The federal government is turning thumbs down on a recommendation from its own expert panel to build a new nuclear reactor to produce medical isotopes.

The government commissioned a study last May during the height of the isotope shortage crisis, created when the half-century-old reactor at Chalk River, Ont., broke down.

The shutdown forced hospitals to delay tests for a number of illnesses, including cancer.

The panel recommended in December that the "best primary option" is to replace the reactor and to start the development process as soon as possible.

The government responded Wednesday in a 13-page report, saying a new reactor would be too expensive and take too long to build.

Instead, it will spend $35 million on research and development of non-reactor-based production of isotopes — and another $13 million on finding more efficient ways to use the existing supply.

Natural Resources Minister Christian Paradis said it would cost about $1 billion to replace the Chalk River reactor and the sale of isotopes would never recover the cost.

"Due to the very high costs and very long lead times, investment in a new research reactor for isotope purposes alone would not be fiscally responsible at this time," he said in a statement.

Atomic Energy of Canada Ltd., reported Wednesday that 65 per cent of the repair work on the aging reactor has been completed and it now believes isotope production can resume at the end of July.

Hugh MacDiarmid, president and CEO of the Crown corporation, told a parliamentary committee this week that the shutdown is costing AECL $11 million a month in repairs and lost revenues from isotope sales.