TOKYO, March 22 (Reuters) - The development of a large nickel deposit in the Solomon Islands is back to square one this week, as the nation's highest court ruled that neither of the two firms in Japan and Australia fighting over the discovery were entitled to the license.
The Solomon Islands Court of Appeal on Monday rejected a portion of Sumitomo Metal Mining's 5713.T appeal that the country's government should not have cancelled in 2011 Sumitomo's license to develop the Isabel nickel laterite discovery.
In the same ruling, the Court of Appeal accepted another portion of the appeal by revoking Axiom Mining's AVQ.AX current license for the Isabel site.
The ruling also returns the site of the Isabel discovery to government ownership without restoring Sumitomo's earlier license.
Japanese mining giant Sumitomo and tiny Australian explorer Axiom Mining have been fighting over the Isabel discovery since 2011.
Sumitomo won an international tender for prospecting licences in 2010. The licences were cancelled in 2011 and similar rights were later that year awarded to Axiom.
Sumitomo in 2013 sued the Solomon Islands Government and Axiom, claiming that the government wrongly cancelled Sumitomo's rights and wrongly granted similar rights to Axiom, even though Axiom did not take part in the 2010 international tender. High Court of the Solomon Islands in 2014 rejected all of Sumitomo's claims, and Sumitomo filed an appeal to the nation's Court of Appeals, the country's court of final appeal.
Analysts estimate the Isabel discovery compares in size or grade to other large South Pacific nickel mines, such as Vale SA's Goro mine in New Caledonia and the China-owned Ramu mine in Papua New Guinea.
"We will look closely into the court's decisions and think about what steps we would take next," a spokesman for Sumitomo Metal Mining said, adding that the company had no information on whether the Solomon government will conduct a new tender.
Sumitomo Metal's shares were up 1.4 percent against the 1.9 percent rise in benchmark Nikkei .N225 average.
Axiom halted trading in their shares on Monday, according to a release to the Australia Stock Exchange, without giving a reason for the halt.
Axiom officials were not available for immediate comment on the decision.