Rio Tinto has been forced into an embarrassing retreat on plans to exploit one of the world’s biggest undeveloped uranium deposits after angering the land’s traditional owners.

The third-biggest mining company lit the fuse while promoting the expansion potential of its uranium business, telling analysts in London last week that opportunities could result in annual group production almost quadrupling to 20,000 tonnes by 2016.

A significant proportion of that growth is reliant on the group securing approval from the Mirarr Gundjeihmi Aboriginal people to develop the Jabiluka deposit in Australia’s Northern Territory, which is worth more than US$40 billion (£20.2 billion) at current prices.

Preston Chiaro, the group’s energy chief executive, told analysts that he had reason to believe that Yvonne Margarula, the leader of the Mirarr, who has long been opposed to the development of Jabiluka, would give her blessing. Mr Chiaro said that the relationship between the parties had “improved dramatically in the past two years”.

Rio would continue to be cautious about seeking official Mirrar approval - a denial would prevent Rio seeking permission for a further four years - but he said: “Hopefully, we can get her to say a ‘yes’ in the near-term future.”

The Mirarr responded with a blast of condemnation, saying that they were “extremely distressed” by the interpretation of their relations with ERA, the Rio Tinto subsidiary that owns Jabiluka and the nearby Ranger uranium mine. “Such comments are injurious to that relationship and immediately throw the prospect of future engagement into jeopardy,” they said in a statement.

The Mirarr said that they had not modified their opposition to mining at the site, which is surrounded by, but not included in, the World Heritage-listed Kakadu National Park. Shares in ERA, which agreed to the Mirarr veto in 2005 after a long environmen-tal campaign, fell more than 5 per cent and the company sought to salvage what good-will remained.

“ERA reiterates its commitment that there will be no development of Jabiluka without the consent of the traditional owners, the Mirarr people,” a spokeswoman said.

Charlie Lenegan, managing director of Rio Tinto Australia, played down the incident yesterday, saying that it was the result of a misunderstanding.

“I do believe there was an element of misunderstanding in there and to the extent that that is being addressed I don’t believe that it should be a major issue,” he said.

Analysts are divided on the long-term prospects for Jabiluka. UBS responded by reducing its “chance of Jabiluka going ahead” rating from 75 per cent to zero; JPMorgan and ABN Amro argue that mining eventually will go ahead.

The dispute came as Rio, which commands a market value of $90 billion, remained silent on the subject of takeover speculation.

On the day of the rebuke from the Mirrar, Rio Tinto’s shares rose 2 per cent in reaction to comments by Chip Goodyear, the chief executive of BHP, that his company looks at “everything”.

Yesterday, Rio itself was cast in the role of predator when The Sydney Morning Herald reported that the company had hired Deutsche Bank to advise it on a possible bid for Alcan, the Canadian aluminium producer. Neither Rio nor Deutsche would comment.

Further questions remain on the future production of the world’s second-biggest uranium miner, which is under pressure to take advantage of a supply shortage that has sent prices to record levels, hitting $125 last week.

Development of Rio’s Kintyre deposit in Western Australia rides on approval from the state’s anti-uranium-mining Labor Government.

The Ranger mine that neighbours Jabiluka in the Northern Territory is due to be exhausted by the end of next year, although processing of stockpiled ore will keep operations going until 2020 and indicative drilling elsewhere on the site has been positive.

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