The government has blocked the sale of 19 hectares of land on the West Coast to a coalmining company.
The Overseas Investment Office had recommended that Bathurst Coal be allowed to buy three separate areas on the Denniston Plateau.
But that recommendation has been rejected by the Conservation Minister, Eugenie Sage, and the Associate Finance Minister, David Clark.
Sullivan mine hasn't operated for 20 years, but Bathurst wanted to buy the land to support its future plans for the Buller coal project.
Bathurst Resources chief executive Richard Tacon said it acquired the land when it bought Solid Energy's assets, but because it sat in the middle of Department of Conservation land it required Overseas Investment Office approval.
He was downplaying the decision and said having acquired Solid Energy's assets which he described as the "last jigsaw" piece on the Denniston, it would continue to evaluate the Buller coal project.
"It allows us to come up with the best result for that area, so the maximum extraction of the high quality coal as well as minimising the environmental and long term footprint of that extraction," he said.
Forest and Bird's chief conservation advisor Kevin Hackwell said the decision was consistent with the government's policy of no new mining on conservation land, which was announced in the Speech from the Throne in November.
"This decision is the government saying very clearly, "No, there's no point in you owning it because you're not going to get an economic benefit, which is one of the requirements of the Overseas Investment Act, because you're not going to be able to mine the rest of the area around it, which is the only way it would be economic to do and you're not going to be able to because that land is conservation land'," he said.
The Overseas Investment Office said for consent to be granted ministers had to be satisfied allowing Bathurst to buy the land would result in substantial and identifiable benefits to New Zealand.
"Given that the Sullivan Mine is closed and the uncertainty around the mine re-opening, ministers were not satisfied that the benefits to New Zealand of the investment were likely to be substantial," it said.
The land has subsequently been bought by the West Coast iwi Ngāti Waewae.
Bathurst Resources said plans to develop the rest of the plateau would go ahead and it wouldn't have to negotiate access arrangements with the new owners until 2027, when the current mining licenses expired.
Lack of Cohesion: National
National's economic development and regional development spokesman Simon Bridges said the decision showed one side of the government couldn't get agreement with the other.
"You've got on the one side of this, the person in charge of Solid Energy as an SOE (State Owned Enterprise) being the Rt Hon Winston Peters, NZ First, known for being pro-regions, pro-development, wanting to see mines work and these sort of things - at least in their rhetoric pre-election - and then of course on the other side of it as LINZ Minister you have Eugenie Sage, a Green MP," Mr Bridges said.
"I think what that shows is something we are going to see more of over the next three years, something quite bizarre and that's a real lack of cohesion, ability for the one hand to get agreement with the other and that's what you see here," he said.
Prior to the election, New Zealand First said it would seek higher Crown levies on mining and would return 25 percent of royalties to the region's they came from.
Meanwhile, the Green Party is opposed to new mining permits.