UPDATE 3-Chilean court suspends Barrick's Pascua-Lama mine project
* Court also orders environmental permit be reviewed
* 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 Pascua-Lama gold mine until the company builds infrastructure that will prevent water pollution, and it ordered a review of the company's environmental permit.
In April, the Copiapo Court of Appeals temporarily and preventively froze construction of the $8.5 billion 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 all data on nearby glaciers to be presented to the regulator and ordered Chile's environmental assessment authority (SEA) to review the project's environmental license.
While the suspension is broadly in line with the freeze already imposed by Chile's environmental regulator, the request that the project's permit be reviewed sets the stage for an additional, and protracted, administrative review.
It could take anywhere from six months to two years to review the license, given the novelty of the procedure and the project's complexity, said Luis Cordero, a law professor at the Universidad de Chile.
"This is a new process, there's an obligation to inform the community, it's possible to make fresh observations and it's possible to appeal again," Cordero said. "Pascua-Lama has a long road ahead."
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 to be too weak, and could potentially ask the top court to revoke Barrick's permit, lawyer Lorenzo Soto told Reuters.
"If we appeal it would be because the safeguards as ordered aren't sufficient," Soto said.
A decision from the Supreme Court would be likely this year, but it is tricky to anticipate how it might rule on Pascua-Lama, originally forecast to produce 800,000 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, since 80 percent of the metal reserves are on the Chilean side of the project. 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 under way - were canceled or placed under review.
To be sure, the new environmental regulator (SMA), which monitors projects that have been approved, told Reuters the project should not 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 which is already billions of dollars over budget.
Climate change has shrunk Andean glaciers between 30 and 50 percent since the 1970s and could melt many of them away altogether in coming years, according to a study published in January in the journal The Cryosphere.
Barrick's U.S.-traded shares were up 1.29 percent to $15.66 in Monday afternoon trading.