BHP Billiton's decision to scrap its Olympic Dam expansion is a commercial decision based on global market conditions rather than a result of the government's mining or carbon taxes, according to Resources Minister Martin Ferguson.
But Opposition leader Tony Abbott immediately labelled the assessment as ''nonsense'' shifting the blame to Labor for creating a restrictive climate for investment in the mining sector through both its headline taxes.
Mr Ferguson acknowledged the decision was a blow to South Australia's economic plans but said the project was far from dead.
''It would have been the icing on the cake for South Australia,'' he said.
A clearly deflated South Australian Premier Jay Weatherill said the decision was based on global factors outside the state government's control.
But he was confident the uranium and copper resources would be developed in time.
''These resources are world class ... they belong to us and they will be developed,'' Mr Weatherill said.
Mr Ferguson said the decision was ''completely unrelated'' to the mining tax and the carbon tax.
''This is purely a commercial decision. This is the third time it's been revisited,'' he said, adding he was regularly in contact with BHP executives.
The sheer size of the project meant it had a high capital cost, he said.
''I must say I am personally not surprised by the BHP Billiton decision, given the size of the project. Potentially the pit is the size of Adelaide CBD,'' Mr Ferguson said.
Mr Abbott said that under a Coalition government he would abolish the mining tax and the carbon tax to maximise opportunities for projects to go ahead.
''BHP is massively affected by the mining tax,'' he said.
''It is absolute nonsense to say the mining tax doesn't impact BHP.
''All we want for investors in this country is a level playing field. The carbon tax and the mining tax mean there is no level playing field in Australia vis-a-vis elsewhere.''
South Australian and senior coalition MP Christopher Pyne said the decision was ''catastrophic'' for his home state.
''South Australia was looking forward to this project as its saviour for what is a depressed state economy,'' he said.
Australian Greens nuclear policy spokesperson Scott Ludlam said BHP's decision to axe its Olympic Dam expansion plan showed the global uranium market was in critical condition.
"Australia stands to benefit from the massive jobs potential of large-scale renewable energy installations,'' he said.
''If Olympic Dam has been proven unsustainable by BHP's announcement, we are ready to work with state and federal governments to fast-track the sustainable jobs that the clean energy economy is all about.''