a result of the ban.

The decision has infuriated the opposition and the Greens.

Opposition Leader Isobel Redmond said Labor had treated Marathon appallingly, and now taxpayers were having to pay for Labor's mistakes and indecision.

"Labor's indecision and failure to clarify its position with Marathon earlier will discourage other mining investment in this state," she said.

"The Liberal opposition supports the protection of Arkaroola, but we are appalled by the confusion Labor has created as they continue to mishandle this issue."

The Greens said Marathon should not be getting one cent from taxpayers, let alone $5 million, if there was no legal obligations.

SA Greens Parliamentary Leader Mark Parnell said there were better ways of spending that money, noting indigenous communities were in need of better services.

"Last week I was in Port Augusta talking to Adnyamathanha elders about the Arkaroola Protection Bill. They are desperate for decent renal facilities at the Leigh Creek Hospital," he said in a statement.