UPDATE 2-Chile court formally freezes Barrick's Pascua-Lama mine
* Court suspends project until environmental standards met
* Indigenous groups say project hurts water supply, glaciers
* Chile environmental regulator has also suspended gold mine
SANTIAGO, July 15 (Reuters) - A Chilean appeals court on Monday formally suspended Barrick Gold Corp's controversial $8.5 billion Pascua-Lama gold mine until the company builds infrastructure that will prevent water pollution.
In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the project, which straddles the Chile-Argentine border high in the Andes, while it examined claims by indigenous communities that it has damaged pristine glaciers and harmed water supplies.
On Monday, the court said it was ordering a freeze on construction of the project until all measures required in the government's environmental license for adequate water management, "as well as urgent and transitory measures required by the environmental regulator," are adopted.
Chile's environmental regulator has also suspended Pascua-Lama, citing major environmental violations, and asked Barrick, the world's top gold miner, to build water management canals and drainage systems. Barrick has said it is fully committed to complying with all aspects of the regulator's order.
The court ruling also called for the project's environmental license to be reviewed and for all data on nearby glaciers to be presented to the regulator.
Barrick or the indigenous Diaguita community now have days to appeal the ruling to the Supreme Court.
A source close to the company said Barrick is not likely to appeal the decision.
The Diaguitas could contest the ruling if they deem the measures imposed by the court are too weak, and could potentially ask the top court to seek Barrick's permit be revoked, lawyer Lorenzo Soto told Reuters.
"If we appeal it would be because the safeguard as ordered aren't sufficient," Soto said.
A potential decision from the Supreme Court would likely be issued this year, but it is tricky to anticipate how it might rule on Pascua-Lama, originally forecast to produce 800,000 ounces to 850,000 ounces of gold per year in its first five years of full production.
Last year, the Supreme Court suspended a key permit for Canadian miner Goldcorp Inc's El Morro copper-gold project, and rejected the planned $5 billion Central Castilla thermo-electric power plant.
But it also cleared the way for the unpopular HidroAysen hydro-power project.
A full court-ordered halt of the project would be a major hit for Barrick as 80 percent of the metal reserves are on the Chilean side. It would also be a further blow to Chile's business-friendly reputation.
Several big mining and power projects have faced setbacks in recent months in Chile, the world's No. 1 copper producer, where around 60 percent of export revenue comes from the metal.
It remains unclear what kind of legal action Barrick could take if the permit for its project - whose construction was already well underway - were canceled or placed under review.
To be sure, the regulator told Reuters the project shouldn't face a permanent block if Barrick meets all the requirements. The regulator added the earliest Pascua-Lama could be reactivated is one to two years.
But Chilean courts have appeared increasingly open to lawsuits from environmental or social groups against mega projects.
While Chile's economy is riding a copper boom, many in the economically stratified country feel mining profits have bypassed them and hurt the environment, and are increasingly taking their demands to court.
Barrick said last month it is slowing construction at Pascua-Lama as it looks to rein in spending on the severely delayed project, already billions of dollars over budget.
Barrick's U.S.-traded shares were up 0.5 percent to $15.01 in Monday afternoon trading.