BANGKOK, Nov 3 (Reuters) - Thailand defended on Friday its decision to close the country's only active gold mine last year, after its Australian operator said it would launch legal proceedings against the government.
The military government closed down the Chatree mine, located 240 km (174 miles) north of Bangkok, under an executive power in December 2016, citing environmental and health concerns.
Australian mining company Kingsgate Consolidated Ltd , which had operated Chatree since 2001 under its Thai subsidiary Akara Resources Public Co Ltd and had a valid mining license through 2028, says the premature closure of the mine was unlawful.
After months of negotiations with the government, Kingsgate said on Thursday it had been unable to reach any settlement and would commence arbitration under the Thailand-Australia Free Trade Agreement (TAFTA) without delay to try to recover "the substantial losses" it has incurred.
A representative of Kingsgate met in August with the government to discuss a possible settlement, demanding compensation of $750 million for the closure, but no agreement was reached.
On Friday, the government said environmental and health concerns outweighed the economic benefits of the Chatree mine.
"People living near the mining area have long complained about the adverse impact on their health from the mining operation," Pasu Loharnjun, permanent secretary at Thailand's Industry Ministry, told a press conference.
The government has set up a committee, headed by Pasu, to handle the case while Kingsgate has appointed international law firm Clifford Chance to represent it in the arbitration.
Pasu, however, suggested a solution could still be reached without arbitration.
"I am sure a solution could be met through talks, and this is not about wining or loosing the proceedings, talks must take place before we reach that point," Pasu said.
A Thai government investigation team in January 2015 said that more than 300 people living near the Chatree mine had tested positive for arsenic and manganese poisoning.
Many locals and environmentalists have campaigned against the mining operation at Chatree and many welcomed the mine's closure at the end of last year. (Reporting by Aukkarapon Niyomyat and Panu Wongcha-um; Editing by Susan Fenton)