PNG Sustainable Development Program chairman Sir Mekere Morauta said the decision by Prime Minister Peter O'Neill to expropriate Ok Tedi Mining Limited without compensation was "nothing more than stealing an asset" from the people of Western Province.
Morauta said PNGSDP would do "everything in its power to prevent expropriation without compensation" and was ready to take legal action if the legislation was brought to Parliament.
"Those shares are owned by the people of Western Province, not PNGSDP," Morauta said in a media statement.
"PNGSDP is merely the custodians of them.
"The prime minister is legally and morally obliged to pay a full and fair price if he is so determined to get his hands on them."
Morauta said the company would stand with the people of Western Province who had voiced their strong opposition to the government's plans.
"PNGSDP has a duty to protect Western Province people's assets and will do so with all necessary legal means," he said.
"Stealing an asset worth approximately K2 billion to the people of Western Province plus their annual K450 million share of the Ok Tedi dividends is not acceptable legally or morally. It is unconstitutional as well.
"I also fear that this is just the first step - I hope he does not want to get his hands on PNGSDP itself and the $US1.4 billion in the long-term fund."
Morauta was shocked by the prime minister's announcement of the expropriation on EMTV and said he had spent the past six months trying to negotiate with the PM for a fair deal on the Western Province's 63.4% shareholding held by PNGSDP.
"The national government has done very little for Western Province with the $3.8 billion it has received in taxes and dividends from Ok Tedi," he said.
"Where has that money gone? It has been wasted, mismanaged and misappropriated and PNGSDP has been left to do things that are rightfully the responsibility of the government.
"Just imagine what will happen if the government gets its hands on the PNGSDP dividends and the $1.4 billion in the long-term fund.
"That money is to be used for development for 40 years after the mine closes.
"Now is not the time for the government to be making this decision when reliable sources estimate that at least billions of kina has gone missing from government coffers in the last few years."
Former mining minister Sam Akoitai also reportedly advised O'Neill to reconsider taking over the ownership of Ok Tedi mine.
According to a report in The National newspaper, Akoitai said the government was blaming BHP Billiton for the damage done to Western Province as a result of mine operations.
But he said the government's approval for operations had equally contributed to the environmental damage done to the province.
He said Western Province provided resource benefits from Ok Tedi mine and had contributed to the development of the country - and the people should not be stripped off their benefits.
"Ok Tedi mine contributes about 26% in terms of GDP to the nation, which is a very significant contribution," Akoitai said.
"Speaking as a citizen and beneficiary of resources in the country, I'm very concerned that the prime minister has decided to take ownership of Ok Tedi mine."
The war of words continued as O'Neill said it was time for the government and the people of Western Province to take over the operations of the mine as PNGSDP had failed to do its job.
"This is why we are now saying that after 10 years of continued mismanagement ... the PNG government and the Western provincial government will play a direct role in management," O'Neil told The National.
"The central claim that we are trying to expropriate Ok Tedi Mining is simply false and very, very misleading."