Fertiliser manufacturer Ravensdown has scaled back plans to mine the country's only onshore phosphate deposit, located at Clarendon, north of Milton.
Ravensdown manufacturing manager Mike Whitty said a 60m to 70m-deep basalt cap had been discovered covering the largest phosphate deposit, which made recovery expensive and uneconomic.
He said the farmer-owned co-operative was now looking at the viability of recovering other localised deposits but determining the viability would take until later this year.
"The idea of a national approach to it has gone," he said.
The 450ha South Otago phosphate deposit was one of only two known in New Zealand.
The other was on the sea floor, on the Chatham Rise.
The deposits were created hundreds of millions of years ago, when sedimentary rock was laid down on the sea floor.
Mr Whitty said the area was a volcano surrounded by seawater and over millions of years, phosphate was deposited around the area.
Eventually, the land was pushed above sea level, exposing the phosphate deposit.
The Clarendon deposit was mined early last century and again during World War 2, and it was estimated it could yield 34 million tonnes.
But it was of relatively low quality, compared to imported phosphate.
Mr Whitty said had it been more accessible, a manufacturing plant could have been built alongside the deposit.
If the company decided to target localised deposits, it would do so with a quarry and screening operation and the phosphate would be carted to its Ravensbourne plant in Dunedin for blending with high-quality imported phosphate.
The company planned to continue test drilling to determine where the accessible localised deposits were, but that work would be delayed by winter.
A final decision on the deposit would be made at the end of this year.
Last year, soaring international phosphate costs prompted Ravensdown to search for a new source, and while prices have since fallen, Mr Whitty said they were still three times their historic level.
