Bougainville Copper Limited (BCL) has been told its bid to extend an exploration licence over its Panguna site was rejected because of divisions among landowners.
"They [the Bougainville Government] said it was a tight split between approval for mining and non-approval for mining and it was too close and they felt that it might lead to conflict," BCL company secretary Mark Hitchcock said.
But Mr Hitchcock said landowners would be upset by the Government's move.
"We're very disappointed that they've taken this decision because we know that we have strong landowner support for mining and for Bougainville Copper," he said.
"There are small groups of opposition and there always is to mining and those opinions have to be listened to and understood, but as a general rule we see strong support for mining and for Bougainville Copper."
The Bougainville Government also recently imposed a moratorium on any company restarting mining at the site.
A consortium led by Perth-based company RTG has put forward a rival proposal to BCL's it said was supported by the head of a key landowner organisation.
But until recently, the Bougainville Government had been expressing qualified support for BCL, in which it has a 36 per cent stake.
The company also holds the resource data for the Panguna site and has been engaging with landowners in recent years, paying compensation outstanding from 1990.
Mr Hitchcock said BCL would continue discussions with the Bougainville Government and wouldn't abandon plans to restart the mine.
"It's up to the landowners, who have the final and ultimate say on whether they go mining and who they go mining with," he said.