Kralcopic, a wholly owned subsidiary of GBM Gold Pty Ltd, made the move after Earth Resources Regulation refused to renew its licences in the Bendigo area in August out of concern the company could not fund the mining work nor rehabilitation of the sites.

ERR executive director Anthony Hurst is listed as the defendant, as the purported delegate of the Minister for Jobs, Precincts and Regions.

Read more: Regulator refuses to renew mining licences

GBM Gold told shareholders of the legal action in its quarterly report. The company said it had entered into a new underwriting agreement and released a new rights issue prospectus to raise $6.7 million, but two days later was informed of the regulator's decision to refuse renewal of the licences.

GBM Gold said the regulator made this decision "in full knowledge" the rights issue was "progressing to completion".

The company said its project to retrieve gold from the coarse sand dam at its Kangaroo Flat mine had ceased as a result of the licence issue.

Stakeholders were told installation and commissioning of the plant was almost completed when the project came to a halt, and eight jobs were lost.

GBM Gold said the coarse sand dam was estimated to contain 5100 ounces of gold.

Related: Mining set to resume in Bendigo

A project to re-equip and re-enter the Swan Decline at the Kangaroo Flat site had also stopped, the company said, as a result of the decision.

GBM Gold said the regulator's desire to rehabilitate the Kangaroo Flat mine would permanently close this decline and put an end to any other exploration from it.

When it refused to renew the licences, Earth Resources Regulation also exempted the land from any further applications until there was further community consultation and consideration given to future land uses.

Related: More land open for gold exploration in central Victoria

In its report to shareholders, GBM Gold said stopping mining in Bendigo sent a negative message to the industry and the community.

Mr Hurst, ERR's executive director, said the regulator did not renew Kralcopic's mining licences "as they were unable to comply with the Minerals Resources (Sustainable Development) Act and adequately provide evidence that they could fund their operations".

Related: ASX queries mining company's funds

"I respect the court process and Kralcopic's right to challenge my decision," Mr Hurst said.

"Earth Resources Regulation will continue to ensure that Kralcopic fulfils its obligations to maintain its former Bendigo mine sites until they are fully rehabilitated."

ERR holds $5.9 million in bonds to rehabilitate the sites if Kralcopic cannot meet these obligations.

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