The High Court has thrown out a bid to mine ironsands from the ocean floor off the coast of South Taranaki.
Trans Tasman Resources had earlier won approval in the second of two hearings before the Environmental Protection Authority.
But iwi and environmental groups challenged this decision in the High Court.
In a judgement handed down, Justice Churchman said a narrow interpretation of the law by the authority's decision-making committee was inconsistent with the purpose of the Exclusive Economic Zone Act.
The appeal has been allowed, and the matter has been sent back to the authority for reconsideration.