This controversial pit became the flashpoint for a bitter civil war in Papua New Guinea in the 1990s that cost as many as 20,000 lives.

Now, 27 years after the war forced the closure of the Panguna mine on the island of Bougainville, resources giant Rio Tinto has finally made the decision to cut its losses and walk away.

In a decision slammed as "remarkably unprincipled, shameful and evil", the mining giant has also side-stepped demands for a billion-dollar clean up.

Furious local leaders on Bougainville – struggling for cash and contemplating forming an independent nation – are threatening an international campaign to shame the company into making a contribution.

But they also want Australia – as the former colonial power responsible for authorising the mine – to contribute to a special fund to repair rivers poisoned by toxic sludge and compensate the people who lost their homes.

"It would be a big amount of money that would be required to restore as much as possible the damaged environment and relocated villages," John Momis, president of Bougainville's autonomous government, told Fairfax Media.

"Probably a billion dollars. Nobody really knows, but that would be about the amount of money required."

John Momis, president of the autonomous government of Bougainville, during a speech in Canberra. Photo: Darren Boyd

Rio Tinto has refused. Correspondence obtained by Fairfax shows the dual London-Melbourne listed giant insisting it has no responsibility for environmental or other consequences from the mine.

"We believe that [the company] was fully compliant will all regulatory requirements and applicable standards at the time," Rio Tinto executive Joanne Farrell wrote to Dr Momis on August 6.

The rebellion

The mine has not operated for more than a quarter of a century after locals – angry about environmental destruction, poor wages and distribution of profits – broke into the site, seized explosives and sparked a separatist rebellion that would last almost a decade. PNG police and military carried out severe reprisals. Rio Tinto has never been back.

Before that, Panguna mine had accounted for about 45 per cent of exports from PNG and generated more than $1 billion in national tax revenue and dividend payments.

But locals complained only a trickle of cash ever made it to Bougainville, while millions of tonnes of acid-laced mine tailings killed the Jaba and Kawerong rivers. The rivers had been a source of water and food for thousands, but large sections now resemble a moonscape, forcing people to leave their homes.

Abandoned heavy mechanised trucks are still rusting on the deep tracks that loop around the edges of the pit. Local landowners, some armed, have designated the surrounding area a "no go zone".

The abandoned Panguna copper mine in Bougainville – once a rich source of profits – sparked a costly environmental and social crisis. Photo: Friedrich Stark

A peace deal in 2001 saw Bougainville win autonomy within PNG, but any talk of reopening the mine remains hugely controversial.

Dr Momis wants the mine to start again. It is the best, perhaps one of the only, sources of revenue for his government, he believes. With a final decision on Bougainville's independence approaching in a referendum expected in 2019, the future economy of the island nation is a pressing issue.

"Rio was able to pay back its debt in loans within three years, I think. After that it was all profit," Dr Momis told Fairfax Media.

"The people of Bougainville got a pittance out of it, even though they were the owners of the resources."

Dr Momis said he was disappointed people in Australia do not show more concern about the problems.

"PNG was Australia's only colony, and the Bougainville mine bankrolled PNG's independence," he said.

Rio withdraws

Rio Tinto's announcement on June 30 it had freely surrendered its 53.8 per cent controlling share of Bougainville Copper Limited came after years of variously flirting with reopening or quitting the mine.

To get out, the company created a trust to split the shares between the governing authority on Bougainville and the PNG national government in Port Moresby – provided they were taken up within two months.

"By distributing our shares in this way, we aimed to provide landowners, those closest to the mine, and all the people of Bougainville a greater say in the future of Panguna," a spokesman for Rio Tinto said.

"It also provides a platform for the [autonomous government] and PNG government to work together on future options for the resource."

The decision to divide control immediately raised fears of complicating the already fragile peace process. Momis' government said it would accept the shares – but insisted Port Moresby should surrender its offer. On Wednesday, PNG Prime Minister Peter O'Neill declared all the shares offered to Port Moresby would instead be handed over directly to the landowners, rather than the autonomous government. Dr Momis accused Mr O'Neill of deliberate interference in Bougainville's affairs and warned, ominously, "the future of peace is now truly under threat".

In August, 2014, Bougainville paved the way for reopening the mine, with a new mining law that led some to hope the trucks might once again rumble into the pit at Panguna.

But that too would be controversial. Some locals, supported by activists overseas, including a group known as Jubilee Australia, have accused Dr Momis of consistently downplaying opposition to mining.

A family panning gold in the polluted Jaba river flowing from Panguna copper mine. Photo: Friedrich Stark

Jubilee believes farming and horticulture offer Bougainville a sustainable future.

But Dr Momis insists the mine is supported.

"My well considered view is the majority would want the mine to be opened so the mine legacy issues can be addressed, as well as to generate revenue."

Is it even economic?

Panguna was once considered the jewel in the crown for Rio Tinto, and the company is expected to hand over valuable technical survey data about the estimated 3 million tonnes of copper reserves remaining in the mine.

But other close observers doubt there is any way the mine could re-establish operations.

"This really puts the nail in the coffin – there is no way the mine is going to reopen in the next decade," said Thiago Oppermann, a Pacific specialist at the Australian National University.

For Rio Tinto's part, it based the decision to withdraw on the results of an almost two-year strategic review. The company's Ms Farrell wrote to the Bougainville government that low global commodity prices meant they could not to take any part in future mining at Panguna.

"This does not mean we don't see a future for the mine which is a significant resource but we are not in the position to participate," Ms Farrell wrote.

And Rio Tinto insists the way to address environmental concerns is to get the mine running again, with local safety and stability assured, and investor friendly laws.

Dr Momis said Rio Tinto must take responsibility for the mess it left behind, and has challenged the company over its claims of corporate social responsibility.

"They justify their position by saying they operated under PNG law, although everybody knows the people of Bougainville never accepted [that] PNG law was a just law," the Bougainville president said.

"When Rio walks away like this, the resource owners are left high and dry for no fault of their own. They are now going to be left with this hugely destroyed environment."

"It is a major disaster which the people of Bougainville do not deserve to have. It was really imposed on them by outside forces."