Ottawa has rejected a billion-dollar proposal to develop a gold-and-copper mine in British Columbia’s central interior due to environmental concerns.

Minister of Environment Leona Aglukkaq issued a statement Wednesday saying the proposal from Taseko Mines Limited to build the “New Prosperity” mine 125 kilometres southwest of Williams Lake would likely cause “significant adverse environmental effects that could not be mitigated,” and could therefore not proceed.

The federal government said in making its decision, it considered a report by an independent review panel that conducted “a rigorous review” of the project.

The study, conducted by the Canadian Environmental Assessment Agency and released late last year, concluded the open-pit gold-and-copper mine would negatively impact water quality and fish habitats in Fish Lake, a body of water considered sacred by First Nations.

The Tsilhqot'in National Government had fought against the mine and Chief Joe Alphonse said Wednesday the federal government's decision was the "best news we could have ever dreamed of getting."

"We didn't really know what to expect," Alphonse told "I think we felt confident on the technical side; on the environmental side we were very confident that if it was based on that, the decision would fall in our favour."

Alphonse said he hopes the victory serves as an example to other First Nations and environmental groups.

"If they stick to the high road, eventually people are going to make the right decision," he said.

He added that companies cannot exclude First Nations from their development proposals.

"Allow us to build proposals together," he said. "That's the only way these types of projects will move forward."

It's not the first time Ottawa has rejected the project.

The original proposal was approved by the provincial government, but rejected by the federal government in 2010 because the plan was to drain the lake for use as a tailings pond.

Aglukkaq did, however, leave the door open for another proposal.

"The Government will continue to make responsible resource development a priority and invites the submission of another proposal that addresses the Government's concerns," she said in a statement posted on the federal government’s website.

Alphonse said he thinks another proposal would be "foolish."

"After two big reports like this that have come out, I think it's time Canada steps in and maybe declares this area as a sacred site and declares it a park," he said.

With files from The Canadian Press