It would be the second such cancellation after the government last week withdrew the lease of PT Mega Bingtang Borneo for its failure to meet the conditions laid down by the Mines and Minerals Board.

Now Asia Pacific Investment Development Ltd has been given 14 days to respond to the government's concerns or lose its lease.

The government says its mining ministry has faced heavy criticism since the leases were issued last year under the previous administration.

It says the lease decisions will end ongoing confusion about the legitimacy of the companies' operations on Rennell Island.

The government says it will now negotiate with the company for royalties payments on the three shipments of bauxite it has already made.