BRASILIA - Brazilian federal prosecutors have filed a lawsuit to suspend a license given to a Canadian firm to install what would be Latin America's largest fertilizer mine in the Amazon rainforest, their office said.

The planned mine by Brazil Potash overlaps with ancestral lands of the Mura Indigenous people whose territory is in the process of demarcation, the prosecutors said in a statement issued on Tuesday. They added the licensing must be a federal issue to be decided by Brazil's environmental protection agency Ibama and not the state environmental body Ipaam.

The prosecutors' office in Manaus said that Mura leaders had been subject to "false promises and threats." It added that the mine presented a "serious environmental risk" that would also affect the entire region's population, especially those near the river, and that impact studies had not been carried out properly.

Brazil Potash maintains that the Mura land has not been officially recognized as a protected reservation by the Brazilian government and therefore can be licensed by the state of Amazonas whose governor fully backs the $2.6-billion project.

The prosecutors' office has disputed the mine since 2016 and the project was halted by a federal judge in 2023, a decision that was subsequently overturned by a higher appeals court.

Brazil Potash CEO Matt Simpson said the company has requested 10 days to offer a statement demonstrating "the legal unfeasibility" of the prosecutors' request.

The appeals court in Brasilia that overruled the Manaus judge's decision had "established the state's competence to conduct environmental licensing and authorized the continuation of the licensing process," Simpson said in writing to Reuters.

The mine could be fundamental for Brazilian agriculture as it will reduce Brazil's 90% dependence on imported potash, but it has been held up by opposition from the Mura people who say they have not been consulted about use of their ancestral lands.

Governor Wilson Lima, who says the mine will bring his state investment and development, announced last month that the installation license had been granted for the mine to be built in Autazes, 120 km southeast of state capital Manaus.

Brazil Potash said it will start this year on the shafts that will extract the potash and return salt to the bottom of the mine. The project will take three years to build.

The mine will deliver potash to Brazilian farm states by river barges at less than even the transportation costs of producers in Russia, Belarus and Canada, who have to ship across the world, according to Simpson.

Brazil Potash is owned by CD Capital with a 34% stake, Sentient with 23% of shares, and Stan Bharti's Forbes & Manhattan Group, a Toronto-based merchant bank that began the project, which now holds 14%, along with other shareholders.