Rio Tinto subsidiary Bougainville Copper has lost its exploration and mining licences in Papua New Guinea after the government passed the Bougainville Mining (Transitional Arrangements) Bill 2014.
Effective from 8 August, the new law has transfered all mining-related powers from the Papua New Guinea Government to Bougainville's Autonomous Government.
Bougainville Copper will lose seven exploration licences and its special mining lease for Panguna open pit copper mine in Papua New Guinea, which it has operated for 20 years.
However, locals fear that the law gives more power to Bougainville Copper, which would destabilise the region. The ten-year civil war over the Panguna mine resulted in the deaths of around 20,000 people.
One of the concerned groups Me'ekamui Government of Unity chairman Philip Miriori said: "This is a dangerous and destabilising move and is not acceptable to the Me'ekamui."
Bougainville President John Momis said the decision to cancel the licences comes after consultations with the community on Bougainville.
"The critics are totally wrong; we have stripped Bougainville Copper of all powers.
"I think [the critics] are being misled deliberately by outsiders who have a vested interest."
Panguna Veteran's Association said in a statement: "This mining Bill will likely lay the foundations for another Bougainville crisis."
Bougainville is scheduled to hold a referendum on independence between 2015 and 2020.