The Environmental Protection Authority's initial view on Chatham Rock Phosphate's application for a marine consent to mine is decidedly negative.
The company's shares plummeted as much as 60 percent to just 8 cents yesterday before recovering to close at 15 cents, down 5 cents.
The EPA says its staff can't recommend the company application to mine phosphate from the Chatham Rise, about 450km off the Canterbury coast.
An EPA manager, Sarah Gardner, stresses that the 175-page report is merely an input into the decision-making process and the authority's view may well change.
The EPA says mining the area using a conventional drag-head to remove up to half a metre of the seabed has the potential to adversely affect fish, marine mammals, seabirds, human health, commercial fisheries and Maori and Moriori cultural interests.
But Chatham Rock Phosphate's managing director, Chris Castle, said he remains confident that the company has done the work to show it can mine in a sustainable way.